Maintain "Neutral" 维持“中性”

股

票

研 Company[Table_Title] Report: Wynn Macau (01128 HK) Noah Hudson

究 (86755) 2397 6684 EquityResearch 公司报告：永利澳门（01128 HK） [email protected]

18 June 2019 [Table_Summary] Maintain "Neutral" 维持“中性”

 Wynn Macau’s 1Q19 luck-normalized adjusted property EBITDA was Rating:[Table_Rank ] Neutral 公 US$362 mn (-14.3% yoy, -4.7% qoq), slightly missing our forecast by Maintain 3.7%. The Company’s 1Q19 GGR was US$1,458 mn (-3.4% yoy, -6.3% 司 qoq), underperforming the sector. The Company was hit by its relatively large 评级：中性维持

( ) 报 exposure to Macau’s declining VIP segment as well as its high-end 告 positioning in both the VIP and mass segments. 6[Table_Price-18m TP目标价] : HK$16.00  We cut the Company's 2019-2021 adjusted EBITDA forecasts by 1.7%, Report Company Revised from 原目标价: HK$21.50 5.6% and 9.2%, respectively. We forecast 2019-2021 adjusted EBITDA at HK$10.9 bn, HK$11.8 bn and HK$12.4 bn, respectively, representing growth Share price 股价： HK$15.940

of -11.8%, 8.2% and 4.9%, respectively. We forecast 2019-2021 revenue of

HK$38.0 bn, HK$39.4 bn and HK$41.2 bn, respectively, representing growth of -4.0%, 3.6% and 4.7%, respectively. We expect revenue to decline in 2019 Stock performance 股价表现 due to construction disruption at the Wynn Macau property. [Table_QuotePic15 % change ]  We lower Wynn Macau's target price from HK$21.50 to HK$16.00 and maintain "Neutral" investment rating. Our new target price reflects a 5

relatively low EV/EBITDA valuation as we see downside risk that the (5)

证 remodeling and reconstruction at the Wynn Macau property might be more (15)

券告 disruptive or take longer than expected. Our new target price is equivalent to

9.5x 2019 EV/adjusted EBITDA and is a 20.3% discount to our DCF derived (25)

研报

NAV per share of HK$20.08.

(35)

究  究永利澳门 2019 年第 1 季度正常化赢率下经调整物业 EBITDA 同比下降 14.3%、环比下降 (45)

报 4.7%至 3.62 亿美元，稍低于我们预期 3.7%。季度内公司博彩毛收入为 14.58 亿美元（同研

比下跌 3.4%、环比下跌 6.3%），跑输行业。由于公司较侧重的贵宾市场步入衰退，且公 (55) 告 HSI Wynn Macau 券司贵宾及中场的定位又较为高端，所以公司此次经营受到不小冲击。

EquityResearch Report 我们分别下调公司至年经调整预测、和。我们预计  证 2019 2021 EBITDA 1.7% 5.6% 9.2% 2019 至 2021 年经调整 EBITDA 将达到 109 亿港元、118 亿港元和 124 亿港元，分别反 Chang[Table_PriceChange]e in Share Price 1 M 3 M 1 Y [Tab

映-11.8%、8.2%和 4.9%的增长率。我们预计 2019 至 2021 年收入将分别达到 380 亿港股价变动 1 个月 3 个月 1 年 le_I 元、394 亿港元和 412 亿港元，分别对应-4.0%、3.6%和 4.7%的增长率。我们估计永利 Abs. % (9.8) (14.9) (41.6) 绝对变动 % nfo1 澳门物业的施工将拖累公司 2019 年的营收。 Rel. % to HS Index (7.5) (7.6) (31.6) 相对恒指变动 % 博  我们将永利澳门的目标价由 21.50 港元下调至 16.00 港元，维持“中性”投资评级。我们 ] Avg. share price（HK$） 16.3 18.9 19.2 彩新的目标价反映了较低的 EV/EBITDA 估值，这是因为我们认为永利澳门物业的改造和重平均股价（港元）行建可能比预期干扰更大、耗时更久而出现下行风险。新的目标价相对应 9.5 倍 2019 年经 Source: Bloomberg, Guotai Junan International.

业调整 EV/EBITDA，同时也对我们用折现现金流方法得出的每股估值（ 20.08 港元）有 20.3% 的折让。

Gaming Sector

[Tab Year End Turnover Net Profit EPS EPS PER BPS PBR DPS Yield ROE 年结收入股东净利每股净利每股净利变动市盈率每股净资产市净率每股股息股息率净资产收益率 le_I 12/31 (HKD mn) ( HKD mn) (HKD) (△ %) (x) (HKD) (x) (HKD) (%) (%)

nfo2 2017A 34,032 3,700 0.714 157.7 22.3 0.578 27.6 0.960 6.0 135.7 2018A 39,592 6,245 1.204 68.6 13.2 0.293 54.5 1.200 7.5 276.4 中] 2019F 38,022 4,858 0.936 (22.3) 17.0 0.398 40.0 0.843 5.3 271.0 永外 2020F 39,390 6,072 1.170 25.0 13.6 0.551 28.9 1.053 6.6 246.4 利 2021F 41,225 6,738 1.298 11.0 12.3 0.735 21.7 1.168 7.3 201.8 运澳 [SharesTable_BaseData] in issue (m)总股数 (m) 5,157.8 Major shareholder 大股东 Wynn Resorts (WYNN US) 72.2% 输门 Market cap. (HK$ m)市值(HK$ m) 82,215.9 Free float(%) 自由流通比率(%) 27.7

3 month average vol. 3 个月平均成交股数(‘000) 12,193.0 FY19 Net gearing(%) FY19 净负债/股东资金(%) 1,220.3 52 Weeks high/low(HK$) 52 周高/低 27.028/ 14.840 FY19Est. NAV (HK$) FY19 每股估值（港元） 20.1

MacauWynn (01128HK) Source: the Company, Guotai Junan International.

