2013 - return of the vips; adding wynn to top picks with...

Deutsche Bank Markets Research

Asia Hong Kong Consumer Hotels / Leisure / Gaming

Industry

Macau

Date 3 January 2013

Recommendation Change

2013 - Return of the VIPs; adding Wynn to top picks with Galaxy, MPEL From Premium Mass to VIPs

________________________________________________________________________________________________________________

Deutsche Bank AG/Hong Kong

Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1. MICA(P) 072/04/2012.

Karen Tang

Research Analyst (+852) 2203 6141 [email protected]

Top picks

Galaxy (0027.HK),HKD31.15 Buy

Melco Crown (MPEL.OQ),USD17.36 Buy

Wynn Macau (1128.HK),HKD21.80 Buy

Companies Featured

Galaxy (0027.HK),HKD31.15 Buy 2011A 2012E 2013EP/E (x) 15.4 17.6 14.0EV/EBITDA (x) 11.2 13.1 10.5Price/book (x) 4.2 6.0 4.2

Melco Crown (MPEL.OQ),USD17.36 Buy 2011A 2012E 2013EP/E (x) 16.6 22.3 17.3EV/EBITDA (x) 8.4 11.3 10.0Price/book (x) 1.8 2.8 2.4

MGM China (2282.HK),HKD14.42 Hold 2011A 2012E 2013EP/E (x) 12.7 13.0 12.1EV/EBITDA (x) 9.7 9.8 9.1Price/book (x) 8.7 9.2 7.7

Sands China (1928.HK),HKD36.45 Buy 2011A 2012E 2013EP/E (x) 17.5 26.4 20.3EV/EBITDA (x) 14.1 20.5 15.4Price/book (x) 4.1 7.0 6.5

SJM (0880.HK),HKD18.54 Hold 2011A 2012E 2013EP/E (x) 14.3 15.1 14.2EV/EBITDA (x) 9.6 11.1 10.8Price/book (x) 4.1 5.2 5.1

Wynn Macau (1128.HK),HKD21.80 Buy 2011A 2012E 2013EP/E (x) 17.7 17.0 15.9EV/EBITDA (x) 14.8 14.0 14.0Price/book (x) 25.1 10.8 14.0

2012 was the year of the Premium Mass. Galaxy & MPEL, which focused on this segment, saw their share prices rise the most (+113% & +75% respectively). We think 2013 will be marked by the return of the VIPs. Leading indicators, such as fine wine prices, suggest an imminent recovery in high-end spending. Junkets also believe that pent-up VIP demand is about to be released. Galaxy & Wynn are the biggest beneficiaries given their high VIP exposure. We upgrade Wynn from Hold to Buy and add it to our top picks alongside Galaxy (Buy) and MPEL (Buy). In 2013, we see biggest share price upside in Galaxy, where our new target price of HK$41.2 implies 32% upside.

The Three “D”s – Demand, Divergence & Dividends In 2013, investors will focus on the Three “D”s. (1) Demand – After six months of lackluster VIP growth, junkets have noticed a sudden surge in VIP demand since early December, particularly from northern China. We see this as the start of the VIP recovery cycle. This prompts us to raise 2013 EPS by 1-15%. (2) Divergence – The much-anticipated Zhuhai high-speed rail station opened on 31 December. Visitor growth will likely resume, making the divergence between Cotai and Peninsula more apparent. We forecast Cotai operators to enjoy strong earnings growth of 26-30% whereas Peninsula operators could see only single-digit earnings growth. (3) Dividends – Peninsula operators offer c.6% dividend yield. Hence, we see 10-15% share price upside even for our least preferred stocks, SJM (Hold) & MGM China (Hold).

Galaxy – Top pick in 2013 Even after last year’s rally, we still think Galaxy will offer the most upside in 2013. Last year, Galaxy proved its strength in VIP but its mass table productivity was still uninspiring. As of 3Q12, Galaxy Macau’s mass table yield was only US$8.8k/table/day, i.e. 17% below Cotai peers. This year, we expect yield management tools to help it close the gap. Expanding at 25% EPS CAGR over the next three years but only trading at 14x PE, Galaxy remains one of the most attractively priced growth stocks in Asia.

Buy ratings on four stocks: Galaxy, MPEL, Sands and Wynn We raise Macau gaming revenue growth from 8% to 11% in 2013, driven by 5% VIP growth and 25% mass growth. We raise target prices across the board and upgrade Wynn and Sands from Hold to Buy. We now have Buys on four stocks: Galaxy (TP HK$41.2), MPEL (TP US$22.4), Sands (TP HK$44.2) and Wynn (TP HK$26.4). Key risk is if VIP recovery proves to be short-lived.

Figure 1: Macau sector valuation 2 Jan 2013 Rating Target

price Upside EV/EBITDA PE DB EPS growth PEG Div

Yield 2013E 2013E 2013E 2014E 2012E 2012E

Galaxy Buy HK$41.2 32% 10.5x 14.0x 26% 23% 0.7x 0.0% Melco Crown Buy US$22.4 29% 10.0x 17.3x 29% 38% 0.7x 0.0% MGM China Hold HK$16.4 15% 9.0x 12.1x 7% 9% nm 6.2% Sands China Buy HK$44.2 24% 15.1x 19.9x 30% 25% 0.9x 4.0% SJM Hold HK$20.0 10% 10.7x 14.0x 6% 6% nm 6.1% Wynn Macau Buy HK$26.4 22% 13.8x 15.8x 7% 11% nm 5.9% Macau average 11.5x 15.5x 17% 19% Source: Deutsche Bank

3 January 2013

Hotels / Leisure / Gaming

Macau


Table Of Contents

2013 Outlook .................................................................................. 3 Leading indicators show early signs of VIP recovery ........................................................ 3 Raise Macau gaming revenue growth from 8% to 11% in 2013 ....................................... 3 New high-speed rail station boosts visitor growth ............................................................ 5 Wynn Macau & Galaxy biggest beneficiaries of VIP recovery .......................................... 5 Smoking ban – Smooth transition on January 1; impact limited ...................................... 6

Mass market growth remains strong ............................................. 7 Driver # 1: Infrastructure improvements ............................................................................ 7 Driver # 2: Rising minimum bets ........................................................................................ 9 Driver # 3: Hotel room bottleneck getting relieved .......................................................... 13

Earnings and ratings changes ...................................................... 14 Margin expansion from favorable mix shift towards mass market ................................. 14 Bigger earnings revisions for Cotai operators .................................................................. 14 Higher than consensus on Galaxy & MPEL ..................................................................... 14 Expect further sector re-rating in 2013 ............................................................................ 15

Company section .......................................................................... 18 Galaxy (Buy): Top pick; Our 2013 EBITDA 11% above consensus .................................. 18 MPEL (Buy): Leader in premium mass ............................................................................. 20 MGM China (Hold): Solid dividend yield but hotel room constraint ................................ 22 Sands China (Buy): Upgrade from Hold to Buy with HK$44.2 TP ................................... 24 SJM (Hold): Good dividend yield but smoking ban impact likely .................................... 26 Wynn Macau (Buy): Biggest beneficiary of VIP recovery ................................................ 28

Appendix A: Company P&L .......................................................... 30

Appendix B: Market share ............................................................ 36 Macau gross gaming revenue .......................................................................................... 36 Overall gaming revenue market share ............................................................................. 36 VIP revenue market share ................................................................................................ 37 VIP rolling ......................................................................................................................... 37 VIP rolling market share ................................................................................................... 38 Mass market revenue market share ................................................................................. 38

3 January 2013


Macau


2013 outlook

Leading indicators show early signs of VIP recovery

Fine wine prices up 3% since mid November Over 90% of VIP players are ultra-rich mainland Chinese. To monitor the spending patterns of Chinese tycoons, we look at the market prices of expensive French fine wines, such as Lafite, Latour and Petrus, among others. Specifically, we track the Fine Wine 50 index, which represents market prices of the 50 most heavily traded French and Italian fine wines. After falling 14-16% from its peak in March 2012, the index remained flat between July and October. In early November, the index started to show some signs of recovery. By 28 December, the index rose to 302.1, up 3% from the trough in mid November. In particular, the index rose 2.0% during December, the first month-on-month increase since February 2012.

Figure 2: French fine wine price yoy vs Macau gaming

revenue yoy

Figure 3: China luxury car sales vs. Macau gaming

revenue yoy

-30%

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Macau gaming revenue yoy (RHS)French fine wine index yoy (LHS)

70% correlation with 1-month lead

0%

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Jul-1

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Sep

-12

Nov

-12

China luxury car sales yoy*

Macau gaming revenue yoy

74% correlation with 3-month lead

Aug-Nov rebound to 22-29% yoy vs trough

of 11% in June

*Luxury car sales include sales of Audi, Mercedes and BMW (incl Mini) in China. These brands account for c. 80% of luxury car sales in China.

Source: Macau government, The London International Vintners Exchange Source: German auto company data, Macau government, Deutsche Bank

China luxury auto sales also seem to be picking up In China, the top three German car brands Audi, Mercedes and BMW (including Mini) represent almost 80% of the country’s total luxury car sales. Sales growth of these three car brands recovered from a 11% yoy trough in June to 22-29% yoy over August-November. Historically, China luxury car sales have been a good indicator of Macau gaming revenue with a three-month lead (74% correlation).

We raise Macau gaming revenue growth forecast from 8% to 11% for 2013

On the back of improving leading indicators, we lift our Macau gaming revenue growth forecast from 8% to 11% for 2013, driven by:

VIP revenue growth of 5% (up from 0%) and

Mass revenue growth of 25% (up from 22%).

3 January 2013


Macau


Figure 4: Macau gaming revenue yoy growth

62%

48%

28%

-3%

-13% -12%

22%

50%57%

77%

49%52%

43%46%48%

33%27%

13%

6%10%11%

-20%

-10%

0%

10%

20%

30%

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50%

60%

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1Q 08

2Q 08

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4Q 10

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3Q 12

4Q 12E

2013E

DB forecast

Source: DICJ, Deutsche Bank estimates

Raising VIP revenue growth to 5% in 2013E In November, junket VIP rolling surprisingly rose 7% yoy to HK$519bn. This is the first growth in junket VIP rolling since May (flat or down 2-7% yoy over June-October). In December, Macau gaming revenue rose 20% yoy to MOP28.2bn, a new monthly record, beating market expectations. These positive data affirm our view that China’s demand for luxury goods has started to recover. Incorporating this change in demand patterns, we raise Macau’s 2013E VIP growth from 0% to 5% yoy.

Figure 5: Macau gaming revenue Figure 6: Macau junket VIP rolling growth (yoy)

19 20 20 21

24

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01/11 03/11 05/11 07/11 09/11 11/11 01/12 03/12 05/12 07/12 09/12 11/12

MOPbn Gaming revenue(LHS) yoy(RHS)

40%

71%

55%

44%42%

65%58%59%

51%

30%30%24%

33%

12%14%13%10%

-2%-3%-7%

0%0%

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01/11 03/11 05/11 07/11 09/11 11/11 01/12 03/12 05/12 07/12 09/12 11/12

+7% yoy in Nov v s. down or flat

ov er Jun-Oct

Source: Macau government, Deutsche Bank estimates Source: Macau government, Deutsche Bank estimates

Figure 7: Macau industry yoy growth by segment

-19% -19%

26%

60%71%

99%

57% 62%

48% 50% 52%

32%24%

7%

-1%

2% 5%2% 4%15%

32% 33% 37% 33% 31% 31% 36% 39% 38% 36% 30% 27% 31% 25%

-20%

0%

20%

40%

60%

80%

100%

1Q 09

2Q 09

3Q 09

4Q 09

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2Q 10

3Q 10

4Q 10

1Q 11

2Q 11

3Q 11

4Q 11

1Q 12

2Q 12

3Q12

4Q12E

2013E

VIP yoy Mass yoy

Source: Macau government, Deutsche Bank estimates

3 January 2013


Macau


New high-speed rail station boosts visitor growth

The Zhuhai station of the Guangzhou-Zhuhai intercity rail (which is located next to Macau’s Gongbei border gate) started operations on 31 December 2012. With this new link, a visitor from Wuhan (Central China) can travel directly to Macau by high speed train within about four hours vs. 14 hours previously (see page 7 for more details).

In 2012, visitor arrivals to Macau remained stagnant at 28m as the 5% growth in overnight visitors was offset by a 4% decline in day-trippers. With the new Zhuhai station, we think visitor growth will resume in 2013. We raise our 2013 mass revenue growth forecast from 22% to 25% yoy, driven by the following factors.

10% growth in overnight visitor arrivals: The 5,800 hotel rooms at Sands Cotai Central released the bottleneck on Macau’s hotel capacity. Typically, visitor growth picks up significantly after a new hotel opens.

15% growth in gaming spend per visitor: We believe Sands Cotai Central’s large number of hotel rooms and diverse entertainment offerings should help increase visitor length of stay and in turn their gaming spend. In addition, we believe expanding premium mass programs at properties like City of Dreams and Galaxy Macau should have a positive impact on gaming spend per visitor, as premium mass players typically spend more than grind mass players.

Figure 8: Macau mass market revenue by drivers

-3%

16% 18% 15%19%

28% 26%

15% 12%19%

21%10%

-2%

15%

8%5%

10%8%

15%

37%

28%

13%

33%36%

31%

25%

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-5%

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40%

2006 2007 2008 2009 2010 2011 2012E 2013E 2014E

Gaming spend per visitor yoy

Overnight visitor arrivals yoy High-speed rail impact

Source: Deutsche Bank estimates, DSEC

Wynn Macau & Galaxy biggest beneficiaries of VIP recovery

We think 2013 will be marked by the return of the VIPs. Leading indicators, such as fine wine prices, suggest an imminent recovery in high-end spending. Junkets also believe that pent-up VIP demand is about to be released. After six months of lackluster VIP growth, junkets have noticed a sudden surge in VIP demand since early December, particularly from northern China. We see this as the start of the VIP recovery cycle. Galaxy and Wynn are the biggest beneficiaries given their high VIP exposure. We upgrade Wynn from Hold to Buy, and add it to our top picks alongside Galaxy and MPEL.

3 January 2013


Macau


Figure 9: Revenue mix of Macau operators (2013E) Figure 10: EBITDA mix of Macau operators (2013E)

45%63%

66% 67% 68% 71%13%

1%5% 8% 2%

3%41% 36% 29% 25% 29% 26%

0%

20%

40%

60%

80%

100%

Sands China

SJM Melco Crown

Wynn Macau

Galaxy MGM China

Mass gaming

Non-gaming

VIP

Macau VIP 61%

22% 33% 34% 34%39%

45%

26% 5% 4% 6%4%

18%

51%62% 61% 60% 57%

37%

0%

20%

40%

60%

80%

100%

Sands China

Melco Crown

SJM MGM China

Galaxy Wynn Macau

Mass gaming

Non-gaming

VIPMacau VIP 33%

Source: Deutsche Bank estimates Source: Deutsche Bank estimates

Smoking ban – Smooth transition on 1 January; impact limited

From 1 January 2013, Macau's smoking ban will cover not only restaurants (effective since 1 January 2012), but also casino gaming floors. Under the laws, casinos need to allocate at least 50% of gaming floor area as non-smoking areas. Non-smoking areas need to be separated from smoking areas by either: (i) four-meter wide transition areas, (ii) two-meter high partitions or (iii) air curtains or special ventilation systems. For smokers violating the law, the fine will be MOP400 (US$50). Casinos will only be liable if they fail to have appropriate warning signs or sell cigarettes inappropriately.

We visited several casinos in Macau on 1 January; all casinos we visited have set up clear signs. For example, we saw in Galaxy Macau that smoking is allowed on all the high-limit tables in the Pavilion areas, while for the remaining mass floor, all tables on the left side are for non-smoking (right side for smoking). While the smoking tables looked slightly busier (80% occupied at 5pm), the non-smoking tables were also reasonably busy (60% occupied). MGM Macau has also included all high-limit tables in the smoking areas. MGM management said that they have complied with all the requirements, including improving ventilation systems to improve air quality. Separately, 42 casino visitors were fined MOP400 each for smoking in non-designated areas on 1 January.

In Australia, a complete 100% smoking ban in public areas (including mass casino floors) came into effect in various states over 2002-07. The average impact on mass gaming revenue was 5-10% in the first year of the smoking ban implementation. Since Macau's ban is only on 50% of the floor space, and 80% of Macau's overall gaming revenue is generated on 20% of the gaming floor space, we think the impact on Macau will be very limited.

3 January 2013


Macau


Mass market growth remains strong

Driver # 1: Infrastructure improvements

Zhuhai station links Gongbei to China’s high-speed rail network The much-anticipated Zhuhai south station finally opened on 31 December. This brings the high-speed rail very close to the Macau border as the station is within a 10 minute walk to Macau’s Gongbei border gate. This opening also reduces the travelling time between Gongbei and Guangzhou to only 80 minutes (vs 120-150 minutes by bus). The travelling between Zhuhai station and Guangzhou South station costs RMB70 per 2nd-class ticket (or RMB90 per first-class ticket). On holidays, Zhuhai station would have 35 trains arriving from Guangzhou South station during 6:30am to 11:00pm (or 25 trains during 7am to 10:40pm on weekdays).

More importantly, the Guangzhou station is also the hub for China’s high-speed railway, which links major cities such as Wuhan and Beijing (the rail link to Beijing opened on 26 December 2012). The average train speed is >300km/hr, hence the travel time i) from Wuhan in central China to Macau is reduced from 14 hours to four and ii) from Beijing to Macau is reduced from about 20 hours to eight hours. Overall, these transport infrastructure improvements should help Macau deepen its penetration further into China. The six provinces/cities along the Beijing-Guangzhou high-speed railway have a combined population of 432m (32% of China), with GDP per capita of RMB37,000 (vs. the Chinese average of RMB35,000).

Figure 11: Macau high-speed rail network

Source: Deutsche Bank, Press articles

3 January 2013


Macau


Capacity expansion at Gongbei Border Gate also likely to be completed soon Gongbei Border Gate, which connects northern Macau to southern Zhuhai, is the biggest entry point to Macau for visitors. In YTD October 2012, 48% of visitors travelled to Macau via this border gate. According to government data, all border gates connecting Zhuhai and Macau handled a total of 100m passengers in 2011 (average of 274k passengers/day). In order to cope with increasing visitor traffic, the expansion project at Gongbei Border Gate is currently under construction. We believe the expansion will be completed in the next one to three months. Upon completion, Gongbei immigration point’s capacity should increase from the current c.260k passengers/day to 350k passengers/day.

Hengqin boundary may extend opening hours In late October, both Macau and Zhuhai governments preliminarily agreed to extend the opening hours of Hengqin Border Gate from the current 9am-8pm to 8am-10pm. This border gate currently handles only about 4% of Macau visitor traffic. But given Zhuhai government’s plans to develop Hengqin, we think this policy should have a modest impact on Macau visitation over the longer term.

Overnight visitors tend to spend more per trip Because the high-speed rail is likely to bring more visitors from outside of Guangdong province to Macau, we think it will help to increase spend per visitor. Below are two key takeaways from our proprietary survey, which gathered data from 11,435 visitors at the three main border gates in Macau in 2011.

Visitors from outside Guangdong stay longer: 80% of visitors from outside Guangdong spend at least one night in Macau whereas only 37-50% of visitors from Guangdong and HK visitors do this.

Visitors from outside Guangdong spend twice more per trip: Visitors from outside Guangdong province typically spend HK$15,700 per trip, which is more than twice that of Guangdong or HK visitors (HK$7,500 and HK$5,700 for Guangdong and HK visitors, respectively).

Figure 12: How long will you stay in Macau? Figure 13: How much will you spend on this trip?

