China Macau Industrypg.jrj.com.cn/acc/Res/CN_RES/INVEST/2017/12/11/bcbe5a51... · 2017. 12. 15. ·...

11 December 2017

Hotels / Leisure / Gaming

Macau

ConsumerHotels / Leisure / Gaming

RecommendationChange

AsiaChinaHong Kong

Industry

MacauDate11 December 2017

Deutsche BankMarkets Research

Lift 2018 GGR forecasts; u/g Galaxy toBuy; Wynn remains our top pickVIP staying stronger for longerAfter our trip, we have grown more confident in our bullish call on Macau, espon VIP. We see Macau entering its 3rd phase of VIP resurgence, where abundantjunket liquidity is propelling Top 5 junkets to speed up VIP room expansion.Indeed, Macau's largest junket, Suncity, expects its VIP rolling to grow 20% in2018. As such, we lift our 2018 VIP GGR growth forecast from 15% to 21% and liftour 2018 Mass GGR growth forecast from 9% to 13%. Therefore, we lift our 2018Macau GGR growth forecast from 13% to 17%. Due to higher VIP exposure, our2018 EBITDA forecasts are most bullish for Wynn Macau (16% above consensus)and Galaxy (13% above consensus). We keep Wynn Macau (Buy) as our Top Pickwith TP of HK$28 (22% upside). We upgrade Galaxy from Hold to Buy with TP ofHK$70 (22% upside) on strong VIP performance and leading VIP market share.

More bullish than the Street on 2018 forecasts, especially on VIPOn our recent Macau trip, we spoke to numerous junket operators. They all feltthat over the past 6 weeks, underlying VIP demand had grown stronger, drivenby the return of Super VIPs. At the same time, junket liquidity remain abundantas cash-only agents still represent 50% of active agents (vs 20% at peak in early2014). As such, Top 5 junkets have enough capital to add at least 12 VIP roomsin the next 6 months. This should boost VIP GGR by 15-20% on our estimate. Wethus feel the Street still underestimates VIP potential (consensus expects 2018VIP GGR +9% vs. DBe +21%).

Margins likely stronger than the Street expectsIn the 3Q17 results, a big surprise was margin beat despite VIP outgrown mass.For 2018, we believe margins will continue to surprise on the upside. As weforecast premium mass will outgrow grind mass in 2018, we expect a sharpmass table yield improvement to lead to strong operating leverage, allowing massmargin to expand. In particular, we see plenty of room for Wynn Palace's massmargin to expand as its comps as % of mass GGR ratio continues to fall.

Top pick Wynn Macau; key risksFor Macau stocks, we raise 2018 EBITDA ests by 3-8% and revise SOTP-basedTPs (see Fig 40-41). Macau stocks are trading at 13.6x DBe 12m fwd EV/EBITDA,below +1 std deviation over historical avg (12x). We view current valuation asreasonable in an upcycle where stocks could trade up to 16x EV/EBITDA. Keyrisks include a sudden end to the GGR growth momentum and policy changes.

Karen Tang

Research Analyst

+852-2203 6141

Key ChangesCompany Target Price Rating

0027.HK 58.60 to 70.00 Hold to Buy

2282.HK 20.00 to 24.00 -

1128.HK 25.70 to 28.00 -

0880.HK 7.60 to 7.00 -Source: Deutsche Bank

Top picks

Galaxy (0027.HK),HKD57.50 Buy

Wynn Macau (1128.HK),HKD23.00 BuySource: Deutsche Bank

Companies featured

Galaxy (0027.HK),HKD57.50 Buy

2016A 2017E 2018E

EV/EBITDA (x) 10.1 16.3 13.5

MGM China (2282.HK),HKD21.95 Buy

2016A 2017E 2018E

EV/EBITDA (x) 13.1 24.0 16.0

Sands China (1928.HK),HKD38.45 Hold

2016A 2017E 2018E

EV/EBITDA (x) 15.3 17.1 15.6

Wynn Macau (1128.HK),HKD23.00 Buy

2016A 2017E 2018E

EV/EBITDA (x) 17.3 17.9 13.3

SJM (0880.HK),HKD6.23 Hold

2016A 2017E 2018E

EV/EBITDA (x) 5.3 13.0 13.1Source: Deutsche Bank

Deutsche Bank AG/Hong Kong

Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors should beaware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should considerthis report as only a single factor in making their investment decision. DISCLOSURES AND ANALYST CERTIFICATIONSARE LOCATED IN APPENDIX 1. MCI (P) 083/04/2017.

Distributed on: 10/12/2017 23:24:11 GMT

7T2se3r0Ot6kwoPa

11 December 2017


Macau

Figure 1: Stock recommendations & revisions

Source: Deutsche Bank forecasts, Bloomberg Finance LP

Note: FCF yield is before capex.


11 December 2017


Macau

Table Of Contents

2018 Outlook - Bullish on VIP & premium mass................ 5Our new 17% GGR forecast is much higher than Street................................... 5More bullish than Street on Wynn Macau and Galaxy......................................5We think VIP remains a growth driver for 2018................................................ 6Table supply likely to remain tight..................................................................... 7

VIP stronger for longer....................................................... 9Lifting 2018 VIP growth forecast from 15% to 21%..........................................9How can strong junket liquidity supply boost VIP in 2018?.............................. 9Why is underlying VIP demand staying strong?..............................................11

Mass growth staying solid................................................13Infrastructural improvement to lift visitation growth....................................... 13Premium mass growth to lift mass table yield sharply....................................13China's Greater Bay Area initiative may help improve visitor flow...................14

Margin expansion potential.............................................. 16Table yield improvement should lead to operating leverage............................16Promotional environment still disciplined........................................................ 16Wynn Palace - Strong margin expansion thanks to falling comps rat..............17

Earnings upgrades............................................................ 19Lift 2018 EBITDA forcasts by 3-8% across the sector..................................... 19

Key industry risks..............................................................21Tighter junket regulations.................................................................................21Smoking ban effective January 2019...............................................................22

Company valuation........................................................... 23Valuations still reasonable for an upcycle........................................................23Galaxy (Buy): Upgrade to Buy as market share expansion not priced............. 24MGM China (Buy): Cotai opening poses near-term volatility risks...................25


11 December 2017


Macau

Figure 2: Macau casino map

Source: Macau Government Tourist Office


11 December 2017


Macau

2018 Outlook - Bullish onVIP & premium massOur new 17% GGR forecast is much higher than Street

In this report, we are lifting 2018 GGR growth forecast from 13% to 17%, as welift VIP GGR growth forecast from 15% to 21% and lift Mass GGR growth forecastfrom 9% to 13%. For 2018, the Street believes mass will take over VIP as the keygrowth driver. We disagree.

Recent conversations with Macau's Top 5 junket operators affirmed our bullishview, as these junket operators are planning to open at least 12 VIP rooms inthe next 6 months, including 5 at MGM Cotai in 1H18 (Figure 17). Our recentconversation with Suncity junket shows that they expect rolling growth to reach20% in 2018. Within mass, we think premium mass will outgrow grind mass in2018.

Figure 3: Lifting 2018 GGR growth forecast from 13% to17%, higher than Street (10%)

Figure 4: Stocks now price in 2018 GGR growth at only10%, too conservative in our view

7.3

8.2 8.8

9.2 9.3 9.3 9.3

10.1 10.7 10.8

11.1

12.5 12.8

11.4

10.4

9.4

8.1

7.1 6.8 6.9 7.0

6.5 6.9

7.6 7.9 7.9

8.4

9.1 9.4 9.3 9.8

10.3 10.3 10.2 10.4 10.8

-

2.0

4.0

6.0

8.0

10.0

12.0

1Q

11

3Q

11

1Q

12

3Q

12

1Q

13

3Q

13

1Q

14

3Q

14

1Q

15

3Q

15

1Q

16

3Q

16

1Q

17

3Q

17

1Q

18

E

3Q

18

E

1Q

19

E

3Q

19

E

(US$bn)

Slot

GGR

Mass

table

GGR

VIP

GGR

DB forecasts:

2017 GGR +19%

2018 GGR +17%

2019 GGR +7%

-15%

-5%

Jan

-Feb

16

Mar-

16

Ap

r-1

6

May-1

6

Ju

n-1

6

Ju

l-1

6

Au

g-1

6

Sep

-16

Oct-

16

No

v-1

6

De

c-1

6

Jan

-Feb

17

Mar-

17

Ap

r-1

7

May-1

7

Ju

n-1

7

Ju

l-1

7

Au

g-1

7

Sep

-17

Oct-

17

No

v-1

7

De

c-1

7

DBe

Stock

price

implied

DBe 2018 GGR

growth: 17% yoy

Stocks now priced in 2018 GGR

growth only at 10% yoy; Too

conservative in our view

Source: Deutsche Bank forecasts, Government data Source: Deutsche Bank forecasts, DICJ

More bullish than Street on Wynn Macau and Galaxy

We expect another around of Street upgrades as consensus is forecasting 2018Macau GGR growth at only 10%, too conservative in our view. In particular, wehighlight that our 2018 EBITDA forecast for Wynn Macau is 16% higher thanconsensus while for Galaxy it is 13% higher than consensus. Our more bullishview on these stocks vs Street stem from our conviction that VIP growth forthe market is stronger than expected, and that these two companies are bestpositioned to benefit from Macau's 3rd wave of VIP resurgence in this upcycle.


11 December 2017


Macau

Figure 5: 2018E DB vs Consensus Figure 6: We expect 8% higher sector EBITDA comparedto consensus

Stock Curr.

Rev EBITDA Rev EBITDA Rev EBITDA

Galaxy HKD 71,501 16,437 64,939 14,551 10% 13%

MGM China HKD 25,126 6,107 22,709 5,756 11% 6%

Sands China USD 8,136 2,804 8,243 2,716 -1% 3%

SJM HKD 42,984 3,239 42,958 3,383 0% -4%

Wynn Macau HKD 43,170 10,583 38,356 9,112 13% 16%

Sector USD 37,645 9,043 35,664 8,365

yoy

FY18 DBe FY18 Consensus vs Consensus

6.0

6.5

7.0

7.5

8.0

8.5

9.0

9.5

10.0

Jan

-16

Mar-

16

May-1

6

Ju

l-1

6

Sep

-16

No

v-1

6

Jan

-17

Mar-

17

May-1

7

Ju

l-1

7

Sep

-17

No

v-1

7

US$bnDB's 2018 industry

EBITDA estimate of US$9bn is 8% higher than

consensus

Source:Deutsche Bank forecasts, Factset Source: Deutsche Bank forecasts, Factset

We think VIP remains a growth driver for 2018

We think that even though VIP GGR growth rate will decelerate from the strong26% yoy growth rate in 2017e, it will still be growing stronger than mass in 2018,which we expect to stay at low-teens growth even if the HK-Macau-Zhuhai Bridgestarts operations in late 2018.

Figure 7: GGR growth by segment (DICJ unadjusted) Figure 8: GGR growth by segment (company reported,adjusted for reclassification)

-27%-32% -31%

-16%

-5%

0%

5%

8%8% 7% 7%

11% 10% 12% 12%10%

-42%

-42%

-38%

-36%

-19%-16%

-1%

13%17%

35% 35%

27%

23% 22%19%

17%

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40% Mass table GGR yoy (DICJ unadjusted)

VIP GGR yoy (DICJ unadjusted)DBe

-19%

-25%-22%

-10%

-2%

5%

10%12% 15%

14%

9%12% 10%

13% 15%13%

-47% -47%-44%

-41%

-22% -21%

-7%

10%11%

31%36%

30%26%

25%

20%

15%

-60%

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%Mass table GGR yoy (co-adjusted)

VIP GGR yoy (co-adjusted)

DBe

Source: Deutsche Bank forecasts, DICJ Source: Deutsche bank forecasts, company data, DICJ


11 December 2017


Macau

Figure 9: Macau GGR/day moderating in 2018 Figure 10: Nov GGR +23% yoy, the 3rd month exceedingStreet expectations

-20%-400

-200

0

Jan-F

eb

17

Mar-

17

Ap

r-1

7

May-1

7

Jun-1

7

Jul-17

Aug

-17

Se

p-1

7

Oct-

17

No

v-1

7

1Q

18

E

2Q

18

E

3Q

18

E

4Q

18

E

MOPm/day

Source: Deutsche Bank forecasts, DICJ Source: DICJ

Figure 11: EPS growth by drivers (VIP vs mass vs margin)

Galaxy 17% 17% -1% 14% 17% -1% 16% 17% -1% 32% 20% -2% 52% 25% -4%

MGM China -3% 88% 11% 2% 53% 11% 0% 71% 10% -2% 47% 14% -16% 13% 20%

Sands China 11% 15% -3% 16% 5% 2% 14% 8% 0% 13% 10% 2% 16% 17% 2%

SJM -3% 7% 20% -1% 5% 17% -2% 6% 19% -6% 6% 32% -6% 8% -57%

Wynn Macau 74% 26% -4% 49% 23% 9% 64% 24% 1% 60% 29% 6% 64% 61% 11%

Macau Sector

VIP GGR growth Mass GGR growth Total GGR Growth EBITDA Growth DB EPS Growth

Source: Deutsche Bank forecasts

Table supply likely to remain tight

For 2018, we expect Macau government to grant new table quotas for MGM Cotai(100 tables), Wynn Palace (25 tables) and Sands Parisian (25 tables). For 2019, weexpect Macau government to grant new table quotas for SJM Cotai (100 tables)and MGM Cotai (25 tables). For 2020, we expect Macau government to grantnew table quotas for MGM Cotai (25 tables) and SJM Cotai (25 tables). Overall,Macau's gaming table supply should grow at only 2% CAGR from 2017-2020E.Given tight supply, demand-supply dynamics should bode well for operatingleverage and therefore margin expansion.