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Page 1 of 10

Wynn Macau (01128 HK)

1Q19 Results

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Wynn Macau’s (the "Company") 1Q19 luck-normalized adjusted property EBITDA decreased 14.3% yoy and 4.7% qoq

to US$362 million, missing our luck-normalized forecast by 3.7%. The Company benefited from favorable VIP luck during

1Q19 and recorded adjusted property EBITDA of US$386 million (-8.4% yoy, -1.9% qoq), which was 7.4% above our forecast. 2019

Adjusted property EBITDA margin was 30.9%, down 1.9 ppt yoy and up 0.4 ppt qoq. June

8 The Company’s 1Q19 gross gaming revenue ("GGR") was US$1,458 million, down 3.4% yoy and down 6.3% qoq, 1 worse than the Macau GGR decline of 0.5% yoy and 3.3% qoq during the quarter. The decline in the Company’s GGR is attributable to the Company’s relatively large exposure to Macau’s VIP business, which recorded the worst decline since 2Q16. Competition within Macau remained intense during the quarter given the ramp-up at MGM Cotai and Melco’s Morpheus, squeezing market share of the Company and other Macau gaming operators, especially those whose properties are relatively more mature. Moreover, the Company’s relatively high-end positioning, both in VIP and mass, made the situation even more challenging as Macau’s VIP sector enters into a downward trajectory.

Table-1: Company Results US$ million 1Q18 2Q18 3Q18 4Q18 1Q19 qoq yoy

] 2 r a (%M t orh ppt)g i R (%_ ore ppt)l b a T [

Company VIP turnover 32,473 27,958 29,493 28,934 22,821 (21.1%) (29.7%) Company VIP gross win 845 777 949 891 788 (11.5%) (6.7%) Company VIP win rate (% of turnover) 2.60% 2.78% 3.22% 3.08% 3.46% 0.38 ppt 0.85 ppt Company mass tables & slots win 664 617 639 665 669 0.6% 0.8% Company total gross win 1,509 1,395 1,588 1,556 1,458 (6.3%) (3.4%)

Wynn Macau property revenue 618 543 580 553 524 (5.3%) (15.3%) Wynn Palace property revenue 666 621 731 741 727 (1.9%) 9.1%

Total operating revenue (Net) 1,284 1,164 1,310 1,294 1,251 (3.4%) (2.6%)

Wynn Macau property VIP market share 8.4% 7.0% 8.5% 7.2% 6.6% (0.6) ppt (1.8) ppt

Wynn Palace VIP market share 7.5% 8.3% 10.7% 10.4% 11.0% 0.6 ppt 3.5 ppt (01128 HK)

Company VIP market share 15.9% 15.3% 19.1% 17.7% 17.7% (0.0) ppt 1.8 ppt

Wynn Macau property mass market share 7.2% 7.2% 6.8% 6.8% 6.5% (0.3) ppt (0.7) ppt 永利澳门 Wynn Palace mass market share 8.8% 8.0% 8.5% 8.3% 7.9% (0.4) ppt (1.0) ppt Company mass market share 16.0% 15.3% 15.3% 15.1% 14.3% (0.7) ppt (1.7) ppt

Company total market share 15.9% 15.3% 17.4% 16.5% 16.0% (0.5) ppt 0.0 ppt Wynn Macau

Operating profit 277 205 258 242 243 0.1% (12.5%) Operating profit margin 21.6% 17.6% 19.7% 18.7% 19.4% 0.7 ppt (2.2) ppt Adjusted property EBITDA 422 352 409 394 386 (1.9%) (8.4%) Adjusted property EBITDA margin 32.8% 30.3% 31.2% 30.5% 30.9% 0.4 ppt (1.9) ppt Net profit (loss) 227 160 224 186 191 2.3% (16.0%) Net profit margin 17.7% 13.8% 17.1% 14.4% 15.2% 0.8 ppt (2.4) ppt Source: the Company, Guotai Junan International.

The Company’s 1Q19 VIP turnover decreased 29.7% yoy and 21.1% qoq to US$22.82 billion, worse than the 13.4% yoy and 11.4% qoq decline in Macau's VIP GGR during the quarter. During 1Q19, the Company derived around 54% of its total GGR from its VIP segment, while the Macau sector generated around 49% of its total GGR from VIP business. Although the

Company intends to reduce its reliance on VIP, it is still more exposed to Macau’s VIP sector compared to its peers. The

Company’s overall VIP hold was 3.46%, up 0.9 ppt yoy and up 0.4 ppt qoq, and VIP GGR was US$788 million, down 6.7% yoy Report and down 11.5% qoq.

The Company’s mass market (tables & slots) GGR in 1Q18 increased 0.8% yoy and 0.6% qoq to US$669 million, Company underperforming Macau mass GGR growth of 16.1% yoy and 5.9% qoq during the quarter. The Company’s total mass

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table drop was US$2.7 billion, up 4.6% yoy and up 3.8% qoq. Total slot machine handle was US$1.8 billion, down 14.1% yoy

and down 6.4% qoq. During the quarter, the Company’s core mass GGR grew over 13% ] yoy,1 butr a wasM offsett h g byi a R cons_ iderablee l b a T [

decline in premium mass GGR (specific figure not disclosed), resulting in relatively flat mass market GGR growth during 1Q19.

