Strong Growth to Continue in 2018, Maintain "Outperform" 2018年将继续保持强劲增长,维持“跑赢大市”

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票

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究 Sector Report: Gaming Sector Noah Hudson EquityResearch 行业报告：博彩行业 +86 2397 6684 [email protected]

21 December 2017

Strong Growth to Continue in 2018, Maintain "Outperform" 2018年将继续保持强劲增长,维持“跑赢大市”

行  We forecast 2018 Macau gross gaming revenue ("GGR") growth of Rating: Outperform 业 15%-17%. We expect new gaming capacity coming online in 2018 to be a Maintained

significant growth catalyst. MGM China (02282 HK)'s new US$2.9 billion 报评级：跑赢大市 (维持)

MGM Cotai will open on 29 Jan. 2018 and will be ramping up for the

告 whole year. Also in 1H18, Morpheus Hotel at City of Dreams will open. In SectorReport

2018, the HK-Zhuhai-Macau Bridge will open and the Macau International Airport is expected to increase capacity from 6 mn Stock Performance 股价表现 passengers to between 8 mn to 9 mn passengers. Melco Resorts & Entertainment (MLCO US) will open its new flagship Morpheus Hotel at the Studio City property. Another major catalyst in 2018 will be the opening of the Hong Kong-Zhuhai-Macau Bridge (also called the Delta Bridge). % return  GGR per visitor increased by 13.9% YoY to MOP8,233 for the first 10 120.0 months of 2017. Higher GGR per visitor is supported by a greater 100.0 number of higher quality visitors as indicated by more overnight visitors, 80.0 60.0 more airplane and helicopter visitors and longer duration of stay. 2017 40.0 year to date through October number of visitors to Macau increased by 20.0 4.6% YoY while the number of air arrivals increased by 12.7% YoY, the 0.0 number of overnight visitors increased by 10.4% YoY and the average (20.0)

证 stay duration increased by 3.4% YoY. At the end of 3Q17, there were (40.0) Dec/16 Feb/17 Apr/17 Jun/17 Aug/17 Oct/17 Dec/17

告 52.1% more hotel projects under construction in Macau compared with at

券 HSI SJM Hds.

the end of 3Q16. More hotel room capacity will be added in 2018 making Galaxy Ent. Wynn Macau 研报 visitation to Macau easier for the higher number of overnight visitors that Melco Resorts MGM China

Sands China

are expected. 究究 Source: Bloomberg.

报  We recommend to "Buy" Melco Resorts & Entertainment (MLCO US) 研 Sector Valuation and Wynn Macau (01128 HK). We also recommend to "Accumulate"

告行业估值券

quityResearch Report Sands China (01928 HK) and MGM China (02282 HK).

EV to BEst EBITDA (Next 4 Quarters) E Mean

 证我们预计 2018 年澳门博彩总收入增速为 15%-17%。我们预期 2018 年新上线的博彩 20 +1 ST. DEV. -1 ST. DEV.

物业容量将成为重要的增长催化剂。美高梅中国（02282 HK）耗资 29 亿美元的美高

梅路氹物业将会在 2018 年 1 月 29 日开幕，并将在一整年持续扩张运营。2018 年上 18

半年，摩珀斯酒店将会在新濠天地物业开幕。在 2018 年，港珠澳大桥将会开通，并 16 且澳门国际机场目前万的旅客容量预期将会增加至到万。 600 800 900 14  旅客人均博彩收入在 2017 年前 10 个月同比增长 13.9%至 8,233 澳门元。更高的旅 12

客人均博彩收入的支撑因素来自更多的高质量访客，比如留宿旅客、飞机旅客和直升博 10 机旅客等，以及更长的逗留时间。截至 2017 年 10 月，访问澳门旅客数量同比增加了 8

彩 4.6%，而乘飞机来的旅客数量同比增长了 12.7%；另外，留宿旅客数量同比增长了

Sector

10.4%，并且平均逗留时间同比延长了 3.4%。2017 年 3 季度末，在建酒店客房数相 6 行 Dec/12 Dec/13 Dec/14 Dec/15 Dec/16 Dec/17 比于 2016 年 3 季度末增加了 52.1%。2018 年更多的酒店客房容量有利于访澳留宿旅 Source: Bloomberg.

业客数量的进一步提高。

Gaming

 我们建议“买入”新濠博亚（MLCO US），“买入”永利澳门（01128 HK）。也建议“收集”金沙中国（01928 HK）和美高梅中国（02282 HK）。

Company[Table_CompanyFinance] Name Code Price Rating 17 PER 18 PER 19 PER 17 ROE 17 P/B 17 Yield 公司名称编号股价(HK$) 投资评级市盈率(x) 市盈率(x) 市盈率(x) 净资产收益(%) 市净率(x) 股息率(%) Galaxy Entertainment 00027 63.100 Neutral 28.8 25.2 23.8 18.4 5.2 1.2 Melco Resorts & Entertainment MLCO US$28.470 Buy 31.6 27.1 22.5 12.0 4.7 1.4 MGM China 02282 24.000 Accumulate 38.0 33.5 22.5 29.7 10.8 1.7 Sands China 01928 40.250 Accumulate 26.9 22.9 20.6 32.3 9.1 5.2 Wynn Macau 01128 24.750 Buy 33.8 24.5 21.2 141.1 44.9 3.7 Weighted Average. 市值加权平均 30.1 25.3 22.0 40.7 12.6 3.0 Source: the Companies, Bloomberg, Guotai Junan International.

See the last page for disclaimer Page 1 of 19

Se Appendix InvestmentSuggestions Macau Visitors Macau CasinosDevelopment Macau Hotels Macau InfrastructureDevelopments Macau Gaming Gross Revenue e th e las t pag

...... e fo r

...... disclaimer ......

...... s

......

...... Contents ......

......

Gaming Sector Page Page 2 .... of of

17 15 11 19

9 7 5 3

Sector Report Gaming Sector 博彩行业 21 December 2017 Se there is growthstill for room assignificant 2018 continued sector with catches in previousthe up highs. MOP1 VIPthesegment. for larger even is gap The2014. Feb. in reached in highest the was available) recovery. for room further indicating 2014, and 2013 rapid the Despite consultancy. Note: Bloomberg. Source: Figure Source: Figure low comparisonbase after declined GGRyears. for had three consecutive ( development infrastructure new 2016, late in opened Macao) growth D H M flagship new its open 2 on catalyst. growth significant a be to 2018 in online coming significant leaves GGR Macau's We Gross GamingMacau Revenue 10 12 14 10 12 14 16 18 - - uring the first 11firstthe uring 2017 months of ong MOP mn 2 4 6 8 2 4 6 8 e 2014

th forecast 2018 Macau gross gaming revenue (" revenue gaming gross Macau 2018 forecast MOP mn 9 9 2018Jan. Monthly VIP and Mass are estimates from IMC, a Macau based based Macau a IMC, from estimates are Mass and VIP Monthly e K 22.5% 5.9 Gaming Inspection and Coordination Bureau of Macao SAR. Macao of Bureau Coordination and Inspection Gaming - - las Gaming Inspection and Coordination Bureau of Macao SAR, SAR, Macao of Bureau Coordination and Inspection Gaming . ong - 3: 1: 6 12.9% The stro The t

, VIP GGR and Mass GGR increased by 2 by MassVIPincreased GGRandGGR ,

Macau Macau Macau billion, which is still is which billion, pag - Zhuhai 8.7% e during the first 11 months of 2017 of months 11 first the during fo r and will be the rampingup wholeyear for 2015 VIP GGR

ng growth was supported by the continued ramp up of two new casinos (Wynn Palac (Wynn casinos new two of up ramp continued the by supported was growth ng 19.3% Monthly Monthly room for for room disclaimer - Oct GGR Macau Br Mass Mass GGR 22.4% - 6 . at MOP2 at . orpheus Hotel orpheus 20.4% growth, growth,

VIP GGR Mass & Amount growth

52.2% idge 36.5 30.1%

2016 GGR & Growth Amount 6

(also the called Delta Bridge) monthly . as % less than the high of MOP25.0 of high the than less % 6 - 6 ,

billion, which is still is which billion, Macau's GGR Macau's the sector just catch just sector the YoY YoY (R) 52.8% 35.0% at the Stu the at YoY YoY (R)

GGR amounts GGR

19.2% 2017 36.2% dio City dio - , monthly GGR amounts are still well below the highs seen in 2 in seen highs the below well still are amounts GGR monthly , 6 Growth 9

increased by YoY19.5%increased .0%

GGR - - - - 10% 20% 0% 10% 20% 30% 40% 50% 60% 0% 40% 30% 20% 10%

property. 29.9 MGM China (02282 HK) (02282 MGMChina YoY . es L ") growth of 15 of growth ") 07 er o ae through date to year 2017

ater in ater have

% less than the all the than less % and TaipaTerminalMaritime . consultancy. Note: Bloomberg. Source: Source:

Growth Figure Figure - - with 10% 20% 30% 40% 20% 10%

MOP MOP mn 0% still 8.1 10 12 Another major catalyst in 2018 will be t be will 2018 in catalyst major Another Year date to 1H - 2 4 6 8

otl VP n Ma and VIP Monthly billion previous GGR levels. levels. GGR previous % YoY, % respectively. 2017, in far So 18 Gaming Inspection and Coordination Bureau of Macao SAR. Macao of Bureau Coordination and Inspection Gaming