Figure 12: Macau table supply to grow by 2% CAGR over 2017-2020E

4,017

4,770 4,791 5,302

5,485 5,750 5,711 5,990

6,233 6,377 6,478 6,626 6,651

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017E 2018E 2019E 2020E

# of year end tables

Wynn Macau

SJM

MGM China

Sands China

Galaxy

Sands Cotai

Central

Ph2

Galaxy

Macau

Ph2

1) Wynn

Palace

2) Sand

SJM Lisboa

Palace Sands Cotai

Central

Ph1Galaxy Macau

Ph 1

Cotai New casinos:

Source: Deutsche Bank estimates, Company data


11 December 2017


Macau

Figure 13: 2018E Revenue mix by segments Figure 14: 2018E EBITDA mix by segments

27%

49% 48% 52%59%

17%

7%1%

5%

9%

56%45%

51%43%

32%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Sands China MGM China SJM Galaxy Wynn Macau

Mass &

slot

Non-

gaming

VIPMacau VIP 44%

12%23% 23% 22%

34%

28%4% 8% 10%

15%

60%

73% 69% 68%

50%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Sands China SJM MGM China Galaxy Wynn Macau

Mass &

slot

Non-

gaming

VIP

Macau VIP 19%

Source: Deutsche Bank forecasts Source: Deutsche Bank forecasts


11 December 2017


Macau

VIP stronger for longerLifting 2018 VIP growth forecast from 15% to 21%

According to Macau's largest junket, Suncity, they are seeing underlying VIPdemand getting stronger in the last 6 weeks. After the 19th Party Congressreaffirmed President Xi's leadership in China, many business owners, includingproperty and construction businesses, trade and manufacturing businesses andconsumer businesses, felt more comfortable expressing their wealth in high-enddiscretionary spending. Suncity junket said their agents are signing up more VIPplayers in the past two months. Another junket operator, David junket, said thatthey have seen the return of Super VIPs, too.

How can strong junket liquidity supply boost VIP in 2018?

Top 5 junkets speeding up VIP room openings...In 3Q17, over 20 junket rooms were opened in Macau, of which 6-7 were bynew junkets. As junket liquidity remains abundant, Big 5 junkets told us that theyare speeding up VIP room opening schedules over the next few months. Weexpect Wynn Macau to benefit from junket expansion in 4Q with MegaStar junketopening a VIP room in Dec, and Tak Chun junket moved to a large room by mid-Nov (from 8 to 14 tables). Our onsite visit also confirmed that Tak Chun, Macau's2nd largest junket, just rejoined MGM Peninsula casino in early Dec.

Figure 15: Junket consolidation - only the strong onesstay

Figure 16: Rolling per licensed junket on the rise

77

161

186

153

169

193

219

235

217

183

141

126

170

-

50

100

150

200

250

De

c-0

5

De

c-0

6

De

c-0

7

De

c-0

8

De

c-0

9

De

c-1

0

De

c-1

1

De

c-1

2

De

c-1

3

De

c-1

4

De

c-1

5

De

c-1

6

De

c

20

17

F

920

587 784

1,272 1,266

1,796

2,309 2,287

2,806 2,945

1,865

2,304

1,979 1,974

2,303 2,363

2,430

2,435

-

500

1,000

1,500

2,000

2,500

3,000

3,500

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

1Q

16

2Q

16

3Q

16

4Q

16

1Q

17

2Q

17

3Q

17

HK$m/mth Rolling per junket

picked up since 3Q16

Source: Macau government, Deutsche Bank forecast Source: Government data, company data


11 December 2017


Macau

Figure 17: New VIP room openings since August 2016Date Company Casino Junket Operator Size

Aug-16 Wynn Wynn Palace SunCity Top junket

Aug-16 Wynn Wynn Palace Tak Chun Top 3 junket

Aug-16 Wynn Wynn Palace Guangdong Top 3 junket

Sep-16 Sands China Parisian SunCity Top junket

Sep-16 Sands China Parisian Tak Chun Top 3 junket

Sep-16 Sands China Parisian Guangdong Top 3 junket

Nov-16 Macau Cotai SunCity Top junket

Nov-16 Macau Cotai Tak Chun Top 3 junket

Mar-17 Sands China Parisian MegStar Mid-sized junket

Mar-17 Wynn Wynn Peninsula David Group Mid-sized junket

May-17 Macau Cotai David Group Mid-sized junket

May-17 Wynn Wynn Palace MegStar Mid-sized junket

Jun-17 SJM Satellite casino (L'Arc) Qian Jin VIP Small junket

Jun-17 SJM Satellite casino (Oriental) Eastern Club Small junket

Jul-17 SJM Satellite casino (Legend Palace) Benny Club Small junket

Aug-17 Galaxy Galaxy Macau David Group Mid-sized junket

Aug-17 SJM Satellite casinos (various) 10 small junkets Small junket

Aug-17 Sands China Venetian 2-3 small causal junkets Small junket

Sep-17 Galaxy Galaxy Macau 2-3 small causal junkets Small junket

Oct-17 SJM Satellite casino (Legend Palace) Ka Sing Club Small junket

Nov-17 Wynn Wynn Peninsula Tak Chun expanding Top 3 junket

Dec-17 Wynn Wynn Peninsula MegStar Mid-sized junket

Dec-17 MGM China MGM Peninsula Tak Chun Top 3 junket

Total 40 new junket VIP rooms in Macau since August 2016

1H18 MGM China MGM Cotai 5 junkets Top 5 junkets

1H18 Various casinos 5-10 junkets

Upcoming Over 10 new junket VIP rooms opening in 2018

Source: Deutsche Bank estimates, GGR Asia, Macau Daily and various news sources

Figure 18: Strong pipeline of VIP room openings: MGMChina to benefit the most

Figure 19: New VIP tables should continue to supportsequential growth

0 0

6

2 2

4

14

3

54

0

2

4

6

8

10

12

14

16

1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17E 1Q18E 2Q18E

No. of new

junket rooms

c. 10 new VIP rooms

opening in the pipeline

0 0

48

1612

22

49

20

36

20

0

10

20

30

40

50

60

1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17E 1Q18E 2Q18E

No. of new

VIP tables ...with almost 80 VIP

gaming tables to be

added to the market

Source: Deutsche Bank forecasts, company data Source: Deutsche Bank forecasts, company data

… because junkets have ample liquidityRecently, we met up with Macau’s top two junket operators again, Suncity andTak Chun. These two junket operators account for over 60% of junket marketshare, on our estimates. These conversations affirmed our above-consensus viewthat even though VIP GGR growth will decelerate from 26% yoy in Jan-Nov 2017e,it will likely still grow at 21% in 2018. In particular, junket operators have noticedthe following positive signs:

■ Both junket operators and junket agents have significant liquidity at themoment.


11 December 2017


Macau

■ At the end of trips, more VIPs now prefer to keep winnings in their junketaccounts, instead of transferring the money to their bank accounts inHK, usually a sign that they plan to return soon;

■ Percentage of cash agent accounts (i.e. junket agents who do not requirecredit from junket operators) are still high at 50%, significantly below the20% seen at the peak of the previous cycle in early 2014. This indicatesthat, after 3 years of downturn, the junket agents still in business haverepaired their capital base, and now have ample liquidity to fund theirVIP players.

■ Junket operator's credit cycle to agents remains healthy at 21-25 days,with no signs of lengthening.

Why is underlying VIP demand staying strong?

Strong Chinese Tier-3 property prices support VIP growthMany investors are concerned about Chinese government’s restriction policies onthe property market and the potential impact on Macau’s VIP GGR, as propertyprices in Tier-1 cities have softened in recent months. However, we want tohighlight our analysis below, which shows that Tier-1-city property prices have avery low correlation with Macau's VIP GGR. Instead, Tier-3-city property priceshave a very high (~75%) correlation with Macau's VIP GGR. According to junketagents we spoke to, they said that their biggest VIP players are often those whorecently became super rich in small cities and not the established rich in Tier1 cities. In our view, this is because VIP bet size is mostly related to how fastsomeone became rich recently, i.e. the second derivative of wealth creation, andnot how rich the person is.

According to our China property analyst Jeffrey Gao, as China's government hastightened home purchase restrictions in Tier 1&2 cities, demand for property hasspread to select Tier 3 cities. This is positive for Macau's VIP GGR.

Figure 20: Macau VIP GGR vs. China's Keqiang Index Figure 21: China credit growth is slowing very mildly

-100%

-50%

0%

50%

100%

150%

(10.0%)

0.0%

10.0%

20.0%

30.0%

40.0%

Keqiang Index VIP GGR growth (RHS)

81% Correlation with 3-mth lead

Keqiang Index= power generation gth x 0.4 weight + total

loans gth x 0.35 weight + rail freight volume gth x 0.25 weight

3-mth lead

-50%

-30%

-10%

10%

30%

50%

70%

90%

110%

130%

0%

5%

10%

15%

20%

25%

30%

35%

Jan-0

7

Jul-

07

Ja

n-0

8

Ju

l-0

8

Jan-0

9

Jul-

09

Ja

n-1

0

Ju

l-1

0

Jan-1

1

Jul-

11

Ja

n-1

2

Ju

l-1

2

Ja

n-1

3

Jul-

13

Jan-1

4

Ju

l-1

4

Ja

n-1

5

Jul-

15

Jan-1

6

Ju

l-1

6

Ja

n-1

7

Jul-

17

China Credit Growth ( (LHS) VIP GGR yoy (RHS)

84% correlation w/ 6-month lead

China credit growth = Total social financing + Municipal bond issuance

Sharp

tightening

Sharp tightening

Mild

tightening

Source: Government data, Wind Source: WIND, DICJ


11 December 2017


Macau

Figure 22: China 1st-tier-city property prices don’t haveany correlation with Macau VIP GGR...

Figure 23: … instead, China’s third-tier city propertyprices have very high correlation with Macau VIP GGR

-60%

-40%

-20%

0%

20%

40%

60%

-10%

0%

10%

20%

30%

40%

Jan-1

1

Ju

l-1

1

Jan

-12

Jul-12

Jan

-13

Jul-13

Jan

-14

Jul-14

Jan

-15

Jul-15

Jan

-16

Jul-16

Jan

-17

Jul-17

China Tier-1 city property price yoy (LHS)

Macau VIP GGR yoy (RHS)

-7% correlation

-60%

-40%

-20%

0%

20%

40%

60%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

Jan-1

1

Ju

l-11

Jan-1

2

Ju

l-12

Jan-1

3

Ju

l-13

Jan-1

4

Ju

l-14

Jan-1

5

Ju

l-15

Jan-1

6

Ju

l-16

Jan-1

7

Ju

l-1

7

China Tier-3 city property price yoy (LHS)

Macau VIP GGR yoy (RHS)

% correlation

Source: Macau government, National Statistical Bureau (NSB) price index of newly constructedresidential buildings in the four Tier-1 cities in China.

Source: Macau government, National Statistical Bureau (NSB) price index of newly constructedresidential buildings in 70 large & medium-sized Tier-3 cities in China.

Figure 24: VIP GGR growth vs Retail price trend ofMoutai white spirits

(80.0%)

(60.0%)

(40.0%)

(20.0%)

0.0%

20.0%

40.0%

60.0%

80.0%

Correlation since 2014: 67%

VIP GGR yoy

Moutai Retail

ppx yoy

Source: Jianiang.cn


11 December 2017


Macau

Mass growth staying solidInfrastructural improvement to lift visitation growth

We expect Macau's Mass GGR to grow by 13% yoy in 2018, driven by 7% morevisitation and 6% higher spend per visitor. Our visitor growth forecast for 2018 isthe highest since 2014 and a key driver would be the Hong Kong-Zhuhai-Macaubridge starting operations from 4Q18 onwards, based on our estimate.