Among the six concessionaries, only Sands China (01928 HK) and MGM China (02282 HK) reported strong growth in their

premium mass segments for the first quarter in 2019. During 1Q19, operating margin declined by 2.2 ppt yoy to 19.4%. The 2019

decline in operating margin was primarily attributable to a disproportionate increase in staff cost. During 1Q19, staff cost June

increased by 7.3%, while net revenue was down by 2.6%. 8 1 The Company's total market share in 1Q19 decreased by 0.4 ppt qoq to around 16.0%. Its VIP market share was flat qoq at around 17.7%, and its mass market share decreased by 0.8 ppt qoq to around 14.3%.

Figure-1: The Company’s Market Share, Annual Figure-2: The Company’s Market Share, Quarterly

VIP Mass Market Total VIP Mass Market Total 20% 18.1% 19.1% 18% 16.8% 18.6% 17.9% 16.1% 17.7% 18% 17.7% 16.3% 17.4% 14% 13.1% 17.0% 11.5% 15.3% 16.2% 16.5% 13.9% 15.9% ] 2 r a M t h g i R _ e l b a T [ 15.3% 10.4% 16.0% 11.5% 16% 15.9% 15.3% 10% 16.0% 10.2% 9.7% 9.8% 15.3% 8.3% 8.8% 15.0% 15.3% 15.1% 14% 6% 14.3% 13.9%

2% 12% 2014 2015 2016 2017 2018 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19

Source: the Company, Gaming Inspection and Coordination Bureau Macao. Source: the Company, Gaming Inspection and Coordination Bureau Macao.

1Q19 Property Level Results (01128 HK)

Wynn Macau Property

永利澳门 The Wynn Macau property's 1Q19 VIP turnover was US$10.2 billion, down 40.3% yoy and down 20.2% qoq, worse than decline in Macau VIP GGR during the quarter. VIP win rate was 2.90%, up by 0.3 ppt yoy and flat qoq. VIP Gross win was US$295 million, down 33.7% yoy and down 19.0% qoq.

Wynn Macau The property's 1Q19 mass market (tables and slots) gross gaming revenue was US$302 million, up 0.8% yoy and up 1.4% qoq, underperforming Macau mass market GGR growth during the quarter. Mass table drop increased 2.2% yoy and 7.4% qoq to US$1,352 million. Mass table gross win increased 3.1% yoy and 3.4% qoq to US$265 million, and mass table hold was 19.6%, up 0.2 ppt yoy and down 0.7 ppt qoq. Slot machine gross win decreased 9.3% yoy and 14.7% qoq to US$38 million, and slot machine win rate was 4.8%, up 0.6 ppt yoy and down 0.3 ppt qoq.

Non-gaming revenue decreased 7.0% yoy and 1.0% qoq to US$74 million, attributable to decline in food and beverage revenue. The property's hotel occupancy rate for 1Q19 was 99.3%, up 0.3 ppt yoy and flat qoq. The Wynn Macau hotel’s average daily rate decreased 0.3% yoy and 1.4% qoq to US$290. Revenue per available room ("RevPAR") was flat yoy and down 1.4% qoq to US$292. During 1Q19, around 80 to 100 rooms at the Encore Tower were under renovation, which is expected to be completed by the end of 2019 according to management.

Report

Company

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Table-2: Wynn Macau Property Operating Results

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US$ million 1Q18 2Q18 3Q18 4Q18 1Q19 qoq yoy (% or ppt) (% or ppt)

VIP turnover 17,087 13,928 13,967 12,777 10,194 (20.2%) (40.3%)

VIP gross win 445 357 421 365 295 (19.0%) (33.7%) 2019

VIP win rate (% of turnover) 2.61% 2.56% 3.01% 2.86% 2.90% 0.04 ppt 0.29 ppt

June

8 Mass tables drop 1,323 1,293 1,184 1,259 1,352 7.4% 2.2% 1 Mass tables gross win 256 252 250 256 265 3.4% 3.1% Mass market win rate (% of table drop) 19.4% 19.5% 21.1% 20.3% 19.6% (0.7) ppt 0.2 ppt

Slot machine handle 1,003 964 895 878 794 (9.6%) (20.8%) Slot machine gross win 42 40 35 44 38 (14.7%) (9.3%) Slots win rate (% of slot handle) 4.2% 4.2% 3.9% 5.1% 4.8% (0.3) ppt 0.6 ppt

Mass tables & slots total GGR 298 292 285 300 302 0.8% 1.4%

Casino revenue (Net) 539 473 504 479 450 (6.0%) (16.5%) Non-casino revenue 79 70 76 74 74 (1.0%) (7.0%)

] 2 r a M t h g i R _ e l b a T [

Property total revenue 618 543 580 553 524 (5.3%) (15.3%)

Adjusted property EBITDA 210 173 183 168 164 (2.2%) (21.9%) Adjusted property EBITDA margin 33.9% 31.8% 31.6% 30.3% 31.3% 1.0 ppt (2.7) ppt

VIP market share 8.4% 7.0% 8.5% 7.2% 6.6% (0.6) ppt (1.8) ppt Mass market share 7.2% 7.2% 6.8% 6.8% 6.5% (0.3) ppt (0.7) ppt Total market share 7.9% 7.1% 7.7% 7.0% 6.5% (0.5) ppt (1.3) ppt

Average occupancy rate 99.0% 99.4% 99.0% 99.3% 99.3% 0.0 ppt 0.3 ppt Adjusted ADR (US$) 291 272 276 294 290 (1.4%) (0.3%)

Adjusted RevPAR (US$) 288 271 273 292 288 (20.2%) (40.3%) (01128 HK) Source: the Company, Guotai Junan International.