- - been Gaming Inspection and Coordination Bureau of Macao SAR, SAR, Macao of Bureau Coordination and Inspection Gaming 2: 4: 5.3%

Total GGR (YoY) Total - - 2Q16 , 9.2% 1.1%

Melco

- Macau Macau Macau Macau 15.7% 2.5%

% reached in Feb. 2014. Feb. in reached

significantly less than the highs the than less significantly - 17%. , surpassing our , , monthly VIP GGR was the highest in highest the wasGGR VIP monthly , 1.2% Mass Mass GGR - eot & Resorts - 3Q16 time high GRR amount of MOP38.0 of amount GRR high time 3.9% 1.2% 15.9% Quarterly new 's Monthly Mass - 3.2%

Despi ss are estimates from IMC, a Macau based based Macau a IMC, from estimates are ss 13.2%

opened on 1 June 2017 June 1 on opened October 12.7% US$2.9 11.4% te the strong the te 7.3% 4Q16 W

Total, VIP VIP GGR& Mass Total, Ent 10.2% 17.0% e expect new gaming capacity gaming new expect e - VIP (YoY) 1.5% ertainment

full

( billion GGR &Growth Amount N 16.8%

1Q17 We think this implies that implies this think We ovember 8.5% - year 5.8%

13.0% 19.5% YoY 19.5% MGM Cotai MGM e and The Parisian The and e 4.0% forecast of 16.5%of forecast total YoY YoY (R)

he 2Q17 34.8% MC US) (MLCO

21.9% 8.1% 12.6% aa s o yet not is data opening of the of opening monthly GGR monthly Mass Mass (YoY)

) 5.9% , and also a also and , Gaming Sector reached Page Page

014. This This 014. growth in growth will open will 21.8% 35.0% 3Q17 7.4%

Oct

3 - 10% 15% 20% 0% 5% billion 5% of of

. at . will 19

Sector Report Gaming Sector 博彩行业 21 December 2017 Se Service Census Source: Growth Macau to going byovernight as indicated visitors, more and airplane helicopter more visitors and longer stay duration. underway. is recovery indicatesthatsustain and the sectorfor sign positive isvisitora per GGR in growthtrend positivea to effect. The change YoY,6.4% YoY decreased 1 has visitor per GGR Source: Figure Figure 10 15 20 25 30 35 40 Q1 MOP thousand 2013 10 0 5 e -

2 3 4 5 6 7 8 9 1 th 7 MOP mn , e - Gover SAR. Macao of Bureau Coordination and Inspection Gaming - 75.0% - - 2 las 11 5: 7:

Q1 t

Macau Macau Quarterly Macau 75.7% pag followed by YoY increases in every month since then since month every inYoY increasesby followed nment of Macao Special Administrative Regio Special Administrative Macao of nment 7 .

and 2014

- e 79.9% fo for 25 consecutive months consecutive 25 for GGR per GGR Visitor per r

- Monthly - disclaimer 3 73.3% 11 Q17, respectively. Q17, Total GGR (L) Total -

13.8% increased YoY every quarter since 3Q16. 3Q16. since quarter YoYeveryincreased The higher GGR per visitor coincides with coincides visitor per GGR higher The 2015 - 8.8%

TotalGGR & Amount

GGR Visitor per - 11 1.1% 7.2% 2016 7.0% With the exception of Feb. 2016 Feb. of exception the With YoY YoY (R) - 15.8% 11 from June 2014 to July 2016. Then in Aug in Then 2016. July to 2014 June from 19.4%

Amount& YoY n Statisticsn and 2017 Growth - - - - - 20% 40% 0% - 100% 80% 60% 40% 20% 11

------10% 20% 30% 40% 50% 0% 60% 50% 40% 30% 20% 10%

Growth Source: Census Service Census Source: Figure

Figure 10 12 14 16 18 , -

MOP mn 10 2 4 6 8 MOP thousand - with the exception of Jan. 2017 Jan. of exception the with a greater number and proportion of proportion and number greater a 1 2 3 4 5 6 7 8 9 2014 GGR per visitor increased visitor per GGR Gaming Inspection and Coordination Bureau of Macao SAR. Macao of Bureau Coordination and Inspection Gaming Government of Macao Special Administrative Regio Special Administrative Macao of Government - 14.4% - - 8:

6: 6 (due to (due

Macau Monthly Macau Macau Macau 1.1% .

Total GGR (L) Total - 12.3% 2015 Chinese New Year effect) Year New Chinese 24.8% Monthly VIP GGR - ust 11.7% 6

2016, GGR per visitor increased by increased visitor per GGR 2016, 4.8%

GGR Visitor per VIP GGR Amount & Amount GGRVIP 2016 by 23.7% 19.2%

7.0 due to Chinese New YearNew Chinese to due - 6 %, YoY YoY (R) 24.8%

hig 21.1% 15.8 her quality visitors quality her , GGR per visitor per GGR , YoY YoY (R) 13.3%

2017 % and % Amount& n Statisticsn and

13.2% - Growth Gaming Sector 6 Page Page 19.4

- - - 20% 40% 60% 80% 0% - - - 10% 15% 20% 25% 30% 0% 5% 4 60% 40% 20% 15% 10% 5% of of % in % able able

Sector Report Gaming Sector 博彩行业 21 December 2017 Se Source: Figure Cotai Macau many resorts casino The catalystfor increased T t Hato Typhoon of rampage the during damage sustained both Terminal operation in routes " t visitation increased expect We per million 91 to million (84 day per Note International. Junan Guotai Source: Macau Int Zhuhai Rail Macau Light Intercity Transit Macau International Airport HK Taipa Maritime Terminal Table Airport expansion, coming infrastructure New Macau

erm Taipa erminal will increase gradually increase will erminal e -

* Zhuhai th : inal. ap Mrtm Terminal Maritime Taipa . expectthe newWe Taipa Maritime Terminal to benefit significantly the Cotai casinos. By 2035, the the 2035, By e -

http://macautripping.com 1: - - available at the new facility newfacility the at available las 9: Macau

opened with just

quarters and and quarters M t oee, codn t Mcus aie n ae Bra, h nme o psegr uig h Taipa the using passengers of number the Bureau, Water and Marine Macau’s to according However,

ercity Light Railercity Light Transit

Infrastructure M pag - acau

Macau Bridge ap ap that and visitors arrive visitors e N fo - . HK

ew r Macau Pen Macau The terminal is located on the northeast side of side northeast the on located is terminal The Infrastructure ProjectsInfrastructure

Macau's a been has - disclaimer

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- Macau Bridge Macau 8

. (Delta B

of of its total 16 berths in operation. d

new new

Expansion

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insula, Taipainsula, Cotai and demolished byferry Pedestrian Border

Major Developments

). , a , s oae na the near located is

ap Mrtm Terminal Maritime Taipa

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is expected to handle handle to expected is

2018 projects include the include projects in at the the at s about the same as as same the about s

t h ed f August, of end the At as Macau Macau Macau

t ap up. ramps it 2018

and - P up schedule up

. eninsula and then and eninsula

50,00

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ihn Macau within ("LRT" TaipaTerminal Maritime 0

the , to 60,000 vehicles per day, allowing for 230,000 to 250,000 person day, 250,000 per vehicles to 230,000 60,000 for allowing to

Upo The

which which

airport airport previous old temporary Taipatemporary old previous te ferry )

Source: Source: Figure and the Zhuhai and n n opening in June, t has been disclosed. been has ap Mrtm Terminal MaritimeTaipa

Taipa, borders which aa Otr abu Fry emnl n Tia Maritime Taipa and Terminal Ferry Harbour Outer Macau mlin Year / million 6 pnd n Jn 2017 June 1 on opened 400,000day / n wl facilitate will and , Las Vegas (LVSLas Sands US)

- would have to eitherto have would Capacity 10: will allow for sustained visitation growth in the the in growth visitation sustained for allow will Current wih lwd down slowed which ,

M ap ap - 0 0 0 0 Macau

- , the the ,

CotaiCasinos he number of ferry operators, sailings and Planned Visitor Planned t 9 n year / mn 9 to 8

W 84 91 to mn mn / H the northern side o side northern the 0,0 / day / 200,000 day / 400,000 e expect that that expecte N ong

oe tourists more (previou Capacity

. take a shuttle a take C

K , hannel ong year* will serve as a catalyst for for catalyst a as serve will n.a. n.a. the

- sly known as "Pac On" or or On" "Pac as known sly Zhuhai rminal, which is no is which rminal,

the

ramping up of of up ramping Pedestrian Border.Pedestrian Planned Operational Planned

ramping up up ramping rvlig to travelling - f bus or taxi to go to go taxi to or bus Macau Br Macau Cotai - border border NotScheduled

. Gaming Sector Page Page Previously Operational idge Maritime the will crossings crossings

longer 5 2019? 2019? Cotai

Date Date of of be a a be 2018 2018 , new new the the 19 ,

Sector Report Gaming Sector 博彩行业 21 December 2017 Se revise link. rail the of section peninsula Macau the on construction of start the for announced been yet has timetable No stops along all the Cotai Strip Checkpoint Lotus c it since casinos Coati mainland a congestion, development resorts as it will greatly ease local traffic congestion. One Phase LRT longkilometers) r be on the Cotaivisitation strip (LRT) We Source: Figure for system buses and cars repeatedly billion) date opening official an on to working bridge 20 Dec. mid in announcement Kong Hong The e th eady until until eady expect e , which which ,

Time

the planned 21 - end complete by to the still scheduled is las 11: bridge t visitors. The LTRThe visitors.