37%50%

80%

63%50%

20%

0%10%20%30%40%50%60%70%80%90%

100%

HK Guangdong Rest of China

Overnight visitros Day Trippers

1,800 2,300

6,800 3,900 5,200

8,900

5,700 7,500

15,700

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

HK Guangdong Rest of China

HK$Gaming loss Non-gaming spend

1 visitor from Rest of China = 2 visitors from HK/ or Guangdong

Source: Deutsche Bank Source: Deutsche Bank

Visitor mix change toward overnight visitors has started already Visitor arrival growth to Macau slowed substantially from 16% yoy in 2H11 to a decline of 2%yoy in 3Q12. That said, visitor arrivals from the key overnight visitor market (China Ex-Guangdong province) have remained strong at 13% yoy in YTD November. As such, the percentage of visitors from China Ex-Guangdong rose from 27% in early 2011 to 36% by November 2012. This is reflected in the accelerating trend of overnight visitor

3 January 2013


Macau


growth (+6% yoy by November- 2012 vs. 0% in May 2012). We think this would feed into higher mass revenue growth as visitors from China Ex-Guangdong typically stay longer (c. 80% of them are overnight visitors) and spend more.

Figure 14: Visitor arrival growth by country/ province Figure 15: Overnight vs. day tripper visitor growth (yoy)

-25%

-15%

-5%

5%

15%

25%

35%

1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11 1Q12 3Q12

China

Guangdong

Total

HK + Taiwan

Visa restrictions

-15%

-10%

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0%

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11Fe

b-11

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ug-1

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Overnight visitor Day tripper

Ov ernight visitor growth accelerating vs.

declining day trippers

Source: Deutsche Bank, DSEC Source: Deutsche Bank, DSEC

Driver # 2: Rising minimum bets

In 2012, to counter the twin constraints of table cap and slow VIP growth, casinos started to focus on raising mass table yield (revenue per table). In 3Q12, Macau’s mass revenue per table reached US$8,681/day, up 30% yoy. A key investor question is whether this mass market growth rate is sustainable. For the next two years, we think mass market growth should be sustainable at 20-25% per year, as the rising average minimum bet, which has been a key driver for the past two years, has more room to grow.

In order to analyze the potential for higher minimum bets, we spent a Friday every month walking the mass gaming floors of the seven biggest casinos in Macau. From 2pm to 8pm, we tallied the min bet size of over 1,000 tables on each occasion. We were able to enter most of the high-limit and premium mass areas. For some of the private lounges that we could not enter, we either made an estimate based on our experience from previous casino tours or checked with casino management afterwards. To be consistent, we only counted open baccarat tables. We ignored other games, such as blackjack or sci-bo, which are not consistent with baccarat play limits. On average, we estimate that the average mass market minimum bet in the Big Seven casinos has risen by 11% from HK$1,236 in late June to HK$1,370 in mid November.

Based on our November table count, 27% of tables are in premium mass (minimum bets HK$2,000 or above), 25% are in high-limit mass (HK$1,000-1,500), 44% are in middle-mass and 4% are in grind mass (HK$200 or less).

3 January 2013


Macau


Figure 16: Distribution of mass market tables by

minimum bet size

Figure 17: Mass table yield (revenue per table per day,

US$)

4%2%

44%50%

25%22%

27%27%

-

200

400

600

800

1,000

1,200

Nov 16, FridayJun 29, Friday

Premium mass≥HK$2,000

High limit massHK$1,000-HK$1,500

Middle massHK$300-HK$800

Grind Mass≤HK$200

Avg min bet: HK$1,236 HK$1,370+11%(no. of tables counted)

4,255 4,715 5,019

5,577 6,320 6,442 6,747

7,545 8,242 8,211

8,681

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12

3Q12 +30% yoy

Source: Deutsche Bank estimates Source: Company data, Macau government

Which casinos have the highest exposure to premium mass? Every casino has a different definition for their premium mass segment. To be consistent, we use the following categorization for this study:

Premium mass: minimum bet HK$2,000 or above;

High-limit mass: minimum bet HK$1,000-1,500;

Middle mass: minimum bet HK$300-800;

Grind mass: minimum bet HK$200 or below.

The following shows the distribution of mass market tables in the Big Seven casinos by their minimum bet limits. Key observations include the following.

City of Dreams has the highest exposure to premium mass (49%)

Galaxy Macau has the second highest exposure to premium mass (37%)

Sands Cotai Central has raised its premium mass tables from 7% in June to 14%

Grand Lisboa (9%) and Sands Cotai Central (13%) have the highest exposure to grind mass

Venetian Macau’s strength is in high limit mass (HK$1,000-1,500 minimum bet)

MGM & Wynn’s ability to grow premium mass is constrained by a limited stock of hotel rooms

3 January 2013


Macau


Figure 18: Distribution of mass market tables by min bet

size (Friday 16 November)

Figure 19: Premium / high limit mass market area

9%

13%

3%4%

11%47%

51%54%

61%35%

54%44%

40%14%

20%31%

13%48%

13%25%

49%37%

20%15%14%

17%30%27%

0% 25% 50% 75% 100%

City of DreamsGalaxy MacauGrand LisboaMGM Grand

Sands Cotai CentralVenetian Macau

Wynn MacauBig 7 casino avg

≤HK$200 HK$300-HK$800 HK$1000-HK$1,500 ≥HK$2,000 Grind mass Middle mass High limit mass Premium mass Opening

dateCasino Premium / high limit

mass area# of tables

2Q 2010 Wynn Macau Wynn Encore / Wynn Club 24

4Q 2010 MGM Macau Supreme Lounge 15-20

1Q 2011 City of Dreams High limit West 15-20

4Q 2011 MGM Macau Platinum Lounge 15-20

1Q 2012 Venetian Macau Venetian high limits area 66

2Q 2012 Galaxy Macau Pavilion Club 23

2Q 2012 City of Dreams near Grand Hyatt entrance 20Source: Deutsche Bank estimates Source: Company data, Press reports, Deutsche Bank site visits

Which casino has been attacking the premium mass segment most aggressively? Between our June and November table counts, we found that Sands Cotai Central and City of Dreams have added the most tables with minimum bets at HK$2,000 or above (Sands Cotai Central from 7% to 14% of mass tables and City of Dreams from 43% to 49%). We think City of Dreams’ premium lounge near the Grand Hyatt lobby has attracted many premium mass players who used to play at Wynn Encore. According to these players, the two areas share a few similar characteristics: i) both have easy access (adjacent to hotel lobby) but are away from the busiest tourist entrance; ii) both have a relatively limited number of tables (20-24 tables) and therefore have a quieter atmosphere and iii both have tables with very high betting limits, some with minimum bets as high as HK$10,000.

For years, Wynn Macau dominated the premium mass segment, and always had the highest mass table yield (revenue per table). But in 2Q12, City of Dreams saw its mass table yield rising to US$11.4k/table/day, and overtook Wynn Macau for the first time. (Note: Plaza casino also overtook Wynn Macau in 2Q12 but we exclude it from our comparison because it is a much smaller casino with only 36 mass market tables.)

Figure 20: Mass table win/day (US$) Figure 21: Mass table win/day (US$) – 3Q12

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12

City of Dreams

Wynn Macau

City of Dreams overtook Wynn Macau for the first time in 2Q12

11,600 11,30010,300 9,900 9,600

8,800

5,800

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

City of Dreams

Wynn Macau

MGM Grand

Venetian Macau

Grand Lisboa

Galaxy Macau

Sands Cotai

Central

1,400rooms

1,010rooms

587 rooms

431 rooms

2,200 rooms

c.2,000 rooms

2,905 rooms

# of rooms:

Source: Company data, Deutsche Bank estimates Source: Company data, Deutsche Bank estimates

For City of Dreams, we think its focus on premium mass segment has been a key driver of the rising mass market hold percentage, and therefore EBITDA margins. The following figure plots the relationship between number of hotel rooms and mass market

3 January 2013


Macau


hold percentage. The more hotel rooms a casino has, the better its ability in attracting premium mass customers by offering them free hotel rooms as “comps”.

Figure 22: Mass market hold vs. EBITDA margin (3Q12)

Figure 23: Promo allowances (as % of gross gaming

revenue)

0%

5%

10%

15%

20%

25%

30%

35%

40%

15% 20% 25% 30% 35%

Mass market hold %

Pro

pe

rty

EB

ITD

A m

arg

in (

HK

GA

AP

)

Wynn Macau(1,010 rooms)

Venetian Macau(2,905rooms)

City of Dreams

(1,400 rooms)

Galaxy Macau(2,200 rooms)

StarWorld(509 rooms)

Altira(216 rooms)

Sands Macau(289 rooms)

MGM Macau(587 rooms)Sands Cotai

Central (c. 2,000 rooms)

2.0%

2.5%2.6%

3.6%

2.7%

2.1%

2.6%

3.4%

3.8%

3.0%2.6%

2.4%

3.3%

4.0%

3.1%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

Melco Crown

MGM China

Sands China

Wynn Macau

Average

1H11 2H11 1H12

Most aggressive: +50bps hoh

% of GGR

Source: Company data, Deutsche Bank estimates Source: Company data, Deutsche Bank calculations

Galaxy Macau has more room to lift minimum bets and expand margins From 2Q11 to 3Q12, Galaxy Macau has focused on raising its mass market hold percentage from 18% to 30% by lengthening customer stay. At 30% hold percentage, it is already near the best-in-class ratio (32% by Venetian). Next, we think Galaxy Macau will try to close the table yield gap. In 3Q12, Galaxy Macau’s mass table only yielded US$8.8k/table/day, at a 25% discount to the best-in-class (US$11.6k by City of Dreams)

Galaxy Macau is now trying to raise table yields by focusing on premium mass customers and therefore lifting the average bet size. Also, we believe it has more room to penetrate this segment by offering more of its 2,200 hotel rooms as comps. This should help expand margins further in 2013.

Figure 24: Galaxy Macau’s mass hold vs. EBITDA margin

Figure 25: Mass table yield (revenue/table/day; US$) –

3Q12

18%

21%

24%

27%

28%30%

15% 15%16%

17% 18%

22%

0%

5%

10%

15%

20%

25%

30%

15%

18%

21%

24%

27%

30%

2Q11

3Q11

4Q11

1Q12

2Q12

3Q12

Mass market hold % (LHS)Property EBITDA margin (luck-adj, HK GAAP) (RHS)

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

MPEL City of

Dreams

Wynn Macau

MGM Grand

Venetian Macau

SJM Grand Lisboa

Galaxy Macau

Sands Cotai

Central

1,400rooms

1,010rooms

587 rooms

431 rooms

2,200 rooms

3,600 rooms

2,905 rooms

# of rooms:

Average ex-Galaxy Macau and Sands Cotai

Central

Galaxy Macau and Sands Cotai Central

should close the gapduring next 12 months

Source: Company data Source: Company data, Deutsche Bank estimates.

3 January 2013


Macau


Driver # 3: Hotel room bottleneck being relieved

We believe one of the bottlenecks for growing visitor volumes (and mass revenue) is the availability of quality hotel rooms in Macau. This bottleneck should be considerably relived in 2013 as Sands Cotai Central is opening about 5,700 four to five star hotel rooms over 2Q12-1Q13. This is a 26% addition to end-2011 hotel rooms in Macau. With more hotel rooms, visitors tend to stay longer and gamble longer, which could lead to both higher mass drop and higher mass hold.

Figure 26: Hotel rooms in Macau

9,168 10,832

12,978 16,148

17,490 19,216 20,091 22,356

27,041 28,041

-

5,000

10,000

15,000

20,000

25,000

30,000

2004 2005 2006 2007 2008 2009 2010 2011 2012E 2013E

Non casino Other Casinos Sands China

Sands Cotai Central adds 5,700 hotel rooms over 2Q12-1Q13, 26% increase to the hotel rooms in Macau as of end 2011

Source: Deutsche Bank

In contrast to growth in hotel rooms, the near-term growth of the gaming tables is restricted by the government table cap. For 2013, we expect only about 200 more tables to open at Sands Cotai in Central Phase 2. The next gaming table supply would come in 2015, when new Cotai projects start operations. We expect the government to approve about 400 gaming tables each for the five Cotai projects (Galaxy Macau Phase 2, Melco Crown’s Cotai project, MGM Cotai, SJM Cotai and Wynn Cotai). Overall, this means Macau would add 2,200 gaming tables over 2013-17, implying a 7% 2012-17E CAGR.

Figure 27: Capacity by gaming tables (by year end)

1,388

2,762

4,375 4,017 4,770 4,791

5,342 5,500 5,700 5,700 6,500 6,500

7,700

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

2005 2006 2007 2008 2009 2010 2011 2012E 2013E 2014E 2015E 2016E 2017E

No of tables

Wynn Macau

SJM

MGM China

Melco Crown

Sands China

Galaxy

Sands Cotai Central P2

Galaxy Macau P2

StudioCity

MGM/SJM/WynnCotai

Source: Government data, Deutsche Bank estimates

3 January 2013


Macau


Earnings and ratings changes

Margin expansion from favorable mix shift toward mass market

Earnings forecast revision – Mass market gaming has higher margins (30-35%) vs. VIP gaming (10-15%). As such, with the higher growth in mass market gaming, we expect EBITDA margins to expand in 2013 despite cost pressures from labour and junket commissions. We expect Macau’s EBITDA margin (HK GAAP) to expand from 18.0% in 2012E to 19.0% in 2013E. Factoring this in, we raise our 2013-14 EBITDA forecasts for the Macau casino operator stocks by 3-13%.

Target price changes – We also raise our target 2013 EV/EBITDA multiple by 2 points for Melco Crown. This is because we believe Melco Crown will be a key beneficiary of the strong mass market growth in 2013E due to its focus on premium mass market. Separately, we now add i) the Parisian (Site 3) project valuation to Sands China, ii) our Philippines project valuation to Melco Crown iii) and ascribe 100% of the estimated value creation from the other five Cotai projects to the target price of each operator (vs. 50% valuation creation ascribed previously). This is done to factor in the improving visibility on the Cotai projects and the Melco Crown Philippines project.

Rating changes - We also upgrade Wynn Macau from Hold to Buy. We think Wynn Macau will benefit from the VIP demand recovery given it has the highest exposure to VIP gaming (45% of 2013 EBITDA). We upgrade Sands China from Hold to Buy as we believe it will be the biggest beneficiary of the strong mass market growth in 2013E.

Figure 28: Rating, target price and EBITDA forecast changes

StockListi. curr.

Repor curr. Rec Change in TP

EV/EBITDA multiple New EBITDA Old EBITDA EBITDA revision

New Old New Old Change New Old 2012E 2013E 2014E 2012E 2013E 2014E 2012E 2013E 2014E

Galaxy HKD HKD Buy Buy 41.2 31.0 33% 11 11 10,017 11,887 14,025 9,636 10,684 12,387 4% 11% 13%

Melco Crown USD USD Buy Buy 22.4 16.0 40% 10 8 925 1,045 1,231 884 980 1,105 5% 7% 11%

MGM China HKD HKD Hold Hold 16.4 15.4 7% 9 9 5,347 5,775 6,210 5,431 5,628 5,792 -2% 3% 7%

Sands China HKD USD Buy Hold 44.2 35.0 26% 17 17 1,920 2,572 3,091 1,876 2,311 2,728 2% 11% 13%

SJM HKD HKD Hold Hold 20.0 18.0 11% 10 10 7,841 8,316 8,807 7,800 7,870 8,541 1% 6% 3%

Wynn Macau HKD HKD Buy Hold 26.4 22.0 20% 12 12 7,678 8,254 9,067 8,151 8,026 8,515 -6% 3% 6%

Source: Deutsche Bank estimates

Bigger earnings revisions for Cotai operators

We believe Cotai-based operators, namely Galaxy, Melco Crown and Sands China, are likely to benefit from the strong visitor growth in 2013 as they have much larger hotel room inventories. As such, we raise 2013-14E EBITDA forecasts for these three operators the most (7-13%).

Higher than consensus on Galaxy & MPEL

Our 2013-14 EBITDA forecasts for Galaxy and Melco Crown are 10-16% above consensus. We believe the Street has not fully factored in the strong growth potential of premium mass operations for both these operators.

3 January 2013


Macau


Figure 29: Deutsche Bank forecasts vs. IBES consensus

Company Curr.% diff (Deutsche Bank

vs. consensus)

2012E 2013E 2014E 2012E 2013E 2014E 2012E 2013E 2014E

Galaxy HKD 10,017 11,887 14,025 9,655 10,682 12,257 4% 11% 14%

Melco Crown USD 925 1,045 1,231 877 946 1,057 6% 10% 16%

MGM China HKD 5,347 5,775 6,210 5,278 5,602 6,270 1% 3% -1%

Sands China USD 1,920 2,572 3,091 1,906 2,475 2,913 1% 4% 6%

SJM HKD 7,841 8,316 8,807 7,617 8,438 9,428 3% -1% -7%

Wynn Macau HKD 7,678 8,254 9,067 8,009 8,684 9,614 -4% -5% -6%

Sector USD 6,830 8,034 9,239 6,726 7,731 8,818 2% 4% 5%

Deutsche Bank forecasts Consensus forecasts

Source: Deutsche Bank estimates, IBES consensus

We expect further sector re-rating in 2013

The Macau sector is trading at 11.5x 2013E EBITDA, near the historical average (11x). On a PE basis, Macau stocks are trading at 15.4x 2013E EPS. This is still at a big discount to Chinese consumer discretionary PE (22.4x). We expect further re-rating in 2013.