Figure-3: Wynn Macau Property Market Share Figure-4: Wynn Palace Property Market Share 永利澳门

VIP Mass Market Total VIP Mass Market Total 12% 12% 11.0% 10.7% Wynn Macau 10.4%

10% 9.7% 8.4% 8.5% 9.4% 9.4% 8.8% 7.2% 8.3% 8% 7.9% 7.2% 7.7% 8.2% 8.3% 7.1% 6.6% 7.9% 6.5% 8.1% 8.5% 7.0% 8% 7.2% 7.0% 8.0% 6.8% 6.8% 6.5% 7.5%

4% 6% 1Q18 2Q18 3Q18 4Q18 1Q19 1Q18 2Q18 3Q18 4Q18 1Q19 Source: the Company, Gaming Inspection and Coordination Bureau Macao. Source: the Company, Gaming Inspection and Coordination Bureau Macao.

Report

Company

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Wynn Palace

] 1 r a M t h g i R _ e l b a T [

Wynn Palace’s 1Q19VIP turnover was US$12.6 billion, down 21.8% yoy and down 15.0% qoq, worse than the decline in

Macau VIP GGR during the quarter. VIP win rate was 3.91%, up 1.3 ppt yoy and up 0.7 ppt qoq. Due to favorable VIP luck,

VIP gross win increased 23.3% yoy (decreased 6.2% qoq) to US$493 million. 2019

June

The property’s 1Q19 mass market (tables and slots) gross gaming revenue was US$315 million, up 2.6% yoy and up 8 1.7% qoq, underperforming growth in Macau mass market GGR during the quarter. Mass table drop increased 7.1% yoy 1 and 0.3% qoq to US$1,304 million. Mass table gross win was US$315 million, up 1.7% yoy and up 2.6% qoq, and mass table win rate was 24.2%, down 1.3 ppt yoy and up 0.6 ppt qoq. 1Q18 slot machine handle was US$975 million, down 7.8% yoy and down 3.6% qoq. Slot machine gross win was US$51 million, down 7.9% yoy and down 10.7% qoq, and slot machine win rate was 5.3%, flat yoy and down 0.4 ppt qoq.

Wynn Palace’s non-gaming revenue increased 6.3% yoy but decreased 0.3% qoq to US$103 million, attributable to the higher yoy but lower qoq RevPAR in 1Q19. The property’s hotel occupancy rate was 97.2%, up 0.4 ppt yoy and flat qoq. average daily rate increased 7.5% but decreased 2.2% qoq to US$271. RevPAR increased 8.2% yoy but decreased 4.7% qoq to US$264.

] 2 r a M t h g i R _ e l b a T [

Table-3: Wynn Palace Operating Results US$ million 1Q18 2Q18 3Q18 4Q18 1Q19 qoq yoy (% or ppt) (% or ppt)

VIP turnover 15,386 14,029 15,526 16,157 12,627 (21.8%) (17.9%) VIP gross win 400 420 528 526 493 (6.2%) 23.3% VIP win rate (% of turnover) 2.60% 3.00% 3.40% 3.25% 3.91% 0.7 ppt 1.3 ppt

Mass market drop 1,217 1,219 1,190 1,300 1,304 0.3% 7.1%

Mass market gross win 310 281 308 307 315 2.6% 1.7% Mass market win rate (% of table drop) 25.5% 23.0% 25.9% 23.6% 24.2% 0.6 ppt (1.3) ppt

Slot machine handle 1,058 941 923 1,011 975 (3.6%) (7.8%) (01128 HK) Slot machine gross win 56 44 46 58 51 (10.7%) (7.9%) Slots win rate (% of slot handle) 5.3% 4.7% 5.0% 5.7% 5.3% (0.4) ppt (0.0) ppt

永利澳门 Mass tables & slots total GGR 366 325 354 365 367 0.5% 0.3%

Casino revenue (Net) 568 525 626 637 623 (2.2%) 9.6% Non-casino revenue 97 96 105 104 103 (0.3%) 6.3%

Property total revenue 666 621 731 741 727 (1.9%) 9.1% Wynn Macau

Adjusted property EBITDA 212 179 226 227 223 (1.8%) 5.0% Adjusted property EBITDA margin 31.8% 28.9% 31.0% 30.6% 30.6% 0.0 ppt (1.2) ppt

Average occupancy rate 96.8% 96.2% 96.0% 97.2% 97.2% 0.0 ppt 0.4 ppt Adjusted ADR (US$) 252 254 275 277 271 (2.2%) 7.5% Adjusted RevPAR (US$) 244 245 264 277 264 (4.7%) 8.2% Source: the Company, Guotai Junan International.