Feb pag Out Hong Kong Hong Out

delayed Hong Kong Hong

that e

for for

s xetd o pn in open to expected is e cnen mn lcl wo at o a te ubr of number the cap to want who locals among concern key 2020. commenced construction construction commenced 2012 fo . r

- , the Macau Peninsula and the Macau a Macau the and Peninsula Macau the , hs Oe of One Phase disclaimer il e mjr aayt for catalyst major a be will Zhuhai

aa' infrastructure Macau's route the peninsula for by a number of formidable engineering chal engineering formidable of number a by

and Phase One Phase . Phase One (Blue Phase Line (Blue One . onnects

– Zhuhai could - , t aa Big ( Bridge Macau

will also make make also will he details of

17 from 17

open

visitors to the to visitors –

Macau Macau Bridge will have 1 have will the as as early as , b , Hong Kong’s Chief Secretary for Administration for Secretary Chief Kong’s Hong aa I Macau

ut such date will be will date such ut 2019, which n 5 Dec 15 on sections thesections LTRof i t s t il ae inter ease will it as lo called also

very easy for visitors to travel to travel to visitors for easy very 1 stations 1 )the LRT of b T

aipa Maritime Ferry TerminalFerry Maritime aipa are are will be a major catalyst to to catalyst major a be will Dec.2017 The triy ih Ri Transit Rail Light ntercity

2019

iiain o Cotai to visitation

yet to

Macau . , but more likely will not

2009

and is 5.8 is and

h Dla rde wl open will Bridge) Delta the T be finali . he LRT is a critical

egan construction T irport government government

he three governments of Hong Kong, Zhuhai and Macau Zhuhai governmentsHong Kong, three of he and in 2018 in .

. It also has also It . lenges z -

had iy traffic city ed. miles ( miles . casino

The rvosy en planned been previously .

may Traffic 9.3

55 ,

- kilomet

on the bridge will be constrained by a quota a by constrained be will bridge the on Transit Transit Figure Source: Source: er , Macau Macau -

oeie n 2018 in sometime

Matthew Cheung Matthew 12: S (34.2 ystem

Maca Transportation Office Infrastructure - mile) mile)

u Intercityu Rail Light o pn n 2016 in open to US$1 ,

5.9 c .

onstruction of the of onstruction A

billion (HK$ billion crig to ccording

Gaming Sector Page Page , but are still are 6

. of of

w 110 19 an as as

Sector Report Gaming Sector 博彩行业 21 December 2017 Se Statistics Source: Figure of Aug. 2017 2016, June in rate occupancy except Macau's Sept. until GEG's 20 was closed for Broadway over was month closed a and did a few days. Only two casinos were forclosed a significant amount of time. SJM HK)’s(00278 Legend Palace casino and hotel sustained casinos most but hours, several for power without were September. 2 until suspended casinos, andMacau, hotelsincluding throughout after the typhoon,Immediately facilities many damaged were infrastructure Hato Typhoon T Macau thefive first (8.1% during Macau monthsof of 2017) visitors arrive the via airport. routes 2016 in Airport Macau the at arrivals million 2.4 only were million extending year per passengers The Source: CotaiSection (Phase Figure 100% he strongesthe 60% 70% 80% 90% e th Macau International Airport International Macau (Monthly) e

2016 . Macau Macau the Companies, the - - las ion passengers Total and W 84.6% 15: 13: total hotel occupancytotalhotel rate t e think think e

Hotels

the - pag Census Service Census

of 87.5% 10 Macau Macau M Transportation Office Infrastructure . Most. recently, occupancytotal rate increased YoY average of by an

aca e Aug passenger terminal passenger fo

ravaged typho 90.2% r u Intercityu Transit Rail Light that disclaimer 2017 . 5 82.0%

Star RatedHotel Occupancy Rates

Government of Macao Special Administrative Region Region Administrative Special Macao of Government - 2017 per year per star on the airport expansion is Macau is expansion airport the 87.0% -

One) , Guotai Junan International. Junan , Guotai 1

in 2018. 2018. in Macau , in 53 years

83.2% which which

currently to 8 to currently

2017 86.6% which was which 4 and not not and - star star ih id pes f 0 klmte pr or 14 p) Ras n ohr transportation other and Roads mph). (124 hour per kilometres 200 of speeds wind with was . (CAM) Company Airport International Macau The -

4 CAM is expected is 85.7%

struck

negatively for ak o nor to back .

86.0% expects the expansion to be completed in 2018, increasing airport ca airport increasing 2018, in completed be to expansion the expects 2017 followed by positive growth for every reported month since then since month reported every for growth positive by followed star rated hotel star rated 91.3% - 3 9 million 9 -

star Macau on

- 7 87.2% S

to increase capacity increase to ystem impacted byimpacted 87.1% mal mal . However, the airport's current current airport's the However, . 2017 ’ s least important infrastructure project since a relatively low proportion low relatively a since project infrastructure important least s 88.7% 2 , o svrl as o weeks to days several for 23 Aug - star - 10 s

increased YoY every single month since June 2016 YoY increasedJune since month everysingle

The

. 2017,. negatively impactingtravel and casino operations. t Source: Source: Section Peninsula Statistics Statistics Source: Figure YoY Change (Monthly)Change YoY Figure yphoon - expansion is expected to allow for for allow to expected is expansion 20 10 15 10

- only minor damage and resumed normal operations within operations normal resumed and damage minor only 0 5 5 2016

Macau Macau t - he Companies he 2.4 2.4 - Total and from 33% to 5 to 33% from 14: 16: - Hato 10

1.8 1.8 Census Service Census

Maca Macau Star Macau Transportation Office Infrastructure . 6.2 6.2 T not reopen until 25 September.not reopen 25 until 2017

here was a 6.6 ppt YoYppt 6.6 t a inwas increase here u Intercityu Transit Rail Light

3.9 , 5 4.4 4.4 . Group tours from mainland China were were China mainland from tours Group .

Government of Macao Special Administrative Region Region Administrative Special Macao of Government - star capacity hasn’t been hasn’t capacity

- ppt. in first the 1 ln to plans 0% , Guotai Junan International. Junan , Guotai 7.3 7.3 -

Rated Hotel OccupancyRated Hotel Rates , or , 5.5 5.5 2017

4 6.4 6.4 from 6 million 6 from

- increase star star - 4 5.3 5.3 ten more airlines and airlines more 2.7 2.7 .

months 2017. months of 2017

, with the exception the with , ipr cpct by capacity airport reached yet; there yet; reached 3 3.3 3.3 - star -

7 (4.4) to

S pacity from pacity

Gaming Sector yste 8 Page Page 3.9 3.9 - , 9 2017 with the the with

he totalhe m, m, million 2 7

- 4.1 4.1 flight of of -

star 10 19 6

Sector Report Gaming Sector 博彩行业 21 December 2017 Se operators casino among is expected to to decline by44.0% then. rooms hotel of proportion its although 2018, through rooms hotel of number of terms in leader the remain will China Sands hotel operator gaming all of 53.1% for accounting suites, and rooms hotel 12,949 total of a itsportfolioto increased China Sands 2016, Sept. in Macao Parisian the of completion the With China Sands Note*: Service Census and Statistics Region Administrative Special Macao of Government Source: Total 2 3 4 5 Table Note*: Service Census and Statistics Region Administrative Special Macao of Government Source: Total 2 3 4 5 Table new capacity will alleviate pressure W reported. not is number and constructitotal a had construction under projects hotel The 2016. of end the at than hotel projects under construction with Macau. to go to M Statistics Source: werewhich of 5 rooms the the T Figure ------he number of star rated hotel rooms in Macau increased byincreased Macau in rooms hotel ratedstar of number he 10 20 30 40 star hotels star hotels star hotels star hotels star hotels star hotels star hotels star hotels star ore hotelroomore capacity e 0

opening of opening of Wynn last few months few last th

7.2

('000) 2017 data is as of end of Oct. of end of as is data 2017 Oct. of end of as is data 2017 e - -

the Companies, Companies, the 3: 2: were in - las Total and % since th since % 17:

2013 Macau Star Star Macau Star Macau 27.1 t

pag Census Service Census

Macau NumberStar of Macau e

(01928 HK) will remain remain will HK) (01928 operation in fo - star hotels, 21. r According to Macau'sto According disclaimer 5 e end of 2016. of end e - Government of Macao Special Administrative Region Region Administrative Special Macao of Government

2014 27.3 star of 2016 of Palace and the Palace Rated Rated , Guotai Junan International. Junan , Guotai

e think that the newly added hotel rooms rooms hotel added newly the that think e all of Macau.

will be in added 2018 will . However, since the end of 2016 through 2016 of end However,the. since