Figure 30: Consensus sector 12-month forward EV/EBITDA

4

6

8

10

12

14

16

Jul-0

8

Oct

-08

Jan-

09

Ap

r-09

Jul-0

9

Oct

-09

Jan-

10

Ap

r-10

Jul-1

0

Oct

-10

Jan-

11

Ap

r-11

Jul-1

1

Oct

-11

Jan-

12

Ap

r-12

Jul-1

2

Oct

-12

Jan-

13+1 Std Div

Avg 11.0x

-1 Std Div

Source: Datastream, IBES consensus, Deutsche Bank

Macau

Ho

tels / Leisure / G

amin

g

3 Jan

uary 2

013

Pag

e 16

D

eutsch

e Ban

k AG

/Ho

ng

Ko

ng

Figure 31: Gaming valuation 02/01/2013 Ticker Rating Price Mkt EV/EBITDA PE EBITDA EBITDA EPS PEG Div Div PB ND/E FCF

cap (x) (x) US$m growth growth (x) Yield Payout (x) yield local cur US$m 12E 13E 14E 12E 13E 14E 12E 13E 14E 12E 13E 14E 12E 13E 14E 12E 12E 12E 12E 12E 12E

MacauGalaxy 0027.HK Buy 31.3 16,855 13.1 10.5 8.7 17.6 14.0 11.5 1,293 1,534 1,810 74% 19% 18% 88% 26% 23% 0.7 0.0% 0% 6.0 1% 5.8%Melco Crown MPEL.OQ Buy 17.4 9,590 11.3 10.0 8.8 22.3 17.3 12.5 925 1,045 1,231 14% 13% 18% 28% 29% 38% 0.7 0.0% 0% 2.8 15% 2.2%MGM China 2282.HK Hold 14.3 7,030 9.8 9.0 8.6 12.9 12.1 11.1 690 745 801 8% 8% 8% 9% 7% 9% nm 6.2% 80% 9.2 -37% 8.3%Sands China 1928.HK Buy 35.8 37,132 20.1 15.1 12.3 25.8 19.9 15.9 1,920 2,572 3,091 22% 34% 20% 18% 30% 25% 0.9 4.0% 131% 6.8 28% 3.9%SJM 0880.HK Hold 18.3 13,377 10.9 10.7 10.2 14.9 14.0 13.2 1,012 1,073 1,136 13% 6% 6% 16% 6% 6% nm 6.1% 90% 5.1 -86% 6.1%Wynn Macau 1128.HK Buy 21.6 14,422 13.8 13.8 13.4 16.8 15.8 14.2 991 1,065 1,170 -3% 8% 10% 0% 7% 11% nm 5.9% 100% 10.7 -54% 6.0%Macau simple average 13.2 11.5 10.3 18.4 15.5 13.1 21% 15% 13% 26% 17% 19% 0.8 3.7% 67% 6.8 -22% 5.4%Macau weighted average 98,092 14.2 12.2 10.7 19.3 16.2 13.6 6,830 8,034 9,239 20% 18% 15% 23% 19% 19%KoreaGrand Korea Leisure* 114090.KS NR 29250.0 1,690 10.4 9.0 8.4 13.0 12.5 11.6 163 187 200 13% 15% 7% 125% 4% 7% nm 3.6% 46% 5.9 -20% 0.5%Kangwon Land* 035250.KS NR 28650.0 5,725 12.3 10.2 9.1 18.1 14.4 12.6 464 562 632 -10% 21% 12% -16% 26% 14% 0.9 2.9% 52% 2.5 -19% naParadise Co* 034230:KS NR 18000.0 1,529 15.7 12.6 11.5 19.9 15.8 14.3 97 122 133 78% 25% 10% 200% 26% 10% 1.1 1.6% 31% 2.6 -15% naKorea average 12.8 10.6 9.7 17.0 14.2 12.9 27% 20% 10% 103% 19% 10% 1.0 2.7% 43% 3.7 -18% 0.5%SE AsiaBerjaya Sports Toto BSTB.KL Hold 4.5 1,963 9.5 9.4 8.8 14.6 14.8 13.8 202 207 219 10% 2% 6% 13% 2% 7% nm 6.3% 91% 12.3 28% 6.2%Genting Berhad GENT.KL Hold 9.3 11,124 9.4 8.0 7.0 15.2 14.8 13.4 2,250 2,538 2,736 -14% 13% 8% -21% 3% 10% nm 0.7% 10% 1.6 -2% naGenting Malaysia GENM.KL Buy 3.6 6,866 6.2 5.4 4.7 12.8 12.1 11.4 847 892 935 11% 5% 5% 5% 5% 6% nm 2.0% 25% 1.6 -14% 5.0%Genting Spore GENS.SI Hold 1.4 13,813 13.0 11.0 9.3 28.2 23.7 20.4 1,044 1,166 1,289 -22% 12% 11% -40% 19% 16% 1.7 0.7% 20% 2.6 15% 1.0%NagaCorp* 3918.HK NR 4.7 1,273 8.9 6.7 5.5 12.2 10.2 8.7 134 166 188 26% 24% 13% na 20% 17% 0.7 4.9% 60% 0.0 0% naSE Asia average 9.4 8.1 7.0 16.6 15.1 13.6 2% 11% 8% -11% 10% 11% 1.2 2.9% 41% 3.6 5% 4.1%US Caesars Entertainment CZR.OQ Hold 7.4 927 22.7 12.7 nm nm nm nm 1,008 1,823 na -42% 81% na nm nm nm nm 0.0% 0% nm nm nmLas Vegas Sands LVS.N Buy 48.8 40,047 14.1 11.4 na 22.7 20.5 na 3,164 3,846 na -1% 22% na 6% 11% na na 2.1% 47% 3.9 55% 2.2%MGM Resorts MGM.N Buy 12.3 5,999 10.2 8.8 8.4 nm nm nm 1,595 1,776 1,847 nm 11% 4% 29% nm na na 0.0% 0% 0.7 113% 21.5%Wynn Resorts WYNN.OQ Buy 118.1 11,792 11.1 10.0 9.8 21.9 18.4 16.6 1,438 1,566 1,653 -7% 9% 6% -3% 19% 11% na 7.9% 172% nm nm 9.1%US average 14.5 10.7 9.1 22.3 19.4 16.6 -17% 31% 5% 11% 15% 11% na 2.5% 55% 2.3 84% 10.9%China Consumer DiscretionaryBelle 1880.HK Buy 17.4 18,905 16.1 13.1 10.6 24.2 20.1 16.6 1,116 1,341 1,606 15% 20% 20% 14% 21% 21% 1.2 1.2% 30% 5.3 -27% 1.8%Chow Tai Fook 1929.HK Buy 13.0 14,983 14.8 13.8 11.0 19.8 22.5 17.5 1,141 1,100 1,377 80% -4% 25% 73% -15% 28% nm 0.7% 15% 4.2 18% -7.1%Esprit 0330.HK Hold 11.1 2,779 20.0 12.1 8.3 107.5 38.9 24.7 158 174 244 -69% 10% 40% -90% 130% 57% 1.2 2.0% 220% 0.8 -10% -6.3%Golden Eagle Retail 3308.HK Hold 19.0 4,772 15.6 13.6 11.8 24.1 20.6 17.7 287 340 404 7% 19% 19% 3% 17% 16% 1.5 1.3% 31% 5.4 -16% -0.5%Li & Fung 0494.HK Buy 14.5 15,203 17.1 12.0 10.1 23.8 16.1 13.3 1,030 1,489 1,767 -1% 45% 19% 3% 47% 21% 0.7 2.5% 60% 3.2 48% -0.1%Lifestyle 1212.HK Buy 19.1 4,174 13.3 11.6 10.0 17.6 15.3 13.5 323 357 401 11% 10% 12% 16% 15% 14% 1.2 2.3% 41% 3.6 10% -1.1%Parkson Retail 3368.HK Hold 6.8 2,440 8.7 7.3 6.1 17.1 15.1 13.3 233 266 296 -16% 14% 11% -20% 13% 14% 1.3 2.6% 45% 2.8 3% 2.1%Prada 1913.HK Buy 73.6 24,296 12.0 18.1 15.5 21.2 30.8 26.5 1,001 1,346 1,543 41% 34% 15% 68% 41% 16% 0.8 1.4% 30% 5.3 -1% 0.2%China Consumer Discretionary average 14.7 12.7 10.4 31.9 22.4 17.9 9% 19% 20% 8% 33% 23% 1.1 1.8% 59% 3.8 3% -1.4%China Consumer StaplesChina Food 0506.HK Buy 7.2 2,594 10.1 8.2 7.1 21.9 17.8 14.7 276 337 389 37% 22% 16% 45% 23% 21% 1.0 1.7% 37% 2.8 5% -0.8%China Mengniu Dairy 2319.HK Hold 22.4 5,009 9.6 7.0 5.5 21.9 17.6 14.8 425 546 644 7% 29% 18% -8% 24% 19% 1.0 1.0% 22% 2.5 -43% 0.0%China Resources Ent 0291.HK Buy 28.3 8,751 5.5 7.1 5.8 18.6 26.8 21.0 1,440 1,163 1,400 36% -19% 20% 28% -31% 28% nm 2.2% 40% 1.8 -12% 5.7%Hengan 1044.HK Buy 72.3 11,373 18.1 14.4 11.8 25.3 20.2 16.8 622 772 925 44% 24% 20% 33% 25% 20% 1.1 2.4% 61% 6.9 -9% 2.2%Huabao lnt'l 0336.HK Buy 3.8 1,540 9.3 4.7 3.8 12.3 6.9 6.0 279 281 324 11% 1% 15% 9% -1% 16% 1.7 3.2% 40% 2.5 -20% 8.1%Sun Art Retail 6808.HK Hold 11.9 14,695 15.7 12.7 9.8 38.4 31.5 24.8 848 1,039 1,298 22% 23% 25% 25% 22% 27% 1.6 1.0% 40% 5.5 -50% 1.4%Tingyi 0322.HK Buy 21.6 15,568 11.9 9.8 8.1 35.8 24.1 20.1 1,319 1,543 1,781 44% 17% 15% 16% 49% 20% 1.1 1.7% 62% 7.2 3% 0.7%Tsingtao Brewery 0168.HK Buy 47.6 8,025 16.1 13.0 10.7 29.3 23.7 19.8 461 558 651 8% 21% 17% 2% 23% 20% 1.4 0.7% 20% 4.1 -28% -0.3%Wumart 1025.HK Buy 16.5 2,727 11.2 9.1 7.2 25.3 21.1 17.0 220 262 320 5% 19% 22% 15% 20% 24% 1.2 1.7% 44% 4.8 -41% 2.7%China Consumer Staples average 12.0 9.6 7.8 25.4 21.1 17.2 24% 15% 19% 18% 17% 22% 1.2 1.7% 41% 4.2 -22% 2.2%

Global Luxury average 11.4 10.7 9.3 19.7 18.9 16.5 24% 11% 12% 26% 12% 14% 1.5 2.0% 38% 5.0 -3% 2.4% Source: Deutsche Bank, DataStream * Based on IBES consensus estimates

3 January 2013


Macau


Figure 32: Macau gaming operator price performance 02/01/2013 Company Mkt Cap Price YTD 1m 3m 6m 12m 2011 2012 1Q12 2Q12 3Q12 4Q12 LTM LTM % from % from T/O Beta

US$m local cur hi low LTM hi LTM low (US$m) Macau0027.HK Galaxy 16,854 31.3 3% 8% 20% 66% 117% 62% 113% 51% -11% 36% 20% 31.3 13.9 0% 126% 67 1.7MPEL.OQ Melco Crown 9,590 17.4 3% 13% 28% 57% 74% 53% 75% 42% -16% 17% 29% 17.4 9.4 0% 85% 65 2.02282.HK MGM China 7,030 14.3 2% 0% 5% 27% 37% na 38% 40% -17% 15% 7% 14.7 10.1 -2% 42% 5 1.11928.HK Sands China 37,132 35.8 5% 9% 26% 51% 58% 32% 55% 38% -19% 18% 23% 35.8 21.2 0% 69% 43 1.30880.HK SJM 13,377 18.3 2% 0% 7% 26% 43% 3% 42% 25% -10% 18% 8% 18.3 12.3 0% 49% 13 1.21128.HK Wynn Macau 14,422 21.6 3% -1% 4% 26% 9% 11% 7% 16% -21% 16% 3% 24.9 14.8 -13% 46% 15 1.2Macau average 3% 5% 15% 42% 56% 32% 55% 35% -16% 20% 15% -3% 69% 35 1.4MSCI HK 12,364.9 0% 2% 4% 14% 22% -19% 24% 13% -6% 12% 5% 12,441.5 9,867.2 -1% 25%MSCI China 62.8 0% 6% 13% 15% 16% -20% 19% 10% -8% 4% 13% 62.8 51.5 0% 22%MSCI China Consumer Discretionary 231.3 3% 10% 26% 25% 12% -23% 12% 10% -17% 1% 26% 236.9 167.8 -2% 38%MSCI China Consumer Staples 1,221.2 2% 1% 1% 1% 1% -13% 5% 6% -8% 6% 4% 1,254.2 1,059.9 -3% 15%

Source: Deutsche Bank, DataStream, Bloomberg Finance LP

Figure 33: Earnings forecast comparison for Macau gaming stocks

US$m Galaxy Melco Crown

MGM China

Sands China

SJM Wynn Macau

Industry Galaxy Melco Crown

MGM China

Sands China

SJM Wynn Macau

Industry

Market share 19% 13% 10% 19% 27% 12% 100% 18% 14% 10% 22% 25% 11% 100%yoy +3ppt -2ppt -1ppt +3ppt -2ppt -2ppt -1ppt 1ppt 0ppt +3ppt -2ppt -1pptVolume measuresVIP rolling 178,820 124,898 91,145 142,072 226,622 119,377 882,933 179,116 144,624 103,496 160,019 231,082 115,451 933,787Mass drop 4,573 4,238 2,451 9,609 14,281 2,799 37,952 5,989 5,223 2,896 13,459 16,773 3,239 47,580 Slot handle 3,005 5,992 4,794 11,060 3,813 4,766 33,429 3,662 6,658 4,990 14,517 3,988 4,504 38,319 Direct VIP (% of VIP rolling) 1% 11% 8% 18% 0% 10% 7% 2% 9% 7% 18% 0% 7% 6%yoyVIP rolling yoy 22% -4% 1% 39% -4% -3% 6% 0% 16% 14% 13% 2% -3% 6%Mass drop yoy 63% 20% 11% 30% 14% 1% 22% 31% 23% 18% 40% 17% 16% 25%Slot handle yoy 65% 25% 31% 71% 2% -12% 29% 22% 11% 4% 31% 5% -5% 15%CapacityNo of tables yoy 24% 0% 0% 13% 0% 2% 6% 0% 0% -1% 11% 1% 2% 3%No of slots yoy 18% 15% 6% 34% -3% -6% 13% 1% 0% 1% 28% 0% 1% 9%No of hotel rooms yoy 40% 0% 0% 60% 0% 0% 32% 0% 0% 0% 61% 0% 0% 29%Table yield Blended VIP & mass 27,126 21,248 22,853 14,369 15,530 23,346 18,390 28,251 24,771 28,062 16,411 16,008 25,759 19,785 VIP rev (US$/table/day) 51,704 27,870 34,859 24,163 29,866 31,521 31,296 49,688 31,368 38,146 26,570 27,703 31,630 31,864 Mass rev (US$/table/day) 8,513 12,009 9,800 8,712 7,532 11,501 8,803 11,646 15,600 12,160 10,930 8,969 13,466 10,880 Slot rev (US$/slot/day) 383 239 598 314 135 715 295 440 251 650 345 141 716 313 RevenueVIP gross revenue 5,525 3,672 2,774 4,116 6,816 3,351 26,284 5,290 4,122 3,105 4,801 6,701 3,464 27,546 Mass gaming revenue 1,511 1,134 717 2,560 3,142 863 10,045 2,040 1,475 857 3,660 3,690 1,016 12,757 Slot revenue 201 303 274 527 191 246 1,679 232 319 299 746 199 249 1,931 Gross gaming revenue 7,236 5,109 3,765 7,204 10,148 4,460 38,009 7,562 5,915 4,261 9,207 10,591 4,729 42,235 Gross non-gaming revenue 247 273 138 851 83 415 2,008 296 286 152 1,212 88 430 2,464 Net revenue (US GAAP) 5,333 4,080 2,805 6,515 5,824 3,681 28,237 5,711 4,659 3,130 8,603 6,103 3,925 32,130 yoyVIP gross revenue 22% -3% 1% 39% 0% -7% 7% -4% 12% 12% 17% -2% 3% 5%Mass gaming revenue 102% 40% 22% 36% 14% 7% 33% 35% 30% 19% 43% 17% 18% 27%Slot revenue 59% 15% 34% 35% 2% -12% 18% 16% 5% 9% 41% 5% 1% 15%Gross gaming revenue 34% 5% 6% 38% 4% -5% 14% 5% 16% 13% 28% 4% 6% 11%Gross non-gaming revenue 81% 10% 4% 35% 12% 4% 24% 20% 5% 10% 42% 5% 4% 23%Earnings Property EBITDA 1,357 995 720 1,941 973 1,166 7,093 1,609 1,134 781 2,593 1,026 1,268 8,351 Group EBITDA 1,293 925 690 1,920 1,012 991 6,830 1,534 1,045 745 2,572 1,073 1,065 8,034 DB EPS 0.23 0.78 0.14 0.18 0.16 0.17 na 0.29 1.01 0.15 0.23 0.17 0.18 naDPS - - 0.11 0.18 0.14 0.17 na - - 0.12 0.18 0.15 0.18 nayoyProperty EBITDA yoy 71% 13% 11% 22% 14% -3% 20% 19% 14% 9% 34% 5% 9% 18%Group EBITDA yoy 74% 14% 8% 22% 13% -3% 20% 19% 13% 8% 34% 6% 8% 18%DB EPS yoy 88% 28% 9% 18% 16% 0% 26% 29% 7% 30% 6% 7%EBITDA marginEBITDA margin (HK GAAP) 17.0% 18.1% 18.3% 26.7% 10.0% 22.2% 18.0% 19.5% 17.7% 17.5% 27.9% 10.1% 22.5% 19.0%yoy change 3.2ppt 1.5ppt 0.3ppt -3.4ppt 0.8ppt 0.4ppt 1.0ppt 2.5ppt -0.4ppt -0.8ppt 1.2ppt 0.1ppt 0.3ppt 1.0pptBalance Sheet Net debt/ (cash) 19 558 (285) 1,545 (2,335) (731) (1,229) (705) 558 (292) 1,643 (1,879) 286 (389)Net gearing 1% 15% Net cash 28% Net cash Net cash Net cash Net cash 13% Net cash 28% Net cash 27% Net cash

2012E 2013E

Source: Deutsche Bank estimates

3 January 2013


Macau


Company section

Galaxy (Buy): Top pick; our 2013E EBITDA 11% above consensus

Galaxy Macau launched its premium mass program in 2Q12. We think it has more room to penetrate this segment by offering more of its 2,200 hotel rooms as comps. Based on our estimates, 37% of Galaxy Macau’s mass tables had a minimum bet size of HK$2,000 as of early November, the second highest in Macau. Trading at 10x 2013 EV/EBITDA and 14x 2013 PE, we believe the stock offers very good value for its strong earnings growth (24% 2012-14E EPS CAGR).

In mid December, Galaxy mgmt unveiled details of Phases 3 & 4 of Galaxy Macau. Phase 3 will include i) 4,000 hotel rooms (vs. 3,500 rooms from Phase 1 & 2), ii) a casino with capacity to host up to 600 tables and 2,000 slots (Phase 1 & 2: 950 tables & 2,500 slots) and iii) a 10k-seat performance hall and two theatres. Management plans to submit these building plans to the government in 1H13 and hopes to start construction in 2H13. Capex for Phase 3 is likely to be HK$40-50bn, and funding can be supported by internal cashflow with some debt financing. Phase 4 will have 0.5m sqft of mainly conference & convention (MICE) facilities.

Assuming 15% ROIC, 11x EV/EBITDA, 15% discount rate and 2017-18 opening, we estimate that Phase 3 will be worth HK$9.9bn or HK$2.4/shr. However, we think it is too early to ascribe value to our target price as building plans are yet to be approved by the government. Our current target price only incorporates Phase 3 at land value.

We value Galaxy on an SOTP basis. We value: i) current gaming operations at 11x 2013E EV/EBITDA, ii) Phase 2 of Galaxy Macau at HK$4.3/share, iii) the 10m sf GFA undeveloped Cotai land bank at HK$1,000psf land value and iv) the construction materials business at book value. Our target EV/EBITDA multiple for Galaxy is in line with the average trading multiple of its peers (11.5x).

Figure 34: Galaxy SOTP valuation

2013E EBITDA Target Valuation

HK$m multiple (x) HK$m HK$/shr % of EV

StarWorld 3,378 x 11 = 38,515 9.2 24%

City Clubs 176 x 11 = 2,012 0.5 1%

Galaxy Macau Phase 1 8,455 x 11 = 96,382 23.1 60%

Construction materials 459 1x PB = 2,495 0.6 2%

Corporate net expenses (581) x 11 = (6,623) (1.6) -4%

Existing businesses 11,887 11 132,780 31.8 83%

Galaxy Macau Phase 2 25% ROIC, 13% disc rate 18,145 4.3 11%

Cotai landbank (10m sf GFA) HK$1,000psf land value 10,000 2.4 6%

Enterprise value 160,925 38.6 100%

Net cash (ex Phase 2 capex) End 2013 11,862 2.8

Minorities End 2013 (781) (0.2)

Target valuation 172,007 41.2Source: Deutsche Bank estimates

Downside risks include: i) market share loss at Galaxy Macau after Sands Cotai Central ramps up, ii) construction delays or capex increases of Galaxy Macau Phase 2.

3 January 2013


Macau


Model updated:03 January 2013

Running the numbers Asia

Hong Kong


Galaxy Reuters: 0027.HK Bloomberg: 27 HK

Buy Price (3 Jan 13) HKD 31.15

Target Price HKD 41.20

52 Week range HKD 13.86 - 31.30

Market Cap (m) HKDm 130,027

USDm 16,774

Company Profile Galaxy is one of the six gaming license holders in Macau. It has two flagship casinos, Galaxy Macau and StarWorld, and four small City Clubs casinos. Phase 2 of Galaxy Macau is under construction with a target opening in mid-2015. Phase 2 has the capacity to host 500 gaming tables, 1,000 slots and 1,350 hotel rooms. Galaxy has further 10.5m sf GFA land in Cotai available for future development. The company also has a legacy construction material business.