Outlook

The Wynn Macau property will be undergoing renovation through 4Q19. With intent on reducing reliance on VIP junkets

and instead shifting focus to the premium mass segment, the Company began remodeling its Wynn Macau property in July

2018. Within the Wynn Macau property, the Encore Tower Suites are being refurbished and will have an entirely newly

designed and renovated premium-mass casino that will be open to the water, three new restaurants and 10,000 square feet of

Report additional retail. The redesign and remodeling will be so extensive that the Company will be essentially launching a new

property at the end of this year. In the meantime however, we expect that construction work will have a significant negative impact on operations. The Company’s management indicated that construction work will last for over 12 months and that there Company will be disruption to normal business and it will increase over the next several months. Some areas of the Wynn Macau property

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will be inaccessible and there will be a reduction in certain table play and customers will be affected. There is also risk that

construction work may not be completed by the end of 2019 as currently planned but instead] 1 extendr a M intot 2020.h g i R _ e l b a T [

The Company's management maintains its plans for Wynn Palace, to increase from 1,700 hotel rooms currently to

over 3,000 sometime after 2020. The Company’s management is planning its 11.0 acre (4.45 hectares) plot land adjacent to 2019

the north and south of the existing Wynn Palace property. The Company is planning 7 acres of the parcel to build a 1.5 million June

square foot facility next to Wynn Palace. The facility is planned to house the "Crystal Pavilion", a large glass structure that will 8 have lots of non-gaming features. For the other four acres, connected to the Crystal Pavilion, the Company is designing a 671 1 room all-suite hotel with a bridge that would connect into the north side of Wynn Palace, which would increase that property from 1,700 hotel rooms to over 3,000. The Company’s management hopes to finalize the design and begin construction in 2020.

Forecast Updates

We decrease the Company's 2019-2021 total revenue forecasts by 2.4%, 9.0% and 11.2%, respectively. We forecast 2019-2021 net revenue of HK$38.0 billion, HK$39.4 billion and HK$41.2 billion, respectively, representing growth of -4.0%, 3.6% and 4.7%, respectively. The Company's 1Q19 total net revenue was 3.1% below our previous forecast. We expect the Company's

revenue to decline in 2019 as business will be disrupted at the Wynn Macau property, which will] be2 r undergoinga M t h g renovationi R _ e atl leastb a T [

through 4Q19 and possibly longer. We lower revenue forecasts for 2020 and 2021 since we now expect competitors, especially MGM China (02282 HK) (see our MGM China June 10 Company Report), to take market share.

We cut the Company's 2019-2021 adjusted EBITDA forecasts by 1.7%, 5.6% and 9.2%, respectively. We forecast the Company's 2019-2021 adjusted EBITDA at HK$10.9 billion, HK$11.8 billion and HK$12.4 billion, respectively, representing growth of -11.8%, 8.2% and 4.9%, respectively. The Company's adjusted EBITDA margin was 31.2% in 2018, and we forecast it to decline to 28.7% in 2019 and then to recover to 29.2% and 30.0% in 2020 and 2021, respectively. We expect that the

renovation this year at the Wynn Macau property will disrupt normal operations to some extent while some operating costs remain constant, thereby putting downward pressure on EBITDA margin. We expect EBITDA margin to start to increase again in 2020 after the renovation is complete, but we think the increase will be limited as by then the Company will be competing with

SJM Holdings’ (00880 HK) Lisboa Palace, which is expected to open toward the end of 2019 or early 2020. We forecast (01128 HK)

2019-2021 EPS of HK$0.937, HK$1.172 and HK$1.229, respectively, representing growth of -22.2%, 25.0% and 10.9%.

永利澳门 Table-4: Wynn Macau Forecast Revisions HK$ million Old New Change (% or ppt) (Except EPS & RevPAR) 2019F 2020F 2021F 2019F 2020F 2021F 2019F 2020F 2021F

VIP turnover 921,002 1,020,253 1,091,256 732,500 785,499 830,263 (20.5%) (23.0%) (23.9%)

VIP Win rate (% of turnover) 2.85% 2.85% 2.85% 3.09% 3.15% 3.15% 0.2 ppt 0.3 ppt 0.3 ppt Wynn Macau

VIP gross win 26,249 29,077 31,101 23,620 24,743 26,153 (10.0%) (14.9%) (15.9%)

Mass tables gross win 18,035 20,155 21,687 18,745 19,554 20,529 3.9% (3.0%) (5.3%)

Slot machine handle 70,877 79,850 86,386 62,286 65,712 69,147 (12.1%) (17.7%) (20.0%)

Slots win rate (% of handle) 4.33% 4.33% 4.33% 4.55% 4.48% 4.48% 0.2 ppt 0.1 ppt 0.1 ppt

Slot machine gross win 3,066 3,454 3,736 2,833 2,942 3,095 (7.6%) (14.8%) (17.1%)

Commissi ons & discounts (14,001) (15,515) (16,599) (11,693) (12,339) (13,047) (16.5%) (20.5%) (21.4%)

Casino revenue (net) 33,349 37,171 39,926 33,504 34,900 36,730 0.5% (6.1%) (8.0%)

Non-casino rev. (net) 5,604 6,101 6,506 4,518 4,490 4,495 (19.4%) (26.4%) (30.9%)

Total revenues (net) 38,952 43,272 46,433 38,022 39,390 41,225 (2.4%) (9.0%) (11.2%)

Operating profit 6,308 7,593 8,630 6,229 7,210 7,744 (1.3%) (5.0%) (10.3%)

Operating profit margin 16.2% 17.5% 18.6% 16.4% 18.3% 18.8% 0.2 ppt 0.8 ppt 0.2 ppt

Adjusted property EBITDA 11,081 12,495 13,620 10,895 11,789 12,362 (1.7%) (5.6%) (9.2%)

Adj. property EBITDA margin 28.4% 28.9% 29.3% 28.7% 29.9% 30.0% 0.3 ppt 1.0 ppt 0.7 ppt

Net profit 4,915 6,389 7,563 4,862 6,080 6,743 (1.1%) (4.8%) (10.8%)

Net profit margin 12.6% 14.8% 16.3% 12.8% 15.4% 16.4% 0.2 ppt 0.6 ppt 0.1 ppt Report