Figure 25: Visitation to drive mass GGR growth

30%25%

10%

-17% -16%-22% -21%

-8%-3%

6%10% 9% 9% 9% 7% 7% 6%

0%

9%

7%

6%

8%

-4%

-3%-2%

-2%

1% -1%

0% 3%6% 5%

2%5% 7%

9%

39%

32%

16%

-10% -19%

-25% -22%

-10%

-2%

5%

10%12% 15%

14%9%

12% 13%9%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

1Q

14

2Q

14

3Q

14

4Q

14

1Q

15

2Q

15

3Q

15

4Q

15

1Q

16

2Q

16

3Q

16

4Q

16

1Q

17

2Q

17

3Q

17

4Q

17

E

201

8E

201

9E

Mass gaming spend per visitor yoy

Visitor arrivals yoy

DBe

2Q17: Again, slowing mass spend

per visitor growth is pointing to

overall mass GGR slowing

2019: HKZM bridge

starts operation

Early 2014: Slowing mass gaming spend per

visitor growth predicted overall mass GGR

growth slowing

Source: DICJ, Government data, Deutsche Bank forecasts

Premium mass growth to lift mass table yield sharply

We believe a key spillover effect from the strong VIP growth and strong propertymarket in China is stronger growth in premium mass in Macau. As such, webelieve all casino operators will focus their attention on grabbing a higher share ofthis premium mass segment. By attracting more high-end mass players, we thinkMacau's average mass table yield will improve by 10% in 2018. In particular, wethink casino operators with stronger focus on customer segmentation and playeranalytics can outperform peers on this front. As such, we think Wynn Palace,Galaxy, MGM Cotai will be key beneficiary of higher mass table yield in 2018.

Figure 26: Table yield to boost mass GGR growth

Galaxy 8% 0% 0% 5% 17% -1% 14% 17% -1%

MGM China 7% 40% 7% -5% 14% 5% 2% 53% 11%

Sands China 6% 2% 0% 9% 3% 2% 16% 5% 2%

SJM 8% 0% 14% -9% 6% 3% -1% 5% 17%

Wynn Macau 32% 3% 0% 17% 19% 9% 49% 23% 9%

Macau Sector

Table capacity

expansion Table yield GGR growth



11 December 2017


Macau

China's Greater Bay Area initiative may help improve visitorflows to Macau

In March 2017, China's Premier Li Keqiang announced the "Greater Bay initiative"for the Guangdong-Hong Kong-Macau Greater Bay Area. The area includes 11cities in total, i.e. 9 key cities in the Guangdong province plus Hong Kong andMacau. The area had a combined GDP of US$1.4 trillion in 2016. Government'starget is to more than triple the area's GDP by 2030. Bloomberg reported in July2017 that a draft development plan for the Greater Bay Area had been submittedto China's national economic planning bureau.

Figure 27: Guangdong-HK-Macau Greater Bay Area vs global comparisons

Tokyo Delta

New york

Delta

San Fracisco

Delta

Guangdong-HK-

Macau Greater

Bay area

Area (Mn km) 0.04 0.02 0.02 0.06

Population (Mn) 44 23 7 67

GDP (trillion US$) 1.80 1.40 0.76 1.36

Per-Capita GDP (US$ Mn) 0.04 0.07 0.10 0.02

Tertiarry industry as % of GDP 82.3 89.4 82.8 62.2

GDP share to country (%) 41.0 7.7 4.4 10.8

Freight Turnover/ Mn teu 8 5 2 65

Flight Passenger turnover 1.12 1.30 0.71 1.75

No. of Forbes 500 companies 60 28 22 16

Source: Guangdong-Hong Kong-Macau Greater Bay Area forum, Macau Daily, GGR Asia, various news sources

Easier online visa application process for IVS visa to MacauEase of travel. With a population of 67 million, ease of travel for business andleisure will be crucial for the Greater Bay Area’s integration. Citizens from the 49approved Chinese cities can come to Macau under the "Individual Visitor Scheme(IVS)" visa once every two months. However, travelers need to reapply for a newvisa permit after every trip. Until recently, the visa application process could bevery time-consuming, often involving a visit to the city's visa office. Thankfully,starting early 2016, some cities have made the Macau visa application processavailable online via the Wechat app. We expect many more cities to roll outthis online visa application process, thereby making travel to Macau a lot moreconvenient.

Figure 28: Electronic visa application processes for key cities/provinces

Available electronic

services

Guangdong

Province

Fujian

ProvinceChengdu Shanghai

Electronic visa x

App-based visa application x x x

Source: Macau Daily, GGR Asia, various news sources

Hong Kong-Zhuhai-Macau Bridge (HZMB), a key infrastructure projectShorter travel time and better connectivity to HK - The 55km bridge connectsHong Kong to Macau and Zhuhai in Mainland China. The project includes a mega


11 December 2017


Macau

main bridge and three link roads, two in Hong Kong and one in Zhuhai, thatconnect to the cities.

Hong Kong to Macau/Zhuhai in 40 mins. On completion, the bridge is expectedto reduce travel time between Hong Kong and Zhuhai from 3 hours to 30-40 mins,and between Hong Kong and Macau from 1 hour by ferry to only 30 mins by road.Hong Kong's Highway Department estimated that initial volumes on the bridgewill reach 9,200-14,000 vehicles on a daily basis. Current discussions of bus faresuggests a one-way ticket could cost as little as HK$100, vs. current economyferry tickets of HK$160.

Bridge should boost tourist arrivals. Macau's tourist arrivals have been flattishsince 2014. The last time tourist arrivals grew strongly was in 2013-2014, afterZhuhai's inter-city rail started operations and connected Zhuhai to Guangzhou'shigh-speed rail. In 1H17, the number of Chinese visitors to Macau increased by6% yoy. We believe that, once the HK-Zhuhai-Macau Bridge starts operations,Chinese visitor growth could accelerate to 10%. Overall, the Macau governmentaims to receive 40m visitors annually by 2025.

Figure 29: Chinese visitor arrivals yoy Figure 30: Macau total visitor arrivals yoy

2%1%

12%

-3%-4%

2%

5%

15%

8%

-10%

-5%

0%

5%

10%

15%

20%

1Q12

2Q12

3Q12

4Q12

1Q13

2Q13

3Q13

4Q13

1Q14

2Q14

3Q14

4Q14

1Q15

2Q15

3Q15

4Q15

1Q16

2Q16

3Q16

4Q16

1Q17

2Q17

3Q17

4Q17

1Q18

2Q18

3Q18

4Q18

1Q19

2Q19

3Q19

4Q19

1Q20

2Q20

3Q20

4Q20

High-speed rail

connects to Zhuhai

4Q18: DB expects HKZM

Bridge to start commercial

operations

DBe

15%

12%

0%

4%

8%

-3%

1%

5%

7%

9%

7%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

2010 2011 2012 2013 2014 2015 2016 2017E 2018E 2019E 2020E

DBe

Source: Deutsche Bank forecasts, Government data Source: Deutsche Bank forecasts, Government data


11 December 2017


Macau

Margin expansion potentialTable yield improvement should lead to operating leverage

3Q results season highlighted that Macau's industry property EBITDA marginimproved from 23.4% of GGR in 2Q to 24.2% in 3Q. Operating leverage supportedmargin, even though VIP GGR (+10% qoq) outgrew mass GGR (+4% qoq). VIProlling improved 6% qoq (+33% yoy) while VIP hold rate was slightly up (+10bps).Mass table drop was up 6% qoq (+11% yoy).

For 2018, we believe EBITDA margin will actually further improve, even thoughwe expect revenue mix shift to be negative as VIP will still likely outgrow mass inour forecasts. This is because we see sharp operating leverage, especially whenmass table yield improves.

Figure 31: Headline EBITDA margin on an uptrend

18%18%

18%18%

19%

20%

20%

20%

21%

20%

22%

20%

19%

19%

20%

21%

20%

21%

24%

22%

22.6%

21.9%

22.8%

22.2%

22.7%

16%

17%

18%

19%

20%

21%

22%

23%

24%

25%

1Q12

2Q12

3Q12

4Q12

1Q13

2Q13

3Q13

4Q13

1Q14

2Q14

3Q14

4Q14

1Q15

2Q15

3Q15

4Q15

1Q16

2Q16

3Q16

4Q16

1Q17

2Q17

3Q17

2017E

2018E

Industry Headline EBITDA increases 90bps

qoq to 22.8%

Source: Deutsche Bank forecasts, company data

Promotional environment still disciplined

In various post-results conference calls, many management teams have reiteratedthe same view that the promotional environment in Macau had remaineddisciplined. 3Q results support this view. In Cotai, promotional allowances(comps) edged up slightly from 12.4% of mass GGR in 2Q17 to 12.7% in 3Q17.But in Peninsula, comps ratio fell from 10.8% of mass GGR in 2Q to 9.8% in 3Q.Hence, overall, Macau's average comps ratio stayed relatively stable at 12.0% ofmass GGR.

We note that comps ratio in Cotai had risen above that in Peninsula since 3Q16,after the opening of Wynn Palace and Parisian (Sands China).


11 December 2017


Macau

Figure 32: Promotional allowances (comps) on thedecline

Figure 33: Wynn: Reaping benefits from customerreinvestments in prior quarters

14.6%

13.8%

10.8%

8.0%

9.0%

10.0%

11.0%

12.0%

13.0%

14.0%

15.0%

16.0%

17.0%

18.0%

Cotai

Macau

average

Peninsula

Promotional allowances as % of Mass table GGR

DBe

10%

15%

20%

25%

MGM China Sands China Wynn Macau

4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17

Wynn Palace's promo

allowance decline

Source: Deutsche Bank forecasts, company reports; Note: Promotional allowances is as a % of masstable GGR (excluding SJM and Galaxy)

Source: Deutsche Bank forecasts, company reports; Note: Promotional spend is as a % of mass tableGGR (excluding SJM and Galaxy)

Wynn Palace - Strong margin expansion thanks to fallingcomps ratio

In particular, we highlight our conviction in our above-consensus EBITDA forecastfor Wynn Macau. As the chart below shows, Wynn Palace's promotionalallowances (comps) as % of mass GGR had fallen sharply from 30% in 4Q16 whenit first opened to 20% by 3Q17. This gives us confidence that Wynn Palace isnow building up a pool of loyal premium mass customers after a year of ramp-up.With further ramp-up after the mass gaming floor reconfiguration and F&B outletaddition in early 2018, we forecast that this cost ratio will further fall to 18%. Thisunderlines our margin expansion thesis for Wynn Palace in 2018-19.

Figure 34: Wynn Macau's promotional allowances as a% of mass table GGR (annual)

Figure 35: Wynn Macau's promotional allowances as a% of mass table GGR (quarterly)

27%

21%

19% 18%

16%

17%

16%

15%

15% 15%

10%

12%

14%

16%

18%

20%

22%

24%

26%

28%

2014 2015 2016 2017E 2018E 2019E

Wynn Palace (Cotai)

Wynn Peninsula

Wynn Palace's reinvestment rate to decline to 18%

by 2019E

DBe31.1%

25.4%23.7%

21.9%

19.9%

16.4%

18.8%

16.4%17.4%

15.6% 15.8% 16.5% 16.2% 15.4% 14.8% 15.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17

Wynn Palace (Cotai)

Wynn Peninsula

Reinvestment rate in Wynn Palace is down

from as high as 2x Wynn Peninsual property

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


11 December 2017


Macau

Figure 36: Sands China's promotional allowances as a %of mass table GGR (annual)

Figure 37: Sands China's promotional allowances as a %of mass table GGR (quarterly)

0%

5%

10%

15%

20%

25%

2014 2015 2016 2017E 2018E 2019E

- Plaza (Cotai)

- Sands Cotai

Central (Cotai)

- Parisian

(Cotai)

- Venetian

(Cotai)

- Sands Macau

Reinvestment rate roughly flat across all properties except

Parisian

DBe

22.9%

20.1%

16.7%

20.9%

16.9%

14.8%

16.5%15.6%

16.7%

15.3%14.6%

14.0%

17.1%

15.7%16.2%

15.3%

12.1% 11.4%12.6% 12.7% 13.2% 13.7%

14.4% 14.7%

13.3% 13.5%14.6%

8.6%8.0%

8.9%9.1%

8.1%9.0% 9.3% 8.8%

8.2% 8.0%8.8%

7.0% 6.5%

8.1% 7.9%7.4% 7.3%

6.6% 6.6% 6.5%7.6%

6.2%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17

- Plaza (Cotai)

- Parisian

(Cotai)

- Sands Cotai

Central

(Cotai)- Venetian

(Cotai)

- Sands

Macau

Sands China's only Peninsula property, Sands Macau, has the

lowest re-investment rate

Source: company data, Deutsche bank forecasts Source: Company data, Deutsche Bank forecasts

Figure 38: Labor cost as % of GGR: flattish for the sector, Wynn saw biggesthoh decline

10%

13%

15% 15% 15% 14%

12%

17%

14%

12%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

2H14 1H15 2H15 1H16 2H16 1H17 MGM

China

Sands

China

SJM Wynn

Macau

Industry 1H17 by company

-4ppts

hoh



11 December 2017


Macau

Earnings upgradesLift 2018 EBITDA forcasts by 3-8% across the sector

As we lift 2018 sector GGR growth from 13% to 17%, we also lift 2018 EBITDAforecasts for the five casino operators by 3-8% and 2018 EPS forecasts by 9-14%.With operating leverage, our new forecasts imply 19% EBITDA growth for thesector in 2018. In particular, we lift forecasts for Wynn Macau and Galaxy moredue to our bigger uplift in our forecasts for VIP, which for these two companiesis strong.