Hotel Rooms Hotel Rooms Hotel

2015 31.7

2 - star star % were% 4 Of the hotels under construction, many are expected to open in 2018, although the exact the although 2018, in open to expected are many construction, under hotels the Of , especially - Rated Hotel RoomsRated Hotel

Parisian Macao a 27,128 18,371 10.5%

- as Macau' as 2,412 5,565 total of Land, Land, 6.7% 6.9% 0.1% 0.1%

2013 2013 I 780 n 2016 35.6 - 3 star15.4% hotels, were 3 October Inventory Growth Inventory -

star

Public Works and Transport Public and Bur Works

8,524 during weekends weekends during holidayand peak seasons.

making itmaking forthe easier Oct

2017, there were a total of 3 largest gaming operator in terms of number of hotel rooms hotel of number of terms in operator gaming largest

36.3 , a totala , 4,161 of rooms, which

2 - 17 - star 27,286 18,379

2,526 5,566 0.6% 4.5 4.7% 0.0% 0.0% 2014 2014 815

room supply in Macau. Even with no planned hotels additions, hotels planned no with Even Macau. in supply room

Statistics Statistics Source: Hotel Room Hotel Figure

100% 150% - 1.8

50% was 50%

0% - in 2018 in star hotels and just % from the end of 2016 through 2016 of end the from % new hotel rooms new hotel

October the Companies, Companies, the

- Total and , , 52. 18: Guotai Junan International Junan Guotai International Junan Guotai

1 Census Service Census 31,669 20,610

16.1% 38.7% 12.1% 6.7% 2013 YoY - 2,528 7,719 % 0.4% 0.1% higher number of 2015 2015 s will be good for Macau for good be will 812 eau

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Sector Report Gaming Sector 博彩行业 21 December 2017 Se themed European third resortdestination. casino a creating thus thereafter, months 24 to 18 about expected completion with 2Q18 in development rebranded and renovated full with to years several next the over Central Cotai billion Sands its improve and US$1 upgrade over of expenditures capital make to plans announced China Sands Source TOTAL ( Holdings The 13 MGM HK) (02282 China Ent & Melco Resorts Macau (01128 HK) Wynn Galaxy HK) (00027 Sand HK) S.J.M.(00880 Operators Table HK), Galaxy (01928 China Sands (02282.HK), China MGM HK), (01128 Macau Wynn SAR, Macao Bureau Coordination and Inspection Gaming Source: yoyGrowth CasinoHotel Rooms yoyGrowth SlotMachines yoyGrowth GamingTables Table resorts is SJM will that Macao capex development G Macau International. Junan Guotai Companies, Source: the Total MGMChina (02282 HK) WynnResorts (01128 HK) HoldingsSJM (00880 HK) MelcoResorts (MLCO US) GalaxyEntertainment (00027 H ChinaSands (01928 HK) GamingOperator Table mn tbe capacity table aming e th

s Chinas HK) (01928 : Gaming Inspection Inspection Gaming : e - - - 6: 5: 4: of of las wer

go into operation into go

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e aca

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(0088 r Market GamingOperatorMarket Rooms Hotel TotalNumber byCasinos of Company,2013 G

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2015 and 2016 and 2015

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pro

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each

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1 January 201 January 1 A

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Guotai Junan International Junan Guotai

and oa Growth Total ad China Sands 20162018to s . The last The . 2016 new

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38 20 casino resort development resort casino A 22.9% 19.5% 0 1 4 2 6 5 5.6%

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2016 HK), SJM (00880 (00880 SJM HK),

39 21 in

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ne Gaming Sector - Page Page 2018CAGR %Totalof w 100.0% 13.9% 15.0% 44.0%

7.2% 9.4% 9.8% casino 2018F 9

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6 19

42 22 % 1 2 4 2 6 5

Sector Report Gaming Sector 博彩行业 21 December 2017 Se Melco HK) & (00577 Holdings HK), 13 The Source: 201 2019 Late Additions: Total 2018 2018 1H 2018 Mar. 2018 31 2018 29 Jan. 2018 1 Jan. 2018 1 Jan. 20 2H 2017 Feb. 2017 27 2017 1 Jan. 2017 1 Jan. Additions: Total 2016 2016 13 Sept. 2016 22 Aug. 2016 1 Jan. Additions: Total 2015 27 O 2015 May27 2015 May27 Opening Table 17 Total Additions: Total 17 e 9

ct. 2015 ct. th

Total Additions: Total e - Guotai Junan Internationa

7: las

Macau Macau t

pag

e SJM Hds. (00880 HK) (00880 SJM Hds. HK) (1928 China Sands HK) Macau (01128 Wynn HK) (1928 China Sands HK) Macau (01128 Wynn Melco Melco HK) (00027 Ent. Galaxy HK) (00027 Ent. Galaxy Developer Sands China (1928 HK) (1928 China Sands SJM Hds. Melco HK) (00577 Hld. 13 The HK) (02282 China MGM HK) (1928 China Sands HK) Macau (01128 Wynn HK) (00880 SJM Hds. fo r Planned CasinoPlannedDevelopment disclaimer

Ent. Ent. Ent.

(00880 HK) (00880

(ML (ML (ML CO CO CO

Wynn Wynn Macau (01128 HK), MGM China (02282.HK), Sands China (01928 HK), SJM (00880 HK), Galaxy Entertainment (00027

US) US) US)

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US). Under construction Under Construction Under Construction Under Construction Under Tables Additional Tables Additional Operating Operating Tables Additional Tables Additional Operating Operating Tables Additional Operating Operating Operating C Planning

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0 0 0 0 0 0 0

Gaming Sector Page Page New Hotel New Hotel 10 Rooms

4,480 2,000 1,500 5,000 3,300 1,700 3,170 1,600 1,250 of of n.a. 645 780 200 3 130 223 320 19 53 0 0 0 0 0

Sector Report Gaming Sector 博彩行业 21 December 2017 Se Service Census Source: Growth Statistics Region Administrative Special Macao of Government Source: decreasedprovince by visito China mainland of source dominant the still was YoYin through The number of visitors from all regions of mainland China increased the and same accountedfor period for 6 26.7 to visitors of number The Visitors Macau Figure Figure - 10% 20% 10% e 0% th

million million visitors to Macau in the first e cre Government of Macao Special Administrative Regio Special Administrative Macao of Government las - - 20: 19: Oct.

10.2% t - - ase in visitors from visitors in ase

4.4% 2013 6.6% 4.4% pag

M NumberMonthly of Macau YoY Growth Visitors, .

2017 e acauVisitors by of Origin Place fo Taiwan, China Taiwan, China Mainland r disclaimer , the number of of number the 14.1% - - 2014 4.7% 5.0% 7.5%

3.0

ppt YoY 5 to

Macau Macau northern northern - 3.6% - 1.7% 2015 4.0% 2.6% - - - mainland 10% 15% 20% 20% 15% 10% - 0% 5% 5% in creased by creased China. South China. 0.2 ten 7.9 - 0.2% 0.8% 2016 8.8% 1.8% %. Total Kong Hong % % all visitors. of months of the year.

Total Visitors Total visitors from visitors

n Statisticsn and , YoY , 2017 Jan 4.6

Oct Central - - % YoY% 4.6% 7.0% 3.5% 1.0% rs, although the proportion of total mainland visitors from Guangdong from visitors mainland total of proportion the although rs, and east -

Census Service. Census

China saw the lowest growth at a still decent still a at growth lowest the saw China

in China

The number of mainland Ch

Census Service Census Source: Figure 100% 201 20% 40% 60% 80% Mainland China Mainland Visitors 0% Mainland China Mainland 7 year to date to year 7 increased the most, up 1 up most, the increased Government of Macao Special Administrative Regio Special Administrative Macao of Government - 21:

63.5% 23.1% 10.0% in 3.4% 2013

Macau Visitors byMacau of Origin Place . 201

7 year7 to date

67.4% 20.4% through 3.0% 9.2% 2014 Hong Kong Hong ina ina visitors increased by

5.8 October

66.5% 21.3% through 3.2% 9.1% 2015 % YoY Taiwan, China Taiwan, .