EPS, basic (HK$) 0.947 1.231 1.457 0.937 1.172 1.299 (1.1%) (4.8%) (10.8%)

EPS, diluted (HK$) 0.946 1.229 1.455 0.936 1.170 1.297 (1.1%) (4.8%) (10.8%)

Source: the Company, Guotai Junan International. Company

See the last page for disclaimer Page 6 of 10 Wynn Macau (01128 HK)

Valuation

] 1 r a M t h g i R _ e l b a T [

We lower Wynn Macau's target price from HK$21.50 to HK$16.00 and maintain "Neutral" investment rating. Our new

target price reflects a relatively low EV/EBITDA valuation as we see downside risk that remodeling and reconstruction at the

Wynn Macau property might be more disruptive or take longer than expected. Our new target price is equivalent to 9.5x 2019 2019

EV/adjusted EBITDA and is a 20.3% discount to our DCF derived NAV per share of HK$20.08. June

8 Table-5: DCF Valuation 1

Risk free rate 1.81% Sum of PV FCFF (HK$ mn) 81,340 Market return 11.15% + PV Terminal value (HK$ mn) 44,748 Market risk premium 9.34% Enterprise value (HK$ mn) 126,088 Adj. Beta 1.1 - Net debt/(cash) (HK$ mn) 21,878 Equity discount rate 12.08% Equity value (HK$ mn) 104,210 Shares outstanding (mn) 5,190 After tax cost of debt 3.2% NAV per share (HK$) 20.08 D/(D+E) 50.0% E/(D+E) 50.0%

] 2 r a M t h g i R _ e l b a T [ WACC 7.6%

Long-term growth rate 2.0% Source: Bloomberg, the Company, Guotai Junan International.

Table-6: Gaming Sector Peers Comparison Company Stock Crncy Price M-Cap PE EV/ Adjusted EBITDA PB ROE

Code Billion Hist Avg. Current Hist Avg. Current 19F 19F

(HK$) Fwd Fwd 19F 20F Fwd Fwd 19F 20F (%)

Macau Operators

Galaxy Entertain 00027 HK HKD 48.200 208.8 20.5 15.6 15.6 14.7 14.4 11.8 11.8 10.7 2.9 19.9 20.040 73.3 21.5 19.4 19.9 16.4 9.4 8.3 7.8 7.1 4.1 18.9

Melco Crown-Adr MPEL US USD (01128 HK)

Mgm China 02282 HK HKD 12.120 46.1 27.0 18.4 18.4 14.4 16.1 9.7 9.7 8.2 4.3 23.3 Sands China Ltd 01928 HK HKD 35.700 288.7 19.4 16.8 16.8 15.2 15.4 12.8 12.8 11.9 8.0 47.7

Sjm Holdings Ltd 00880 HK HKD 8.210 46.5 20.0 18.0 18.0 17.1 13.6 13.0 13.0 9.8 1.6 9.2 永利澳门 Wynn Macau Ltd 01128 HK HKD 15.940 82.8 20.5 13.7 13.8 12.3 11.9 10.1 10.1 9.2 47.9 345.4 Simple Average 21.2 17.3 17.4 14.7 12.6 10.4 10.3 9.0 10.0 67.2

Weighted Average 20.5 16.6 16.6 14.9 14.1 11.6 11.6 10.4 10.0 66.2

Wynn Macau

USA Operators

Las Vegas Sands LVS US USD 55.070 333.7 19.4 16.6 16.4 15.5 12.2 10.1 10.2 9.9 7.1 42.8

Mgm Resorts Inte MGM US USD 25.960 109.3 22.1 19.7 24.3 15.5 10.7 9.9 10.0 8.8 2.0 7.6

Penn Natl Gaming PENN US USD 18.670 17.1 18.4 11.3 13.0 9.0 7.0 4.8 6.3 5.8 1.6 17.8 Wynn Resorts Ltd WYNN US USD 110.460 93.2 21.1 16.1 17.3 13.7 11.9 9.9 10.2 8.3 5.9 32.9

Simple Average 20.2 15.9 17.7 13.4 10.5 8.7 9.2 8.2 4.2 25.2

Weighted Average 20.2 16.9 18.0 15.0 11.7 9.9 10.0 9.3 5.7 33.4

Other Operators

Genting Singapor GENS SP SGD 0.860 59.9 18.6 14.7 14.6 14.1 9.2 5.9 5.9 5.8 1.3 9.0

Genting Malaysia GENM MK MYR 3.160 33.7 17.1 14.8 14.8 13.5 10.1 7.7 7.7 7.0 1.0 6.4

Bloomberry Res BLOOM PM PHP 11.940 20.0 16.8 16.8 16.8 14.5 9.4 9.7 9.7 8.7 3.1 19.6

Belle Corp BEL PM PHP 2.330 3.4 12.2 7.1 7.1 6.1 12.9 8.0 8.0 6.0 0.8 11.8

Simple Average 16.2 13.3 13.3 12.1 10.4 7.8 7.8 6.9 1.5 11.7

Weighted Average 17.7 14.8 14.8 13.8 9.6 7.1 7.1 6.6 1.5 10.1 Report

Source: Bloomberg, Guotai Junan International.