Figure 39: Target price revisions

Stock

New Old New Old

Galaxy Hold $70.0 $58.6

MGM China Buy $24.0 $20.0

Sands China Hold Hold $42.0 $42.0

SJM Hold Hold $7.0 $7.6

Wynn Macau Buy $28.0 $25.7

Rec.

Source: Deutsche Bank Forecast

Figure 40: 2017/18 revision

EBITDA Revision

DBRTN00132

New New

Galaxy HKD 13,701 13,701 0% 16,437 15,428 7%

MGM China HKD 4,152 4,129 1% 6,107 5,810 5%

Sands China USD 2,541 2,544 0% 2,804 2,732 3%

SJM HKD 3,041 3,032 0% 3,239 3,006 8%

Wynn Macau HKD 8,182 8,182 0% 10,583 9,762 8%

DB Ind. EBITDA USD 7,611 7,606 9,043 8,580

DB Ind. EBITDA yoy

DB EPS Revision

DBRTN00101 Curr

New New

Galaxy HKD 2.26 2.25 0% 2.81 2.58 9%

MGM China HKD 0.67 0.66 1% 0.76 0.70 9%

Sands China USD 0.20 0.19 4% 0.23 0.21 9%

SJM HKD 0.35 0.35 0% 0.38 0.34 12%

Wynn Macau HKD 0.77 0.78 -1% 1.24 1.09 14%


We feel that the Street still underestimates the VIP potential. Consensus isforecasting 2018 VIP GGR to grow only 9% yoy (vs DBe +21% yoy). We believeWynn Macau and Galaxy are the key beneficiaries and have the highest potentialfor upgrades.


11 December 2017


Macau

Figure 41: Parisian and Wynn Palace drove Cotai VIPshare to 60% in 3Q

Figure 42: Cotai's mass share flat at 61% in 3Q17

50%45%

53% 54% 56%53%

60%57%

61%

4Q16

Cotai/Taipa properties Peninsula properties

55% 54% 56%61% 60% 61% 61% 61%

65%

1Q17 3Q17

Cotai/Taipa properties Peninsula properties

Source: Deutsche Bank forecasts, company data Source: Deutsche Bank forecasts, company data


11 December 2017


Macau

Key industry risksTighter junket regulations

As part of this year's policy address, Macau Chief Executive said the authoritieswould attempt to draft "guidelines to hold specific audits on the problems found"of Macau's 126 junkets. For example, the DICJ may review the minimum internalcontrol requirements in terms of information technology. DICJ may also look into"temporary deposits" accepted by junket operators as cases of internal fraud inrecent years had led to some investors losing large sums of money.

Over the past 3 years, the junket industry has undergone consolidation. Macau'sTop 5 junket operators now account for over 85% of the VIP market according toour estimates. As these 5 big junkets are of greater scale, we believe they cancope with the new regulations relatively easily. As such, these new regulationsare unlikely to have much impact on the VIP market, in our view.

The Head of DICJ, Paulo Chan, also touched on regulation of other issues. Forexample, by year-end, DICJ plans to propose a ban on Macau gaming workersfrom entering casino floors outside work hours. In 2018, the regulator will alsointroduce new rules on gaming machines.

Figure 43: Key VIP gaming regulations since 2016

Source: Various news sources including GGR Asia and Macau Daily


11 December 2017


Macau

Smoking ban effective January 2019

Some casino operators have more 'smoking allowed' premium mass tables inthe VIP area. From our floor check, new casinos opened after 2015 have littleexposure. To isolate the effect of smoking ban’s impact on length of play, we focuson the decline in the mass table hold percentage. Mass table hold percentage isa function of (i) luck and (ii) the length of play. In 4Q14, when the governmentbanned smoking on mass gaming floors, mass market hold percentages in almostall casinos in Macau came down by 1-5 ppt because game play was interruptedas players took breaks to light up. For the market as a whole, mass table holdpercentage fell from 27.2% in 3Q14 to 25.5% in 4Q14, suggesting that length ofplay was shortened by 6%.

Figure 44: Smoking mass tables GGR as % of Co-adjusted Mass GGR

Figure 45: Mass table hold rate declined only 6% in4Q14

(3.0%)

2.0%

7.0%

12.0%

17.0%

22.0%

Reclassification: % of company reported mass table GGR

generated by smoking premium tables

27.2%

25.5%

25.4%

25.2% 25.7%

25.8%

25.1%25.2%

25.4%

25.1%

25.5% 25.5%

24.9%

23.5%

24.0%

24.5%

25.0%

25.5%

26.0%

26.5%

27.0%

27.5%

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17

Mass table hold declined from 27.2% to

25.5%, indicating that length of play was

shortened by 6%

Smoking was banned on mass gaming floors on 6 Oct

2014

Source: Company data, Deutsche Bank forecasts Source: Company data


11 December 2017


Macau

Company valuationValuations still reasonable for an upcycle

Macau stocks are trading at 13.8x DB 12m fwd EV/EBITDA, slightly below+1 standard deviation over historical average. We view current valuations asreasonable. We upgrade Galaxy from Hold to Buy with TP of HK$70. We keepWynn Macau as our top pick on high VIP exposure. We value Macau stockson SOTP. Downside risks include a sharp slowdown in GGR momentum andregulatory changes.

Figure 46: Macau sector valuationTicker Rec Price EBITDA DB EPS EPS Dividend

local cap growth growth CAGR Yield

cur US$m

Galaxy 0027.HK Buy 57.50 31,484 16.3 14.2 25.5 21.3 32% 20% -2% 52% 25% -4% 9% 1.2% 1.5% 6.1% 5.8%

MGM China 2282.HK Buy 21.95 10,212 24.0 13.7 32.6 24.0 -2% 47% 14% -16% 13% 20% 16% 1.3% 2.3% 5.9% 6.0%

Sands China 1928.HK Hold 38.45 39,741 17.2 15.5 25.3 21.4 13% 10% 2% 16% 17% 2% 9% 5.2% 5.2% 5.5% 5.6%

SJM 0880.HK Hold 6.23 4,438 13.0 9.8 17.7 38.0 -6% 6% 32% -6% 8% -57% -32% 3.1% 3.2% 7.8% 6.8%Wynn Macau 1128.HK Buy 23.00 14,494 17.2 12.3 29.8 16.7 60% 29% 6% 64% 61% 11% 34% 3.0% 5.1% 7.3% 7.9%

Macau average

FCF yield

Pre capexEV/EBITDA P/E

Source:Deutsche Bank forecasts, Bloomberg Finance LP

Figure 47: Absolute share price performancesTicker Mkt Cap % from % from L3M T/O Beta

8/12/2017 US$m local cur YTD 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4QTD L3M hiL3M low US$m

Macau

Galaxy 0027.HK 31,484 57.50 70% -1% 2% 19% -21% 27% 16% 26% 11% 16% 5% -2% 12% 74.3 1.3

MGM China 2282.HK 10,212 21.95 37% 14% 16% 22% -15% 34% 19% 1% 7% 8% 17% 0% 29% 18.3 1.0

Sands China 1928.HK 39,212 38.45 14% 2% 1% 19% -18% 30% 0% 7% -1% 14% -5% -6% 6% 65.7 1.1

SJM 0880.HK 4,438 6.23 2% 2% -5% 0% -15% 21% 7% 4% 30% -13% -13% -15% 2% 8.4 1.0

Wynn Macau 1128.HK 14,494 23.00 86% 1% 5% 32% -7% 15% -4% 28% 15% 15% 9% -2% 19% 21.9 1.2

Macau Average -17% -5% 42.5 1.2

MSCI HK 16,571 27% -4% -1% -1% -1% 11% -9% 13% 6% 4% 1% -4% 2%

Absolute perf

Source: Deutsche Bank forecasts, Bloomberg Finance LP

Figure 48: Sector consensus 12-month forward EV/EBITDA

Figure 49: GGR momentum drives multiple expansion

6

8

10

12

14

16

18

Ju

l 0

9

Jan

10

Ju

l 1

0

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11

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l 1

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Ju

l 1

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l 1

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14

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l 1

4

Jan

15

Ju

l 1

5

Jan

16

Ju

l 1

6

Jan

17

Ju

l 1

7

Avg 12.4x

+1 Std Dev

-1 Std Dev

8.0

10.0

12.0

14.0

16.0

18.0

20.0

-50%

-30%

-10%

10%

30%

50%

70%

90%

01

-20

11

07

-20

11

01

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07

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12

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07

-20

17

01

-20

18

07

-20

18

Macau GGR yoy (LHS)

12m fwd consensus EV/EBITDA (RHS)

DBe

Source: Factset, Bloomberg Finance LP Source: Deutsche Bank estimates, Bloomberg Finance LP


11 December 2017


Macau

Figure 50: Consensus: Macau share price vs GGR yoy Figure 51: Consensus: Low-teens EBITDA growth next12 months

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

-

50

100

150

200

250

300

350

400

Jan

-13

Ap

r-1

3

Jul-

13

Oct

-13

Jan

-14

Ap

r-1

4

Jul-

14

Oct

-14

Jan

-15

Ap

r-1

5

Jul-

15

Oct

-15

Jan

-16

Ap

r-1

6

Jul-

16

Oct

-16

Jan

-17

Ap

r-1

7

Jul-

17

Oct

-17

Macau Share Price Index (LHS)

Macau GGR yoy (RHS)

1/2011=100 In Oct 2013, GGR growth peaked at 32% yoy and slowed to 13% yoy by

March 2014But Macau stock prices jumped 20% in these 4 months, and

Galaxy share price jumped from HK$60 to HK$80.

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

5

10

15

20

Jan-1

1

Jul-1

1

Jan-1

2

Jul-1

2

Jan-1

3

Jul-1

3

Jan-1

4

Jul-1

4

Jan-1

5

Jul-1

5

Jan-1

6

Jul-1

6

Jan-1

7

Jul-1

7

12m fwd consensus EV/EBITDA (LHS)

12m fwd consensus EBITDA growth (RHS)

Source: Deutsche Bank, Bloomberg Finance LP

Note: DB Macau Index= Market cap weighted share price index of the six gaming concessionaires inMacau

Source: Factset, Bloomberg Finance LP

Figure 52: Sector consensus 12-month forward P/E chart Figure 53: Consensus: High-teens EPS growth next 12months

5

10

15

20

25

30

35

Ju

l 0

9

Jan

10

Ju

l 1

0

Jan

11

Ju

l 1

1

Jan

12

Ju

l 1

2

Jan

13

Ju

l 1

3

Jan

14

Ju

l 1

4

Jan

15

Ju

l 1

5

Jan

16

Ju

l 1

6

Jan

17

Ju

l 1

7

+1 Std Div

Avg 19.7x

-1 Std Div

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

0

5

10

15

20

25

30

35Jul-10

Jan

-11

Jul-11

Jan-1

2

Jul-12

Jan

-13

Jul-13

Jan

-14

Jul-14

Jan

-15

Jul-15

Jan

-16

Jul-16

Jan-1

7

Jul-17

12m fwd consensus P/E (LHS)

12m fwd consensus EPS growth (RHS)

Source: Factset, Bloomberg Finance LP Source: Factset, Bloomberg Finance LP

Galaxy (Buy): Upgrade to Buy as market share expansionnot priced in

We upgrade Galaxy from Hold to Buy on strong VIP performance and its leadingVIP market share (c.25%) with a TP of HK$70.0 (raised fro HK$58.6). We valueGalaxy on an SOTP basis, including i) current gaming operations valued at 16x2018E EV/EBITDA, ii) NPV of Ph3-4 land, iii) construction materials at book valueand iv) 5% stake in a casino in Monaco at acquisition cost. Downside risks toour target price being achieved include i) more intense competition from WynnPalace and MGM Cotai new property; ii) VIP room smoking ban in 2019; iii) lower-than expected returns for Phases 3-4.


