Company report
Global Research
Overweight (V)
Target price (HKD)
Share price (HKD)
Potential return (%)
47.59
32.50
46.4
2011 a 2012 e
2013 e
0.73
44.6
1.69
19.2
2.25
14.4
Performance
1M
3M
12M
Absolute (%)
Relative^ (%)
10.9
7.0
30.5
19.8
106.0
73.2
21 January 2013
Sean Monaghan*
Analyst
The Hongkong and Shanghai Banking
Corporation Limited, Singapore Branch
+65 6658 0610
seanmonaghan@hsbc.com.sg
Sachin Varma*
Associate
Bangalore
View HSBC Global Research at:
http://www.research.hsbc.com
*Employed by a non-US affiliate of
HSBC Securities (USA) Inc, and is not
registered/qualified pursuant to FINRA
regulations
Issuer of The Hongkong and Shanghai
report: Banking Corporation Limited,
Singapore Branch
Disclaimer &
Disclosures
This report must be read
with the disclosures and
the analyst certifications in
the Disclosure appendix,
and with the Disclaimer,
which forms part of it
We reiterate our Overweight (V) rating on GEG and increase our TP by 20% to
HKD47.59/share from HKD39.82/share. The increase in the target price reflects a combination
of earnings estimate changes (stronger market growth) and changes to future resort
developments (larger resorts coming sooner), see Macau Gaming, 2013: More to come,
21 January. We also roll forward the base year for our valuation to 2013 from 2012, while
maintaining multiples and discount rates. Our target price remains based on a weighted
average of our sum-of-the-parts (SOTP) and discounted cash flow (DCF) valuations.
We increase our 2013 EBITDA estimate by 3% to HKD12.2bn (from HKD11.8bn) on
the back of stronger actual growth in the Macau market in 2012 (13.5% vs. an estimated
12.5%) and a slightly stronger growth forecast in 2013 (13.5% vs. 12.9%). Our revised
2013-14 EBITDA estimates are 13% and 10%, respectively, above consensus.
We update our Galaxy Macau model for changes to timing and capex for new resort
developments. We make no changes to Galaxy Macau Phase II (expected 2015 opening);
however, we bring forward and increase our assumptions for Galaxy Macau Phase III
(now USD4.7bn and expected 1H17 opening) and Phase IV (now USD1.9bn and expected
1H18 opening). We increase the assumed plot ratio for the entire Cotai land bank to 5.5x
from 4.7x, resulting in a 10% increase in total GFA to 24.3m sqft.
Risks: Specific risks for GEG relate to the companys ability to continue to develop
additional resorts as required. Generic risks for Macau casino concessionaires include
unexpected changes in government gaming policy or economic changes in China that
could impair customer visitation and expenditure. Business concentration risk also exists,
given that the companys operations are largely centred in Macau SAR.
Index^
Index level
RIC
Bloomberg
Source: HSBC
136,054
50
17,604
136,487
abc
12/2012e
12/2013e
12/2014e
41,151
5,749
-1,248
4,501
-338
3,061
3,061
-32
3,004
3,004
58,234
9,845
-2,470
7,375
-385
7,190
7,190
-58
7,067
7,067
67,812
12,151
-2,470
9,681
-335
9,596
9,596
-77
9,433
9,433
74,624
13,590
-2,470
11,120
-285
11,185
11,185
-89
10,995
10,995
5,758
-4,510
-4,973
-17
313
1,416
8,451
-3,233
-3,233
0
-5,255
5,161
10,808
-9,146
-9,146
0
-1,662
1,585
12,296
-14,774
-14,774
0
2,477
-2,566
1,221
27,258
15,191
12,011
44,839
10,425
12,326
315
21,290
21,234
1,171
36,387
16,853
13,672
55,580
11,733
12,326
-1,347
30,723
29,006
1,121
51,144
14,376
11,195
67,810
12,968
12,326
1,131
41,717
42,478
Year to (HKDm)
City Clubs EBITDA
StarWorld EBITDA
Galaxy Macau EBITDA
Other EBITDA
Total EBITDA
12/2011a
12/2012e
12/2013e