Price Performance

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Jan 11Apr 11 Jul 11 Oct 11Jan 12Apr 12 Jul 12 Oct 12

Galaxy HANG SENG INDEX (Rebased)

Margin Trends

48

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EBITDA Margin EBIT Margin

Growth & Profitability

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Sales growth (LHS) ROE (RHS)

Solvency

05101520253035

-40

-20

0

20

40

60

09 10 11 12E 13E 14E

Net debt/equity (LHS) Net interest cover (RHS)

Karen Tang +852 2203 6141 [email protected]

Fiscal year end 31-Dec 2009 2010 2011 2012E 2013E 2014E

Financial Summary DB EPS (HKD) 0.11 0.37 0.94 1.77 2.22 2.72Reported EPS (HKD) 0.29 0.23 0.71 1.75 2.22 2.72DPS (HKD) 0.00 0.00 0.00 0.00 0.00 0.00BVPS (HKD) 2.1 2.3 3.4 5.2 7.4 10.1

Weighted average shares (m) 3,938 3,945 4,125 4,174 4,174 4,174Average market cap (HKDm) 9,139 20,032 59,745 130,027 130,027 130,027Enterprise value (HKDm) 11,732 25,407 64,138 130,756 125,345 121,991

Valuation Metrics P/E (DB) (x) 22.0 13.7 15.4 17.6 14.0 11.5P/E (Reported) (x) 8.0 22.5 20.3 17.8 14.0 11.5P/BV (x) 1.55 3.78 4.18 6.04 4.22 3.09

FCF Yield (%) nm nm 1.9 2.9 4.2 2.7Dividend Yield (%) 0.0 0.0 0.0 0.0 0.0 0.0

EV/Sales (x) 1.0 1.3 1.6 2.3 2.1 1.8EV/EBITDA (x) 10.1 11.4 11.2 13.1 10.5 8.7EV/EBIT (x) 18.9 14.8 14.2 15.9 12.4 10.0

Income Statement (HKDm) Sales revenue 12,233 19,262 41,178 57,529 60,237 67,740Gross profit 1,161 2,231 5,749 10,017 11,887 14,025EBITDA 1,161 2,231 5,749 10,017 11,887 14,025Depreciation 348 326 1,038 1,604 1,604 1,604Amortisation 194 184 210 210 210 210EBIT 620 1,721 4,501 8,203 10,073 12,210Net interest income(expense) -139 -59 -400 -633 -663 -663Associates/affiliates -7 -136 -151 0 0 0Exceptionals/extraordinaries 732 -581 -951 -64 0 0Other pre-tax income/(expense) 28 15 62 64 150 150Profit before tax 1,233 959 3,062 7,570 9,560 11,697Income tax expense 76 45 32 101 101 101Minorities 9 16 26 159 201 246Other post-tax income/(expense) 0 0 0 0 0 0Net profit 1,149 899 3,004 7,310 9,258 11,350

DB adjustments (including dilution) -732 581 951 64 0 0DB Net profit 417 1,479 3,955 7,373 9,258 11,350

Cash Flow (HKDm) Cash flow from operations 1,541 2,128 5,664 8,177 11,123 13,260Net Capex -2,727 -5,597 -4,529 -4,451 -5,651 -9,800Free cash flow -1,186 -3,469 1,135 3,726 5,472 3,460Equity raised/(bought back) 2 0 1,287 0 0 0Dividends paid 0 0 0 0 0 0Net inc/(dec) in borrowings -874 3,583 3,533 5,333 0 0Other investing/financing cash flows -469 798 -2,682 0 0 0Net cash flow -2,526 912 3,273 9,059 5,472 3,460Change in working capital 962 518 1,587 -1,000 0 0

Balance Sheet (HKDm) Cash and other liquid assets 3,516 4,428 7,701 16,856 22,468 26,068Tangible fixed assets 11,589 16,802 21,991 24,848 28,905 37,111Goodwill/intangible assets 1,391 1,320 1,270 1,060 850 640Associates/investments 1,039 1,065 1,177 1,177 1,177 1,177Other assets 1,426 1,571 3,625 4,625 4,625 4,625Total assets 18,963 25,186 35,764 48,566 58,025 69,621Interest bearing debt 5,843 9,426 11,673 17,006 17,006 17,006Other liabilities 4,685 6,185 9,448 9,448 9,448 9,448Total liabilities 10,528 15,612 21,121 26,454 26,454 26,454Shareholders' equity 8,169 9,197 14,222 21,532 30,790 42,140Minorities 267 378 421 580 781 1,027Total shareholders' equity 8,435 9,575 14,643 22,112 31,570 43,167Net debt 2,327 4,998 3,971 149 -5,462 -9,062

Key Company Metrics Sales growth (%) 16.5 57.5 113.8 39.7 4.7 12.5DB EPS growth (%) na 251.6 153.0 87.9 25.6 22.6EBITDA Margin (%) 9.5 11.6 14.0 17.4 19.7 20.7EBIT Margin (%) 5.1 8.9 10.9 14.3 16.7 18.0Payout ratio (%) 0.0 0.0 0.0 0.0 0.0 0.0ROE (%) 15.1 10.4 25.7 40.9 35.4 31.1Capex/sales (%) 22.7 29.1 11.1 7.7 9.4 14.5Capex/depreciation (x) 5.1 11.0 3.6 2.5 3.1 5.4Net debt/equity (%) 27.6 52.2 27.1 0.7 -17.3 -21.0Net interest cover (x) 4.5 29.1 11.3 13.0 15.2 18.4

Source: Company data, Deutsche Bank estimates

3 January 2013


Macau


MPEL (Buy): Leader in premium mass

We rate Melco Crown a Buy as i) City of Dreams’ focus on premium mass should allow it to outgrow peers in 2013 (as of mid November, 49% of City of Dreams’ mass tables had minimum bets above HK$2,000, the highest in Macau) and ii) trading at 9.8x 2013E EV/EBITDA, the stock looks to be pricing in a free option for two growth opportunities (Cotai and the Philippines).

In early December, Melco Crown announced that it is acquiring a 93% stake in a Philippines-listed company, called Manchester International Holdings (MIH.PS), for a net purchase cost of US$5m (PHP200m). Upon completion, this company will be used to manage Melco Crown’s Philippines business, including the Belle Grande project. Melco Crown plans to invest US$600m in Belle Grande and is likely to share roughly 50% of the property EBITDA. Management targets opening Phases 1 & 2 together in 1H14. We expect the project to have about 300 tables, 1,200 slots and 800 hotel rooms. Assuming a 20% ROIC, first full-year EBITDA would be US$120m, applying MPEL’s current trading multiple of 10x EV/EBITDA and a discount rate of 13%, value accretion could be US$469m, or US$0.8 per MPEL share, i.e. 5% of current share price.

We value Melco Crown’s current operations at 10x 2013E EV/EBITDA, its Cotai project (60% stake) at US$1.4/share and its Philippines project at US$0.9/share. Our target EV/EBITDA multiple for Melco Crown is at a discount to the average trading multiple of its peers (11.5x), which we believe is fair given the historical volatility in quarterly earnings.

Figure 35: Melco Crown SOTP valuation


US$m multiple (x) US$m US$/shr % of EV

Altira 139 x 10 = 1,393 2.5 13%

City of Dreams 953 x 10 = 9,528 17.2 91%

Mocha Clubs 41 x 10 = 414 0.7 4%

Corporate expenses (89) x 10 = (888) (1.6) -9%

Enterprise value 1,045 x 10 = 10,447 18.9 100%

Net debt End-2013 614 1.1

Cotai project (60% stake) 20% ROIC, 13% disc rate 789 1.4

Philippines project 20% ROIC, 13% disc rate 516 0.9


Key downside risks are: i) significant market share loss at City of Dreams after Sands Cotai Central ramps up, ii) higher-than-expected bad debt provisions as a result of greater working capital support to junket operators and iii) cost overruns or construction delays in its Cotai and Philippines projects.

3 January 2013


Macau




Hong Kong


Melco Crown Reuters: MPEL.OQ Bloomberg: MPEL US

Buy Price (2 Jan 13) USD 17.36

Target Price USD 22.40

52 Week range USD 9.37 - 17.36

Market Cap (m) EURm 7,268

USDm 9,590

Company Profile Melco Crown is one of the six licensed gaming operators in Macau. It operates two casinos, (i) City of Dreams, an integrated resort in Cotai, with about 440 gaming tables, 1,400 slot machines and 1,400 hotel rooms, and (ii) Altira, a VIP-focused casino, and a chain of slot lounges called Mocha Clubs. Melco Crown also owns 60% of another project in Cotai, which is scheduled to open in 2015. Melco Int'l (0200.HK) and Crown Ltd (CWN.AX) each own 34% of the company.

Price Performance

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Melco Crown HANG SENG INDEX (Rebased)

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Financial Summary DB EPS (USD) -0.63 -0.01 0.61 0.78 1.01 1.39Reported EPS (USD) -0.63 -0.02 0.55 0.76 1.01 1.39DPS (USD) 0.00 0.00 0.00 0.00 0.00 0.00BVPS (USD) 4.7 4.7 5.4 6.1 7.2 8.6

Weighted average shares (m) 488 533 539 552 552 552Average market cap (USDm) 2,307 2,497 5,438 9,590 9,590 9,590Enterprise value (USDm) 3,657 3,727 6,838 10,492 10,492 10,883

Valuation Metrics P/E (DB) (x) nm nm 16.6 22.3 17.3 12.5P/E (Reported) (x) nm nm 18.4 22.9 17.3 12.5P/BV (x) 0.71 1.35 1.77 2.83 2.42 2.03

FCF Yield (%) nm 6.3 1.8 nm 0.0 nmDividend Yield (%) 0.0 0.0 0.0 0.0 0.0 0.0

EV/Sales (x) 2.7 1.4 1.8 2.6 2.3 2.1EV/EBITDA (x) 65.6 8.7 8.4 11.3 10.0 8.8EV/EBIT (x) nm 31.8 14.9 19.2 15.7 12.8

Income Statement (USDm) Sales revenue 1,333 2,642 3,831 4,080 4,659 5,143Gross profit 56 430 810 925 1,045 1,231EBITDA 56 430 810 925 1,045 1,231Depreciation 144 243 271 281 285 287Amortisation 73 70 80 97 94 91EBIT -162 117 459 547 666 852Net interest income(expense) -40 -103 -125 -108 -99 -75Associates/affiliates 0 0 0 0 0 0Exceptionals/extraordinaries 0 -3 -34 -12 0 0Other pre-tax income/(expense) -107 -20 -12 -23 -12 -12Profit before tax -309 -10 287 405 555 766Income tax expense 0 1 -2 -2 0 0Minorities 0 0 -6 -12 0 0Other post-tax income/(expense) 0 0 0 0 0 0Net profit -308 -11 295 419 555 766

DB adjustments (including dilution) 0 3 34 12 0 0DB Net profit -308 -7 329 431 555 766

Cash Flow (USDm) Cash flow from operations 79 288 473 310 938 1,193Net Capex -835 -130 -377 -413 -938 -1,584Free cash flow -756 158 95 -103 0 -391Equity raised/(bought back) 384 0 116 0 0 0Dividends paid 0 0 0 0 0 0Net inc/(dec) in borrowings 271 41 486 42 1,108 125Other investing/financing cash flows 0 0 0 100 0 0Net cash flow -102 199 697 39 1,108 -266Change in working capital 101 -33 -183 -517 0 0

Balance Sheet (USDm) Cash and other liquid assets 449 609 1,158 1,810 2,918 2,652Tangible fixed assets 2,787 2,672 2,655 2,801 3,362 4,523Goodwill/intangible assets 1,243 1,167 1,624 1,620 1,527 1,436Associates/investments 0 0 0 0 0 0Other assets 422 437 832 795 895 995Total assets 4,900 4,884 6,270 7,027 8,703 9,606Interest bearing debt 1,799 1,840 2,326 2,368 3,476 3,601Other liabilities 592 521 756 925 925 925Total liabilities 2,391 2,361 3,082 3,293 4,401 4,526Shareholders' equity 2,509 2,523 2,956 3,391 3,958 4,736Minorities 0 0 231 343 343 343Total shareholders' equity 2,509 2,523 3,188 3,734 4,301 5,079Net debt 1,350 1,231 1,168 558 558 949

Key Company Metrics Sales growth (%) -5.9 98.2 45.0 6.5 14.2 10.4DB EPS growth (%) na 97.9 na 27.9 29.0 37.9EBITDA Margin (%) 4.2 16.3 21.1 22.7 22.4 23.9EBIT Margin (%) -12.1 4.4 12.0 13.4 14.3 16.6Payout ratio (%) nm nm 0.0 0.0 0.0 0.0ROE (%) -12.5 -0.4 10.8 13.2 15.1 17.6Capex/sales (%) 62.7 4.9 9.8 10.1 20.1 30.8Capex/depreciation (x) 3.8 0.4 1.1 1.1 2.5 4.2Net debt/equity (%) 53.8 48.8 36.6 14.9 13.0 18.7Net interest cover (x) nm 1.1 3.7 5.1 6.7 11.4


3 January 2013


Macau


MGM China (Hold): Solid dividend yield but hotel room constraint

We think MGM China’s limited hotel room inventory caps its ability to capture the growing premium mass segment in Macau. Due to this, we expect MGM China's EBITDA to grow only 8% yoy in 2013E, slower than sector average of 18% yoy growth. That said, we believe the company’s solid balance sheet provides decent dividend yield support (we expect 2012E dividend yield of 6.8%, assuming 80% payout ratio). As such, we rate MGM China as a Hold.

Just before the Golden Week in early October, MGM China opened two new VIP rooms with a total of 40 tables on Level 2 for Macau's two largest junkets, Suncity and Neptune. Of these, only 10 tables were taken from the mass gaming floor. The other 30 tables were vacated by small low-yielding junkets. We see this as a positive since the larger junkets have stronger balance sheets and thus slightly reduce credit risks for MGM China.

We value MGM China at 9x 2013E EV/EBITDA plus HK$2.0/share for Cotai. Our target multiple is below the average trading multiple of peers (11.5x), which we think is justified given the company’s lack of near-term growth potential.

Figure 36: MGM China SOTP valuation


HK$m multiple (x) HK$m HK$/shr

MGM Macau 6,054 x 9 = 53,575 14.1

Corporate expenses (279) x 9 = (2,469) (0.6)

Enterprise value 5,775 x 9 = 51,106 13.4

Net cash (ex Cotai project capex) End-2013 3,863 1.0

Target valuation 54,970 14.5

MGM Cotai 20% ROIC, 15% disc rate, 9x multiple 7,412 2.0

Target valuation 62,493 16.4 Source: Deutsche Bank estimates

Key downside risks are i) further market share loss after Sands Cotai Central ramps up and ii) volatility in quarterly earnings, given operations are based at a single property. Key upside risks are i) improving visibility of the Cotai project (i.e. publication of the land concession in the government Gazette) and ii) market share expansion after opening new VIP tables on Level 2.

Figure 37: Consensus 12-month forward EV/EBITDA (x) Figure 38: EBITDA growth trend

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MGM China Sector average

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Avg 8.5x

1,179

2,831

4,933 5,347

5,775 6,210

(114) (233) (279) (335)

(1,000)

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6,000

7,000

2009 2010 2011 2012E 2013E 2014E

HK$mMGM Macau property EBITDA Corp expenses (License fees)

2013E EBITDA +8% yoy

Source: Bloomberg Finance LP, DataStream, Deutsche Bank estimates Source: Company data, Deutsche Bank estimates

3 January 2013


Macau




Hong Kong


MGM China Reuters: 2282.HK Bloomberg: 2282 HK

Hold Price (3 Jan 13) HKD 14.42


52 Week range HKD 10.10 - 14.66


USDm 7,069

Company Profile MGM China is one of the six licensed gaming operators in Macau. It currently owns and operates one casino resort (MGM Macau) with about 430 gaming tables, 1,200 slot machines, and 600 hotel rooms. In Cotai, the company has identified a site of approximately 18 acres for longer term development. MGM Resorts (MGM.US) owns 51% of the company, while Ms. Pansy Ho holds another 27%.

Price Performance

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MGM China HANG SENG INDEX (Rebased)

Margin Trends

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Financial Summary DB EPS (HKD) -0.04 0.42 1.02 1.11 1.19 1.29Reported EPS (HKD) -0.04 0.41 0.86 1.22 1.19 1.29DPS (HKD) 0.00 0.00 0.82 0.89 0.95 1.03BVPS (HKD) 0.1 0.4 1.2 1.6 1.9 2.2

Weighted average shares (m) 3,800 3,800 3,800 3,800 3,800 3,800Average market cap (HKDm) na na 49,061 54,796 54,796 54,796Enterprise value (HKDm) na na 47,607 52,590 52,533 53,936

Valuation Metrics P/E (DB) (x) nm na 12.7 13.0 12.1 11.1P/E (Reported) (x) nm na 15.0 11.8 12.1 11.1P/BV (x) 0.00 0.00 8.75 9.21 7.72 6.52

FCF Yield (%) na na 12.3 7.5 6.9 4.6Dividend Yield (%) na na 6.3 6.1 6.6 7.2

EV/Sales (x) nm nm 2.3 2.4 2.2 2.1EV/EBITDA (x) nm nm 9.7 9.8 9.1 8.7EV/EBIT (x) nm nm 11.4 11.5 10.6 10.1

Income Statement (HKDm) Sales revenue 7,727 12,435 20,294 21,738 24,255 26,208Gross profit 1,179 2,831 4,933 5,347 5,775 6,210EBITDA 1,179 2,831 4,933 5,347 5,775 6,210Depreciation 584 623 594 640 669 698Amortisation 209 155 153 146 146 146EBIT 386 2,053 4,186 4,561 4,960 5,366Net interest income(expense) -531 -449 -228 -256 -333 -333Associates/affiliates 0 0 0 0 0 0Exceptionals/extraordinaries 1 -36 -170 -12 0 0Other pre-tax income/(expense) -22 -1 -51 -80 -84 -88Profit before tax -166 1,566 3,738 4,212 4,543 4,946Income tax expense 1 0 459 -425 30 30Minorities 0 0 0 0 0 0Other post-tax income/(expense) 0 0 0 0 0 0Net profit -167 1,566 3,279 4,637 4,513 4,916

DB adjustments (including dilution) -1 36 594 -413 0 0DB Net profit -168 1,602 3,874 4,224 4,513 4,916

Cash Flow (HKDm) Cash flow from operations 1,012 3,358 6,346 4,745 5,788 6,168Net Capex -242 -251 -303 -637 -2,028 -3,628Free cash flow 770 3,107 6,042 4,108 3,760 2,540Equity raised/(bought back) 0 0 132 0 0 0Dividends paid 0 0 -476 -3,100 -3,370 -3,611Net inc/(dec) in borrowings 254 -648 -1,800 3,210 0 0Other investing/financing cash flows -497 -2,512 -231 -256 -333 -333Net cash flow 527 -53 3,668 3,962 57 -1,403Change in working capital -243 432 1,373 -488 127 75

Balance Sheet (HKDm) Cash and other liquid assets 1,976 1,923 5,590 9,552 9,609 8,206Tangible fixed assets 6,205 5,751 5,316 5,283 6,622 9,533Goodwill/intangible assets 1,301 1,174 1,047 920 793 666Associates/investments 0 0 0 0 0 0Other assets 985 1,376 735 1,353 1,507 1,598Total assets 10,468 10,224 12,689 17,108 18,532 20,004Interest bearing debt 8,271 5,887 4,136 7,346 7,346 7,346Other liabilities 1,945 2,857 4,139 3,810 4,090 4,257Total liabilities 10,216 8,743 8,275 11,156 11,436 11,603Shareholders' equity 251 1,481 4,414 5,952 7,095 8,400Minorities 0 0 0 0 0 0Total shareholders' equity 251 1,481 4,414 5,952 7,095 8,400Net debt 6,296 3,964 -1,454 -2,206 -2,263 -860

Key Company Metrics Sales growth (%) 11.7 60.9 63.2 7.1 11.6 8.1DB EPS growth (%) 48.7 na 141.7 9.1 6.8 8.9EBITDA Margin (%) 15.3 22.8 24.3 24.6 23.8 23.7EBIT Margin (%) 5.0 16.5 20.6 21.0 20.4 20.5Payout ratio (%) nm 0.0 94.6 72.7 80.0 80.0ROE (%) -49.9 180.8 111.3 89.5 69.2 63.4Capex/sales (%) 3.1 2.0 1.5 2.9 8.4 13.8Capex/depreciation (x) 0.3 0.3 0.4 0.8 2.5 4.3Net debt/equity (%) nm 267.7 -32.9 -37.1 -31.9 -10.2Net interest cover (x) 0.7 4.6 18.3 17.8 14.9 16.1


3 January 2013


Macau


Sands China (Buy): Upgrade from Hold to Buy with HK$44.2 TP

We think Sands China will be the biggest beneficiary of the strong industry growth in mass market gaming in 2013. This is given i) the ramp up of the new mass floor which opened in Sands Cotai Central in September 2012 and ii) the huge hotel room inventory (c. 5,700) of Sands Cotai Central, helping it to attract more overnight visitors. As such, we upgrade the stock from Hold to Buy.