11 December 2017


Macau

Figure 54: Galaxy SOTP-based TP Figure 55: Galaxy 12-month forward EV/EBITDA2018E Valuation

HK$m EBITDA HK$m HK$/shr

Galaxy Macau (Ph1&2) 13,009 x 16 = 206,579 48.3

StarWorld 3,449 x 16 = 54,777 12.8

Broadway Macau 19 x 16 = 306 0.1

City Clubs 111 x 16 = 1,765 0.4

Construction materials 634 1x FY16 BV 3,571 0.8

Corporate net expenses (786) x 16 = (12,475) (2.9)

Core operations 16,437 15 254,523 59.5

5% stake Monaco casino (SBM) Acquisition cost 362 0.1

Phase 3&4 landbank (NPV 20,000 4.7

Net cash End-2018ࠉ 24,332 5.7

Target price 299,217 70.0

No. of shares outstanding (m) 4,276 5.0

10.0

15.0

20.0

25.0

Avg 12.8x

+1 Std div

-1 Std Div

Source: Deutsche Bank estimates Source: Deutsche Bank, Bloomberg Finance LP

MGM China (Buy): Cotai opening poses near-term volatilityrisks

MGM China’s new property will open on 29 Jan 2018, just before Chinese NewYear. A near-term risk is if the government's table quota for the new casino willbe lower than the market's expectation of 100 tables at opening. We like thecompany because i) Cotai property should boost company market share after 4years of decline; ii) the company will add junket VIP rooms to both of its properties,which should help the new property ramp and protect the old property fromcannibalization; and iii) company's free cash flow should turn positive in 2018. Weraise our TP from HK$20.0 to HK$24.0; we value the stock with SOTP method,with target 2018E EV/ EBITDA multiple of 17x, in line with +1.0 sd above thehistorical average. Key downside risks include i) intense competition for premiummass clientele from other operators, ii) a lack of non-gaming offerings at the newproperty, and iii) an abrupt end to Macau's GGR growth.

Figure 56: MGM China SOTP-based TP Figure 57: MGM China 12-month forward EV/EBITDA2018E Valuation


MGM Macau 4,468 x 17 = 77,296 20.3MGM Cotai (opens

Jan 2018) 2,076 x 17 = 35,907 9.4

Corporate net expense (436) x 17 = (7,543) (2.0)

Net debt End-2018ࠉ (14,604) (3.8)


No of shares (m) 3,800

5.0

10.0

15.0

20.0

+1 Std div

-1 Std Div

Avg 13.8x


Sands China (Hold): Mass market giant with solid dividend yieldSands China is now trading on 15.6x DB 2018e EV/EBITDA compared to industry13.6x. This valuation looks rich given only 6% EBITDA CAGR in 2017-19E,lagging behind industry average of 11% CAGR. We value Sands China's currentoperations at 17x 2018E EV/EBITDA. TP is HK$42 (unchanged). We believeSands China has the most fundamentally stable business model in Macau withhigh exposure to mass gaming and non-gaming. However, the company risks


11 December 2017


Macau

losing market share in 2017-20, as VIP GGR outgrows mass and the companyattracts lower quality mass players. Downside risks include: i) dividend cut, ii)continued Parisian cannibalization of Sands Cotai Central, iii) Disruptions due torenovation of Sands Cotai Central and Four Seasons and iv) mass competitionfrom MGM Cotai opening. Upside risks include i) better than expected massmarket performance and ii) better than expected margin expansion.

Figure 58: Sands China SOTP-based TP Figure 59: Sands China 12-month forward EV/EBITDA2018E Valuation

US$m EBITDA US$m HK$/shr

Venetian Macau 1,182 x 17 = 20,040 19.2

Sands 171 x 17 = 2,902 2.8

Plaza at Four Seasons 244 x 17 = 4,143 4.0

Sands Cotai Central 586 x 17 = 9,941 9.5

Parisian (opens Sept

2016) 595 x 17 = 10,083 9.7

Ferry and other operations 25 x 17 = 424 0.4

Net cash End-2018ࠉ (3,822) (3.7)

Target price 2,804 43,712 42.0

No of Shares (m) 8,071 5.0

10.0

15.0

20.0

+1 Std div

-1 Std Div

Avg 14.8x


SJM (Hold): Cotai likely further delayed into 2019Though SJM's flagship Grand Lisboa will remain resilient in 2017, we now pushthe opening of Grand Lisboa Palace, SJM's new property, further to mid 2019from late 2018 after continuing project delays. The company's mass gaming isstill shedding market share, as more crowds go to Cotai. Maintain Hold ratingon valuation. SOTP is based on i) 10x 2018E Current operations, ii) 6x SJM Cotai2020E EBITDA minus capex. SOTP-generated target price is HK$7.0 (previouslyHK$7.6). Downside risks include i) further construction delays or capex overrunsin Cotai project; ii) losing more market share to properties on Cotai strip. Upsiderisks include: i) Pick-up in Satellite and self-promoted casinos performance, ii)better than expected margin expansion.

Figure 60: SJM SOTP-based TP Figure 61: SJM 12-month forward EV/EBITDA2018E Valuation


Grand Lisboa Casino 1,898 x 10 = 18,787 3.3

Self-promoted Casinos 574 x 10 = 5,682 1.0

Satellite Casinos 648 x 10 = 6,420 1.1

Grand Lisboa Hotel & others 119 x 10 = 1,174 0.2

Net debt End 2018 (7,071) (1.2)

Current operations 24,991 4.4

Lisboa Palace (opens

early 2019)6x 2020 EBITDA of US$330m less capex

14,490 2.6


Fully diluted shares (million) 5,657

-

5.0

10.0

15.0

20.0

+1 Std div

-1 Std Div

Avg 9.6x


Wynn Macau (Buy): Strong margin & re-rating potential; Top pick


11 December 2017


Macau

Buy. Wynn Macau has been the biggest gainer of market share in 2017 thanks toramp-up at Wynn Palace and the company’s success in VIP segment. Our targetEV/EBITDA multiple is 16x, second highest in the sector, just below Sands China.We believe this is justified as i) GGR growth momentum supports higher valuationand ii) Wynn Macau is a high quality name with declining leverage. Our SOTPbased on 2018 EBITDA generates a target price of HK$28.0 (up from previousHK$25.7). Downside risks include i) Abrupt end to VIP GGR growth, ii) tightenedcapital control and credit environment in China, iii) lack of flow through from topline to EBITDA.

Figure 62: Wynn Macau SOTP-based TP Figure 63: Wynn Macau 12-month forward EV/EBITDA2018E Valuation


Wynn Macau & Encore 6,556 x 16 = 103,591 19.9

Wynn Palace 5,713 x 16 = 90,259 17.4

Corporate expenses (1,686) x 16 = (26,645) (5.1)

Net debt End-2018 (21,577) 9.5

Target price 10,583 145,628 28.0

No of Shares (m) 5,196

5.0

10.0

15.0

20.0

+1 Std div

-1 Std Div

Avg 14.3x



11 December 2017


Macau

Figure 64: Annual Financial Summary

US$m Galaxy MGM

China

Sands

China

SJM Wynn

Macau

Industry Galaxy MGM

China

Sands

China

SJM Wynn

Macau

Industry

VIP GGR share 26% 7% 14% 16% 22% 25% 11% 13% 14% 22%

Mass table GGR share 21% 7% 30% 17% 11% 21% 9% 27% 16% 12%

GGR market share 23% 7% 22% 16% 16% 23% 10% 20% 14% 17%

yoy -0.2ppt -1.2ppt -0.6ppt -3.1ppt 4.7ppt -0.1ppt 3.2ppt -1.8ppt -1.6ppt 0.9ppt

Volume measuresVIP rolling 113,002 33,541 70,541 79,385 108,399 487,846 128,898 64,688 79,996 84,872 134,976 592,410 Mass table drop 6,804 5,103 20,688 11,850 7,710 59,864 8,023 7,945 21,466 12,467 9,040 67,704 Slot handle 6,943 3,861 13,960 2,610 6,486 42,396 7,240 6,105 13,918 2,480 7,571 46,502 VIP hold rate 3.6% 3.2% 3.1% 3.1% 3.1% 3.3%yoyVIP rolling 22% -3% 15% -6% 76% 14% 93% 13% 7% 25%Mass table drop 13% -3% 17% -1% 38% 18% 56% 4% 5% 17%Slot handle 9% 4% 3% -5% 57% 4% 58% 0% -5% 17%VIP hold rate -15bps 0bps -11bps 12bps -4bps 8bps

Capacity

Avg no of tables 1,099 416 1,660 1,657 608 6,312 1,093 527 1,654 1,644 644 6,435

Hotel rooms 4,693 582 9,444 821 2,714 21,470 4,693 1,982 9,819 413 2,714 23,467 No of tables yoy 0% 0% 6% 1% 16% -1% 27% 0% -1% 6%No of hotel rooms yoy 0% 0% -4% 0% 67% 0% 241% 4% -50% 0%

Table yield

VIP GGR/table (US$/day) 35,464 20,189 25,606 22,911 46,662 30,602 40,588 35,743 29,607 27,124 52,499 38,040

Mass GGR/table (US$/day) 10,748 10,237 8,768 5,096 10,856 8,534 12,595 11,259 9,044 5,386 12,902 9,336

yoy 5% -4% 9% -8% 17% 17% 10% 3% 6% 19%

Slot GGR/unit (US$/day) 194 471 261 136 427 208 319 255 127 479

Revenue

VIP GGR 4,013 1,076 2,199 2,500 3,385 16,090 4,709 2,017 2,522 2,680 4,254 19,522

Mass table GGR 3,096 1,010 4,476 2,607 1,621 15,229 3,634 1,549 4,698 2,743 1,987 17,135

Slot GGR 277 178 575 130 306 1,911 296 295 577 124 353 2,077

Gross gaming revenue 7,386 2,263 7,249 5,238 5,312 33,230 8,639 3,861 7,796 5,546 6,594 38,734

Gross non-gaming rev 436 113 1,548 55 583 3,288 449 272 1,627 52 636 3,621

Net revenue (US GAAP) 6,356 1,921 7,580 3,412 4,551 29,112 7,404 3,242 8,136 3,594 5,570 33,871

yoy

VIP GGR 17% -3% 11% -3% 74% 17% 88% 15% 7% 26%

Mass table GGR 14% 2% 16% -1% 48% 17% 53% 5% 5% 23%

Slot GGR 10% 9% 8% -5% 64% 7% 66% 0% -5% 15%

Gross gaming revenue 16% 0% 14% -2% 65% 19% 17% 71% 8% 6% 24% 17%

Gross non-gaming rev 5% -6% 15% -19% 48% 3% 140% 5% -5% 9%

Earnings

Property EBITDA 1,869 2,541 1,256 7,840 2,222 2,804 1,583 9,295

Group Headline EBITDA 1,768 536 2,541 392 1,056 7,370 2,121 788 2,804 418 1,365 8,785

Group Luck-adj EBITDA (Headl 1,780 536 2,496 400 1,056 7,304 2,121 788 2,804 418 1,365 8,785

Luck benefits / (impact) on EBITDA -

DB EPS (US$) 0.29 0.09 0.20 0.05 0.10 na 0.36 0.10 0.23 0.05 0.16 na

DPS (US$) 0.09 0.04 0.26 0.03 0.09 0.11 0.06 0.26 0.03 0.15

Property EBITDA yoy -2% -6%

Group EBITDA yoy 32% -2% 13% -6% 60% 20% 47% 10% 6% 29%

DB EPS yoy 52% -16% 16% -6% 64% 25% 13% 17% 8% 61%

EBITDA margin

EBITDA as % of GGR 22.6% 22.5% 28.9% 7.4% 17.9% 22.2% 23.3% 19.1% 29.8% 7.5% 18.9% 22.7%

yoy change 3.0ppt -0.4ppt -0.2ppt -0.3ppt -0.3ppt 0.6ppt 0.7ppt -3.4ppt 0.9ppt 0.1ppt 1.0ppt 0.5ppt

Balance Sheet

Net debt/ (cash) (2,948) 2,088 3,568 559 3,769 7,035 (3,140) 1,884 3,822 912 3,769 7,247

Net gearing Net Cash 201% 80% 17% 925% Net Cash 151% 90% 27% 380%

Flagship casino 1

Galaxy

Macau

MGM

Grand

Venetian

Macau

Grand

Lisboa

Wynn

Macau

Macau

average

Galaxy

Macau

MGM

Grand

Venetian

Macau

Grand

Lisboa

Wynn

Macau

Macau

average

VIP rev/table (US$k/day) 38.9 19.7 32.3 29.1 54.6 29.6 46.9 41.3 33.5 33.4 53.2 36.9