12/2014e
183
2,955
2,572
38
5,749
195
3,484
6,199
-33
9,845
233
3,993
8,058
-132
12,151
213
3,856
9,682
-161
13,590
Valuation data
Year to
12/2011a
12/2012e
12/2013e
12/2014e
3.4
24.6
7.3
44.6
9.5
1.0
0.0
2.3
13.8
6.4
19.2
6.4
3.8
0.0
2.0
11.1
4.6
14.4
4.4
1.2
0.0
1.8
10.1
3.2
12.4
3.3
-1.9
0.0
EV/sales
EV/EBITDA
EV/IC
PE*
P/NAV
FCF yield (%)
Dividend yield (%)
1,270
24,041
9,283
6,103
35,764
9,071
11,673
5,570
14,222
19,421
Price relative
35
35
30
30
25
25
20
20
15
15
10
10
2011
12/2011a
12/2012e
12/2013e
12/2014e
113.6
157.7
161.6
219.2
219.9
41.5
71.2
63.8
134.8
132.2
16.4
23.4
31.3
33.5
33.2
10.0
11.8
14.9
16.6
16.3
2.4
27.8
25.7
11.2
14.0
10.9
17.0
38.0
1.0
103.4
2.9
37.3
39.8
18.7
16.9
12.7
25.6
1.5
0.0
2,683.0
2.7
39.3
36.3
19.7
17.9
14.3
36.3
-4.3
-0.1
-
2.1
31.6
30.4
18.5
18.2
14.9
47.7
2.7
0.1
1,087.4
0.73
0.73
0.00
3.41
1.69
1.69
0.00
5.09
2.25
2.25
0.00
7.33
2.62
2.62
0.00
9.92
Source: HSBC
Y-o-y % change
Revenue
EBITDA
Operating profit
PBT
HSBC EPS
Ratios (%)
Revenue/IC (x)
ROIC
ROE
ROA
EBITDA margin
Operating profit margin
EBITDA/net interest (x)
Net debt/equity
Net debt/EBITDA (x)
CF from operations/net debt
Per share data (HKD)
EPS reported (fully diluted)
HSBC EPS (fully diluted)
DPS
NAV
2012
2013
Rel to HANG SENG INDEX
2014
abc
Contents
Executive summary
Galaxy remains a great story
Financial estimates
Earnings estimates
Macau maps
Macau casinos
Cotai resorts
Galaxy Cotai resorts
4
4
6
6
7
12
12
15
15
22
23
24
25
Disclosure appendix
28
Disclaimer
31
abc
Executive summary
Macau market offers stronger growth prospects in 2013
Company to build larger resorts on Cotai sooner than expected
Reiterate OW(V); raise TP to HKD47.59 from HKD39.82 on
abc
Project success
Bloomberg
Ticker
Pricing
currency
HSBC
Rating
Price
17-Jan
HSBC
TP
Mcap
(USDm)
27 HK
6883 HK
2282 HK
1928 HK
880 HK
1128 HK
HKD
HKD
HKD
HKD
HKD
HKD
OW(V)
OW(V)
OW(V)
N(V)
OW
OW(V)
32.50
50.05
16.30
36.60
20.45
21.85
47.59
66.70
27.34
35.38
27.33
34.70
17,605
10,704
7,989
38,029
14,634
14,620
103,582
24.7
13.5
12.3
24.7
14.0
13.9
17.2
13.9
11.1
10.9
21.8
12.1
13.9
13.9
11.1
8.8
9.3
16.3
9.4
12.3
11.2
0.0%
0.0%
0.0%
0.0%
3.6%
5.5%
1.5%
0.0%
0.0%
5.0%
3.2%
4.5%
5.5%
3.0%
19.2
24.7
14.3
30.7
17.9
16.9
20.6
14.4
18.3
12.7
19.6
14.4
14.3
15.6
0.0%
0.0%
1.6%
4.1%
5.6%
5.5%
2.8%
0.6%
4.9%
7.4%
2.2%
5.8%
6.5%
4.6%
4.5%
7.8%
9.1%
-0.5%
7.0%
2.8%
5.1%
1.8%
5.3%
7.3%
3.9%
8.4%
2.5%
4.9%
Target
Price
Share
Price
Potential
Return*
47.59
66.70
27.34
35.38
27.33
34.70
32.50
50.05
16.30
36.60
20.45
21.85
46%
33%
73%
0%
38%
64%
42%
Galaxy Ent.
Melco Crown
MGM China
Sands China
SJM
Wynn Macau
Disc to TP
Bloomberg
Ticker
Currency
27 HK
6883 HK
2282 HK
1928 HK
880 HK
1128 HK
HKD
HKD
HKD
HKD
HKD
HKD
70%
70%
70%
70%
70%
70%
48.70
69.53
29.72
42.55
27.54
34.45
30%
30%
30%
30%
30%
30%
*Potential return equals the percentage difference between the current share price and the target price, plus the forecast dividend yield.
Source: HSBC estimates
abc
completed by end-2017
Phased opening of new resorts to provide constant growth
Ownership structure
Lui Family
Free Float
4.9%
KWah Int
50.3%
49.7%
100% (1)
100%
StarWorld Casino
(Macau)
Waldo
President
Rio
Grand Waldo
100%
100%
25-100%
Construction materials
(China, HK, Macau)
abc
Operations
Overview
Construction materials
We forecast GEGs construction activities will
generate 2013 EBITDA of HKD440m, broadly in
line with the expected result in 2012.
We value GEGs construction operations at
HKD3bn, which represents 1% of the companys
SOTP valuation (see Figure 12).