, followed by a a by followed , There were a total of total a were There October 66.1% 20.7% 3.5% 9.7% 2016 3.9 %. Guangdong %. n Statisticsn

, %, Total of . Gaming Sector Page Page 2017 Jan During Jan. 7.0 67.9% 19.2% 3.3% 9.6% Oct Other 11 % % YoY 1

and and 4.6 of of - 19 %

Sector Report Gaming Sector 博彩行业 21 December 2017 Se Shaanxi. includes China Northwest Chongqing; and Sichuan includes China Southwest Jilin; and Heilongjiang Liaoning, includes China Northeast M Inner Shanxi, Hebei, Beijing, includes China North and Anhui; Shandong Jiangxi, Shanghai, Jiangsu, Zhejiang, Fujian, includes East China Guangxi; and, Henan Hubei, Hunan, Guangdong, includes China Central Note*: South Source: NorthwestChina SouthwestChina NortheastChina NorthChina ChinaEast CentralSouth China Region InnerMongolia Tianjin Shaanxi Shanxi Jilin Chongqing Shandong Helongjiang Hebei Anhui Liaoning Beijing Sichuan Henan Jiangxi Jiangsu Shangai Zhejiang Guangxi Hubei Fujian Hunan Guangdong Province/Region Table Shaanxi. includes China Northwest C Southwest Jilin; and Heilongjiang Liaoning, includes China Northeast Tianjin; and Mongolia Inner Shanxi, Hebei, Beijing, includes China North and Anhui; Shandong Jiangxi, Shanghai, Jiangsu, Zhejiang, Fujian, includes East China Guangxi; H Hunan, Guangdong, includes China Central Note*: South Service Census Source: Figure 100% 20% 40% 60% 80% e 0%

Government of Macao Special Administrative Regio Special Administrative Macao of Government Government of Macao Special Administrative Re Special Administrative Macao of Government 8: * las -

Southwest China Southwest China Northern Central South China

22:

PRC Visitors by PRC Visitors Province/Municipality t

63.3% 20.8%

hina includes Sichuan and Chongqing; and Sichuan includes hina 6.6% 4.5% pag 2013

PRC Visitors by Region, %by PRC Visitors Total Region, of .

r disclaimer

62.9% 20.5% 7.0% 4.9% 2014

64.9% 19.5% 6.1% 4.6% 2015 Northwest China Northwest China Northeast East China

ongolia and Tianjin; and ongolia 66.9% 18.8% 5.7% 4.4% 2016 gio

ubei, Henan and, and, Henan ubei, n Statisticsn and n Statistics Service n Census and

2017 Jan and byand Region 65.4% 20.0% 5.8% 4.3% Oct 49.5% 20.5% 62

4.1% 1.1% 3.6% 4.9% 7.0% 0.8% 0.8% 1.1% 1.4% 1.3% 1.4% 1.7% 1.7% 1.9% 1.4% 1.9% 2.1% 2.2% 2.8% 2.5% 3.2% 3.0% 3.8% 2.8% 3.7% 5.0% 2014 .9% -

Nort Chongqing; and Sichuan includes China Southwest Jilin; and Heilongjiang Liaoning, includes China Northeast Tianjin; and Mongolia Inner Shanxi, Hebei, Beijing, includes China North and Anhui; inc East China Guangxi; and, Henan Hubei, Hunan, Guangdong, includes China Central Note*: South Service Census Source: Figure - - - , % Total of , 10% 20% 30% 30% 20% 10% hwest China includes Shaanxi. includes China hwest 0%

Government of Macao Special Administrative Regio Special Administrative Macao of Government - .

23:

Southwest China Southwest China Northern Central South China

ludes Fujian, Zhejiang, Jiangsu, Shanghai, Jiangxi, Shandong Shandong Jiangxi, Shanghai, Jiangsu, Zhejiang, Fujian, ludes PRC Visitors by Growth PRC Visitors Region, . 2014

51.1% 19.5% 64.9% 4.6% 1.1% 3.7% 4.6% 6.1% 0.6% 0.7% 1.1% 1.2% 1.2% 1.4% 1.6% 1.5% 1.6% 1.5% 1.9% 1.9% 2.3% 2.5% 2.5% 2.9% 2.8% 3.3% 3.1% 3.8% 4.9%

2015

52.4% 18.8% 66.9% 5.1% 0.9% 3.4% 4.4% 5.7% 0.6% 0.7% 0.9% 1.1% 1.2% 1.3% 1.4% 1.4% 1.4% 1.4% 1.7% 1.9% 2.1% 2.5% 2.5% 2.7% 3.0% 3.3% 3.3% 3.6% 4.5% 2016 2016 Northwest China Northwest China Northeast East China

2017 Jan

n Statisticsn and (YoY)

Gaming Sector Page Page 2017 2017 Jan

12.5% 14.6% 14.4% 15.8% 3.9% 12 8.8% - 50.2% 20.0% 65.4% Oct

1.0% 3.5% 4.3% 5.8% 0.6% 0.7% 1.0% 1.1% 1.1% 1.3% 1.5% 1 1.5% 1.4% 1.7% 1.9% 2.2% 2.5% 2.8% 3.1% 3.3% 3.5% 3.4% 4.0% 4.5% 5.3% of of .5% - Oct 19

Sector Report Gaming Sector 博彩行业 21 December 2017 Se ten YoY. quality of visitors T S Byair Heliport(Outer Harbour) Airport Bysea Taipa InnerH OuterHarbour Byland Otherland GongbeiBorder Gate TOTAL%OF VISITORS Total Byair Heliport(Outer Harbour) Airport Bysea Taipa InnerHarbour OuterHarbour Byland Otherland BorderGate GROWTH Total Byair Heliport(Outer Harbour) Airport Bysea Taipa InnerHarbour OuterHarbour Byland Otherland Gong NUMBEROF VISITORS Table arrivals. tourist completed or works under still are projects infrastructure Macau 201 ource: Government of Macao Special Administrative Region Statistics and Census Service Census and Statistics Region Administrative Special Macao of Government ource: he number of air passengerairby increasednumber of arrivals he e

months of2017, coinciding growth high with the 7 year to date th

beiBorder Gate

After decreasing by 32.9% in 2016, the number of helicopter visitor arrivals to Macau surged by surged Macau to arrivals visitor helicopter of number the 2016, in 32.9% by decreasing After e

FerryTerminal FerryTerminal FerryTerm

arbour 9: las

visitors

Macau Visitors byMacau Entry Point t

pag . The expanded capacity for handling incoming travelers will help shorten time at the border the at time shorten help will travelers incoming handling capacity expandedfor The .

e , 57. , fo inal r disclaimer

through through 4

is is improving.

arrived

October

by l by

From From Jan. th and , 49.5 , 34.2

% of Macau’s visitor % by ferry boat and only and boat ferry by rough are are 29,325 15,817 14,250 11,558 24.1% 53.9% 48.6% 10.3% 49.9% 26.5% 39.4% 13.6% - 1,950 1,907 3,982 7,072 1,568 6.6% 0.1% 6.5% 1.7% 5.3% 4.4% 9.6% 0.6% 2.1% 7.0% 0.4% 6.7% 4.9% 2013 be 503 43 in VIPin GGR. Oct. ing planned planned ing

12.7

2017, % - 31,526 12,081 17,390 15,574 YoYfirstthe during 38.3% 13.5% 23.4% 55.2% 49.4% 34.7% 15.8% - 2,055 2,027 4,244 7,363 1,816 9.3% s 6.5% 0.1% 6.4% 1.5% 5.8% 7 5.4% 6.3% 4.5% 6.6% 5.9% 4.1% 9.9% 2014 the the number of Macau's arrivals at the airport increased

.5% 473

arrived and will make for easier access to and to access easier for make will and 28

8.4 .

via the by air by - - 30,715 15,176 11,414 17,211 37.2% 13.3% 22.8% 56.0% 49.4% 54.5% 31.9% 12.0% ------2,090 2,077 4,099 6,993 2,034 2.6% 6.8% 0.0% 6.8% 1.0% 6.6% 2.6% 1.7% 2.5% 5.5% 3.4% 5.0% 1.0% 2015 322 13

Gongbei d

uring Jan. uring ten

months of 2017, indicating that the the thatindicating 2017, of months - - 30, 10,777 17,760 15,477 34.8% 13.7% 21.1% 57.4% 50.0% 15.5% 32.9% 15.8% 96.2% 12.2%

b - - 2,413 2,405 4,229 6,537 2,282 2.0% 7.8% 0.0% 7.8% 0.0% 7.4% 0.8% 5.6% 3.2% 6.5% 3.2% 2016 order

950 through through 12 9

crossing Oct. s 51.4

and encourage more encourage and

within Macau when Macau within

201

% YoYfirst % the for

in in Zhuhai 2017Jan 7 . A of number.

Gaming Sector Page Page -

100.0%

26,724 15,340 13,239

34.2% 13.2% 21.0% 57.4% 49.5% 12.7% 51.4% 12.6% 10.9% 2,243 2,233 9,140 3,515 5,625 2,101 2.5% 8.4% 0.0% 8.4% 0.0% 7.9% 4.6% 4.4% 2.5% 5.9% 3.6% - 13 . O 12.7 Oct

of of f all -

19 %

Sector Report Gaming Sector 博彩行业 21 December 2017 Se Service Census Source: Visitors Ga Source: Macau to dayvisitors for day of stay of duration average the period, time same January During Statistics Region Administrative Special Inspection Gaming Source: Figure Figure Figure 100% - - 20% 40% 60% 80% 15% 10% 10% 15% 20% e 0% -

5% 0% 5% - th trippers decreased by decreased trippers e Government of Macao S Macao of Government las - - - 46.6% 53.4% 24: 27: 26:

ming Inspection Inspection ming t 0.9% pag

Macau Visitor Macau Macau Proportion Macau of Visitors AverageMacau StayDuration Same . e

2.8% 47.5% 52.5% fo r -

through through disclaimer day Visitors day 15.8% Sea 46.5% 53.5% and and

Coordination Bureau Macao SAR, Macao Bureau Coordination trips. 14.6% pecial Administrative Regio pecial Administrative

October

Arrivals by Modality YoY Growth

43.3% 56.7% 1.2 oriain ueu aa SAR, Macao Bureau Coordination

% and . Land 17.8% 44.8% 55.2% More overnight visitors is good news for the sector as overnight visitors spend more than more spend visitors overnight as sector the for news good is visitors overnight More Same Day Overnight Vs. 0.0 0.5 1.0 1.5 2.0 2.5 Overnight Visitors Overnight Census Service. Census

2017 13.8% 46.0% , 54.0% 0.2 1.2 2.1 the number of overnightby numberof to the visitors increased Macau 1 Same All Visitors 8.7% 44.4% 55.6% n Statisticsn and Air

0.2 1.2 2.1 - day Visitors day 10.9% all

Macao Special Administrative Region Statistics Statistics Region Administrative Macao Special

49.1% 50.9% Macau visitors increa visitors Macau 2.2 0.2 1.3 14.5%

Macao Macao

2.1 0.2 1.3

Special Administrative Region Statistics Statistics Region Administrative Special Inspection Gaming Source: Growth Figure - - 10% 15% 20% 15% 10% - Census Service Census Source: Figure 0% 5% 5% 120% - - 0.2 1.2 2.1 80% 40% 40% 80% 0% - 13.9% 28:

Government of Ma of Government - Overnight Visitors Overnight - 2.4% 25: 1.4% 0.2 1.3 2.2 - sed by sed

43.7% Macau Same DayMacau Visitors YoY Overnight Vs.