Mass rev/table (US$k/day) 10.1 10.2 9.8 5.7 11.7 8.5 12.2 14.1 10.7 6.1 12.2 9.3

Mass rev/table yoy 3% -4% 9% -5% 5% 4% 21% 38% 9% 7% 4% 9%

Gross gaming rev 5,231 2,263 2,765 1,914 2,953 6,239 2,210 2,954 2,141 3,312

Gross non-gaming rev 383 113 539 55 245 398 113 591 52 260

EBITDA 1,381 1,074 1,679 1,182

EBITDA as % of GGR 25% 24% 33% 12% 24% 25% 25% 33% 12% 24%

Flagship casino 2

Star

World Parisian

Satellite

casinos

Wynn

Palace

Macau

average

Star

World

MGM

Cotai Parisian

Satellite

casinos

Wynn

Palace

Macau

average

VIP rev/table (US$k/day) 42.8 26.5 17.9 39.1 29.6 52.6 30.4 33.5 26.7 51.7 36.9

Mass rev/table (US$k/day) 12.9 7.0 5.6 7.0 8.5 14.2 8.7 8.0 6.0 8.0 9.3

Mass rev/table yoy 15% 40% -13% 34% 4% 10% nm 13% 8% 36% 9%

Gross gaming rev 1,842 1,584 2,580 2,358 2,070 1,652 2,002 2,682 3,282

Gross non-gaming rev 26 286 - 337 25 158 302 - 376

EBITDA

EBITDA as % of GGR 21% 24% 3% 18% 21% 15% 26% 3% 20%



Deu

tsche B

ank A

G/H

on

g K

on

gPag

e 29

Figure 65: Overall GGR market share by property

Source: Company data, Deutsche Bank estimates

11

Decem

ber 2

017

Ho

tels / Leisure / G

amin

g

Macau

Pag

e 30

Deu

tsche B

ank A

G/H

on

g K

on

g

Figure 66: EBITDA market share by property


11

Decem

ber 2

017

Ho

tels / Leisure / G

amin

g

Macau

Deu

tsche B

ank A

G/H

on

g K

on

gPag

e 31

Figure 67: VIP market share by property


11

Decem

ber 2

017

Ho

tels / Leisure / G

amin

g

Macau

Pag

e 32

Deu

tsche B

ank A

G/H

on

g K

on

g

Figure 68: Mass market share by property


11

Decem

ber 2

017

Ho

tels / Leisure / G

amin

g

Macau

11 December 2017


Macau

Model updated: 08 December 2017

Running the numbersAsiaHong KongHotels / Leisure / Gaming

GalaxyReuters: 0027.HK Bloomberg: 27 HK

BuyPrice (8 Dec 17) HKD 57.50

Target Price HKD 70.00

52 Week range HKD 33.05 - 58.60

Market cap (m) HKDm 245,843 USDm 31,497

Company ProfileGalaxy is one of the six gaming license holders in Macau. It hastwo flagship casinos, Galaxy Macau and StarWorld, and threesmaller City Clubs casinos. Galaxy Macau, the company's keyproperty in Cotai, operates over 700 gaming tables and has morethan 3,000 rooms. The company is also planning to developGalaxy Macau Phase 3 and 4, with Phase 3 to be completed by2019 and phase 4 post 2020. The company also has a legacyconstruction material business.

Price Performance

Galaxy HANG SENG INDEX (Rebased)

Jan '16 Jan '17Jul '16 Jul '1710203040506070

Margin Trends

EBITDA Margin EBIT Margin

14 15 16 17E 18E 19E10

15

20

25

Growth & Profitibility

Sales growth (LHS) ROE (RHS)

14 15 16 17E 18E 19E-40-20

020406080

5101520253035

Solvency

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

14 15 16 17E 18E 19E-50-40-30-20-10

0

100200300400

0

500

Karen Tang+852 2203 6141 [email protected]

Fiscal year end 31-Dec 2014 2015 2016 2017E 2018E 2019E

Financial SummaryDB EPS (HKD) 2.57 1.21 1.48 2.26 2.81 2.70Reported EPS (HKD) 2.41 0.97 1.46 2.23 2.80 2.58DPS (HKD) 0.73 0.29 0.44 0.67 0.85 0.78BVPS (HKD) 9.0 9.6 10.8 12.7 14.8 16.6Weighted average shares (m) 4,239 4,256 4,266 4,274 4,276 4,276Average market cap (HKDm) 258,084 137,949 117,941 245,843 245,843 245,843Enterprise value (HKDm) 249,337 131,510 104,638 223,511 222,030 228,644

Valuation MetricsP/E (DB) (x) 23.7 26.9 18.7 25.5 20.4 21.3P/E (Reported) (x) 25.3 33.4 19.0 25.8 20.5 22.3P/BV (x) 4.83 2.53 3.12 4.54 3.88 3.47FCF Yield (%) 1.0 nm 9.0 4.4 1.7 nmDividend Yield (%) 1.2 0.9 1.6 1.2 1.5 1.4EV/Sales (x) 3.5 2.6 2.0 3.6 3.1 3.2EV/EBITDA (x) 18.9 15.1 10.1 16.3 13.5 14.2EV/EBIT (x) 22.0 23.3 15.5 22.3 17.6 18.7

Income Statement (HKDm)Sales revenue 71,752 50,991 52,826 61,560 71,501 71,079Gross profit 13,222 8,736 10,348 13,701 16,437 16,140EBITDA 13,222 8,736 10,348 13,701 16,437 16,140Depreciation 1,565 2,766 3,252 3,320 3,456 3,592Amortisation 320 321 336 336 336 336EBIT 11,338 5,649 6,759 10,045 12,644 12,211Net interest income(expense) -33 -33 -44 -67 -95 -151Associates/affiliates -409 -511 -443 -425 -460 -460Exceptionals/extraordinaries -663 -1,015 -92 -117 -40 -500Other pre-tax income/(expense) 189 118 151 283 151 151Profit before tax 10,422 4,209 6,331 9,718 12,200 11,251Income tax expense 59 82 77 85 85 85Minorities 23 -35 -12 0 0 0Other post-tax income/(expense) 0 0 0 0 0 0Net profit 10,340 4,161 6,267 9,633 12,115 11,166DB adjustments (including dilution) 663 1,015 92 117 40 500DB Net profit 11,003 5,176 6,359 9,750 12,155 11,666

Cash Flow (HKDm)Cash flow from operations 12,020 6,626 12,732 13,558 16,210 15,397Net Capex -9,413 -7,161 -2,103 -2,750 -11,950 -18,400Free cash flow 2,606 -536 10,628 10,808 4,260 -3,003Equity raised/(bought back) 256 125 109 0 0 0Dividends paid -4,879 -1,788 -1,408 -1,880 -2,878 -3,620Net inc/(dec) in borrowings 345 402 4,800 -1,000 0 0Other investing/financing cash flows 277 -148 -2,614 100 100 100Net cash flow -1,394 -1,944 11,514 8,029 1,482 -6,522Change in working capital -204 66 1,888 0 0 0

Balance Sheet (HKDm)Cash and other liquid assets 10,355 8,441 19,956 27,985 29,467 22,853Tangible fixed assets 35,662 40,854 38,600 38,046 46,557 61,382Goodwill/intangible assets 1,516 1,341 1,138 943 747 551Associates/investments 1,457 1,325 1,265 839 379 11Other assets 2,849 3,393 5,302 5,202 5,102 5,002Total assets 51,839 55,354 66,261 73,015 82,253 89,799Interest bearing debt 988 1,390 6,135 5,135 5,135 5,135Other liabilities 11,862 12,251 13,263 13,263 13,263 13,263Total liabilities 12,850 13,641 19,398 18,398 18,398 18,398Shareholders' equity 38,369 41,101 46,345 54,099 63,336 70,882Minorities 620 612 518 518 519 519Total shareholders' equity 38,989 41,713 46,863 54,617 63,854 71,401Net debt -9,367 -7,051 -13,821 -22,850 -24,332 -17,718

Key Company MetricsSales growth (%) 8.7 -28.9 3.6 16.5 16.1 -0.6DB EPS growth (%) 5.8 -53.0 22.7 52.5 24.6 -4.0EBITDA Margin (%) 18.4 17.1 19.6 22.3 23.0 22.7EBIT Margin (%) 15.8 11.1 12.8 16.3 17.7 17.2Payout ratio (%) 29.9 29.7 29.9 29.9 29.9 29.9ROE (%) 29.2 10.5 14.3 19.2 20.6 16.6Capex/sales (%) 13.3 14.2 4.0 4.5 16.7 25.9Capex/depreciation (x) 5.0 2.3 0.6 0.8 3.2 4.7Net debt/equity (%) -24.0 -16.9 -29.5 -41.8 -38.1 -24.8Net interest cover (x) 345.1 172.4 154.8 150.5 132.9 80.6

Source: Company data, Deutsche Securities estimates


11 December 2017


Macau



Sands ChinaReuters: 1928.HK Bloomberg: 1928 HK

HoldPrice (8 Dec 17) HKD 38.45


52 Week range HKD 31.55 - 40.85


Company ProfileSands China is one of six gaming operators in Macau. It currentlyoperates five casinos: (i) Venetian Macau, (ii) Parisian Macau, (iii)Plaza at Four Seasons, (iv) Sands Cotai Central and (v) SandsMacau. Sands China casinos have more than 1,600 tables and5,500 slot machines. The company also operates over 12,000hotel rooms, almost 1/3 of Macau's total inventory. Las VegasSands Corp (LVS.N) owns 70% of the company.

Price Performance

Sands China HANG SENG INDEX (Rebased)

Jan '16 Jan '17Jul '16 Jul '1715202530354045

Margin Trends


14 15 16 17E 18E 19E

25

30

35

20

40



14 15 16 17E 18E 19E-40

-20

0

20

20

30

40

50

Solvency


14 15 16 17E 18E 19E0

50

100

150

0

20

40

60



Financial SummaryDB EPS (USD) 0.32 0.19 0.17 0.20 0.23 0.23Reported EPS (USD) 0.32 0.18 0.15 0.19 0.23 0.23DPS (USD) 0.26 0.26 0.26 0.26 0.26 0.26BVPS (USD) 0.8 0.7 0.6 0.6 0.5 0.5Weighted average shares (m) 8,065 8,069 8,070 8,071 8,071 8,071Average market cap (USDm) 55,693 32,353 31,295 39,757 39,757 39,757Enterprise value (USDm) 56,352 34,449 34,385 43,398 43,630 44,126

Valuation MetricsP/E (DB) (x) 21.5 21.2 23.0 25.2 21.6 21.3P/E (Reported) (x) 21.9 22.2 25.6 25.8 21.6 21.3P/BV (x) 6.17 4.73 7.00 8.88 9.37 9.84FCF Yield (%) 4.1 2.1 3.7 4.4 5.1 4.5Dividend Yield (%) 3.7 6.4 6.6 5.2 5.2 5.2EV/Sales (x) 5.9 5.1 5.2 5.7 5.4 5.4EV/EBITDA (x) 17.3 15.5 15.3 17.1 15.6 15.4EV/EBIT (x) 20.6 20.4 21.1 23.3 19.9 19.6

Income Statement (USDm)Sales revenue 9,505 6,820 6,653 7,580 8,136 8,098Gross profit 4,061 2,859 2,800 3,302 3,510 3,422EBITDA 3,261 2,223 2,244 2,541 2,804 2,867Depreciation 482 489 560 625 552 552Amortisation 42 46 51 51 61 61EBIT 2,738 1,688 1,633 1,865 2,191 2,253Net interest income(expense) -50 -48 -83 -137 -174 -208Associates/affiliates 0 0 0 0 0 0Exceptionals/extraordinaries -48 -64 -139 -39 0 0Other pre-tax income/(expense) -83 -105 -143 -128 -139 -139Profit before tax 2,556 1,471 1,268 1,561 1,878 1,906Income tax expense 8 11 44 21 38 38Minorities 0 0 0 0 0 0Other post-tax income/(expense) 0 0 0 0 0 0Net profit 2,548 1,459 1,224 1,541 1,841 1,868DB adjustments (including dilution) 48 64 139 39 0 0DB Net profit 2,596 1,523 1,363 1,580 1,841 1,868

Cash Flow (USDm)Cash flow from operations 3,224 1,968 2,346 2,385 2,628 2,690Net Capex -947 -1,294 -1,185 -631 -604 -900Free cash flow 2,277 674 1,161 1,754 2,024 1,790Equity raised/(bought back) 0 0 0 0 0 0Dividends paid -2,601 -2,072 -2,072 -2,072 -2,072 -2,072Net inc/(dec) in borrowings 0 179 1,000 650 -56 500Other investing/financing cash flows -84 -33 -87 -140 -184 -213Net cash flow -408 -1,252 2 192 -288 5Change in working capital 64 -37 334 0 0 0