Las Vegas Sands (LVS.N), the parent company of Sands China, announced with 3Q results on 9 November that they will lift 2013 regular DPS by 40% to US$0.35/quarter. Management said about US$1.0bn (or c. 80% of total US$1.2bn dividend payment for 2013) will be sourced from Sands China dividend. Adjusting for the 70% ownership stake of LVS in Sands China, we calculate that Sands China’s annual dividend will be about US$1.4bn or US$0.18/shr (4.2% dividend yield), up from US$0.15 last year. Exact details are likely to be announced after the Macau board meeting, which usually takes place in January. Separately, on 27 November, LVS announced a special dividend of US$2.75/shr (US$2.26bn total payment). This will be paid on 18 December to LVS shareholders on record as of 10 December.

We value Sands China at 17x 2013E EV/EBITDA plus HK$3.3/shr value creation from the Parisian (Site 3) project in Cotai. Our target multiple is at a premium to the average trading multiple of peers (11.5x). We think this is justified given the higher exposure to mass and non-gaming and above-industry margins.

Figure 39: Sands China SOTP valuation

2013E EBITDAR Target Valuation

US$m multiple (x) US$m HK$/shr % of EV

Venetian Macau 1,256 x 17 = 21,327 20.5 49%

Sands Macau 344 x 17 = 5,849 5.6 13%

Plaza Macau at Four Seasons 311 x 17 = 5,277 5.1 12%

Sands Cotai Central 682 x 17 = 11,577 11.1 27%

Ferry and operations (21) x 17 = (357) (0.3) -1%


Parisian (Site 3) 20% ROIC, 13% disc rate 3,426 3.3

Net debt End-2013 (1,143) (1.1)


Key downside risks include: i) higher-than-expected market share cannibalization of other three properties after Sands Cotai Central ramp up and ii) US regulator subpoena and the lawsuit with the former CEO leading to unfavorable outcomes.

3 January 2013


Macau




Hong Kong


Sands China Reuters: 1928.HK Bloomberg: 1928 HK



52 Week range HKD 21.15 - 36.45


USDm 37,857

Company Profile Sands China is one of the six gaming operators in Macau. It currently operates four casinos, (i) Sands, (ii) Venetian, (iii) Plaza at Four Seasons and (iv) Sands Cotai Central (Phase 1 opened in April 2012, Phase 2-3 opening in Sep 2012 and Jan 2013). The company has another land plot in Cotai (Site 3), which is scheduled to open by 2016. Las Vegas Sands Corp (LVS.N) owns 70% of the company.

Price Performance

81216202428323640


Sands China HANG SENG INDEX (Rebased)

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Financial Summary DB EPS (USD) 0.05 0.09 0.15 0.18 0.23 0.29Reported EPS (USD) 0.03 0.08 0.14 0.14 0.23 0.29DPS (USD) 0.00 0.00 0.15 0.18 0.18 0.18BVPS (USD) 0.5 0.5 0.7 0.7 0.7 0.8

Weighted average shares (m) 6,435 8,048 8,049 8,049 8,049 8,049Average market cap (USDm) 8,181 13,296 21,307 37,857 37,857 37,857Enterprise value (USDm) 10,360 15,389 22,225 39,403 39,500 38,894


FCF Yield (%) 5.4 7.6 2.8 2.0 4.1 5.9Dividend Yield (%) 0.0 0.0 5.7 3.9 3.9 3.9


Income Statement (USDm) Sales revenue 3,301 4,142 4,881 6,515 8,603 10,015Gross profit 1,216 1,634 1,979 2,454 3,371 4,015EBITDA 809 1,216 1,576 1,920 2,572 3,091Depreciation 294 286 245 341 476 516Amortisation 34 28 28 28 28 28EBIT 481 902 1,303 1,552 2,069 2,548Net interest income(expense) -154 -115 -45 -64 -145 -153Associates/affiliates 0 0 0 0 0 0Exceptionals/extraordinaries -97 -84 -86 -307 0 0Other pre-tax income/(expense) -15 -33 -37 -52 -56 -56Profit before tax 215 670 1,135 1,129 1,867 2,339Income tax expense 0 4 2 0 0 0Minorities 0 0 0 0 0 0Other post-tax income/(expense) 0 0 0 0 0 0Net profit 215 666 1,133 1,129 1,867 2,339

DB adjustments (including dilution) 97 84 86 307 0 0DB Net profit 312 750 1,219 1,436 1,867 2,339

Cash Flow (USDm) Cash flow from operations 821 1,363 1,376 1,700 2,516 3,035Net Capex -379 -347 -784 -958 -973 -800Free cash flow 442 1,016 592 742 1,543 2,235Equity raised/(bought back) 1,630 0 0 0 0 0Dividends paid 0 0 0 -1,205 -1,475 -1,475Net inc/(dec) in borrowings -832 91 536 -161 500 0Other investing/financing cash flows -750 -974 323 -146 -155 -143Net cash flow 491 132 1,451 -770 412 617Change in working capital -1,059 19 85 0 0 0

Balance Sheet (USDm) Cash and other liquid assets 908 1,041 2,491 1,721 2,134 2,750Tangible fixed assets 6,274 6,263 6,997 7,549 8,038 8,295Goodwill/intangible assets 41 35 32 32 32 32Associates/investments 0 0 0 0 0 0Other assets 405 1,136 608 908 1,008 1,008Total assets 7,628 8,475 10,128 10,210 11,211 12,085Interest bearing debt 3,087 3,133 3,409 3,267 3,777 3,787Other liabilities 842 979 1,203 1,503 1,603 1,603Total liabilities 3,929 4,112 4,612 4,770 5,380 5,390Shareholders' equity 3,699 4,362 5,516 5,440 5,831 6,695Minorities 0 0 0 0 0 0Total shareholders' equity 3,699 4,362 5,516 5,440 5,831 6,695Net debt 2,179 2,092 918 1,545 1,643 1,037

Key Company Metrics Sales growth (%) 8.1 25.5 17.8 33.5 32.1 16.4DB EPS growth (%) 17.3 92.3 62.4 17.8 30.0 25.3EBITDA Margin (%) 24.5 29.4 32.3 29.5 29.9 30.9EBIT Margin (%) 14.6 21.8 26.7 23.8 24.0 25.4Payout ratio (%) 0.0 0.0 106.3 130.6 79.0 63.1ROE (%) 8.7 16.5 22.9 20.6 33.1 37.3Capex/sales (%) 11.7 8.4 16.1 14.7 11.3 8.0Capex/depreciation (x) 1.2 1.1 2.9 2.6 1.9 1.5Net debt/equity (%) 58.9 48.0 16.6 28.4 28.2 15.5Net interest cover (x) 3.1 7.8 29.0 24.4 14.2 16.7


3 January 2013


Macau


SJM (Hold): Good dividend yield but smoking ban impact likely

We believe SJM is a solid value play in Macau due to its net-cash balance sheet and solid 2012E dividend yield. That said, we rate SJM as a Hold as we forecast a loss of market share from 27% in 4Q12 to 24% in 2014 as we believe Satellite casinos are losing competitiveness to Cotai competitors.

At Grand Lisboa, SJM added a total of 40 VIP tables and 200 slots (on floors 9 and 10) over September-October. The company shifted these new tables from one of its Satellite casinos. As such, we expect Grand Lisboa’s market share to remain stable at 3Q12 level (10-11%) until 2014.

We value SJM based on a 10x 2013E EBITDA forecast of HK$8.4bn, plus net cash of HK$3.1/share and HK$2.2/share value creation from Cotai. Our target EV/EBITDA multiple for SJM is at a discount to the average trading multiple of peers (11.5x). We believe a discount is fair given SJM’s EBITDA margins are lower than industry average margin.

Figure 40: SJM SOTP valuation


HK$m multiple (x) HK$m HK$/shr % of EV

Grand Lisboa 5,268 x 10 = 52,943 9.3 63%

Self-promoted Casinos 1,270 x 10 = 12,767 2.3 15%

Satellite Casinos 1,410 x 10 = 14,171 2.5 17%

Non-gaming 368 x 10 = 3,698 0.7 4%


Net cash End-2013 17,761 3.1

SJM Cotai 20% ROIC, 13% disc rate 12,397 2.2


Key downside risks include: i) changes of shareholding at parent company STDM and ii) ii) market share loss at Grand Lisboa. Key upside risks include a special dividend and slower-than-expected loss in market share.


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5.0

10.0

15.0

20.0

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SJM Sector average

+1 Std Div

Avg 8.5x

-1 Std Div

2,061 1,600 2,269

4,838

6,923 7,841 8,316

8,807

-

2,000

4,000

6,000

8,000

10,000

12,000

2007 2008 2009 2010 2011 2012E 2013E 2014E

(HK$m) Grand Lisboa Self-promoted Casinos

Satellite Casinos Non-gaming

+7% yoy in 2013E


3 January 2013


Macau




Hong Kong


SJM Reuters: 0880.HK Bloomberg: 880 HK

Hold Price (3 Jan 13) HKD 18.54


52 Week range HKD 12.28 - 18.54


USDm 13,567

Company Profile SJM is one of the six gaming operators in Macau. It is the largest operator in terms of gaming revenue. Grand Lisboa, SJM's flagship casino, has about 370 gaming tables and 790 slot machines. SJM also owns and operates two two casinos (Old Lisboa and Oceanus). The rest of its 14 casinos are run by third-party promoters, who pay a fixed % of revenue to SJM. SJM is 54% owned by the privately-owned Macau conglomerate STDM, in which Dr. Stanley Ho's family members hold a 32% stake.

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Income Statement (HKDm) Sales revenue 34,066 57,195 75,514 78,650 82,079 86,306Gross profit 7,528 9,975 12,353 15,712 16,553 18,204EBITDA 2,269 4,838 6,923 7,841 8,316 8,807Depreciation 1,109 1,170 1,114 1,148 1,185 1,223Amortisation 6 6 6 6 6 6EBIT 1,154 3,661 5,803 6,687 7,125 7,578Net interest income(expense) -160 -140 71 177 125 103Associates/affiliates -8 10 -38 25 80 80Exceptionals/extraordinaries 0 0 32 0 0 0Other pre-tax income/(expense) -173 1 -522 0 0 0Profit before tax 812 3,532 5,346 6,889 7,330 7,761Income tax expense 18 18 35 27 32 39Minorities -112 -45 3 25 25 25Other post-tax income/(expense) 0 0 0 0 0 0Net profit 906 3,559 5,308 6,837 7,273 7,697

DB adjustments (including dilution) 208 40 563 -6 0 0DB Net profit 1,114 3,600 5,870 6,831 7,273 7,697

Cash Flow (HKDm) Cash flow from operations 4,063 8,266 8,408 7,771 8,606 9,053Net Capex -1,344 -808 -558 -1,777 -4,766 -4,166Free cash flow 2,719 7,458 7,850 5,994 3,840 4,888Equity raised/(bought back) 0 347 100 0 0 0Dividends paid -300 -716 -2,094 -4,139 -6,936 -6,622Net inc/(dec) in borrowings -702 -1,030 -1,040 -392 -240 0Other investing/financing cash flows 770 541 645 -269 -440 138Net cash flow 2,487 6,599 5,461 1,195 -3,776 -1,596Change in working capital 1,793 3,330 1,310 -343 22 -14

Balance Sheet (HKDm) Cash and other liquid assets 8,603 15,202 20,597 21,792 18,016 16,419Tangible fixed assets 10,985 10,291 9,552 10,889 14,169 16,504Goodwill/intangible assets 46 40 33 33 27 21Associates/investments 1,241 349 304 809 1,489 1,569Other assets 2,491 3,008 2,533 2,876 2,854 2,868Total assets 23,367 28,889 33,020 36,399 36,554 37,381Interest bearing debt 7,059 5,297 4,087 4,710 4,470 4,163Other liabilities 7,788 10,417 11,687 11,733 11,779 11,825Total liabilities 14,847 15,714 15,773 16,442 16,249 15,988Shareholders' equity 8,455 13,138 17,208 19,906 20,242 21,317Minorities 65 38 39 51 64 76Total shareholders' equity 8,519 13,175 17,247 19,957 20,306 21,393Net debt -1,543 -9,904 -16,511 -17,082 -13,546 -12,256

Key Company Metrics Sales growth (%) 21.7 67.9 32.0 4.2 4.4 5.2DB EPS growth (%) 20.7 195.2 60.9 16.4 6.5 5.8EBITDA Margin (%) 6.7 8.5 9.2 10.0 10.1 10.2EBIT Margin (%) 3.4 6.4 7.7 8.5 8.7 8.8Payout ratio (%) 50.1 50.6 75.7 90.0 90.0 90.0ROE (%) 11.5 33.0 35.0 36.8 36.2 37.0Capex/sales (%) 3.9 1.4 0.7 2.3 5.8 4.8Capex/depreciation (x) 1.2 0.7 0.5 1.5 4.0 3.4Net debt/equity (%) -18.1 -75.2 -95.7 -85.6 -66.7 -57.3Net interest cover (x) 7.2 26.1 nm nm nm nm


3 January 2013


Macau


Wynn Macau (Buy): Biggest beneficiary of VIP recovery

Wynn Macau has the biggest exposure to VIP gaming in Macau (45% of 2013E EBITDA vs. sector average 31%). Therefore, we think it will benefit the most from the recovery in VIP demand. Further, we think that there is a possibility that Wynn Macau could announce a solid DPS (HK$1.2-1.4/shr) in March, implying 6-7% dividend yield. As such, we upgrade Wynn Macau from Hold to Buy.

Wynn Macau announced in early December that its board will consider i) recommending a final dividend around March of the succeeding fiscal year and ii) declaring an interim dividend around August of the then-current fiscal year. We believe this means that Wynn Macau is now moving into paying regular semi-annual dividends, rather than special dividends as they had paid in 2010 and 2011. This likely means that the next dividend announcement will be in March (vs. November/December in previous years). In March 2013, we expect Wynn Macau to announce a DPS of HK$1.2-1.4/shr, taking into account the parent company's US$7.5/shr special dividend announced in November. This implies a 5.7-6.7% dividend yield.

We value Wynn Macau at 12x 2013E EV/EBITDA plus HK$0.8/shr net cash and HK$6.6/share value creation from Wynn Cotai. Our target EV/EBITDA multiple for Wynn Macau is slightly above the average trading multiple of peers (11.5x), which we think is fair given its strong brand, management track record, superior quality, etc.

Figure 43: Wynn Macau SOTP valuation


HK$m multiple (x) HK$m HK$/shr

Wynn Macau and Encore 9,827 x 12 = 117,929 22.7

Corporate expenses (1,573) x 12 = (18,877) (3.6)

Enterprise value 8,254 x 12 = 99,052 19.1

Net cash (ex-Wynn Cotai capex) End-2013 4,141 0.8

Wynn Cotai 25% ROIC, 13% disc rate 33,553 6.5

Target valuation 136,745 26.4 Source: Deutsche Bank estimates

Key downside risks are: i) delays in starting Cotai project construction, ii) higher-than expected bad debt provisions and iii) dispute at the parent company level with the former vice chairman leading to unfavorable outcomes.


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Wynn Macau Sector average

+1 Std Div

Avg 13.3x

-1 Std Div

3,242

5,876

7,951 7,678 8,2549,067

-1,000

1,000

3,000

5,000

7,000

9,000

11,000

13,000

2009 2010 2011 2012E 2013E 2014E

Corp expenses Wynn MacauExpect 2013E +8% yoy


3 January 2013


Macau




Hong Kong


Wynn Macau Reuters: 1128.HK Bloomberg: 1128 HK



52 Week range HKD 14.80 - 24.90


USDm 14,588

Company Profile Wynn Macau is one of the six gaming operators in Macau. It has one casino with about 460 gaming tables, 1,300 slot machines, 1,000 luxury hotel rooms & suites, and 50k sf high-end retail space. Wynn Macau also owns 52 acres of land in Cotai, in which mgmt plans to build an integrated resort (Wynn Cotai) with a target opening in 2016. The new project may include 500 gaming tables, 1,000 slot machines, 2,000 room all-suite hotel and 120k sf retail space. Wynn Resorts (WYNN.OQ) owns 72% of the company.

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Income Statement (HKDm) Sales revenue 14,077 22,439 29,498 28,525 30,418 33,228Gross profit 3,242 5,876 7,951 7,678 8,254 9,067EBITDA 3,242 5,876 7,951 7,678 8,254 9,067Depreciation 700 967 992 901 926 938Amortisation 18 23 25 25 25 25EBIT 2,524 4,887 6,935 6,752 7,304 8,104Net interest income(expense) -312 -253 -210 -189 -126 -129Associates/affiliates 0 0 0 0 0 0Exceptionals/extraordinaries -40 -32 -744 -21 0 0Other pre-tax income/(expense) -98 -135 -87 -65 -65 -67Profit before tax 2,074 4,466 5,894 6,477 7,113 7,909Income tax expense 6 44 -27 16 16 16Minorities 0 0 0 0 0 0Other post-tax income/(expense) 0 0 0 0 0 0Net profit 2,069 4,422 5,921 6,461 7,097 7,893

DB adjustments (including dilution) 40 32 744 186 0 0DB Net profit 2,109 4,454 6,665 6,647 7,097 7,893

Cash Flow (HKDm) Cash flow from operations 4,508 6,878 9,417 7,284 8,160 9,031Net Capex -2,167 -984 -549 -1,337 -6,025 -8,195Free cash flow 2,342 5,894 8,868 5,947 2,134 836Equity raised/(bought back) 14,490 0 0 0 0 0Dividends paid -1,009 -3,943 -6,225 0 -9,486 -7,415Net inc/(dec) in borrowings 0 -3,110 -189 831 2,698 5,814Other investing/financing cash flows -13,068 -280 -1,594 -699 -447 -552Net cash flow 2,755 -1,439 859 6,080 -5,101 -1,317Change in working capital 1,330 997 1,593 -356 -59 0

Balance Sheet (HKDm) Cash and other liquid assets 5,229 3,819 5,157 11,236 6,136 4,818Tangible fixed assets 8,992 8,827 9,937 10,135 15,238 22,598Goodwill/intangible assets 398 398 398 398 398 398Associates/investments 0 0 0 0 0 0Other assets 972 1,304 1,868 2,224 2,283 2,283Total assets 15,592 14,348 17,360 23,994 24,054 30,098Interest bearing debt 8,017 4,950 4,803 5,568 8,349 14,246Other liabilities 3,803 5,102 8,528 7,936 7,605 7,274Total liabilities 11,821 10,051 13,332 13,504 15,954 21,520Shareholders' equity 3,771 4,297 4,028 10,489 8,100 8,578Minorities 0 0 0 0 0 0Total shareholders' equity 3,771 4,297 4,028 10,489 8,100 8,578Net debt 2,788 1,131 -353 -5,669 2,213 9,427

Key Company Metrics Sales growth (%) -4.3 59.4 31.5 -3.3 6.6 9.2DB EPS growth (%) -3.3 105.2 49.6 -0.3 6.8 11.2EBITDA Margin (%) 23.0 26.2 27.0 26.9 27.1 27.3EBIT Margin (%) 17.9 21.8 23.5 23.7 24.0 24.4Payout ratio (%) 26.3 89.2 105.1 102.9 100.0 100.0ROE (%) 91.8 109.6 142.2 89.0 76.4 94.6Capex/sales (%) 15.4 4.4 1.9 4.7 19.8 24.7Capex/depreciation (x) 3.0 1.0 0.5 1.4 6.3 8.5Net debt/equity (%) 73.9 26.3 -8.8 -54.0 27.3 109.9Net interest cover (x) 8.1 19.3 33.0 35.7 58.0 63.0