Overview
20,000
StarWorld
15,000
33%
10,000
5,000
Galax y
Macau
2011
2012e
Gaming
2013e
2014e
Other
2015e
Phase I
City Clubs
1%
66%
Source: Company reports, HSBC estimates
abc
Hotel operations
The Galaxy Macau Phase I resort has three hotels
operating in the two towers with a total room
inventory of 2,200 rooms.
i) Galaxy Macau
Galaxy Macau occupies the single tower on the
right hand side of the resort (closest to Taipa) and
has 1,500 rooms in a modern style similar to
StarWorld in design.
ii) Hotel Okura
Hotel Okura at Galaxy Macau is probably one of
the best in terms of servicing the Japanese market.
Okura is renowned for its service and was
founded on the principle that Okura hotels must
consistently offer the best accommodation, the
best cuisine, and the best service in the Japanese
tradition of attention to detail.
iii) Banyan Tree Macau Hotel
Banyan Tree Macau Hotel at Galaxy Macau
encompasses 256 deluxe suites as well as what is
considered to be the best spa in Macau.
Banyan Tree is famous for bungalows with
infinity pools and as such, Galaxy Macau has
incorporated these rooms in a unique style yet to
be seen in the Macau market.
Other attractions and features
i) Retail
Galaxy Macau has two retail arcades designed to
cater to specific customer groups.
The mass retail outlets are contained in the arcade
running along the eastern side of the property
(below the Galaxy Hotel), near the lobby where
the bus tour groups arrive.
abc
ii) Rio
The Rio casino was opened in February 2006 and
is located behind the Waldo property on Rua Luis
Gonzaga Gomes, Peninsula Macau (see Figure 18
on page 23).
Rio is primarily a VIP room casino with different
floors and rooms operated by certain junket
operators. GEG receives 2-3% of revenue from these
operations, which it reports in its EBITDA line.
iii) President
The President casino was opened in May 2006
and is located further up the Avenida da Amizade
from Waldo and across the road from StarWorld,
Peninsula Macau (see Figure 18 on page 23).
The President hotel and casino is primarily a VIP
room casino with different floors and rooms
operated by certain junket operators.
GEG does not consolidate the revenue of
President and only receives EBITDA equal to 12% of actual gross revenue. The remaining
EBITDA is retained by the VIP room operators.
iv) Grand Waldo
Grand Waldo was opened in May 2006 and was
the first casino property to be developed and
opened on Cotai.
The property is located across the road from
Galaxy Macau (see Figure 18 on page 23).
Grand Waldo has gone through various iterations
as it struggled financially and is now a
combination of mass and VIP room gaming.
GEG consolidates only 50% of the revenue of the
Grand Waldo casino, although the EBITDA
contribution is only 2-3% of revenue.
abc
Start
Galaxy Macau
Phase IV
Start
Complete
Complete
Galaxy Macau
Phase III
Start
Galaxy Macau
Complete
Phase II
Galaxy
Macau
Opens
2011
2012
10
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Completed
Sands Macau
Wynn Macau
Phase I, II
Encore
Total
StarWorld
Grand Lisboa
Altira
Venetian
MGM Macau
Plaza
City of Dreams
Oceanus
Galaxy Macau
Sands C/C
Total/average
Site
area (sqft)
GFA
Plot ratio
Cost psft
(USD)
Apr-04
479,160
1,376,390
2.9x
363
500
437,513 1,987,931
256,952 1,177,302
694,465 3,165,232
Oct-06
73,883 1,022,571
Feb-07
125,141 1,457,895
May-07
56,295 1,022,600
Aug-07 3,136,320 10,400,000
Dec-07
464,645 2,215,490
Aug-08
784,080 3,000,000
Jun-09 1,219,680 5,705,091
Dec-09
86,250
345,000
May-11 1,400,000 5,800,000
Apr-12 1,616,027 13,300,000
10,135,948 48,810,269
4.5x
4.6x
4.6x
13.8x
11.7x
18.2x