Balance Sheet (USDm)Cash and other liquid assets 2,535 1,283 1,284 1,477 1,188 1,193Tangible fixed assets 8,056 8,866 9,433 9,459 9,468 9,767Goodwill/intangible assets 21 28 35 27 20 12Associates/investments 0 0 0 0 0 0Other assets 735 594 431 431 431 431Total assets 11,348 10,772 11,183 11,394 11,107 11,403Interest bearing debt 3,194 3,379 4,374 5,118 5,062 5,562Other liabilities 1,724 1,554 1,802 1,802 1,802 1,802Total liabilities 4,918 4,933 6,176 6,920 6,864 7,364Shareholders' equity 6,429 5,839 5,007 4,475 4,243 4,039Minorities 0 0 0 0 0 0Total shareholders' equity 6,429 5,839 5,007 4,475 4,243 4,039Net debt 659 2,096 3,090 3,641 3,874 4,369

Key Company MetricsSales growth (%) 6.7 -28.2 -2.4 13.9 7.3 -0.5DB EPS growth (%) 15.2 -41.3 -10.5 15.9 16.5 1.5EBITDA Margin (%) 34.3 32.6 33.7 33.5 34.5 35.4EBIT Margin (%) 28.8 24.7 24.5 24.6 26.9 27.8Payout ratio (%) 81.3 142.0 169.3 134.5 112.6 110.9ROE (%) 39.6 23.8 22.6 32.5 42.2 45.1Capex/sales (%) 10.0 19.0 17.8 8.3 7.4 11.1Capex/depreciation (x) 1.8 2.4 1.9 0.9 1.0 1.5Net debt/equity (%) 10.3 35.9 61.7 81.4 91.3 108.2Net interest cover (x) 54.7 35.1 19.7 13.6 12.6 10.8



11 December 2017


Macau



MGM ChinaReuters: 2282.HK Bloomberg: 2282 HK



52 Week range HKD 13.60 - 21.95


Company ProfileMGM China is one of six licensed gaming operators in Macau. Itcurrently operates one casino resort, MGM Macau, with about 400gaming tables and 1,000 slot machines. Its new property, MGMCotai, is slated to open in January 2018 with c. 250 gaming tablesand 1,500 hotel rooms. MGM Resorts (MGM.US) owns 56% ofthe company; Ms. Pansy Ho holds 22%.

Price Performance

MGM China HANG SENG INDEX (Rebased)

Jan '16 Jan '17Jul '16 Jul '175

10

15

20

25

Margin Trends


14 15 16 17E 18E 19E

15

20

25

30

10



14 15 16 17E 18E 19E-50

0

50

100

150

0

100

25

50

75

Solvency


14 15 16 17E 18E 19E

0

100

200

-100

300

0

100

200

-100

300




Valuation MetricsP/E (DB) (x) 17.4 17.2 14.8 32.6 28.9 24.0P/E (Reported) (x) 17.4 17.3 14.8 47.0 30.5 24.0P/BV (x) 11.82 7.50 8.47 10.38 8.61 7.36FCF Yield (%) 2.3 nm nm nm 3.9 6.7Dividend Yield (%) 5.0 1.8 2.4 1.3 2.3 0.0EV/Sales (x) 4.0 3.5 3.7 6.7 3.9 3.5EV/EBITDA (x) 15.0 13.8 13.1 24.0 16.0 13.7EV/EBIT (x) 17.0 16.9 16.2 30.4 25.9 20.8

Income Statement (HKDm)Sales revenue 25,454 17,170 14,907 14,889 25,126 26,886Gross profit 6,770 4,368 4,231 4,152 6,107 6,947EBITDA 6,770 4,368 4,231 4,152 6,107 6,947Depreciation 638 638 643 710 2,180 2,237Amortisation 161 168 168 168 146 146EBIT 5,970 3,563 3,420 3,274 3,781 4,563Net interest income(expense) -25 -133 -47 -132 -395 -564Associates/affiliates 0 0 0 0 0 0Exceptionals/extraordinaries -21 -18 -1 -789 -155 0Other pre-tax income/(expense) -95 -282 -360 -400 -479 -504Profit before tax 5,830 3,129 3,013 1,953 2,752 3,495Income tax expense 16 17 15 180 20 25Minorities 0 0 0 0 0 0Other post-tax income/(expense) 0 0 0 0 0 0Net profit 5,814 3,113 2,998 1,773 2,732 3,470DB adjustments (including dilution) 21 18 1 789 155 0DB Net profit 5,834 3,130 2,998 2,562 2,887 3,470

Cash Flow (HKDm)Cash flow from operations 5,199 3,210 2,762 3,904 6,655 6,729Net Capex -2,874 -5,083 -9,641 -7,665 -3,405 -1,100Free cash flow 2,325 -1,873 -6,878 -3,761 3,250 5,629Equity raised/(bought back) 0 0 0 0 0 0Dividends paid -5,928 -4,625 -806 -1,049 -1,080 -2,190Net inc/(dec) in borrowings 0 7,800 2,899 3,163 0 -2,152Other investing/financing cash flows -50 -113 2,913 -502 -595 -564Net cash flow -3,653 1,189 -1,872 -2,149 1,575 723Change in working capital -668 10 -532 1,120 1,047 312

Balance Sheet (HKDm)Cash and other liquid assets 4,232 5,421 3,547 1,737 3,311 4,034Tangible fixed assets 10,933 15,157 22,470 29,593 30,844 30,063Goodwill/intangible assets 666 539 412 285 158 31Associates/investments 0 0 0 0 0 0Other assets 996 837 651 628 703 735Total assets 16,828 21,955 27,080 32,243 35,017 34,863Interest bearing debt 4,118 11,732 14,709 17,916 17,916 15,764Other liabilities 6,368 5,308 5,155 6,289 7,410 7,753Total liabilities 10,486 17,040 19,864 24,204 25,326 23,517Shareholders' equity 6,342 4,915 7,217 8,032 9,684 11,339Minorities 0 0 0 0 0 0Total shareholders' equity 6,342 4,915 7,217 8,032 9,684 11,339Net debt -114 6,311 11,162 16,179 14,604 11,730

Key Company MetricsSales growth (%) -1.1 -32.5 -13.2 -0.1 68.7 7.0DB EPS growth (%) 8.1 -46.3 -4.2 -14.6 12.7 20.2EBITDA Margin (%) 26.6 25.4 28.4 27.9 24.3 25.8EBIT Margin (%) 23.5 20.7 22.9 22.0 15.0 17.0Payout ratio (%) 87.7 30.4 35.4 59.2 69.2 0.0ROE (%) 90.5 55.3 49.4 23.3 30.8 33.0Capex/sales (%) 11.3 29.6 64.7 51.5 13.6 4.1Capex/depreciation (x) 3.6 6.3 11.9 8.7 1.5 0.5Net debt/equity (%) -1.8 128.4 154.7 201.4 150.8 103.4Net interest cover (x) 236.4 26.7 73.1 24.8 9.6 8.1



11 December 2017


Macau



Wynn MacauReuters: 1128.HK Bloomberg: 1128 HK



52 Week range HKD 12.04 - 23.45


Company ProfileWynn Macau is one of the six gaming operators in Macau. It hastwo casinos: Wynn Macau in Peninsula and Wynn Palace in Cotai(opened in 2016). The two properties operate over 600 gamingtables, 1,900 slot machines and 160,000 square feet of high-end retail space. Wynn Resorts (WYNN.OQ) owns 72% of thecompany.

Price Performance

Wynn Macau HANG SENG INDEX (Rebased)

Jan '16 Jan '17Jul '16 Jul '175

10

15

20

25

Margin Trends


14 15 16 17E 18E 19E

15

20

25

30

10



14 15 16 17E 18E 19E-50-25

0255075

50100150

0

200250

Solvency


14 15 16 17E 18E 19E0

250

500

750

1000

5

10

15

0

20




Valuation MetricsP/E (DB) (x) 23.2 26.7 24.0 29.8 18.6 16.7P/E (Reported) (x) 24.3 31.9 40.8 32.2 18.6 16.8P/BV (x) 16.12 11.47 26.14 41.48 21.02 17.87FCF Yield (%) nm nm nm 6.2 8.2 8.7Dividend Yield (%) 5.8 4.0 3.7 3.0 5.1 5.7EV/Sales (x) 5.6 5.3 4.0 4.1 3.3 3.2EV/EBITDA (x) 19.5 21.7 17.3 17.9 13.3 12.3EV/EBIT (x) 22.1 27.6 25.1 27.0 18.0 16.2

Income Statement (HKDm)Sales revenue 29,445 19,096 22,099 35,269 43,170 43,746Gross profit 8,423 4,681 5,105 8,182 10,583 11,247EBITDA 8,423 4,681 5,105 8,182 10,583 11,247Depreciation 891 905 1,496 2,668 2,666 2,663Amortisation 95 95 95 95 95 95EBIT 7,437 3,681 3,514 5,419 7,822 8,489Net interest income(expense) -457 -564 -814 -1,199 -1,146 -1,098Associates/affiliates 0 0 0 0 0 0Exceptionals/extraordinaries -306 -476 -1,006 -295 -30 -30Other pre-tax income/(expense) -205 -224 -246 -212 -223 -229Profit before tax 6,469 2,417 1,448 3,713 6,422 7,132Income tax expense 24 6 12 12 12 12Minorities 0 0 0 0 0 0Other post-tax income/(expense) 0 0 0 0 0 0Net profit 6,445 2,410 1,436 3,701 6,410 7,119DB adjustments (including dilution) 306 476 1,006 295 30 30DB Net profit 6,752 2,886 2,442 3,996 6,440 7,149

Cash Flow (HKDm)Cash flow from operations 5,758 2,480 5,843 8,143 10,570 11,235Net Capex -8,329 -12,448 -6,660 -803 -803 -803Free cash flow -2,572 -9,968 -817 7,341 9,767 10,432Equity raised/(bought back) 0 0 0 0 0 0Dividends paid -8,721 -5,455 -3,109 -3,273 -3,607 -6,118Net inc/(dec) in borrowings 6,888 12,713 773 -3,165 131 -3,391Other investing/financing cash flows -484 -1,351 -975 -1,146 -1,093 -1,057Net cash flow -4,888 -4,061 -4,128 -243 5,198 -134Change in working capital -1,396 -1,509 2,115 -27 0 0

Balance Sheet (HKDm)Cash and other liquid assets 10,792 6,731 2,604 2,361 7,559 7,424Tangible fixed assets 21,170 32,951 37,641 35,680 33,722 31,766Goodwill/intangible assets 398 398 398 398 398 398Associates/investments 0 0 0 0 0 0Other assets 1,789 2,201 2,303 2,329 2,329 2,329Total assets 34,150 42,282 42,945 40,769 44,008 41,918Interest bearing debt 18,605 31,318 32,170 29,005 29,136 25,744Other liabilities 8,501 6,861 8,323 8,883 9,188 9,488Total liabilities 27,106 38,179 40,492 37,888 38,324 35,233Shareholders' equity 7,044 4,102 2,453 2,881 5,684 6,686Minorities 0 0 0 0 0 0Total shareholders' equity 7,044 4,102 2,453 2,881 5,684 6,686Net debt 7,812 24,587 29,566 26,644 21,577 18,320

Key Company MetricsSales growth (%) -6.0 -35.1 15.7 59.6 22.4 1.3DB EPS growth (%) -11.1 -57.2 -15.3 63.7 60.7 11.0EBITDA Margin (%) 28.6 24.5 23.1 23.2 24.5 25.7EBIT Margin (%) 25.3 19.3 15.9 15.4 18.1 19.4Payout ratio (%) 140.9 129.1 151.6 97.2 95.4 95.4ROE (%) 79.3 43.3 43.8 138.8 149.7 115.1Capex/sales (%) 28.3 65.2 30.2 2.3 1.9 1.8Capex/depreciation (x) 8.4 12.5 4.2 0.3 0.3 0.3Net debt/equity (%) 110.9 599.3 nm 924.8 379.6 274.0Net interest cover (x) 16.3 6.5 4.3 4.5 6.8 7.7



11 December 2017


Macau



SJMReuters: 0880.HK Bloomberg: 880 HK

HoldPrice (8 Dec 17) HKD 6.23


52 Week range HKD 5.85 - 8.50

Market cap (m) HKDm 35,244 USDm 4,515.4

Company ProfileSJM is one of the six gaming operators in Macau. Its flagshipcasino is Grand Lisboa in Peninsula, which has more than 400gaming tables and 700 slot machines. SJM also owns andoperates two casinos (Old Lisboa and Oceanus). The rest of its14 casinos are run by third-party promoters, who pay a fixed %of revenue to SJM. SJM's new property in Cotai, Grand LisboaPalace, is expected to be opened in 2019. SJM is 54% ownedby the privately-owned Macau conglomerate STDM, in which Dr.Stanley Ho's family members hold a 32% stake.Price Performance