Macau Air Macau . Same

4.4% - 17.7% 50.4% 3.4% 0.2 1.3 2.2

3.4 - 16.2% 14.2% day Visitors day - % YoY % days 1.2 to 6.1% and - 45.8% cao Special Administrative Regio Administrative Special cao Heliport 0.2 1.2 2.2

Visitors Coordination Bureau Macao SAR, Macao Bureau Coordination - and 46.0% 15.0% 10.1% - 9.1%

Census Service. Census 18.1% and - 31.3%

- arrivals YoY

2.3% Census Service. Census 10.6% 13.9% - 6.0% 0.4 Overnight Overnight Visitors , while the number of number the while , 4.8% 40.3% Airport -

6.2% %YoY. 8.6% - 5.4% 1.0% Growth

93.7% 10.6% n Statistics and and Statistics n Gaming Sector Page Page During theDuring

Macao 8.4% 7.3% 14 14.4% 37.3%

of of 19

Sector Report Gaming Sector 博彩行业 21 December 2017 Se competitorMGM Cotai will beopen and ramping up. new 20 in yearwhole the nearly for upramping be both will which Macao,Parisian the and Palace Wynn to share market loses it as Macau's 2017 GGR will gro EBITDA,is equivalent 26.2x to 2017 PER,and isa 17.5% discount toour DCF derived NAV per share HK$67.91. of develo demanding,ourin view. However, we give We verynot attractive, and 27.2x / 2017 PER and is a 20.0% discount to our DC "Accumulate" openedMGM Cotaiwill double the expect we 2018 in However, Macao. Parisian the and Palace Wynn opened expect we 2017, of remainder EBITDA and is equivalent to 27.9x forward PER. Our target price is a 19.9% discount to our DCF derived NAV per share of HK$27 b is China MGM "Accumulate" havehighera we up, ramping finished is Palace Wynn Once earnings. and revenue to contributionsignificant more a making be will and then catchingup wit margin will continue to decline in 2017 due to Wynn Palace being in its ramp 19.0% a is it PER; 2018 24.8x margin improvement at Wynn Palace, we think MacauWynn is a "Buy". Wynn for rating investment "Buy" ramp were which of both Manila, Dreams of City and (Macau) City Studio at costs operating controls and efficiency operating gains US$35.37. of per share derived NAV DCFourdiscount 19.1% to US$2 is pick top sector Our Source: PE Figure Entertainment(00027 HK). HK). (01128 "Buy" to recommend We Investment Suggestions 20 25 30 10 15 e Dec

are "Neutral" on Galaxy Entertainment (00027 Entertainment Galaxy on "Neutral" are th rjcs r eeu sras n ih fr E, e xet t o otnet ls aktsae n 08 hn h te nwy opene newly then the when 2018 in share market lose to continue to it expect we GEG, for sight in streams revenue or projects - 8.6 upphases partfor of 2016. e mn, E' promne fac performance GEG's pment, - Bloomberg, Guotai Junan International Guotai Junan Bloomberg, las - 12 29: 0. t

Our target price is equivalent to 12.4x 2017 and 10.7x 2018 EV/Adjusted EBITDA, 35.9x 2017 and 27.2x 2018 PER and is a is and PER 2018 27.2x and 2017 35.9x EBITDA, EV/Adjusted 2018 10.7x and 2017 12.4x to equivalent is price target Our pag

Macau Gaming Peers Gaming Macau Peers Index, 5 e ae Acmlt" aig for ratings "Accumulate" have We - than Dec h fulloperating expenses. However, we expect EBITDA margin increase to in 2018 as Wynn Palacewill be fully ramped upby e Sands MGM China MGM fo eing discounted too much by the market. the by much too discounted eing r - - we like Sands China'shigh dividend yield, mass marketfocus and relatively diversified revenue streams.

sectoraverage EBITDA marginas itattracts the moreprofitable premium mass gamers.market 13 disclaimer

China Mean 4 Quarters) (Next P/E Ratio BEst - ST. +1 DEV. 1 DEV. ST. Melco Resorts & Entertainment & Resorts Melco Dec

w at a percentage in the upper

(02282 HK) with target price of price target with HK) (02282

- Melco Resorts & En & Resorts Melco MGM China' MGM 14

MGMChina

1 discount to our DCF derived NAV per share of HK$32.10. of share per NAV derived DCF our to discount

928 HK) with target price of pricetarget withHK)928

Dec Macau smr dwsd rs hn upside. than risk downside more es

GalaxyEntertainment 15 's 's footprintMacau.in s net revenue to grow slower than the sector growth rate as it loses market share to the newly the to share market loses it as rate growth sector the than slower grow to revenue net s

018 HK) (01128 - G China MGM Dec Ye

ar Forward ar tertainment -

16 HK) F derived NAV per share of HK$56.22. - teens, we expect that

with Our target price is equivalent to 16.0x forward (next four quarters) EV/Adjusted quarters) four (next forward 16.0x to equivalent is price target Our with (MLCO US), which we have a have we which US), (MLCO Dec

022 K ad Sands and HK) (02282

HK$ HK$

agt price target

target price target a"Neutral" investment rating sincewe thinkthat with nonew casinosunder We expect adjusted pr expectadjusted We - (MLCO US), which is is which US), (MLCO 17 45.00 22.00

Our target price is equivalent to 13.9x 2018 EV/adjusted EBITDA and Source: Source: EV/AdjustedEBITDA Figure . .

Our target price is equivalent to 16.2x 2017 EV/Adjusted EBITDA16.2xEV/Adjusted2017equivalent to priceis target Our W - 10 12 14 16 18 20 Our up phase for most of the year, when revenue contribution will be Dec 6 8 ith the second lowest valuation among Macau peers, we think we peers, Macau among valuation lowest second the ith of of Bloomberg, Guotai Junan International Guotai Junan Bloomberg, Galaxy Entertainment -

30: - e tre pie seuvln t 1.x 07 EV/Adjusted 2017 15.7x to equivalent is price target new HK$ HK$2 12 MGM China' MGM

Macau Gaming Peers Gaming Macau Peers Index, 5 56

6.0 China Dec operty EBITDA margin to increase in 2017 as2017 increase in EBITDAoperty to margin .00. our sector top pick, as well as as well as pick, top sector our 0.

"Buy" investment rating with target price of price target with rating investment "Buy" We expect that expect We Galaxy Entertainment Galaxy 13 With With Mean 4 Quarters) (Next EV EBITDA to BEst

- ST. +1 DEV. 1 DEV. ST. 098 K and HK) (01928 s net revenue to increase as the th the as increase to revenue net s Although

an undemanding an Dec 's net revenue will grow at a slower rate - 14 we think Sands China's valuation Wynn Macau Wynn Dec we .