3.3x
4.8x
3.8x
4.7x
4.0x
4.3x
8.2x
4.8x
550
488
527
421
554
512
231
564
367
421
484
362
376
378
1,094
575
1,669
430
808
524
2,500
1,250
1,100
2,400
167
2,100
5,000
18,448
Sep-06
Apr-10
1,383
513
711
158
1,095
785
412
965
104
1,036
701
8,217
ROA
(%)
Slots
Hotel
Rooms
71%
77
340
417
1,177
285
2,500
2,500
5,000
83%
119%
88%
30%
44%
63%
37%
40%
62%
49%
14%
45%
199
61
260
100
127
160
150
200
30
190
6
120
140
1,560
234
0
234
180
241
40
450
220
70
235
188
400
400
2,998
433
61
494
280
368
200
600
420
100
425
194
520
540
4,558
1,020
95
1,115
550
785
200
2,181
1,200
200
1,500
1,160
1,000
2,000
13,068
600
414
1,014
505
430
216
2,820
1,174
360
1,400
0
2,200
6,000
16,404
2,500
500
3,000
2,000
2,250
1,150
4,000
3,000
1,250
3,600
1,600
4,000
3,600
31,950
2,500
500
3,000
2,000
2,250
1,150
4,000
3,000
1,250
3,600
400
4,000
5,400
32,550
5,000
1,000
6,000
4,000
4,500
2,300
8,000
6,000
2,500
7,200
2,000
8,000
9,000
64,500
150
250
150
250
400
0
400
1,000
1,000
2,000
2,000
1,000
3,000
2,400
0
2,400
3,000
1,500
4,500
5,400
1,500
6,900
850
1,275
1,275
Yr-3 EBITDA
3Q15
4Q18
1,200,000
300,000
1,500,000
6,088,062
1,522,015
7,610,077
5.1x
5.1x
5.1x
329
526
368
2,000
800
2,800
100,000
1,500,000
15.0x
533
800
1Q16
1,099,560 5,167,932
1,700,000 10,000,000
700,000 3,290,000
3,499,560 18,457,932
650,990 3,580,444
4.7x
5.9x
4.7x
5.3x
5.5x
406
470
564
469
838
2,100
4,700
1,856
8,656
3,000
709
1,298
512
2,519
720
34%
28%
28%
29%
24%
100
200
100
400
0
300
400
300
1,000
0
400
600
400
1,400
0
1,000
2,000
1,000
4,000
2,000
1,300
4,000
1,000
6,300
3,000
2,400
3,600
2,400
8,400
400
4,000
6,000
1,500
11,500
4,200
6,400
9,600
3,900
19,900
4,600
3Q16
2,265,086
6,400,000
2.8x
625
4,000
1,612
40%
200
200
400
1,500
2,000
2,400
5,600
8,000
2Q17
516,912
258,456
775,368
4,000,000
1,600,000
5,600,000
7.7x
6.2x
7.2x
625
875
696
2,500
1,400
3,900
1,195
31%
150
250
400
2,000
3,000
2,400
5,100
7,500
794,979
1,186,182
1,981,160
10,772,165
6,518,825
8,303,272
14,822,097
57,970,551
8.2x
7.0x
7.5x
5.4x
400
440
2,608
3,800
6,408
29,563
780
30%
0%
12%
26%
50
150
200
1,100
100
250
350
2,050
150
400
550
3,150
1,000
1,000
2,000
13,500
1,500
1,500
3,000
21,150
900
2,400
3,300
19,300
2,550
4,000
6,550
38,725
3,450
6,400
9,850
58,025
1Q16
3Q15
2Q17
2Q18
2Q17
>2020
510
926
780
7,753
33%
11
abc
Pending
Studio City
Phase I
Phase II
Total
City of Dreams
Phase III
Galaxy Macau
Phase II
Phase III
Phase IV
Total
Parisian
Wynn Cotai
Phase I&II
MGM Cotai
Phase I
Phase II
Total
SJM Cotai
Phase I
Phase II
Total
Total/average
Date
Opened
abc
Financial estimates
2013 EBITDA revised up 3% on better market outlook
Galaxy Macau Phase II to boost estimated 2015 EBITDA by 10%
All new resort development fully funded via existing cash,
Earnings estimates
Revenue
We forecast Galaxy will achieve revenue growth
of 16% in 2013 with a slight improvement in
market share as player spend continues to shift to
Cotai resorts.
We revise up our 2013 growth estimate for Macau
gross gaming revenue (GGR) to 13.5% from
12.9%. The stronger growth forecast reflects the
stronger recovery in VIP after the leadership
transition in Beijing; mass gaming continues to
grow in the 25-30% y-o-y range (see Macau
Gaming, 2013: More to come, 21 January).
EBITDA
We increase our 2013 EBITDA forecast by 3% to
HKD12.2bn from HKD11.8bn on the back of
stronger actual growth in the Macau market in
2012 (13.5% vs. an estimated 12.5%) and a
slightly stronger growth forecast in 2013 (13.5%
vs. 12.9%).
Our revised 2013-14 EBITDA estimates are 13%
and 10%, respectively, above consensus.
NPAT
We forecast 2013 NPAT of HKD9.4bn, up 33%
from an estimated HKD7.1bn in 2012.