3 January 2013


Macau


Appendix A: company P&L Figure 46: Galaxy earnings forecast summary HK$m 2011 1Q12 2Q12 3Q12 4Q12E 2012E 1Q13E 2Q13E 3Q13E 4Q13E 2013E 2014EMarket share Group 16% 19% 21% 19% 18% 19% 18% 18% 18% 18% 18% 18% - StarWorld 9% 7% 8% 7% 6% 7% 6% 6% 6% 6% 6% 6% - Galaxy Macau 6% 10% 11% 11% 10% 11% 10% 10% 10% 11% 10% 11% - City Clubs 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1%Operating StatisticsVIP rolling 1,139,233 364,648 364,021 330,807 326,381 1,385,857 334,094 339,558 351,755 362,744 1,388,151 1,508,600yoy 85% 100% 59% -9% -11% 22% -71% -7% -3% 10% 0% 9%qoq 0% 0% -9% -1% 2% 2% 4% 3% - StarWorld 664,424 176,117 163,000 147,064 147,949 634,130 144,990 146,440 153,762 158,375 603,567 652,695 - Galaxy Macau 380,000 171,393 186,400 173,295 166,363 697,451 176,345 181,635 187,084 192,697 737,762 810,164 - City Clubs 94,809 17,138 14,621 10,448 12,069 54,276 12,759 11,483 10,909 11,672 46,822 45,741VIP hold 3.1% 2.8% 3.2% 3.2% 3.1% 3.1% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%

Mass market drop* 21,745 8,263 8,370 8,924 9,886 35,443 10,789 11,320 11,886 12,419 46,414 58,283 yoy 152% 325% 86% 22% 24% 63% -50% 37% 42% 39% 31% 26%qoq 3% 1% 7% 11% 9% 5% 5% 4% - StarWorld 8,645 2,392 2,370 2,627 2,771 10,160 2,890 2,948 3,096 3,188 12,122 14,432 - Galaxy Macau 13,100 5,871 6,000 6,297 7,116 25,284 7,898 8,372 8,791 9,230 34,292 43,851Mass hold 21% 26% 27% 28% 27% 27% 28% 28% 29% 29% 28% 29%Slot handle* 14,129 5,273 5,240 6,227 6,546 23,286 7,059 7,076 7,093 7,155 28,383 29,998Slot hold 6% 7% 6% 6% 6% 6% 6% 6% 6% 6% 6% 6%No. of tables (avg)*- VIP tables 216 282 282 282 282 282 282 282 282 282 282 282- Mass tables 274 400 400 400 400 400 400 400 400 400 400 400No. of slots 938 1,300 1,355 1,355 1,355 1,341 1,355 1,355 1,355 1,355 1,355 1,355No. of hotel rooms 1,934 2,709 2,709 2,709 2,709 2,709 2,709 2,709 2,709 2,709 2,709 2,709Table win (US$/table/day)*- Blended VIP & mass 27,269 26,048 29,066 26,757 26,629 27,126 27,227 27,671 28,564 29,513 28,251 31,993- VIP tables 52,973 50,200 57,255 50,411 48,979 51,704 48,273 48,752 50,091 51,594 49,688 54,197- Mass tables 5,809 7,731 8,018 8,776 9,506 8,513 10,886 11,318 11,908 12,454 11,646 14,767Slot win (US$/slot/day) 334 397 346 385 403 383 444 440 437 440 440 464RevPAR (US$) 149 156 164 169 176 166 171 175 181 181 177 180Revenues by segment - VIP gross revenues 34,964 10,371 11,811 10,439 10,198 42,819 9,865 10,029 10,388 10,712 40,994 44,560 - Mass revenues 5,786 2,603 2,728 3,037 3,341 11,709 3,667 3,842 4,065 4,240 15,814 19,737 - Slot revenues 976 385 356 397 416 1,554 446 447 450 455 1,799 1,903Gross gaming revenues 41,726 13,359 14,895 13,873 13,955 56,082 13,979 14,318 14,902 15,408 58,606 66,200yoy 109% 122% 85% 5% -3% 34% -66% 7% 0% 11% 5% 13%qoq -7% 11% -7% 1% 0% 2% 4% 3%Revenues by property - StarWorld 22,514 5,486 5,825 5,195 5,155 21,647 5,049 5,111 5,364 5,525 21,050 23,102 - Galaxy Macau 16,375 7,233 8,756 8,311 8,306 32,599 8,449 8,764 9,116 9,417 35,746 41,025 - City Clubs 3,899 968 915 862 1,006 3,752 1,027 1,009 1,013 1,056 4,104 4,479 - Construction materials 1,490 402 538 538 538 1,267 317 317 317 317 1,267 1,267Gross revenues 44,278 14,089 16,034 14,906 15,005 59,264 14,841 15,201 15,809 16,316 62,167 69,873yoy 106% 120% 87% 7% -2% 34% 5% -5% 6% 9% 5% 12%qoq -8% 14% -7% 1% -1% 2% 4% 3%EBITDA by property - City Clubs 183 43 39 39 44 165 44 43 44 45 176 193 - StarWorld 2,955 852 906 843 826 3,425 809 821 861 887 3,378 3,769 - Galaxy Macau Resort 2,581 1,304 1,565 1,757 1,840 6,471 1,977 2,064 2,166 2,247 8,455 10,211 - Construction materials 433 83 145 113 118 459 83 145 113 118 459 459 - Corporate inc & exp (403) (129) (96) (139) (139) (503) (139) (139) (139) (164) (581) (606)EBITDA 5,749 2,153 2,559 2,613 2,689 10,017 2,774 2,935 3,045 3,133 11,887 14,025yoy 158% 202% 131% 46% 26% 74% 29% 15% 17% 17% 19% 18%qoq 1% 19% 2% 3% 3% 6% 4% 3%HK GAAP EBITDA Margin 12.7% 15.3% 16.0% 17.5% 17.9% 17.0% 18.7% 19.3% 19.3% 19.2% 19.5% 20.5%Headline net profit 3,004 7,310 9,258 11,350Exceptionals (951) (64) - - DB Net Profit 3,955 7,373 9,258 11,350

Headline EPS (HK$) 0.73 1.75 2.22 2.72 yoy 220% 140% 27% 23%DB EPS (HK$) 0.94 1.77 2.22 2.72 yoy 153% 88% 26% 23%DPS (HK$) - - - - *Note: Show data on StarWorld and Galaxy Macau only

Source :Company data, Deutsche Bank forecasts

3 January 2013


Macau


Figure 47: Melco Crown earnings forecast summary US$m 2011 1Q12 2Q12 3Q12 4Q12E 2012E 1Q13E 2Q13E 3Q13E 4Q13E 2013E 2014EMarket share Group 15% 14% 13% 13% 14% 13% 14% 14% 14% 14% 14% 14% - Altira 5% 4% 3% 3% 4% 4% 4% 3% 3% 3% 3% 3% - City of Dreams 9% 9% 9% 10% 10% 10% 10% 10% 10% 10% 10% 10%Operating StatisticsVIP rolling 130,000 30,100 29,300 30,500 34,998 124,898 34,998 35,581 36,651 37,394 144,624 151,621yoy 41% -4% -10% -9% 8% -4% 0% 0% 0% 0% 16% 5%qoq -7% -3% 4% 15% 0% 2% 3% 2% - Altira 51,200 10,900 10,200 11,000 11,658 43,758 11,658 11,775 11,892 11,892 47,218 47,560 - City of Dreams 78,800 19,200 19,100 19,500 23,340 81,140 23,340 23,806 24,759 25,501 97,406 104,061Junket VIP rolling (DB est) 119,404 26,728 26,269 27,247 31,497 111,741 31,730 32,251 33,314 33,960 131,254 137,618Direct VIP rolling (DB est) 10,614 3,372 3,031 3,253 3,501 13,157 3,267 3,330 3,338 3,434 13,369 14,004Direct VIP rolling % 8% 11% 10% 11% 10% 11% 9% 9% 9% 9% 9% 9%VIP hold 2.9% 3.0% 2.9% 3.0% 2.9% 2.9% 2.9% 2.9% 2.9% 2.9% 2.9% 2.9%Mass market drop 3,521 1,016 962 1,044 1,218 4,238 1,255 1,268 1,321 1,379 5,223 6,315yoy 45% 29% 7% 18% 27% 20% 0% 0% 0% 0% 23% 21%qoq 6% -5% 9% 17% 3% 1% 4% 4% - Altira 582 150 139 154 144 587 152 160 168 168 648 734 - City of Dreams 2,939 865 823 890 1,074 3,652 1,103 1,108 1,153 1,211 4,575 5,581Mass hold 23% 27% 27% 26% 27% 27% 27% 28% 28% 29% 28% 29%Slot handle 4,778 1,426 1,420 1,508 1,638 5,992 1,647 1,647 1,665 1,698 6,658 6,984Slot hold 6% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5%No. of tables (avg)- VIP tables 363 367 370 360 360 361 360 360 360 360 360 360- Mass tables 258 258 259 259 259 259 259 259 259 259 259 259No. of slots 3,022 3,474 3,479 3,475 3,475 3,476 3,475 3,475 3,475 3,475 3,475 3,475No. of hotel rooms 1,616 1,616 1,616 1,616 1,616 1,616 1,616 1,616 1,616 1,616 1,616 1,616Table win (US$/table/day)- Blended VIP & mass 20,305 21,135 19,419 20,915 23,320 21,248 24,077 24,413 25,223 25,625 24,771 27,122- VIP tables 28,613 27,669 25,198 27,778 30,193 27,870 30,785 30,954 31,885 32,178 31,368 32,886- Mass tables 8,610 11,840 11,164 11,375 13,765 12,009 14,753 15,320 15,964 16,516 15,600 19,110Slot win (US$/slot/day) 240 246 236 226 243 239 252 249 249 252 251 264RevPAR (avg) 160 178 169 176 179 176 194 186 185 188 188 206 Revenues by segment - VIP gross revenues 3,793 914 848 910 1,000 3,672 997 1,014 1,045 1,066 4,122 4,321 - Mass revenues 811 275 263 268 328 1,134 344 361 376 394 1,475 1,807 - Slot revenues 264 77 75 72 79 303 79 79 80 81 319 334Gross gaming revenues 4,868 1,266 1,186 1,250 1,407 5,109 1,420 1,454 1,501 1,541 5,915 6,462yoy 44% 19% -3% -6% 11% 5% -71% 15% 26% 23% 16% 9%qoq 0% -6% 5% 12% 1% 2% 3% 3%Net revenue by property - Altira 1,174 261 209 216 271 956 260 263 267 266 1,056 1,080 - City of Dreams 2,491 717 684 747 796 2,944 822 843 881 909 3,455 3,911 - Mocha Clubs 132 37 35 36 37 145 37 37 37 38 148 153Net revenues (US GAAP) 3,831 1,027 939 1,011 1,103 4,080 1,118 1,143 1,184 1,213 4,659 5,143yoy 45% 27% -2% -4% 9% 6% 9% 22% 17% 10% 14% 10%qoq 2% -9% 8% 9% 1% 2% 4% 2%EBITDA by property - Altira 246 55 26 30 36 147 33 35 36 36 139 145 - City of Dreams 594 198 184 204 225 811 226 233 243 252 953 1,102 - Mocha Clubs 40 10 9 9 9 37 10 10 10 11 41 43 - Phillipines project - - - - - - - - - - - 30Corporate expenses (71) (20) (16) (17) (18) (70) (22) (22) (22) (22) (89) (89)EBITDA 810 243 204 227 252 925 247 255 267 276 1,045 1,231yoy 88% 100% -6% -6% 9% 14% 2% 25% 18% 9% 13% 18%qoq 5% -16% 11% 12% -2% 3% 4% 3%US GAAP EBITDA Margin 21% 24% 22% 22% 23% 23% 22% 22% 23% 23% 22% 24%HK GAAP EBITDA Margin 17% 19% 17% 18% 18% 18% 17% 18% 18% 18% 18% 19%EBITDA by property yoy - Altira 84% 34% -64% -62% -33% -40% -40% 34% 19% 0% -5% 4% - City of Dreams 82% 130% 22% 20% 21% 36% 14% 26% 19% 12% 17% 16% - Mocha Clubs 35% -15% -10% 5% -9% -8% 7% 13% 11% 14% 11% 3%Headline net profit 295 122 82 105 110 419 116 131 149 159 555 766Exceptionals 34 (0) - - 12 12 - - - - - - DB Net Profit 329 122 82 105 120 431 116 131 149 159 555 766Headline EPS (US$) 0.55 0.22 0.15 0.19 0.20 0.76 0.21 0.24 0.27 0.29 1.01 1.39 DB EPS (US$) 0.61 0.22 0.15 0.19 0.22 0.78 0.21 0.24 0.27 0.29 1.01 1.39

Source :Company data, Deutsche Bank forecasts

3 January 2013


Macau


Figure 48: MGM China earnings forecast summary HK$m 2011 1Q12 2Q12 3Q12 4Q12E 2012E 1Q13E 2Q13E 3Q13E 4Q13E 2013E 2014EMarket shareGroup 11% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10%VIP market share 11% 11% 11% 10% 11% 11% 11% 11% 11% 11% 11% 11%Mass market share 8% 7% 7% 7% 7% 7% 7% 7% 7% 7% 7% 7%Slot market share 14% 15% 17% 17% 16% 16% 16% 16% 16% 15% 16% 14%Operating StatisticsVIP rolling 701,305 173,464 162,839 170,536 199,535 706,374 197,540 197,540 199,516 207,496 802,092 838,326yoy 72% 6% -6% -5% 8% 1% 14% 21% 17% 4% 14% 5%qoq -6% -6% 5% 17% -1% 0% 1% 4%Junket VIP rolling (DB est) 648,450 161,900 148,026 157,710 185,568 653,204 183,712 183,712 185,549 192,971 745,946 788,026Direct VIP rolling (DB est) 52,748 11,564 14,813 12,826 13,967 53,170 13,828 13,828 13,966 14,525 56,146 50,300Direct VIP rolling % 8% 7% 9% 8% 7% 8% 7% 7% 7% 7% 7% 6%VIP hold 3.0% 3.2% 3.3% 3.0% 2.8% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%

Mass market drop 17,095 4,677 4,521 4,772 5,025 18,995 5,327 5,540 5,761 5,819 22,446 26,342yoy 17% 13% 7% 10% 14% 11% 14% 23% 21% 16% 18% 17%qoq 6% -3% 6% 5% 6% 4% 4% 1%Mass hold 26.7% 27.5% 30.4% 29.6% 29.6% 29.3% 29.6% 29.6% 29.6% 29.6% 29.6% 29.6%Slot machinesSlot handle 28,354 9,015 9,542 9,187 9,406 37,151 9,406 9,594 9,786 9,884 38,671 39,422Slot hold 5.6% 5.5% 5.8% 5.6% 6.0% 5.7% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0%No. of tables (avg) 420 426 426 406 416 419 416 416 416 416 416 416- VIP tables 200 218 218 213 223 218 223 223 223 223 223 223- Mass tables 220 208 208 193 193 201 193 193 193 193 193 193No. of slots 1,184 1,242 1,252 1,262 1,262 1,255 1,262 1,262 1,262 1,262 1,262 1,262No. of hotel rooms 587 587 587 587 587 587 587 587 587 587 587 587Table win (US$/table/day)- Blended VIP & mass 21,724 22,677 22,284 22,390 23,820 22,853 25,853 25,784 25,925 26,789 28,062 30,003- VIP tables 37,550 35,953 34,604 33,384 35,088 34,859 38,100 37,682 37,645 39,150 38,146 39,869- Mass tables 7,337 8,763 9,372 10,257 10,801 9,800 11,703 12,037 12,383 12,507 12,160 14,271Slot win (US$/slot/day) 475 561 627 570 627 598 641 647 653 659 650 663RevPAR 2,149 na na na na 2,106 na na na na 2,221 2,332Revenues by segment- VIP gross revenues 21,244 5,528 5,320 5,070 5,579 21,497 5,926 5,926 5,985 6,225 24,063 25,150- Mass revenues 4,566 1,286 1,375 1,411 1,486 5,558 1,575 1,638 1,704 1,721 6,639 7,791- Slot revenues 1,590 491 554 513 564 2,123 564 576 587 593 2,320 2,365Gross gaming revenues 27,400 7,304 7,249 6,994 7,630 29,177 8,066 8,140 8,277 8,539 33,022 35,306yoy 68% 16% 4% 6% 1% 6% 10% 12% 18% 12% 13% 7%qoq -3% -1% -4% 9% 6% 1% 2% 3%Junket comm rebated (7,426) na na na na (7,805) na na na na (9,144) (9,557) Net Non-gaming revenue 319 na na na na 365 na na na na 377 459Net revenues (US GAAP) 20,294 5,448 5,505 5,154 5,622 21,738 5,899 5,976 6,088 6,294 24,255 26,208yoy 63% 17% 6% 6% 1% 7% 8% 9% 18% 12% 12% 8%qoq -3% 1% -6% 9% 5% 1% 2% 3%EBITDAProperty EBITDA 5,047 1,382 1,555 1,235 1,408 5,579 1,478 1,509 1,523 1,543 6,054 6,545License fees (114) (95) (96) (41) - (233) (106) (107) (66) - (279) (335) Group EBITDA 4,933 1,287 1,459 1,194 1,408 5,347 1,372 1,402 1,457 1,543 5,775 6,210yoy 74% 12% 10% 9% 3% 8% 7% -4% 22% 10% 8% 8%qoq -6% 13% -18% 18% -3% 2% 4% 6%US GAAP EBITDA Margin 24.3% 23.6% 26.5% 23.2% 25.0% 24.6% 23.3% 23.5% 23.9% 24.5% 23.8% 23.7%HK GAAP EBITDA Margin 18.0% 17.6% 20.1% 17.1% 18.4% 18.3% 17.0% 17.2% 17.6% 18.1% 17.5% 17.6%Headline net profit 3,279 4,637 4,513 4,916Exceptionals (594) 413 - - DB Net Profit 3,874 4,224 4,513 4,916

Headline EPS (HK$) 0.86 1.22 1.19 1.29 yoy 109% 41% -3% 9%DB EPS (HK$) 1.02 1.11 1.19 1.29 yoy 142% 9% 7% 9%DPS (HK$) 0.82 0.89 0.95 1.03