- 's current valuation is not is valuation current 's

a Althoughwe expect that auto ad expected and valuation e Nurl on "Neutral" re - Dec Year Forward Year 's overall EBITDA overall 's

- 16 Wynn Macau Wynn Gaming Sector Page Page 17. With no With 17. .45. .45. expect it expect still in their in still en newly en Dec

15 For t Galaxy Melco of of - 17

he 19 to is d

Sector Report Gaming Sector 博彩行业 21 December 2017 Se Note International. Junan Guotai Source: Bloomberg, Weighted Average Simple Average Belle Corp Bloomberry Res Genting Malaysia Genting Singapor Other Operators Weighted Average Simple Average Wynn Resorts Ltd Pinnacle Enterta Penn Natl Gaming Mgm Resorts Inte VegasLas Sands USA Operators Weighted Average Simple Average MacauWynn Ltd HoldingsSjm Ltd Sands China Ltd Mgm China ResortsMelco & Ent Int.Melco Dev. Galaxy Entertain Macau Operators Company Table e

: Forward valuatio Forward : th e - 10: las

pag Gaming Sector Peers Comparison Sector Peers Gaming

e fo . r

ns a ns disclaimer BEL PM BLOOM PM GENM MK GENS SP WYNN US PNK US PENN US MGM US LVS US 0 00 0 0 MLCO US 00 00027 HK Code Stock 1128 HK 1928 HK 2282 HK 880 880 HK 2 re calculated based on next 12 months earnings forecasts. earnings months 12 next on based re calculated 00

USD HKD HKD Crncy PHP PHP MYR SGD USD USD USD USD USD HKD HKD HKD HKD

168.950 28.470 23.800 63.100 10.800 32.160 30.900 33.160 70.760 24.750 40.250 24.000 3.820 3.820 5.580 1.330 7.030 Price (mn)

(HK$)

109.6 271.8 135.9 146.9 437.6 128.6 325.0 - 18.5 60.6 93.0 14.5 22.0 39.8 91.3 36.6

Cap 6.2 Bn

Hist Fwd 32.8 22.3 15.8 32.8 18.9 21.9 20.7 24.2 25.1 31.4 18.7 25.3 20.3 23.3 23.7 21.7 18.0 21.8 22.6 32.7 26.2 22.7

Fwd 1 23.6 26.0 27.7 28.8 24.3 25.6 23.4 27.1 27.4 26.6 22.6 23.4 38.0 27.3 25.0 28.8 15.4 17.9 12.3 15.4 26.0 8.0

Current

24.2 25.1 34.4 32.6 39.8 45.4 29.5 24.6 29.6 29.5 33.8 22.6 26.9 38.0 31.6 25.0 28.8 18.2 20.2 12.3 18.2 26.0 1 7

21.1 23.3 24.5 25.1 27.0 24.8 22.3 23.2 25.0 25.0 24.5 23. 22.9 33.5 27.1 18.9 25.2 15.2 16.3 15.2 19.0 1 9.8 9.8 8

F 0

151.2

Hist Fwd 10.8 12.5 10.2 13.3 12.6 19.4 33.2 15.0 16.6 15.5 13.4 10.9 13.1 10.7 11.2 11.0 6.9 6.9 7.1 9.6 8.8 8.8 8.8

EV/ .

Adjusted

Fwd 13.1 13.8 14.2 14.0 18.1 16.8 19.1 13.5 18.3 26.1 12.2 18.9 12.4 12.9 14.0 11.2 11.9 7.8 7.8 8.1 9.7 9.8 9.8 9.8

Current

13.1 14.0 14.9 12.3 14.2 18.2 16.9 19.1 13.5 18.3 26.1 12.8 18.9 12.4 12.9 14.0 11.6 1 EBITDA 8.0 8.0 8.6 9.7 9.8 9.8 9.8 7

12.2 13.9 10.8 13.7 10.8 14.1 15.6 14.4 16.1 14.3 16.5 18.1 16.4 10.0 10.6 11.3 1

7.5 7.5 7.9 8.4 8.2 8.2 8.8 8.2 8

(9.3) (5.3) 35.0 44.9 10.8 11.7 11.1 8.8) 1

2.1 2.1 8.8 3.2 9.3 1.6 9.1 4.7 1.6 5.2 3.9 3.9 2.3 1.5 3.9 1.6 PB 7 F

Gaming Sector

(119.3) Page Page ROE (14.4) 132.3 132.3 141.1 1 (%) 33.6 35.2 38.1 35.3 32.3 29.7 12.0 18.4 24.7 12.8 12.1 2 7 8.4 8.4 8.6 9.4 7.1 6.5 5.9 5.9 4.7 F

of of Yield 1 n.a. n.a. (%) 1.0 1.0 1.9 2.6 1.0 1.8 2.3 4.2 2.3 1.3 1.4 4.3 2.9 2.3 3.7 2.5 5.2 1.7 1.4 0.3 1.2

19 7 F

Sector Report Gaming Sector 博彩行业 21 December 2017 Se Appendix GamingRevenue Market Share Source: Avg.Macau WynnMacau (01128 HK) ChinaSands (01928 HK) (00880SJM HK) MGMChina (02282 HK) MelcoResorts (MLCOEnt. US) Galaxy(00027Ent. HK) AdjustedProperty EBITDA Margins Galaxy(00027Ent. HK) MassCasino Table Win W ChinaSands (01928 HK) (00880SJM HK) MGMChina (02282 HK) MelcoResorts (MLCOEnt. US) Galaxy(00027Ent. HK) CasinoVIP Table Win WynnMacau (01128 HK) ChinaSands (01928 HK) (00880SJM HK) MGMChina (02282 HK) MelcoResorts (MLCOEnt. US) Galaxy(00027Ent. HK) CasinoRevenue Source: CasinoRevenue WynnMacau (01128 HK) ChinaSands (01928 HK) (00880SJM HK) MGMChina (02282 HK) Mel Galaxy(00027Ent. HK) Slots WynnMacau (01128 HK) ChinaSands (01928 HK) (00880SJM HK) MGMChina (02282 HK) MelcoResorts (MLCOEnt. US) Galaxy(00027Ent. HK) Mass TablesMarket WynnMacau (01128 HK) ChinaSands (01928 HK) (00880SJM HK) MG MelcoResorts (MLCOEnt. US) Galaxy(00027Ent. HK) VIP WynnMacau (01128 HK) ChinaSands (01928 HK) (00880SJM HK) MGMChina (02282 HK) MelcoResorts (MLCOEnt. US) Galaxy(00027Ent. HK) e ynnMacau (01128 HK)

co Resorts co (MLCOEnt. US) MChina (02282 HK) th e the Companies the Companies the las t pag e fo

r (HK$mn) disclaimer . .

111,223

100.0% 100.0% 100.0% 100.0% 97,234 29,580 22,386 14,304 16,030 12,867 17,963 25,064 11,737 15,148 28,444

24.4% 22.1% 17.1% 22.5% 24.3% 12.8% 23.1% 13.0% 10.0% 36.3% 14.1% 11.5% 15.2% 30.4% 23.0% 14.7% 16.5% 11.6% 16.2% 22.5% 10.6% 13.6% 25.6% 21.0% 28.8% 32.6% 1,741 7,376 7,557 8.9% 8.4% 7.6% 7.8% 7.5% 2015 2015 2015

103,226

100.0% 100.0% 100.0% 100.0% 30,053 20,273 17,438 19,289 98,818 15,092 15,344 19,934 13,640 26,177

27.1% 20.5% 19.6% 10.6% 22. 21.3% 13.9% 24.4% 10.6% 10.0% 39.8% 11.8% 10.5% 17.2% 29.1% 19.6% 16.9% 18.7% 15.3% 15.5% 20.2% 13.8% 26.5% 21.6% 27.6% 31.2% 1,835 8,484 7,6 8,631 7.5% 8.2% 7.4% 8.7% 7.7% 2016 2016 2016 3% 89

100.0% 100.0% 100.0% 100.0% 24,985 25,713

29.1% 20.6% 16.9% 18.4% 11.4% 16.5% 21.8% 14.0% 27.7% 20.9% 31.4% 31.9% 24.3% 20.0% 18.2% 22.0% 22.7% 13.9% 24.9% 14.7% 10.0% 37.6% 12.0% 10.3% 15.4% 1,924 7,263 5,146 1,847 4,211 4,593 2,944 4,2 5,604 2,222 3,592 7,117 1Q16 1Q16 1Q16 7.7% 7.4% 8.6% 7.0% 9.1% 7.3%

412 34

100.0% 100.0% 100.0% 100.0% 24,310 22,469

28.8% 20.7% 16.8% 18.5% 16.3% 12.7% 20.4% 15.5% 26.2% 21.5% 29.8% 33.2% 26.4% 19.5% 18.7% 10.6% 21.3% 22.0% 14.2% 24.3% 10.1% 10.6% 38.9% 12.0% 18.6% 1,825 7,005 5,034 1,863 4,074 4,509 3,655 2,858 4,578 2,005 3,492 5,880 2Q16 2Q16 2Q16 7.5% 7.7% 8.9 7.4% 7.7% 9.8%

474 %

100.0% 100.0% 100.0% 100.0% 26,444 23,383

28.9% 20.1% 16.7% 18.8% 16.1% 16.6% 18.8% 13.9% 25.8% 23.3% 25.9% 36.7% 30.0% 21.2% 20.7% 10.2% 23.2% 20.7% 14.0% 23.9% 10.4% 40.2% 11.4% 10.3% 18.9% 1,991 7,639 5,317 2,098 4,423 4,976 3,766 3,876 4,393 2,058 3,255 6,036 3Q16 3Q16 3Q16 7.5% 7.9% 8.8% 7.5% 7.9% 8.7%

494

100.0% 100.0% 100.0% 100.0% 27,436 27,254

10.0% 29.5% 17.4% 17.2% 19.0% 17.3% 16.1% 19.7% 12.1% 26.2% 22.4% 24.7% 32.3% 27.5% 21.3% 20.6% 12.4% 22.6% 19.9% 13.3% 24.5% 39.8% 12.2% 11.6% 17.7% 2,743 8,106 4,776 1,882 4,719 5,211 4,725 4,377 5,359 2,347 3,302 7,144 4Q16 4Q16 4Q16 6.9% 8.6% 8.7% 7.2% 9.2% 9.4%