Company

See the last page for disclaimer Page 7 of 10 Wynn Macau (01128 HK)

Table-7: Target Price Based Valuation and Multiples

FY18A Next 4 Quarters ] 1 FY19Fr a M t h FY20g i F R _ e FYl 21Fb a T [

Target price HK$16.00

Shares outstanding, period end, fully diluted (mn) 5,193 5,197 5,197 5,198 5,198

TP based market cap (HK$ mn) 83,093 83,154 83,154 83,163 83,174

2019

+ Period end minority interest (HK$ mn) 0 0 0 0 0

June

+ Period end borrowings (HK$ mn) 33,078 26,157 26,157 24,163 20,180 8 1 - Period end cash &equivalents (HK$ mn) 9,533 4,310 4,310 4,376 3,217 Year end enterprise value (HK$ mn) 106,638 105,001 105,001 102,950 100,137 Adjusted property EBITDA (HK$ mn) 12,347 10,895 10,895.1 11,789 12,362 TP Based EV/Adjusted Property EBITDA 8.6 9.6 9.6 8.7 8.1

EPS (HK$), diluted 1.20 0.93 0.93 1.17 1.30 Target Price Based PER 13.3 17.1 17.1 13.7 12.3 Source: the Company, Guotai Junan International.

] 2 r a M t h g i R _ e l b a T [

(01128 HK)

永利澳门 Wynn Macau

Report

Company

See the last page for disclaimer Page 8 of 10 Wynn Macau (01128 HK)

Financial Statements and Ratios

[Table_IncomeStatement] [Table_BalanceSheet] ] 1 r a M t h g i R _ e l b a T [

Income Statement Balance Sheet

Year end 31 Dec (HKD m) 2017A 2018A 2019F 2020F 2021F As at 31 Dec (HKD m) 2017A 2018A 2019F 2020F 2021F

Total revenue 34,032 39,592 38,022 39,390 41,225 Property and equipment and

33,504 31,943 30,927 29,707 27,868 2019 Gaming taxes and premiums (16,737) (18,928) (18,495) (19,367) (20,383) construction in progress

Staff costs (4,612) (4,987) (5,334) (4,865) (5,050) Leasehold interest in land 1,686 1,590 1,498 1,403 1,308

June

Other operating expenses (4,404) (5,098) (5,245) (5,311) (5,517) Goodwill 398 398 398 398 398 8 1 Depreciation and amortisation (2,776) (2,726) (2,594) (2,465) (2,341) Others 833 749 722 746 778

Property charges and other (133) (154) (126) (171) (190) Total non-current assets 36,422 34,681 33,545 32,254 30,352

Operating profit 5,370 7,698 6,229 7,210 7,744 Cash & cash equivalents 5,240 9,526 4,279 4,322 3,138 Finance revenues 15 103 57 35 31 Inventories 332 313 300 311 326

Finance costs (1,270) (1,496) (1,368) (1,161) (1,023) Trade and other receivables 677 1,135 1,090 1,130 1,182

Others (402) (48) (50) 0 0 Prepayments and other current assets 134 136 129 122 115

Profit before tax 3,713 6,258 4,868 6,085 6,752 Others 192 290 302 336 373

Total current assets 6,574 11,401 6,102 6,221 5,135

Income Tax (12) (12) (10) (12) (13)

Total assets 42,996 46,082 39,647 38,475 35,486

Profit after tax 3,700 6,245 4,858 6,072 6,738

] 2 r a M t h g i R _ e l b a T [ Non-controlling interest 0 0 0 0 0 Accounts payable 1,137 1,160 1,114 1,154 1,208

Shareholders' profit / loss 3,700 6,245 4,858 6,072 6,738 Other payables and accruals 9,969 9,704 9,710 9,716 9,722

Others 770 201 209 219 229

Basic EPS 0.714 1.204 0.936 1.170 1.298 Total current liabilities 11,876 11,065 11,033 11,089 11,159

Diluted EPS 0.713 1.203 0.935 1.168 1.296

Interest-bearing borrowings 27,674 33,078 26,152 24,153 20,165

Construction retention payable 2 1 0 0 0

[Table_CashFlowStatement] Cash Flow Statement Other payables and accruals 266 204 142 80 18 Others 177 215 253 291 330

Total non-current liabilities 28,119 33,498 26,547 24,524 20,513 Year end 31 Dec (HKD m) 2017A 2018A 2019F 2020F 2021F

Profit before tax 3,713 6,258 4,868 6,085 6,752 Total liabilities 39,995 44,563 37,580 35,613 31,671 Depreciation of property and equipment 2,681 2,631 2,498 2,370 2,246

95 95 95 95 95 Amortisation of leasehold interest in land (01128 HK) Total shareholders' equity 3,001 1,518 2,067 2,862 3,815 Provision for doubtful accounts (56) 23 (8) (14) 0 Minority interest 0 0 0 0 0 Share-based payment expense 111 106 107 116 122 Total equity 3,001 1,518 2,067 2,862 3,815 1,270 1,496 1,368 1,161 1,023

Finance costs 永利澳门

Working capital adjustments 4,333 (993) 28 7 4

Others 520 99 (56) (34) (28) [Table_FinancialRatio] Financial Ratios Cash from operating activities 12,667 9,716 8,901 9,786 10,215 2017A 2018A 2019F 2020F 2021F

Wynn Macau Margins Increase in restricted cash and cash 5 (1) (24) (24) (24) Effective gaming tax rate 56.7% 55.5% 55.2% 55.5% 55.5% equivalents Operating margin 15.8% 19.4% 16.4% 18.3% 18.8% Purchase of property and equipment, net (1,261) (1,189) (1,577) (1,245) (502) Net profit margin 10.9% 15.8% 12.8% 15.4% 16.3% of construction retention pay Adj. property EBITDA margin 29.5% 31.2% 28.7% 29.9% 30.0% Others 99 99 174 108 95