12
2012e
2013e
2014e
2015e
5,091
26,596
44,248
0
75,934
2,398
(3,708)
74,624
5,748
28,338
48,969
13,146
96,202
2,590
(4,079)
94,713
EBITDA
Gaming
CityClubs
StarWorld
Galaxy Macau
Pre-opening
Total Gaming
C/ materials
Other
Total
Dep & Amort
233
213
209
183
195
2,955 3,484 3,993 3,856 4,367
2,572 6,199 8,058 9,682 10,867
(784)
(301) (483) (573) (640)
5,410 9,395 11,711 13,110 14,659
440
480
518
433
449
(94)
5,749 9,845 12,151 13,590 15,177
(1,248) (2,470) (2,470) (2,470) (2,470)
EBIT
Net interest
Other
PBT
Tax
Minorities
NPAT
Growth
4501
(338)
(1,102)
3,061
(32)
(26)
3,004
234%
7,375
(385)
200
7,190
(58)
(65)
7,067
135%
4,174
72.8
0.0
0%
4,184
169.1
0.0
0%
4,194
225.2
0.0
0%
Shares on issue
EPS
DPS
Payout ratio
4,204
261.8
0.0
0%
4,214
332.2
0.0
0%
abc
Cash flow
Balance sheet
2011
2012e
2013e
2014e
2015e
C/ assets
Cash
Other
Total
6,103
9,089
9,283
12,011
3,181
15,191
13,672
3,181
16,853
11,195
3,181
14,376
6,564
3,181
9,744
NC Assets
PPE
Intangibles
Other
Total
17,469
1,270
10,908
26,481
20,703
1,221
7,724
29,648
29,849
1,171
7,707
38,727
44,623
1,121
7,690
53,434
64,592
1,072
7,673
73,336
2011
2012e
2013e
2014e
2015e
Total assets
35,764
44,839
55,580
67,810
83,081
4,501
5,698
7,375
8,437
9,681
10,793
11,120
12,282
14,161
15,323
Investing
Capex
Other
Total
C/Liabilities
Borrowings
Other
Total
1,142
10,206
9,993
1,142
10,206
11,348
1,142
11,514
12,655
1,142
12,748
13,890
1,142
14,035
15,177
(4,510)
1,291
(4,913)
(3,233)
14
(3,219)
Financing
Equity
Debt change
Dividends
Other
Total
162
1,840
(17)
(2,002)
1,616
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
NC Liabilities
Borrowings
Other
Total
Total
10,531
1,250
11,128
21,121
11,184
597
11,781
23,128
11,184
597
11,781
24,436
11,184
597
11,781
25,671
11,184
597
11,781
26,958
Net assets
Debt/Assets
Net Debt/Equity
14,643
33%
38%
21,711
27%
1%
31,144
22%
-4%
42,139
18%
3%
56,123
15%
10%
2,402
4,369
22
6,793
5,218
6,793
0
12,011
1,662
12,011
0
13,672
(2,477)
13,672
0
11,195
(4,631)
11,195
0
6,564
EBIT
Operating CF
Net change
Cash beginning
Adjustments
Cash end
13
abc
Share capital
Dividend policy
2010
2011
Beginning
New issue
Buy back
End of year
WA
14
abc
47. 11
48.70
47.59
40
32. 50
30
20
10
0
SOP
DCF
TP
Share price
15
abc
Figure 12: Galaxy sum-of-the-parts (SOTP) valuation (HKDm, except per share data)
Owned
StarWorld
Galaxy Macau
Total
City Clubs
Total current gaming
Cotai Projects
Phase II (2015)
Gross value (2017)
Develop cost
Net value
Disc. Net value
Phase III (2017)
Gross value (2019)
Develop cost
Net value
Disc. Net value
Phase IV (2018)
Gross value (2020)
Develop cost
Net value
Disc. Net value
Total
Total gaming
Construction mat.
Corporate
Gross Assets
Less:
Land premium
License renewal
Less: net debt
Borrowings
Cash
Net assets
Shares in issue
Value per share
Source: HSBC estimates
16
EBITDA
(x)
Value
Share
3,993
8,058
12,051
233
12,284
13.0x
14.0x
13.7x
10.0x
13.6x
51,911
112,808
164,718
2,327
167,046
24%
53%
77%
1.1%
78%
5,514
10.0x
55,144
-16,338
38,806
22,020
10%
81,821
-36,566
45,255
20,471
10%
39,810
-14,782
25,028
10,109
5%
52,600
219,645
3,082
-8,016
214,711
24%
102%
1%
-4%
100%
8,182
3,981
440
-573
10.0x
10.0x
7.0x
14.0x
-850
-16,900
12,326
12,011
196,647
4,174
HKD47.11
abc
a) RMB-TWD convertibility
Figure 13: Galaxy DCF valuation (HKDm, except per share data)
2013e
2014e
2015e
2016e
2017e
2018e
2019e
2020e
EBITDA
Less: capex
Less: land premium
Op Free CF
Income Tax
Total
12,151
-9,146
-425
2,580
-77
2,503
13,590
-14,774
16,631
-19,969
20,618
-17,849
22,793
-5,773
27,985
-1,452
34,850
-1,740
40,921
-1,740
-1,184
-89
-1,273
-3,338
-114
-3,451
2,769
-146
2,623
17,020
-163
16,857
26,533
-205
26,329
33,110
-260
32,850
39,181
-308
38,872
Cashflows
Terminal value
Total
License renewal fee
Less:
Borrowings
Cash
Net
Net Assets
Shares in issue (m)
Value per share
HKD
60,361
160,139
220,501
-16,900
WACC
TG
12.0%
2.0%
12,326
12,011
-315
203,286
4,174
48.70
17
abc
Valuation methodology
Our target price for GEG is based on a weighted
average (70/30) of SOTP and DCF valuations.