Source :Company data, Deutsche Bank estimates

3 January 2013


Macau


Figure 49: Sands China earnings forecast summary US$m 2011 1Q12 2Q12 3Q12 4Q12E 2012E 1Q13E 2Q13E 3Q13E 4Q13E 2013E 2014EMarket share Group 16% 18% 18% 19% 21% 19% 21% 22% 22% 22% 22% 23% - Venetian Macau 9% 9% 7% 8% 8% 8% 8% 8% 8% 8% 8% 9% - Sands Macau 5% 5% 3% 4% 4% 4% 4% 3% 3% 3% 3% 3% - Plaza at Four Seasons 2% 4% 4% 3% 4% 4% 4% 4% 3% 3% 4% 3% - Sands Cotai Central 0% 0% 3% 4% 6% 3% 6% 6% 7% 7% 7% 8%Operating StatisticsVIP rolling 102,538 32,938 33,354 36,036 39,743 142,072 38,957 39,323 40,351 41,388 160,019 170,681yoy 17% 34% 36% 45% 39% 39% 18% 18% 12% 4% 13% 7%qoq 15% 1% 8% 10% -2% 1% 3% 3% - Venetian Macau 52,017 13,802 11,162 11,199 12,189 48,351 12,503 12,628 13,007 13,527 51,664 54,378 - Sands Macau 31,537 6,434 6,165 6,819 5,737 25,154 5,872 5,696 5,696 5,753 23,017 23,821 - Plaza at Four Seasons 18,984 12,703 9,207 8,963 11,298 42,171 10,168 10,168 10,168 10,168 40,674 41,906 - Sands Cotai Central - - 6,821 9,055 10,519 26,395 10,414 10,830 11,480 11,939 44,664 50,576Junket VIP rolling (DB est) 80,285 26,537 27,356 29,964 32,855 116,712 32,123 32,430 33,292 34,136 131,980 140,178Direct VIP rolling (DB est) 22,253 6,401 5,998 6,072 6,681 25,153 6,835 6,892 7,060 7,252 28,039 30,503Direct VIP rolling % 22% 19% 18% 17% 17% 18% 18% 18% 17% 18% 18% 18%VIP hold 2.9% 3.0% 2.9% 2.8% 2.9% 2.9% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%Mass market drop 7,379 1,919 2,218 2,533 2,938 9,609 3,174 3,341 3,463 3,480 13,459 16,453yoy 11% 10% 21% 33% 56% 30% -57% 74% 56% 37% 40%qoq 2% 16% 14% 16% 8% 5% 4% 0% - Venetian Macau 4,179 1,106 1,021 1,141 1,129 4,397 1,242 1,329 1,396 1,424 5,392 6,575 - Sands Macau 2,812 708 717 739 726 2,890 762 762 793 801 3,118 3,716 - Plaza at Four Seasons 388 106 91 111 133 441 162 162 165 169 659 756 - Sands Cotai Central - - 389 542 950 1,881 1,007 1,088 1,109 1,087 4,291 5,406Mass hold 25.4% 27.8% 26.0% 26.0% 26.9% 26.6% 26.4% 26.9% 27.4% 27.9% 27.2% 28.4%Slot handle 6,454 2,102 2,625 3,106 3,226 11,060 3,415 3,562 3,688 3,852 14,517 16,674Slot hold 6.0% 5.3% 4.7% 4.1% 5.2% 4.8% 5.1% 5.1% 5.1% 5.1% 5.1% 5.1%No. of tables (avg) 1,131 1,134 1,354 1,322 1,283 1,273 1,283 1,401 1,483 1,483 1,413 1,483- VIP tables 356 391 528 483 483 471 483 499 499 499 495 499- Mass tables 775 743 826 839 800 802 800 902 984 984 918 984No. of slots 3,439 3,551 4,380 4,634 5,934 4,625 5,934 5,934 5,934 5,934 5,930 5,934No of hotel rooms 3,568 3,573 5,433 5,633 8,233 5,718 9,233 9,233 9,233 9,233 9,233 9,233Table win (US$/table/day)- Blended VIP & mass 11,713 14,899 12,410 13,673 16,495 14,369 17,375 16,313 15,838 16,227 16,411 18,077- VIP tables 22,790 28,213 19,810 22,590 26,037 24,163 26,886 25,979 26,369 27,046 26,570 28,113- Mass tables 6,632 7,892 7,681 8,539 10,734 8,712 11,633 10,966 10,498 10,740 10,930 12,988Slot win (US$/slot/day) 311 342 307 301 304 314 329 339 347 362 345 393RevPAR (US$) 216 236 172 190 165 173 157 158 162 176 163 188Revenues by segment - VIP gross revenues 2,959 1,004 952 1,004 1,157 4,116 1,169 1,180 1,211 1,242 4,801 5,120 - Mass revenues 1,875 534 577 659 790 2,560 838 900 950 972 3,660 4,665 - Slot revenues 390 111 122 128 166 527 176 183 189 197 746 851Gross gaming revenues 5,224 1,648 1,651 1,791 2,113 7,204 2,182 2,263 2,350 2,411 9,207 10,636yoy 15% 32% 26% 43% 49% 38% 32% 37% 31% 14% 28% 16%qoq 0% 8% 18% 0% 0% 0% 0% 0%Junket comm rebated (992) (360) (336) (358) (393) (1,446) (386) (390) (400) (410) (1,586) (1,689)Net Non-gaming revenue 649 156 164 193 244 757 228 231 248 276 982 1,069Net revenues (US GAAP) 4,881 1,445 1,480 1,629 1,964 6,515 2,024 2,104 2,198 2,277 8,603 10,015yoy 18% 25% 22% 36% 49% 33% 40% 42% 35% 16% 32% 16%qoq 9% 2% 10% 21% 3% 4% 4% 4%EBITDAR by property - Venetian Macau 1,023 282 229 299 306 1,116 296 301 318 341 1,256 1,418 - Sands Macau 351 107 71 81 84 342 85 85 86 88 344 384 - Plaza at Four Seasons 218 67 77 54 67 265 71 73 81 86 311 332 - Sands Cotai Central 0 0 52 53 112 217 136 162 184 199 682 978 - Ferry and other operations (16) (6) (6) (2) (6) (21) (6) (6) (6) (6) (21) (21)EBITDAR 1,576 450 423 485 562 1,920 582 615 663 708 2,572 3,091yoy 30% 21% 11% 24% 31% 22% 29% 46% 37% 26% 34% 20%qoq 5% -6% 15% 16% 3% 6% 8% 7%US GAAP EBITDAR Margin 32% 31% 29% 30% 29% 29% 29% 29% 30% 31% 30% 31%HK GAAP EBITDAR Margin 30% 27% 26% 27% 27% 27% 27% 27% 28% 29% 28% 29%EBITDAR by property yoy - Venetian Macau 26% 24% -11% 18% 8% 9% -71% 7% 39% 14% 13% 13% - Sands Macau 10% 16% -25% 6% -5% -2% -76% -21% 21% 10% 1% 11% - Plaza at Four Seasons 91% 18% 104% -9% 6% 22% -67% 9% 6% 58% 17% 7% - Sands Cotai Central na na na na na na na na na na 214% 43%Headline net profit 1,133 279 160 328 359 1,129 405 439 487 532 1,867 2,339 Exceptionals (86) (93) (145) (35) (35) (307) - - - - - - DB net profit 1,219 373 306 363 394 1,436 405 439 487 532 1,867 2,339 Headline EPS (US$) 0.14 0.03 0.02 0.04 0.04 0.14 0.05 0.05 0.06 0.07 0.23 0.29 DB EPS (US$) 0.15 0.05 0.04 0.05 0.05 0.18 0.05 0.05 0.06 0.07 0.23 0.29 yoy 62% 37% 4% 21% 12% 18% 9% 44% 34% 35% 30% 25%DPS (US$) 0.15 0.18 0.18 0.18


3 January 2013


Macau


Figure 50: SJM earnings forecast summary HK$m 2011 1Q12 2Q12 3Q12 4Q12E 2012E 1Q13E 2Q13E 3Q13E 4Q13E 2013E 2014EMarket share Group 29% 27% 27% 26% 27% 27% 26% 25% 25% 25% 25% 24% - Grand Lisboa 9% 9% 10% 10% 11% 10% 11% 11% 11% 11% 11% 10% - Self-Promoted Casinos 5% 4% 4% 4% 4% 4% 4% 4% 4% 4% 4% 3% - Satellite Casinos 16% 14% 13% 12% 12% 13% 11% 11% 11% 10% 11% 10%Operating StatisticsVIP rolling 1,830,047 454,200 434,828 409,100 458,189 1,756,317 446,366 447,693 446,076 450,748 1,790,883 1,810,531yoy 37% 0% -8% -12% 4% -4% -2% 3% 9% -2% 2% 1%qoq 3% -4% -6% 12% -3% 0% 0% 1% - Grand Lisboa 653,533 178,112 184,959 196,057 231,347 790,475 229,033 233,614 233,614 238,286 934,548 962,724 - Self-Promoted Casinos 252,448 55,507 59,564 53,607 56,288 224,966 54,036 52,415 52,415 52,415 211,282 204,451 - Satellite Casinos 924,066 220,355 190,531 163,362 166,629 740,877 163,296 161,663 160,047 160,047 645,053 643,356VIP hold - Group 2.9% 2.9% 3.0% 3.1% 3.0% 3.0% 2.9% 2.9% 2.9% 2.9% 2.9% 2.9%VIP hold - Grand Lisboa 2.6% 2.9% 2.9% 2.9% 3.0% 2.9% 2.9% 2.9% 2.9% 2.9% 2.9% 2.9%Mass market revenue 21,282 5,941 5,785 6,039 6,584 24,349 6,906 7,119 7,268 7,305 28,598 32,152yoy 24% 15% 15% 12% 15% 14% 16% 23% 20% 11% 17% 12%qoq 4% -3% 4% 9% 5% 3% 2% 1% - Grand Lisboa 5,449 1,499 1,486 1,546 1,608 6,139 1,709 1,780 1,835 1,872 7,196 8,615 - Self-Promoted Casinos 4,135 1,188 1,046 1,136 1,250 4,620 1,284 1,348 1,402 1,402 5,437 6,163 - Satellite Casinos 11,698 3,254 3,254 3,357 3,726 13,591 3,913 3,991 4,031 4,031 15,965 17,374No. of tables (avg) 1,756 1,768 1,770 1,759 1,768 1,757 1,782 1,782 1,782 1,768 1,779 1,768- VIP tables 595 603 615 601 648 621 662 662 662 648 659 648- Mass tables 1,161 1,165 1,155 1,158 1,120 1,136 1,120 1,120 1,120 1,120 1,120 1,120No. of slots 3,947 3,877 3,884 3,812 3,841 3,845 3,841 3,841 3,841 3,841 3,841 3,841Hotel rooms 431 431 431 431 400 431 400 400 400 400 431 431Table win (US$/table/day)- Blended VIP & mass 14,909 15,302 14,976 14,768 16,206 15,530 15,623 15,821 15,902 16,165 16,008 16,927- VIP tables 31,358 31,056 29,916 29,129 29,967 29,866 27,425 27,506 27,407 28,292 27,703 28,460- Mass tables 6,480 7,149 7,021 7,315 8,244 7,532 8,648 8,915 9,102 9,148 8,969 10,083Slot win (US$/slot/day) 130 143 135 130 139 135 139 140 142 143 141 151RevPAR(US$) 246 256 256 256 256 256 301 291 285 285 291 319Revenues by segment - VIP gross revenues 52,779 13,352 13,118 12,482 13,845 52,824 12,945 12,983 12,936 13,072 51,936 52,505 - Mass revenues 21,282 5,938 5,782 6,040 6,584 24,349 6,906 7,119 7,268 7,305 28,598 32,152 - Slot revenues 1,455 394 375 354 381 1,477 381 384 389 391 1,545 1,649Gross gaming revenues 75,516 19,684 19,275 18,876 20,810 78,650 20,231 20,487 20,594 20,767 82,079 86,306yoy 32% 9% -1% -1% 10% 4% 3% 6% 9% 0% 4% 5%qoq 4% -2% -2% 10% -3% 1% 1% 1%Revenues by property - Grand Lisboa 22,797 6,714 6,999 7,315 8,557 29,585 8,475 8,679 8,737 8,910 34,802 37,070 - Self-promoted Casinos 12,012 2,852 2,846 2,591 3,050 11,339 2,963 2,983 3,040 3,040 12,026 12,583 - Satellite Casinos 40,706 10,118 9,430 8,986 9,204 37,738 8,793 8,824 8,817 8,817 35,252 36,654Gross gaming revenues 75,515 19,684 19,275 18,892 20,810 78,661 20,231 20,487 20,594 20,767 82,079 86,306Non-gaming revenue 578 154 160 160 161 646 170 170 170 170 681 733EBITDA by property - Grand Lisboa 3,756 1,085 1,148 1,148 1,387 4,768 1,286 1,325 1,316 1,341 5,268 5,724 - Self-promoted Casinos 1,226 339 285 271 323 1,218 311 322 319 319 1,270 1,219 - Satellite Casinos 1,658 409 393 371 380 1,553 352 353 353 353 1,410 1,466 - Non-gaming 283 81 72 101 48 302 92 92 92 92 368 397EBITDA 6,923 1,914 1,898 1,891 2,138 7,841 2,040 2,093 2,079 2,105 8,316 8,807yoy 43% 14% 5% 15% 20% 13% 7% 10% 10% -2% 6% 6%qoq 7% -1% 0% 13% -5% 3% -1% 1%EBITDA Margin (HKGAAP) 9.2% 9.6% 9.8% 10.0% 10.3% 10.0% 10.1% 10.2% 10.1% 10.1% 10.1% 10.2%Property EBITDA yoy - Grand Lisboa 47% 23% 22% 20% 42% 27% 18% 15% 15% -3% 10% 9% - Self-promoted Casinos 38% 2% -16% 7% 7% -1% -8% 13% 18% -1% 4% -4% - Satellite Casinos 42% 5% -10% -12% -7% -6% -14% -10% -5% -7% -9% 4%Headline net profit 5,308 1,713 1,698 1,658 1,768 6,837 1,777 1,829 1,816 1,851 7,273 7,697Exceptionals (563) - 6 - - 6 - - - - - - DB Net Profit 5,870 1,713 1,692 1,658 1,768 6,831 1,777 1,829 1,816 1,851 7,273 7,697

Headline EPS (HK$) 0.96 0.31 0.31 0.30 0.32 1.23 0.32 0.33 0.33 0.34 1.31 1.38 yoy 39% 22% 35% 41% 20% 28% 4% 8% 10% 5% 6% 6%DB EPS (HK$) 1.05 0.31 0.30 0.30 0.32 1.23 0.32 0.33 0.33 0.33 1.31 1.38 yoy 61% 22% 8% 32% 8% 16% 4% 8% 10% 5% 6% 6%DPS (HK$) 0.73 1.11 1.18 1.24


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Figure 51: Wynn Macau earnings forecast summary HK$m 2011 1Q12 2Q12 3Q12 4Q12E 2012E 1Q13E 2Q13E 3Q13E 4Q13E 2013E 2014EMarket share by segment 14% 12% 12% 12% 11% 12% 11% 11% 11% 11% 11% 11%VIP market share 15% 13% 13% 13% 12% 13% 12% 12% 13% 13% 13% 13%Mass market share 10% 9% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8%Slot market share 20% 18% 16% 14% 12% 15% 13% 13% 13% 13% 13% 12%Operating StatisticsVIP rolling 958,374 259,625 234,825 213,900 216,820 925,170 213,879 218,156 229,064 233,645 894,744 946,263yoy 35% 14% -7% -12% -6% -3% -18% -7% 7% 8% -3% 6%qoq 13% -10% -9% 1% -1% 2% 5% 2%Junket VIP rolling (DB est) 873,900 234,275 215,600 192,249 194,952 837,076 198,907 202,885 213,030 217,290 832,112 880,025Direct VIP rolling (DB est) 80,125 25,350 19,225 21,651 21,868 88,094 14,972 15,271 16,034 16,355 62,632 66,238Direct VIP rolling % 8% 10% 8% 10% 10% 10% 7% 7% 7% 7% 7% 7%VIP hold 2.9% 2.6% 2.8% 3.1% 2.8% 2.8% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%

Mass table drop 21,559 5,482 5,206 5,317 5,689 21,696 6,031 6,151 6,398 6,525 25,105 30,051yoy 18% 4% -3% -3% 6% 1% 10% 18% 20% 15% 16% 20%qoq 2% -5% 2% 7% 6% 2% 4% 2%Mass hold 28.4% 30.3% 29.8% 30.8% 29.7% 30.1% 30.8% 30.8% 30.8% 30.8% 30.8% 30.8%Slot handle 42,044 11,625 9,300 7,624 8,386 36,935 8,554 8,639 8,726 8,987 34,906 36,849Slot hold 5.1% 5% 5% 6% 6% 5.2% 6% 6% 6% 6% 5.5% 5.5%No. of tables (avg) 481 490 493 493 493 492 503 503 503 503 503 503- VIP tables 265 295 290 290 290 291 300 300 300 300 300 300- Mass tables 219 195 203 203 203 201 203 203 203 203 203 203No. of slots 999 927 939 954 954 944 954 954 954 954 954 954No. of hotel rooms 1,010 1,010 1,010 1,010 1,010 1,010 1,010 1,010 1,010 1,010 1,010 1,010Table win (US$/table/day)- Blended VIP & mass 25,143 24,370 23,410 23,505 22,276 23,346 23,686 23,893 24,757 25,250 25,759 27,991- VIP tables 37,495 32,321 32,034 31,862 29,526 31,521 30,664 30,933 32,127 32,769 31,630 33,452- Mass tables 9,911 12,079 10,837 11,315 11,669 11,501 13,119 13,234 13,614 13,886 13,466 16,118Slot win (US$/slot/day) 763 881 752 620 608 715 711 710 710 731 716 755RevPAR (US$) 290 303 285 289 289 292 292 309 291 291 295 294Revenues by segment- VIP gross revenues 28,056 6,724 6,552 6,588 6,105 25,969 6,416 6,545 6,872 7,009 26,842 28,388- Mass revenues 6,132 1,661 1,552 1,638 1,689 6,539 1,858 1,895 1,970 2,010 7,732 9,256- Slot revenues 2,157 576 498 422 413 1,909 473 478 483 497 1,931 2,038- Poker revenues 125 36 36 36 36 145 36 36 36 36 145 145Gross gaming revenues 36,470 8,997 8,637 8,684 8,244 34,562 8,783 8,954 9,361 9,553 36,651 39,827yoy 33% 10% -8% -6% -13% -5% -2% 4% 8% 16% 6% 9%qoq -5% -4% 1% -5% 7% 2% 5% 2%Junket comm rebated (8,714) (2,051) (1,976) (2,004) (1,857) (7,888) (1,951) (1,990) (2,090) (2,132) (8,163) (8,633) Gross non-gaming revenue 3,094 824 749 753 892 3,219 791 766 830 947 3,334 3,518Non-gaming comps (1,352) (366) (340) (344) (319) (1,369) (335) (342) (359) (366) (1,403) (1,484) Net revenues (US GAAP) 29,498 7,404 7,070 7,089 6,960 28,525 7,288 7,387 7,742 8,002 30,418 33,228yoy 31% 10% -7% -4% -10% -3% -2% 4% 9% 15% 7% 9%qoq -4% -5% 0% -2% 5% 1% 5% 3%EBITDAProperty EBITDA 9,294 2,246 2,342 2,265 2,182 9,034 2,334 2,370 2,510 2,613 9,827 10,758Corp overhead (mainly royalty (1,343) (346) (343) (340) (329) (1,357) (379) (386) (401) (408) (1,573) (1,691) Company EBITDA 7,951 1,900 1,999 1,925 1,853 7,678 1,955 1,985 2,110 2,205 8,254 9,067yoy 35% 5% -5% -1% -10% -3% 3% -1% 10% 19% 8% 10%qoq 5% -4% -4% 0% 5% 2% 6% 5%US GAAP EBITDA Margin 27.0% 25.7% 28.3% 27.1% 26.6% 26.9% 26.8% 26.9% 27.3% 27.6% 27.1% 27.3%HK GAAP EBITDA Margin 21.8% 21.1% 23.1% 22.2% 22.5% 22.2% 22.3% 22.2% 22.5% 23.1% 22.5% 22.8%Headline net profit 5,921 1,627 1,710 1,576 1,548 6,461 1,665 1,695 1,820 1,916 7,097 7,893 Exceptionals 744 (18) 167 37 - 186 - - - - - - DB Net Profit 6,665 1,609 1,877 1,613 1,548 6,647 1,665 1,695 1,820 1,916 7,097 7,893

Headline EPS (HK$) 1.14 0.31 0.33 0.30 0.30 1.25 0.32 0.33 0.35 0.37 1.37 1.52 yoy 34% -12% 5% -8% -2% 9% 8% 2% 7% 5% 10% 11%DB EPS (HK$) 1.28 0.31 0.36 0.31 0.30 1.28 0.32 0.33 0.35 0.37 1.37 1.52 yoy 50% -12% 17% -14% -4% 0% 8% 2% 7% 5% 7% 11%DPS (HK$) 1.20 - - - - 1.28 - - - - 1.37 1.52