Cash from investing activities (1,157) (1,091) (1,427) (1,161) (431) Return Ratios

ROA 8.6% 14.0% 11.3% 15.5% 18.2% Proceeds from borrowings 11,951 4,889 0 0 0 ROE 135.7% 276.4% 271.0% 246.4% 201.8% Repayment of borrowings (16,069) 0 (6,926) (1,999) (3,988) Return on capital employed 16.3% 23.4% 19.8% 26.1% 30.4% Interest paid (1,079) (1,328) (1,368) (1,161) (1,023) Return on invested capital 1.4% 5.8% 7.6% 7.5% 7.7% Special/interim dividends paid (3,272) (7,790) (4,372) (5,465) (6,065)

Others (394) (104) (5) 43 109 Liquidity & leverage Cash from financing activities (8,864) (4,333) (12,671) (8,582) (10,967) Leverage (ie., gearing) 1,031.3% 1,463.9% 1,458.9% 980.4% 604.5%

Net gearing 839.2% 1,042.3% 1,220.3% 805.1% 510.5% Cash at beg of year 2,591 5,240 9,526 4,279 4,322 Interest coverage ratio (x) 4.3 5.5 4.8 6.4 7.8 Net changes in cash 2,647 4,291 (5,197) 42 (1,183)

Current ratio (x) 0.6 1.0 0.6 0.6 0.5 Report

Effect of foreign exchanges 1 (5) (50) 0 0

Cash at end of year 5,240 9,526 4,279 4,322 3,138

Source: the Company, Guotai Junan International. Company

[Table_CompanyRatingDefinition] See the last page for disclaimer Page 9 of 10 Wynn Macau (01128 HK)

Company Rating Definition

The Benchmark: Hong Kong Hang Seng Index ] 1 r a M t h g i R _ e l b a T [

Time Horizon: 6 to 18 months

Rating Definition

Buy Relative Performance>15%; 2019

or the fundamental outlook of the company or sector is favorable.

Accumulate Relative Performance is 5% to 15%; June

or the fundamental outlook of the company or sector is favorable. 8 Neutral Relative Performance is -5% to 5%; 1 or the fundamental outlook of the company or sector is neutral. Reduce Relative Performance is -5% to -15%; or the fundamental outlook of the company or sector is unfavorable. Sell Relative Performance <-15%; or the fundamental outlook of the company or sector is unfavorable.

Sector[Table_ RatingIndustry DefinitionRatingDefinition] The Benchmark: Hong Kong Hang Seng Index Time Horizon: 6 to 18 months Rating Definition Outperform Relative Performance>5%;

] 2 r a M t h g i R _ e l b a T [

or the fundamental outlook of the sector is favorable. Neutral Relative Performance is -5% to 5%; or the fundamental outlook of the sector is neutral. Underperform Relative Performance<-5%; Or the fundamental outlook of the sector is unfavorable.

[DISCLOSURETable_DISCLOSUREOFINTERESTS OF INTERESTS ] (1) The Analysts and their associates do not serve as an officer of the issuer mentioned in this Research Report. (2) The Analysts and their associates do not have any financial interests in relation to the issuer mentioned in this Research Report. (3) Except for KAISA GROUP (01638 HK), GUOTAI JUNAN I (01788 HK), CHINA MINSHENG BANKING CORP.- H SHARES (01988 HK), BANK OF GANSU (02139 HK), BINHAI INVESTMENT (02886 HK), VALUE A SHARE (03095 HK), CAM SCSMALLCAP (03157 HK), HAITIANTIAN (08227 HK), CSOP MSCI-R (CNY) (83149 HK), Guotai Junan and its group companies do not hold equal to or more than 1% of the market capitalization of the issuer mentioned in this Research Report.

(4) Guotai Junan and its group companies have not had investment banking relationships with the issuer mentioned in this Research (01128 HK) Report within the preceding 12 months. (5) Guotai Junan and its group companies are not making a market in the securities in respect of the issuer mentioned in this Research Report.

(6) Guotai Junan and its group companies have not employed an individual serving as an officer of the issuer mentioned in this Research 永利澳门 Report. There is no officer of the issuer mentioned in this Research Report associated with Guotai Junan and its group companies.

DISCLAIMER

This Research Report does not constitute an invitation or offer to acquire, purchase or subscribe for securities by Guotai Junan Securities Wynn Macau (Hong Kong) Limited ("Guotai Junan"). Guotai Junan and its group companies may do business that relates to companies covered in research reports, including investment banking, investment services, etc. (for example, the placing agent, lead manager, sponsor, underwriter or invest proprietarily).

Any opinions expressed in this report may differ or be contrary to opinions or investment strategies expressed orally or in written form by sales persons, dealers and other professional executives of Guotai Junan group of companies. Any opinions expressed in this report may differ or be contrary to opinions or investment decisions made by the asset management and investment banking groups of Guotai Junan.

Though best effort has been made to ensure the accuracy of the information and data contained in this Research Report, Guotai Junan does not guarantee the accuracy and completeness of the information and data herein. This Research Report may contain some forward-looking estimates and forecasts derived from the assumptions of the future political and economic conditions with inherently unpredictable and mutable situation, so uncertainty may contain. Investors should understand and comprehend the investment objectives and its related risks, and where necessary consult their own financial advisers prior to any investment decision.

This Research Report is not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation or which would subject Guotai Junan and its group companies to any registration or licensing requirement within such jurisdiction.

Tel.: (852) 2509-9118 Fax: (852) 2509-7793 Report

Website: www.gtja.com.hk

Company

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