Key points:
Sum-of-the-parts (SOTP) valuation
18
abc
Sands CC
14.0x
Galax y Macau
14.0x
City of Dreams
14.0x
Plaza
14.0x
Venetian
14.0x
Wy nn Macau
13.0x
MGM Macau
13.0x
Grand Lisboa
13.0x
StarWorld
13.0x
Sands Macau
Altira
12.0x
5. 0x
10. 0x
15.0x
M acau Cotai
14.0x
Macau Peninsula
13.0x
Macau other
12.0x
Singapore
10.0x
8.0x
5.0x
10.0x
11.0x
Philippines
0.0x
Malay sia
Renewal scenarios
10.0x
0.0x
12.0x
Oceanus
15.0x
19
abc
Fee / device
2000000
50000
Galaxy Macau
Other Cotai
StarWorld
Service Contracts
Total
Devices
Tables
400
800
270
150
1620
EGM
1500
4000
250
599
6349
Galaxy Macau
Other Cotai
StarWorld
Service Contracts
Total
Fee payable
Tables
800
1600
540
300
3240
EGM
75
200
13
30
317
Total
875
1800
553
330
3557
GGR (USDm)
Concessionaire price
Ratio
2004
2006
2018e
5021
200
4.0%
6,875
900
13.1%
82,983
10,863
13.1%
20
abc
21
Macau maps
22
abc
abc
Macau casinos
Figure 18: Location of Macau casino resorts
Zhuhai PRC
Zhu
h ai
PR
Reservoir
2
20
5
3
18
16
1
15
2
Nam Van
Lake
Ferry
Terminal
21
4
8
1
7
13
Secondary
Casino
Activity
Cluster
17
5
1
1
19
Friendship Bridge
ed
Prop os
Secondary
Casino
Activity
Cluster
B
l
Tu nn e
e
id g
) Br
Br id g e
-Taip a
n
(V a
r
Harb ou
Cr oss
M ac au
n
Wa
Sai
Primary
Casino
Activity
Cluster
SJM
Lisboa
1.
Sands Macau
2.
3.
Jai Alai
Kam Pek
4.
5.
6.
7.
Macau Palace
Casino Jimei
Lan Kwai Fong
Diamond
2.
3.
4.
Venetian Macau
Four Seasons
Cotai Central
5.
Parisian (PD)
8.
9.
10.
11.
12
13.
14.
15.
16.
17.
Casa Real
Marina
Greek Mythology
Grandview
Taipa
18.
19.
20.
21.
Grand Lisboa
Le Arc
Ponte 16
Oceanus
22.
1.
2.
Pharaoh's
Golden Dragon
Fortuna
Grand Emperor
Babylon
Galaxy Entertainment
1.
Waldo
2.
3.
RIO
President
4.
Grand Waldo
5.
6.
StarWorld
Galaxy Macau
7.
8.
1.
2.
3.
4.
Altira Macau
City of Dreams
Taipa Square
Studio City (UD)
1.
2.
MGM Macau
MGM Cotai (UD)
MGM China
Taipa
Wynn Macau
Wynn Cotai (UD)
Pac On
Terminal
10
12
11
Sands China
1.
Ma
uA
ca
o rt
irp
UD = Under development
PD= Pre Development/Planning
9
6
4
2
3
8
Primary
Casino
Activity Lotus Bridge
Cluster
Green
Space
Golf Course
(Harrahs)
Go
Cart
4
7
8
2
Shun Tak
Zhuhai PRC
(Hengqin Island)
Sports
Sports
Dome
22
Power Station
Theme
Park
Sites
14,15,16
Reservoir
Coloane
China Sea
Source: HSBC
23
24
Cotai resorts
Figure 19: Location of Macau casino resorts on Cotai
Taipa
u
ca
Ma
Ma ri na
Ga laxy Macau
II
Venetia n
Zhuhai PRC
(Hengqin Island)
Cotai MGM
Central
SJM
Pa risian
Studio City
W ynn
Cotai
III
Green
Sp ace
rt
rp o
City of
Dreams
IV
Pl aza
Ai
Sites Shun
7&8 Tak
Lotus Bridge
Power Station
Sports
Dome
Theme
Park
Golf Course
(Caesars)
Reservoir
Coloane
China Sea
Source: HSBC
abc
abc
Phase I
Phase II
Phase IV
Venetian
Grand Waldo
Phase II
Phase III
China Sea
Source: HSBC
25
Notes
26
abc
abc
Notes
27
abc
Disclosure appendix
Analyst Certification
The following analyst(s), economist(s), and/or strategist(s) who is(are) primarily responsible for this report, certifies(y) that the
opinion(s) on the subject security(ies) or issuer(s) and/or any other views or forecasts expressed herein accurately reflect their
personal view(s) and that no part of their compensation was, is or will be directly or indirectly related to the specific
recommendation(s) or views contained in this research report: Sean Monaghan
Important disclosures
Stock ratings and basis for financial analysis
HSBC believes that investors utilise various disciplines and investment horizons when making investment decisions, which
depend largely on individual circumstances such as the investor's existing holdings, risk tolerance and other considerations.