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Appendix B: market share

Macau gross gaming revenue

Figure 52: Macau gross gaming revenue US$m 2011 1Q12 2Q12 3Q12 4Q12E 2012E 1Q13E 2Q13E 3Q13E 4Q13E 2013E 2014ETotal gaming revenue 33,483 9,289 9,302 9,323 10,095 38,009 10,197 10,423 10,688 10,926 42,235 46,484 yoy 42% 27% 13% 6% 10% 14% 10% 12% 15% 8% 11% 10%qoq 1% 0% 0% 8% 1% 2% 3% 2%VIP revenue 24,516 6,585 6,522 6,396 6,782 26,284 6,735 6,802 6,931 7,078 27,546 28,923 yoy 45% 24% 7% -1% 2% 7% 2% 4% 8% 4% 5% 5%qoq -1% -1% -2% 6% -1% 1% 2% 2%As % of Total 73% 71% 70% 69% 67% 69% 66% 65% 65% 65% 65% 62%Mass revenue 7,540 2,291 2,369 2,533 2,851 10,045 2,994 3,143 3,269 3,351 12,757 15,436 yoy 37% 39% 33% 30% 33% 33% 31% 33% 29% 18% 27% 21%qoq 7% 3% 7% 13% 5% 5% 4% 3%As % of Total 23% 25% 25% 27% 28% 26% 29% 30% 31% 31% 30% 33%Slot revenue 1,428 413 411 394 462 1,679 469 478 488 497 1,931 2,124 yoy 33% 21% 16% 11% 21% 18% 13% 16% 24% 8% 15% 10%qoq 9% -1% -4% 17% 1% 2% 2% 2%As % of Total 4% 4% 4% 4% 5% 4% 5% 5% 5% 5% 5% 5%

Source: Macau government, Deutsche Bank estimates

Overall gaming revenue market share

Figure 53: Overall gaming revenue market share 2011 1Q12 2Q12 3Q12 4Q12E 2012E 1Q13E 2Q13E 3Q13E 4Q13E 2013E 2014E

Galaxy 16% 19% 21% 19% 18% 19% 18% 18% 18% 18% 18% 18% - StarWorld 9% 7% 8% 7% 6% 7% 6% 6% 6% 6% 6% 6% - City Clubs 2% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% - Galaxy Macau 6% 10% 11% 11% 10% 11% 10% 10% 10% 11% 10% 11%Melco Crown 15% 14% 13% 13% 14% 13% 14% 14% 14% 14% 14% 14% - Altira 5% 4% 3% 3% 4% 4% 4% 3% 3% 3% 3% 3% - City of Dreams 9% 9% 9% 10% 10% 10% 10% 10% 10% 10% 10% 10%MGM China 11% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10%Sands China 16% 18% 18% 19% 21% 19% 21% 22% 22% 22% 22% 23% - Venetian Macau 9% 9% 7% 8% 8% 8% 8% 8% 8% 8% 8% 9% - Sands Macau 5% 5% 3% 4% 4% 4% 4% 3% 3% 3% 3% 3% - Four Seasons Macau 2% 4% 4% 3% 4% 4% 4% 4% 3% 3% 4% 3% - Sands Cotai Central 0% 0% 3% 4% 6% 3% 6% 6% 7% 7% 7% 8%SJM 29% 27% 27% 26% 27% 27% 26% 25% 25% 25% 25% 24% - Grand Lisboa 9% 9% 10% 10% 11% 10% 11% 11% 11% 11% 11% 10% - Self Promoted Casinos 5% 4% 4% 4% 4% 4% 4% 4% 4% 4% 4% 3% - Satellite Casinos 16% 14% 13% 12% 12% 13% 11% 11% 11% 10% 11% 10%Wynn Macau 14% 13% 12% 12% 11% 12% 11% 11% 11% 11% 11% 11%Industry 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%

Cotai/Taipa 32% 37% 38% 40% 42% 39% 42% 43% 43% 43% 43% 44%Peninsula 68% 63% 62% 60% 58% 61% 58% 57% 57% 57% 57% 56%


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VIP revenue market share

Figure 54: VIP revenue market share 2011 1Q12 2Q12 3Q12 4Q12E 2012E 1Q13E 2Q13E 3Q13E 4Q13E 2013E 2014E

Galaxy 18% 20% 23% 21% 20% 21% 19% 19% 19% 20% 19% 20% - StarWorld 11% 9% 10% 9% 8% 9% 8% 8% 8% 8% 8% 8% - City Clubs 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% - Galaxy Macau 6% 10% 12% 12% 11% 11% 10% 10% 10% 11% 10% 11%Melco Crown 15% 14% 13% 14% 15% 14% 15% 15% 15% 15% 15% 15% - Altira 6% 5% 4% 4% 5% 5% 5% 5% 5% 5% 5% 5% - City of Dreams 9% 9% 9% 10% 10% 9% 10% 10% 10% 10% 10% 10%MGM China 11% 11% 11% 10% 11% 11% 11% 11% 11% 11% 11% 11%Sands China 12% 15% 15% 16% 17% 16% 17% 17% 17% 18% 17% 18% - Venetian Macau 6% 6% 5% 6% 6% 6% 6% 6% 6% 6% 6% 6% - Sands Macau 4% 4% 2% 3% 3% 3% 3% 3% 2% 2% 3% 2% - Four Seasons Macau 2% 5% 4% 4% 4% 4% 5% 4% 4% 4% 4% 4% - Sands Cotai Central 0% 0% 3% 3% 5% 3% 5% 5% 5% 5% 5% 5%SJM 28% 26% 26% 25% 27% 26% 25% 25% 24% 24% 24% 23% - Grand Lisboa 9% 10% 12% 11% 13% 11% 13% 13% 13% 13% 13% 12% - Self Promoted Casinos 4% 3% 3% 3% 3% 3% 3% 3% 3% 3% 3% 3% - Satellite Casinos 15% 13% 12% 11% 10% 12% 9% 9% 9% 8% 9% 8%Wynn Macau 15% 13% 13% 13% 12% 13% 12% 12% 13% 13% 13% 13%Industry 100% 100% 100% 100% 101% 100% 100% 100% 100% 100% 100% 100%



VIP rolling

Figure 55: VIP rolling (US$m) 2011 1Q12 2Q12 3Q12 4Q12E 2012E 1Q13E 2Q13E 3Q13E 4Q13E 2013E 2014E

Galaxy 146,998 47,051 46,970 42,685 42,114 178,820 43,109 43,814 45,388 46,806 179,116 194,658 - City Clubs 12,233 2,211 1,887 1,348 1,557 7,003 1,646 1,482 1,408 1,506 6,042 5,902 - Starworld 85,732 22,725 21,032 18,976 19,090 81,823 18,708 18,895 19,840 20,435 77,880 84,219 - Galaxy Macau 49,032 22,115 24,052 22,361 21,466 89,994 22,754 23,437 24,140 24,864 95,195 104,537 Melco Crown 130,000 30,100 29,300 30,500 34,998 124,898 34,998 35,581 36,651 37,394 144,624 151,621 - Altira 51,200 10,900 10,200 11,000 11,658 43,758 11,658 11,775 11,892 11,892 47,218 47,560 - City of Dreams 78,800 19,200 19,100 19,500 23,340 81,140 23,340 23,806 24,759 25,501 97,406 104,061 MGM China 90,491 22,382 21,011 22,005 25,747 91,145 25,489 25,489 25,744 26,774 103,496 108,171 Sands China 102,538 32,938 33,354 36,036 39,743 142,072 38,957 39,323 40,351 41,388 160,019 170,681 - Venetian Macau 52,017 13,802 11,162 11,199 12,189 48,351 12,503 12,628 13,007 13,527 51,664 54,378 - Sands Macau 31,537 6,434 6,165 6,819 5,737 25,154 5,872 5,696 5,696 5,753 23,017 23,821 - Four Seasons Macau 18,984 12,703 9,207 8,963 11,298 42,171 10,168 10,168 10,168 10,168 40,674 41,906 - Sands Cotai Central - - 6,821 9,055 10,519 26,395 10,414 10,830 11,480 11,939 44,664 50,576 SJM 236,135 58,577 56,136 53,294 58,615 226,622 57,596 57,767 57,558 58,161 231,082 233,617 - Grand Lisboa 84,327 22,982 23,866 25,298 29,851 101,997 29,553 30,144 30,144 30,747 120,587 124,223 - Self Promoted Casinos 32,574 7,162 7,686 6,917 7,263 29,028 6,972 6,763 6,763 6,763 27,262 26,381 - Satellite Casinos 119,234 28,433 24,585 21,079 21,501 95,597 21,070 20,860 20,651 20,651 83,233 83,014 Wynn Macau 123,100 33,500 30,300 27,600 27,977 119,377 27,597 28,149 29,557 30,148 115,451 122,098 Industry 829,262 224,549 217,072 212,119 229,193 882,933 227,746 230,123 235,249 240,670 933,787 980,847

Cotai/Taipa 253,703 79,383 81,107 82,482 90,937 333,910 91,331 93,089 95,869 98,345 378,633 404,790 Peninsula 575,559 145,166 135,965 129,637 138,256 549,023 136,415 137,034 139,380 142,325 555,154 576,058


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VIP rolling market share

Figure 56: VIP rolling market share 2011 1Q12 2Q12 3Q12 4Q12E 2012E 1Q13E 2Q13E 3Q13E 4Q13E 2013E 2014E

Galaxy 18% 21% 22% 20% 18% 20% 19% 19% 19% 19% 19% 20% - Starworld 10% 10% 10% 9% 8% 9% 8% 8% 8% 8% 8% 9% - City Clubs 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% - Galaxy Macau 6% 10% 11% 11% 9% 10% 10% 10% 10% 10% 10% 11%Melco Crown 16% 13% 13% 14% 15% 14% 15% 15% 16% 16% 15% 15% - Altira 6% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% - City of Dreams 10% 9% 9% 9% 10% 9% 10% 10% 11% 11% 10% 11%MGM China 11% 10% 10% 10% 11% 10% 11% 11% 11% 11% 11% 11%Sands China 12% 15% 15% 17% 17% 16% 17% 17% 17% 17% 17% 17% - Venetian Macau 6% 6% 5% 5% 5% 5% 5% 5% 6% 6% 6% 6% - Sands Macau 4% 3% 3% 3% 3% 3% 3% 2% 2% 2% 2% 2% - Four Seasons Macau 2% 6% 4% 4% 5% 5% 4% 4% 4% 4% 4% 4% - Sands Cotai Central 0% 0% 3% 4% 5% 3% 5% 5% 5% 5% 5% 5%SJM 28% 26% 26% 25% 26% 26% 25% 25% 24% 24% 25% 24% - Grand Lisboa 10% 10% 11% 12% 13% 12% 13% 13% 13% 13% 13% 13% - Self Promoted Casinos 4% 3% 4% 3% 3% 3% 3% 3% 3% 3% 3% 3% - Satellite Casinos 14% 13% 11% 10% 9% 11% 9% 9% 9% 9% 9% 8%Wynn Macau 15% 15% 14% 13% 12% 14% 12% 12% 13% 13% 12% 12%Industry 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%



Mass market revenue market share

Figure 57: Mass market revenue market share 2011 1Q12 2Q12 3Q12 4Q12E 2012E 1Q13E 2Q13E 3Q13E 4Q13E 2013E 2014E

Galaxy 10% 15% 15% 16% 15% 15% 16% 16% 16% 16% 16% 17% - Starworld 3% 3% 3% 3% 3% 3% 3% 3% 3% 3% 3% 3% - City Clubs 2% 3% 3% 3% 3% 3% 3% 3% 3% 3% 3% 3% - Galaxy Macau 5% 9% 10% 10% 9% 9% 10% 10% 11% 11% 10% 11%Melco Crown 11% 12% 11% 11% 12% 11% 11% 11% 12% 12% 12% 12% - Altira 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% - City of Dreams 10% 11% 10% 10% 11% 10% 11% 11% 11% 11% 11% 11%MGM China 8% 7% 8% 7% 7% 7% 7% 7% 7% 7% 7% 7%Sands China 25% 23% 25% 26% 28% 25% 28% 29% 29% 29% 29% 31% - Venetian Macau 15% 15% 13% 14% 13% 14% 13% 13% 13% 13% 13% 13% - Sands Macau 8% 7% 6% 6% 5% 6% 5% 5% 5% 5% 5% 5% - Four Seasons Macau 2% 2% 2% 1% 2% 2% 2% 2% 2% 2% 2% 2% - Sands Cotai Central 0% 0% 4% 4% 7% 4% 8% 9% 9% 9% 9% 10%SJM 36% 33% 32% 31% 30% 31% 30% 29% 29% 28% 29% 27% - Grand Lisboa 9% 8% 8% 8% 7% 8% 7% 7% 7% 7% 7% 7% - Self Promoted Casinos 7% 7% 6% 6% 6% 6% 6% 6% 6% 5% 5% 5% - Satellite Casinos 20% 18% 18% 17% 17% 17% 17% 16% 16% 16% 16% 15%Wynn Macau 11% 10% 9% 9% 8% 9% 8% 8% 8% 8% 8% 8%Industry 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%



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The author of this report wishes to acknowledge the contribution made by Mr. Thilan Sampath and Ms. Janani Perera, employees of Amba Research Lanka Private Ltd and Mr. Cyrus Ng, employees of Amba Research (Hong Kong) Ltd, both are third-party providers to Deutsche Bank offshore research support services.

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Appendix 1

Important Disclosures Additional information available upon request For disclosures pertaining to recommendations or estimates made on securities other than the primary subject of this research, please see the most recently published company report or visit our global disclosure look-up page on our website at http://gm.db.com/ger/disclosure/DisclosureDirectory.eqsr Analyst Certification

The views expressed in this report accurately reflect the personal views of the undersigned lead analyst about the subject issuers and the securities of those issuers. In addition, the undersigned lead analyst has not and will not receive any compensation for providing a specific recommendation or view in this report. Karen Tang Equity rating key Equity rating dispersion and banking relationships

Buy: Based on a current 12- month view of total share-holder return (TSR = percentage change in share price from current price to projected target price plus pro-jected dividend yield ) , we recommend that investors buy the stock. Sell: Based on a current 12-month view of total share-holder return, we recommend that investors sell the stock Hold: We take a neutral view on the stock 12-months out and, based on this time horizon, do not recommend either a Buy or Sell. Notes:

1. Newly issued research recommendations and target prices always supersede previously published research. 2. Ratings definitions prior to 27 January, 2007 were:

Buy: Expected total return (including dividends) of 10% or more over a 12-month period Hold: Expected total return (including dividends) between -10% and 10% over a 12-month period Sell: Expected total return (including dividends) of -10% or worse over a 12-month period

56 %

38 %

6 %13 % 15 % 11 %0

50100150200250300350400450

Buy Hold Sell

Asia-Pacific Universe

Companies Covered Cos. w/ Banking Relationship

3 January 2013


Macau


Regulatory Disclosures

1. Important Additional Conflict Disclosures

Aside from within this report, important conflict disclosures can also be found at https://gm.db.com/equities under the "Disclosures Lookup" and "Legal" tabs. Investors are strongly encouraged to review this information before investing.

2. Short-Term Trade Ideas

Deutsche Bank equity research analysts sometimes have shorter-term trade ideas (known as SOLAR ideas) that are consistent or inconsistent with Deutsche Bank's existing longer term ratings. These trade ideas can be found at the SOLAR link at http://gm.db.com.

3. Country-Specific Disclosures

Australia and New Zealand: This research, and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act and New Zealand Financial Advisors Act respectively. Brazil: The views expressed above accurately reflect personal views of the authors about the subject company(ies) and its(their) securities, including in relation to Deutsche Bank. The compensation of the equity research analyst(s) is indirectly affected by revenues deriving from the business and financial transactions of Deutsche Bank. In cases whereat least one Brazil based analyst (identified by a phone number starting with +55 country code) has taken part in the preparation of this research report, the Brazil based analyst whose name appears first assumes primary responsibility for its content from a Brazilian regulatory perspective and for its compliance with CVM Instruction # 483. EU countries: Disclosures relating to our obligations under MiFiD can be found at http://www.globalmarkets.db.com/riskdisclosures. Japan: Disclosures under the Financial Instruments and Exchange Law: Company name - Deutsche Securities Inc. Registration number - Registered as a financial instruments dealer by the Head of the Kanto Local Finance Bureau (Kinsho) No. 117. Member of associations: JSDA, Type II Financial Instruments Firms Association, The Financial Futures Association of Japan, Japan Investment Advisers Association. Commissions and risks involved in stock transactions - for stock transactions, we charge stock commissions and consumption tax by multiplying the transaction amount by the commission rate agreed with each customer. Stock transactions can lead to losses as a result of share price fluctuations and other factors. Transactions in foreign stocks can lead to additional losses stemming from foreign exchange fluctuations. "Moody's", "Standard & Poor's", and "Fitch" mentioned in this report are not registered credit rating agencies in Japan unless “Japan” or "Nippon" is specifically designated in the name of the entity. Russia: This information, interpretation and opinions submitted herein are not in the context of, and do not constitute, any appraisal or evaluation activity requiring a license in the Russian Federation.

GRCM2013PROD027879

Deutsche Bank AG/Hong Kong Asia-Pacific locations

Deutsche Bank AG Deutsche Bank Place Level 16 Corner of Hunter & Phillip Streets Sydney, NSW 2000 Australia Tel: (61) 2 8258 1234

Deutsche Bank AG Filiale Hongkong International Commerce Centre, 1 Austin Road West,Kowloon, Hong Kong tel: (852) 2203 8888

Deutsche Equities India Pte Ltd 3rd Floor, Kodak House 222, Dr D.N. Road Fort, Mumbai 400 001 SEBI Nos: INB231196834 INB011196830, INF231196834 Tel: (91) 22 6658 4600

Deutsche Securities Inc. 2-11-1 Nagatacho Sanno Park Tower Chiyoda-ku, Tokyo 100-6171 Japan Tel: (81) 3 5156 6770

Deutsche Bank (Malaysia) Berhad Level 18-20 Menara IMC 8 Jalan Sultan Ismail Kuala Lumpur 50250 Malaysia Tel: (60) 3 2053 6760

In association with Deutsche Regis Partners, Inc. Level 23, Tower One Ayala Triangle, Ayala Avenue Makati City, Philippines Tel: (63) 2 894 6600

Deutsche Securities Korea Co. 17th Floor, YoungPoong Bldg., 33 SeoRin-Dong, Chongro-Ku, Seoul (110-752) Republic of Korea Tel: (82) 2 316 8888

Deutsche Bank AG Singapore One Raffles Quay South Tower Singapore 048583 Tel: (65) 6423 8001

Deutsche Securities Asia Ltd Singapore One Raffles Quay South Tower Singapore 048583 Tel: (65) 6423 8001

Deutsche Securities Asia Ltd Taiwan Branch Level 6 296 Jen-Ai Road, Sec 4 Taipei 106 Taiwan Tel: (886) 2 2192 2888

In association with TISCO Securities Co., Ltd TISCO Tower 48/8 North Sathorn Road Bangkok 10500 Thailand Tel: (66) 2 633 6470

In association with PT Deutsche Verdhana Indonesia Deutsche Bank Building, 6th Floor, Jl. Imam Bonjol No.80, Central Jakarta, Indonesia Tel: (62 21) 318 9541

International locations

Deutsche Bank Securities Inc. 60 Wall Street New York, NY 10005 United States of America Tel: (1) 212 250 2500

Deutsche Bank AG London 1 Great Winchester Street London EC2N 2EQ United Kingdom Tel: (44) 20 7545 8000

Deutsche Bank AG Große Gallusstraße 10-14 60272 Frankfurt am Main Germany Tel: (49) 69 910 00

Deutsche Bank AG Deutsche Bank Place Level 16 Corner of Hunter & Phillip Streets Sydney, NSW 2000 Australia Tel: (61) 2 8258 1234

Deutsche Bank AG Filiale Hongkong International Commerce Centre, 1 Austin Road West,Kowloon, Hong Kong Tel: (852) 2203 8888

Deutsche Securities Inc. 2-11-1 Nagatacho Sanno Park Tower Chiyoda-ku, Tokyo 100-6171 Japan Tel: (81) 3 5156 6770

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