485

100.0% 100.0% 100.0% 100.0% 28,732 27,794

10.3% 29.8% 18.1% 15.8% 18.6% 21.6% 15.4% 17.8% 13.3% 24.5% 23.5% 27.6% 32.7% 28.5% 22.9% 22.6% 14.1% 22.6% 19.1% 13.9% 23.3% 10.7% 40.2% 12.2% 17.8% 2,953 8,553 5,196 2,157 4,539 5,334 6,004 4,272 4,936 2,073 3,69 6,816 1Q17 1Q17 1Q17 7.5% 7.5% 7.5% 7.0% 9.2% 9.8%

496 4

100.0% 100.0% 100.0% 100.0% 27,842 29,067

10.9% 30.9% 17.4% 15.1% 19.2% 21.9% 13.3% 17.0% 17.2% 23.8% 23.3% 23.8% 32.7% 25.9% 23.8% 22.7% 14.9% 22.3% 18.5% 14.2% 23.7% 11.2% 39.5% 11.5% 10.6% 17.6% 3,039 8,605 4,841 1,824 4,197 5,335 6,375 3,869 4,937 1,963 4,991 6,932 2Q17 2Q17 2Q17 6.6% 6.8% 6.6% 6.4% 9

.6% 483 Gaming Sector Page Page

100.0% 100.0% 100.0% 100.0% 28,959 31,916

14.7% 22.1% 17.4% 14.6% 24.9% 40.6% 12.9% 18.9% 11.1% 30.1% 17.4% 15.5% 19.5% 21.1 14.6% 14.8% 17.3% 25.5% 24.4% 27.9% 33.5% 25.1% 27.9% 22.1% of of 3,210 8,723 5,036 1,861 4,488 5,642 6,727 4,654 4,736 2,141 5,511 8,146 3Q17 3Q17 3Q17 6.3% 9.9% 9.0% 8.7% 6.4% 6.7% 7.2%

19 529 %

Sector Report Gaming Sector 博彩行业 21 December 2017 Se Source: CasinoRevenue WynnMacau (01128 HK) ChinaSands (01928 HK) (00880SJM HK) MGMChina (02282 HK) MelcoResorts (MLCOEnt. US) Galaxy(00027Ent. HK) Slots WynnMacau (01128 HK) ChinaSands (01928 HK) (00880SJM HK) MGMChina (02282 HK) MelcoResorts (MLCOEnt. US) Total WynnMacau (01128 HK) ChinaSands (01928 HK) (00880SJM HK) MGMChina MelcoResorts (MLCOEnt. US) Galaxy(00027Ent. HK) Numberof Slot Machines Source: Total WynnMacau (01128 HK) ChinaSands (01928 HK) (00880SJM HK) MGMChina (02282 HK) MelcoResorts (MLCOEnt. US) Galaxy(00027Ent. HK) Slot Machines Share Source: Total WynnMacau (0112 ChinaSands (01928 HK) (00880SJM HK) MGMChina (02282 HK) MelcoResorts (MLCOEnt. US) Galaxy(00027Ent. HK) NumberGamingof Tables Source: MacauGaming WynnMac ChinaSands (01928 HK) (00880SJM HK) MGMChina (02282 HK) MelcoResorts (MLCOEnt. US) Galaxy(00027Ent. HK) GamingTable Share Source: e

e the Companies the the Companies the Companies the Companies the Companies the las t

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r disclaimer 8 HK)8 . . . . .

200,038

100.0% 100.0% 13,918 17,887 44,973 48,590 16,842 25,552 46,195 11,438

35.3% 19.5% 23.1% 26.1% 29.5% 14.1% 15.3% 1,483 4,154 1,139 1,612 1,310 5,824 1,518 1,718 4,907 2,711 1,174 1,202 3,216 5.1% 8.4% 8.6% 7.9% 7.2% 2015 2015 2015 2015

458 421 819 890 708

193,880

1 100.0% 26,857 47,332 10,639 20,553 43,260 41,273 14,606 14,400

00.0% 32.1% 18.9% 28.5% 11.2% 23.2% 26.6% 14.0% 18.2% 4,622 2,718 1,060 1,091 4,107 6,169 1,431 1,642 1,123 1,132 4,235 1,065 1,257 1,114 5.6% 7.4% 7.6% 6.7% 2016 2016 2016 2016

802 691 416 866

100.0% 100.0% 48,642 10,719 11,019 12,123 14,297

25.1% 27.4% 14.3% 19.2% 34.1% 20.3% 23.9% 1,166 4,445 3,569 6,767 2,675 1,007 4,877 2,898 1,183 1,134 3,424 6,087 1,525 1,667 1Q16 1Q16 1Q16 1Q16 7.1% 6.9% 5.5% 8.3% 7.9%

392 267 321 276 781 435 421 873

100.0% 100.0% 44,793 10,865 13,706

25.4% 27.7% 14.5% 18.4% 36.0% 20.6% 22.1% 1,105 4,732 9,526 9,865 3,443 6,362 2,553 4,938 2,820 1,024 1,115 3,034 5,998 1,525 1,662 2Q16 2Q16 2Q16 2Q16 7.0% 6.9% 5.7% 7.5% 8.1%

258 992 27 307 251 775 421 416 869 0

100.0% 100.0% 48,157 11,177 11,507 15,769

10.9% 29.4% 25.9% 13.5% 13.7% 29.2% 17.4% 34.8% 4,926 9,992 3,808 6,747 2,607 1,049 4,597 2,748 1,032 1,098 5,490 6,304 1,856 1,634 3Q16 3Q16 3Q16 3Q16 6.5% 5.1% 6.5% 7.0%

865 227 272 296 269 804 689 409 851

100.0% 100.0% 52,348 11,837 10,397 12,842 13,826

25.9% 26.1% 13.8% 18.3% 29.5% 19.7% 30.1% 1,151 6,505 3,786 6,981 2,733 1,088 4,083 2,718 1,002 1,018 4,160 6,287 1,626 1,642 4Q16 4Q16 4Q16 4Q16 9.3% 6.6% 6.1% 7.2 7.4%

253 256 334 318 845 584 416 868 %

100.0% 100.0% 54,356 12,270 10,389 12,647 16,018

25.6% 26.3% 13.6% 18.7% 25.1% 15.9% 41.6% 1,198 7,644 3,832 7,575 2,787 1,121 4,014 2,549 1,016 6,658 6,423 1,646 1,690 1Q17 1Q17 1Q17 1Q17 9.2% 6.5% 5.5% 6.3% 5.6%

300 257 340 274 886 895 593 420 876

100.0% 100.0% 53,837 11,984 12,777 16,204

25.7% 26.3% 13.6% 18.4% 28.6% 17.4% 36.9% 1,179 7,997 9,986 3,428 7,665 2,747 1,086 4,639 2,819 1,033 5,978 6,413 1,646 1,688 2Q17 2Q17 2Q17 2Q17 9.5% 6.5% 5.7% 6.4% 5.0%

308 263 315 292 917 818 610 415 875 Gaming Sector Page Page

100.0% 100.0% 16,310 57,629 12,762 10,015 14,346

28.8% 16.1% 38.6% 25.3% 25.7% 13.5% 19.7% of of 4,694 2,632 1,040 6,292 6,449 1,629 1,658 1,270 8,457 3,610 8,439 2,801 1,138 3Q17 3Q17 3Q17 3Q17 5.6% 6.4% 4.5% 9.4% 6.4%

19 918 734 609 415 868 278 251 361 245

Sector Report Gaming Sector 博彩行业 21 December 2017 Se Website:www.gtja.com.hk Tel.:(852) 2509 27/F.,Low Block, GrandMillennium Plaza, 181 Queen’s Road Centr 201 © regulati or lawsubjectGuotai Junanand applicablegroupits companies any to registration to or licensingrequirement within contrarysuch jurisdiction. be would use or availability publication, distribution, such where jurisdiction any in Research This Report isnot direc unpredic andwhere necessary consult their own inherently financial advisers prior to any investment decision. with conditions economic and political future the mutable of assumptions the from derived forecasts and estimates acc the guarantee not Thoughbest effort has been ensuremade to the accuracy of the information and data containedin this ResearchReport, Guotai becontrary to opinions ori reportthis professionalopinionsexpressedcompanies.in otherdealersAnyandexecutivesGuotai Junan of persons,group of Any opinions expressed in this report may differ or be co orinvest proprietarily). research reports, including investment banking, investment services Kon (Hong d Report Research This DISCLAIMER (6) (5) (4) (3) (2) (1) DISCLOSURE OF INTERESTS Horizon: Time to6 18 months TheBenchmark: Hong KongHang Seng Index Sector Horizon: Time to6 18 months TheBenchm Company e Underperform Neutral Outperform Rati Sell Reduce Neutral Accumulate Buy Rating

th Report. There Guo Guotai Junanand its group companies Reportwithin precedingthe 12 months. group its and Junan Guotai Res this in mentioned issuer the of capitalization Report market the of 1% than more or to equal hold not do companies group its and A(03156SC HK),CAMMSCI I HK),GFI (02886INVESTMENTINTERNATIONAL HK),GUOTAIHK),BINHAI (01253JUNAN (01788 BROAD GREENLAND for Except The Analys mentionedin thisResearch Report. Except for Shenzhen International Holdings Limited (00152 HK), t 7 e

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Sector Report Gaming Sector 博彩行业 21 December 2017