Given these differences, HSBC has two principal aims in its equity research: 1) to identify long-term investment opportunities
based on particular themes or ideas that may affect the future earnings or cash flows of companies on a 12 month time horizon;
and 2) from time to time to identify short-term investment opportunities that are derived from fundamental, quantitative,
technical or event-driven techniques on a 0-3 month time horizon and which may differ from our long-term investment rating.
HSBC has assigned ratings for its long-term investment opportunities as described below.
This report addresses only the long-term investment opportunities of the companies referred to in the report. As and when
HSBC publishes a short-term trading idea the stocks to which these relate are identified on the website at
www.hsbcnet.com/research. Details of these short-term investment opportunities can be found under the Reports section of this
website.
HSBC believes an investor's decision to buy or sell a stock should depend on individual circumstances such as the investor's
existing holdings and other considerations. Different securities firms use a variety of ratings terms as well as different rating
systems to describe their recommendations. Investors should carefully read the definitions of the ratings used in each research
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be used or relied on in isolation as investment advice.
HSBC assigns ratings to its stocks in this sector on the following basis:
For each stock we set a required rate of return calculated from the cost of equity for that stocks domestic or, as appropriate,
regional market established by our strategy team. The price target for a stock represents the value the analyst expects the stock
to reach over our performance horizon. The performance horizon is 12 months. For a stock to be classified as Overweight, the
potential return, which equals the percentage difference between the current share price and the target price, including the
forecast dividend yield when indicated, must exceed the required return by at least 5 percentage points over the next 12 months
(or 10 percentage points for a stock classified as Volatile*). For a stock to be classified as Underweight, the stock must be
expected to underperform its required return by at least 5 percentage points over the next 12 months (or 10 percentage points
for a stock classified as Volatile*). Stocks between these bands are classified as Neutral.
Our ratings are re-calibrated against these bands at the time of any 'material change' (initiation of coverage, change of volatility
status or change in price target). Notwithstanding this, and although ratings are subject to ongoing management review,
expected returns will be permitted to move outside the bands as a result of normal share price fluctuations without necessarily
triggering a rating change.
28
abc
*A stock will be classified as volatile if its historical volatility has exceeded 40%, if the stock has been listed for less than 12
months (unless it is in an industry or sector where volatility is low) or if the analyst expects significant volatility. However,
stocks which we do not consider volatile may in fact also behave in such a way. Historical volatility is defined as the past
month's average of the daily 365-day moving average volatilities. In order to avoid misleadingly frequent changes in rating,
however, volatility has to move 2.5 percentage points past the 40% benchmark in either direction for a stock's status to change.
37%
Underweight (Sell)
17%
rating history
From
N/A
Target Price
40
Price 1
Price 2
Price 3
Price 4
Price 5
Price 6
Price 7
Price 8
Price 9
35
30
25
20
15
10
5
To
Date
Overweight (V)
Value
30 May 2011
Date
19.37
30.50
31.85
33.35
33.86
32.00
35.89
38.64
39.82
30 May 2011
16 January 2012
16 March 2012
23 April 2012
26 April 2012
10 June 2012
27 August 2012
12 September 2012
25 November 2012
Source: HSBC
Jan-13
Jan-12
Jan-11
Jan-10
Jan-09
Jan-08
Source: HSBC
29
abc
Ticker
Recent price
Price Date
Disclosure
0027.HK
32.50
17-Jan-2013
4, 5, 6, 7, 11
Source: HSBC
1
2
3
4
5
6
7
8
9
10
11
HSBC* has managed or co-managed a public offering of securities for this company within the past 12 months.
HSBC expects to receive or intends to seek compensation for investment banking services from this company in the next
3 months.
At the time of publication of this report, HSBC Securities (USA) Inc. is a Market Maker in securities issued by this
company.
As of 31 December 2012 HSBC beneficially owned 1% or more of a class of common equity securities of this company.
As of 30 November 2012, this company was a client of HSBC or had during the preceding 12 month period been a client
of and/or paid compensation to HSBC in respect of investment banking services.
As of 30 November 2012, this company was a client of HSBC or had during the preceding 12 month period been a client
of and/or paid compensation to HSBC in respect of non-investment banking securities-related services.
As of 30 November 2012, this company was a client of HSBC or had during the preceding 12 month period been a client
of and/or paid compensation to HSBC in respect of non-securities services.
A covering analyst/s has received compensation from this company in the past 12 months.
A covering analyst/s or a member of his/her household has a financial interest in the securities of this company, as
detailed below.
A covering analyst/s or a member of his/her household is an officer, director or supervisory board member of this
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At the time of publication of this report, HSBC is a non-US Market Maker in securities issued by this company and/or in
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Analysts, economists, and strategists are paid in part by reference to the profitability of HSBC which includes investment
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For disclosures in respect of any company mentioned in this report, please see the most recently published report on that
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* HSBC Legal Entities are listed in the Disclaimer below.
Additional disclosures
1
2
3
30
abc
Disclaimer
* Legal entities as at 8 August 2012
Issuer of report
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The Hongkong and Shanghai Banking
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Corporation Limited, Singapore Branch
France; DE HSBC Trinkaus & Burkhardt AG, Dsseldorf; 000 HSBC Bank (RR), Moscow; IN HSBC Securities and Capital
21 Collyer Quay #03-01
Markets (India) Private Limited, Mumbai; JP HSBC Securities (Japan) Limited, Tokyo; EG HSBC Securities Egypt SAE,
HSBC Building
Cairo; CN HSBC Investment Bank Asia Limited, Beijing Representative Office; The Hongkong and Shanghai Banking
Corporation Limited, Singapore Branch; The Hongkong and Shanghai Banking Corporation Limited, Seoul Securities Branch;
Singapore 049320
The Hongkong and Shanghai Banking Corporation Limited, Seoul Branch; HSBC Securities (South Africa) (Pty) Ltd,
Website: www.research.hsbc.com
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[356636]
31
abc
Asia
Sophie Dargnies
Analyst
+33 1 56 52 43 48
Chris Zee
Analyst
+852 2822 2912
chriscmzee@hsbc.com.hk
Christopher Leung
Analyst
+852 2996 6531
christopher.k.leung@hsbc.com.hk
Lina Yan
Analyst
+852 2822 4344
linayjyan@hsbc.com.hk
Catherine Chao
Analyst
+852 2996 6570
catherinefchao@hsbc.com.hk
Karen Choi
Analyst
+822 3706 8781
karen.choi@kr.hsbc.com
Jena Han
Associate
+822 3706 8772
jenahan@kr.hsbc.com
Sean Monaghan
Analyst
+65 6658 0610
seanmonaghan@hsbc.com.sg
Cedric Besnard
Analyst
+33 1 56 52 43 66
sophie.dargnies@hsbc.com
cedric.besnard@hsbc.com
Florence Dohan
Analyst
+44 207 992 4647
florence.dohan@hsbc.com
Jrme Samuel
Analyst
+33 1 56 52 44 23
jerome.samuel@hsbc.com
Emmanuelle Vigneron
Analyst
+33 1 56 52 43 19
emmanuelle.vigneron@hsbc.com
Paul Rossington
Analyst
+44 20 7991 6734
Leisure
Lena Thakkar
Analyst
+44 20 7991 3448
paul.rossington@hsbcib.com
lena.thakkar@hsbcib.com
CEEMEA
Consumer Brands & Retail
Michele Olivier
Analyst
+27 11 6764208
michele.olivier@za.hsbc.com
Specialist Sales
Lynn Raphael
+44 20 7991 1331
David Harrington
+44 20 7991 5389
lynn.raphael@hsbcib.com
abelchlee@hsbc.com.tw
Amit Sachdeva
Analyst
+91 22 2268 1240
amit1sachdeva@hsbc.co.in
stewart.h.ragar@us.hsbc.com
Manisha A Chaudhry
Associate, Latin America & US
+1 212 525 3035
manisha.a.chaudhry@us.hsbc.com
Beverages
Lauren Torres
Analyst, Global Beverages
+1 212 525 6972
lauren.torres@us.hsbc.com
James Watson
Analyst, Global Beverages
+1 212 525 4905
james.c.watson@us.hsbc.com
Food & Agricultural Products
Pedro Herrera
Analyst, Global Food & Agricultural Products
+1 212 525 5126
pedro.herrera@us.hsbc.com
Ravi Jain
Analyst, Global Food & Agricultural Products
+1 212 525 3442
ravijain@us.hsbc.com
Diego T Maia
Analyst, Food & Agricultural Products, Brazil
+55 11 33718192
diego.t.maia@hsbc.com.br
Household Durables
Francisco Suarez
Analyst, Household Durables, Mexico
+52 55 5721 2173
francisco.suarez@hsbc.com.mx
Berenice Munoz
Associate, Household Durables, Mexico
+52 55 5721 5623