SJM HANG SENG INDEX (Rebased)

Jan '16 Jan '17Jul '16 Jul '174

6

8

10

Margin Trends


14 15 16 17E 18E 19E

10

02.5

57.5

12.5



14 15 16 17E 18E 19E-60-40-20

02040

01020304050

Solvency


14 15 16 17E 18E 19E-100

-50

0

50

100

0

50

100

150

-50




Valuation MetricsP/E (DB) (x) 16.3 16.3 13.1 17.7 16.3 38.0P/E (Reported) (x) 16.5 17.9 12.0 18.6 18.0 38.0P/BV (x) 2.82 1.34 1.39 1.39 1.35 1.36FCF Yield (%) 1.0 nm nm nm nm 5.5Dividend Yield (%) 4.2 2.9 4.6 3.1 3.2 1.7EV/Sales (x) 1.1 0.7 0.4 1.0 1.0 0.8EV/EBITDA (x) 11.4 8.6 5.3 13.0 13.1 9.8EV/EBIT (x) 13.3 12.0 7.9 20.1 19.5 31.6

Income Statement (HKDm)Sales revenue 79,269 48,590 41,438 40,593 42,984 51,158Gross profit 14,984 11,622 10,347 8,812 9,515 11,701EBITDA 7,763 3,862 3,219 3,041 3,239 4,270Depreciation 1,094 1,095 1,065 1,065 1,065 2,941Amortisation 6 6 6 4 3 3EBIT 6,663 2,761 2,148 1,972 2,171 1,326Net interest income(expense) 305 206 100 -15 -47 -434Associates/affiliates 33 72 56 55 55 55Exceptionals/extraordinaries -73 -267 198 -96 -200 0Other pre-tax income/(expense) 0 0 0 0 0 0Profit before tax 6,929 2,772 2,502 1,916 1,979 947Income tax expense 88 38 34 33 33 33Minorities 51 -13 -12 -13 -13 -13Other post-tax income/(expense) 0 0 0 0 0 0Net profit 6,790 2,747 2,480 1,896 1,959 927DB adjustments (including dilution) 73 267 -215 96 200 0DB Net profit 6,862 3,014 2,265 1,992 2,159 927

Cash Flow (HKDm)Cash flow from operations 6,252 409 3,975 3,326 3,927 4,150Net Capex -5,106 -7,116 -5,477 -19,100 -5,100 -2,200Free cash flow 1,147 -6,707 -1,501 -15,774 -1,173 1,950Equity raised/(bought back) 0 0 0 0 0 0Dividends paid -5,769 -4,073 -1,188 -1,301 -1,106 -1,143Net inc/(dec) in borrowings -519 -278 -174 16,961 0 0Other investing/financing cash flows 1,767 4,078 -870 -138 -462 -462Net cash flow -3,374 -6,980 -3,733 -253 -2,741 345Change in working capital -1,691 -3,541 737 26 -65 -191

Balance Sheet (HKDm)Cash and other liquid assets 23,892 16,895 13,423 13,170 10,429 10,774Tangible fixed assets 14,160 16,689 22,374 40,175 43,664 42,855Goodwill/intangible assets 14 8 2 -3 -6 0Associates/investments 751 704 512 567 621 676Other assets 3,397 2,560 2,445 2,419 2,484 2,676Total assets 42,215 36,855 38,755 56,328 57,192 56,981Interest bearing debt 1,664 1,348 1,106 18,066 18,066 18,066Other liabilities 15,689 12,028 12,808 12,833 12,851 12,863Total liabilities 17,353 13,375 13,914 30,899 30,917 30,929Shareholders' equity 24,764 23,326 24,753 25,347 26,200 25,983Minorities 98 154 88 82 76 69Total shareholders' equity 24,862 23,479 24,841 25,429 26,275 26,052Net debt -22,228 -15,547 -12,317 4,896 7,637 7,293

Key Company MetricsSales growth (%) -8.8 -38.7 -14.7 -2.0 5.9 19.0DB EPS growth (%) -9.0 -56.2 -24.8 -12.0 8.4 -57.1EBITDA Margin (%) 9.8 7.9 7.8 7.5 7.5 8.3EBIT Margin (%) 8.4 5.7 5.2 4.9 5.1 2.6Payout ratio (%) 69.4 51.5 54.8 58.4 58.4 63.4ROE (%) 28.2 11.4 10.3 7.6 7.6 3.6Capex/sales (%) 6.4 14.6 13.2 47.1 11.9 4.3Capex/depreciation (x) 4.6 6.5 5.1 17.9 4.8 0.7Net debt/equity (%) -89.4 -66.2 -49.6 19.3 29.1 28.0Net interest cover (x) nm nm nm 133.2 46.4 3.1



11 December 2017


Macau

Appendix 1

Important Disclosures

*Other information available upon request

Disclosure checklistCompany Ticker Recent price* Disclosure

Galaxy 0027.HK 57.50 (HKD) 8 Dec 2017 NA

MGM China 2282.HK 21.95 (HKD) 8 Dec 2017 1, 7, 8, 14, 15

Sands China 1928.HK 38.45 (HKD) 8 Dec 2017 NA

SJM 0880.HK 6.23 (HKD) 8 Dec 2017 NA

Wynn Macau 1128.HK 23.00 (HKD) 8 Dec 2017 1, 2, 7, 8, 14, 15*Prices are current as of the end of the previous trading session unless otherwise indicated and are sourced from local exchanges via Reuters, Bloomberg and other vendors . Otherinformation is sourced from Deutsche Bank, subject companies, and other sources. For disclosures pertaining to recommendations or estimates made on securities other than theprimary subject of this research, please see the most recently published company report or visit our global disclosure look-up page on our website at http://gm.db.com/ger/disclosure/DisclosureDirectory.eqsr. Aside from within this report, important conflict disclosures can also be found at https://gm.db.com/equities under the "Disclosures Lookup" and "Legal"tabs. Investors are strongly encouraged to review this information before investing.

Important Disclosures Required by U.S. RegulatorsDisclosures marked with an asterisk may also be required by at least one jurisdiction in addition to the United States.SeeImportant Disclosures Required by Non-US Regulators and Explanatory Notes.

1. Within the past year, Deutsche Bank and/or its affiliate(s) has managed or co-managed a public or privateoffering for this company, for which it received fees.

2. Deutsche Bank and/or its affiliate(s) makes a market in equity securities issued by this company.

7. Deutsche Bank and/or its affiliate(s) has received compensation from this company for the provision ofinvestment banking or financial advisory services within the past year.

8. Deutsche Bank and/or its affiliate(s) expects to receive, or intends to seek, compensation for investment bankingservices from this company in the next three months.

14. Deutsche Bank and/or its affiliate(s) has received non-investment banking related compensation from thiscompany within the past year.

15. This company has been a client of Deutsche Bank Securities Inc. within the past year, during which time itreceived non-investment banking securities-related services.

Important Disclosures Required by Non-U.S. RegulatorsDisclosures marked with an asterisk may also be required by at least one jurisdiction in addition to the United States.SeeImportant Disclosures Required by Non-US Regulators and Explanatory Notes.

1. Within the past year, Deutsche Bank and/or its affiliate(s) has managed or co-managed a public or privateoffering for this company, for which it received fees.

2. Deutsche Bank and/or its affiliate(s) makes a market in equity securities issued by this company.

7. Deutsche Bank and/or its affiliate(s) has received compensation from this company for the provision ofinvestment banking or financial advisory services within the past year.

For disclosures pertaining to recommendations or estimates made on securities other than the primary subject of thisresearch, please see the most recently published company report or visit our global disclosure look-up page on our websiteat http://gm.db.com/ger/disclosure/DisclosureDirectory.eqsr

Analyst Certification

The views expressed in this report accurately reflect the personal views of the undersigned lead analyst about the subjectissuers and the securities of those issuers. In addition, the undersigned lead analyst has not and will not receive anycompensation for providing a specific recommendation or view in this report. Karen Tang


11 December 2017


Macau

Historical recommendations and target price. Galaxy (0027.HK)

(as of 12/08/2017)

Current RecommendationsBuyHoldSellNot RatedSuspended Rating

** Analyst is no longer atDeutsche Bank

Date

Secu

rity

pric

e

1

23

45 6

7

Jan '16 May '16 Sep '16 Jan '17 May '17 Sep '170.00

20.00

40.00

60.00

80.00

1. 09/08/2016 Hold, Target Price Change HKD 33,00 Karen Tang 5. 06/19/2017 Hold, Target Price Change HKD 52,00 Karen Tang2. 11/14/2016 Hold, Target Price Change HKD 34,00 Karen Tang 6. 07/13/2017 Hold, Target Price Change HKD 53,20 Karen Tang3. 11/29/2016 Upgraded to Buy, Target Price Change HKD 46,50

Karen Tang7. 10/03/2017 Hold, Target Price Change HKD 58,60 Karen Tang

4. 04/26/2017 Downgraded to Hold, Target Price Change HKD 46,50Karen Tang

§§§§$$$$$§§§§§

Historical recommendations and target price. MGM China (2282.HK)

(as of 12/08/2017)



Date

Secu

rity

pric

e

1

23

4

5

67


5.00

10.00

15.00

20.00

25.00

1. 02/18/2016 Hold, Target Price Change HKD 9,50 Karen Tang 5. 02/16/2017 Buy, Target Price Change HKD 19,60 Karen Tang2. 09/08/2016 Upgraded to Buy, Target Price Change HKD 15,40

Karen Tang6. 04/26/2017 Downgraded to Hold, Target Price Change HKD 19,60

Karen Tang3. 11/07/2016 Buy, Target Price Change HKD 16,00 Karen Tang 7. 09/06/2017 Upgraded to Buy, Target Price Change HKD 20,00

Karen Tang4. 11/29/2016 Buy, Target Price Change HKD 21,00 Karen Tang§§§§$$$$$§§§§§


11 December 2017


Macau

Historical recommendations and target price. Sands China (1928.HK)

(as of 12/08/2017)



Date

Secu

rity

pric

e 1

2

34

56


10.00

20.00

30.00

40.00

50.00

1. 09/08/2016 Buy, Target Price Change HKD 40,00 Karen Tang 4. 04/26/2017 Downgraded to Hold, Target Price Change HKD 40,00Karen Tang

2. 11/29/2016 Buy, Target Price Change HKD 45,00 Karen Tang 5. 10/03/2017 Hold, Target Price Change HKD 40,50 Karen Tang3. 02/19/2017 Buy, Target Price Change HKD 43,50 Karen Tang 6. 10/26/2017 Hold, Target Price Change HKD 42,00 Karen Tang§§§§$$$$$§§§§§

Historical recommendations and target price. SJM (0880.HK)(as of 12/08/2017)



Date

Secu

rity

pric

e

1

23

4 56 7

89

1011


10.00

2.50

5.00

7.50

1. 02/23/2016 Hold, Target Price Change HKD 5,20 Karen Tang 7. 04/26/2017 Downgraded to Hold, Target Price Change HKD 7,50Karen Tang

2. 08/08/2016 Hold, Target Price Change HKD 5,00 Karen Tang 8. 06/19/2017 Hold, Target Price Change HKD 8,50 Karen Tang3. 09/08/2016 Hold, Target Price Change HKD 6,00 Karen Tang 9. 07/13/2017 Hold, Target Price Change HKD 8,80 Karen Tang4. 11/29/2016 Upgraded to Buy, Target Price Change HKD 7,80 Karen

Tang10. 10/03/2017 Hold, Target Price Change HKD 8,70 Karen Tang

5. 02/28/2017 Buy, Target Price Change HKD 7,10 Karen Tang 11. 10/31/2017 Hold, Target Price Change HKD 7,60 Karen Tang6. 04/10/2017 Buy, Target Price Change HKD 7,50 Karen Tang§§§§$$$$$§§§§§


11 December 2017


Macau

Historical recommendations and target price. Wynn Macau (1128.HK)(as of 12/08/2017)



Date

Secu

rity

pric

e

1 2

34

5

6 78

9 10


5.00

10.00

15.00

20.00

25.00

30.00

1. 01/17/2016 Hold, Target Price Change HKD 9,40 Karen Tang 6. 03/30/2017 Buy, Target Price Change HKD 18,70 Karen Tang2. 02/12/2016 Hold, Target Price Change HKD 8,70 Karen Tang 7. 04/26/2017 Buy, Target Price Change HKD 20,00 Karen Tang3. 09/08/2016 Hold, Target Price Change HKD 13,00 Karen Tang 8. 06/19/2017 Buy, Target Price Change HKD 22,00 Karen Tang4. 11/14/2016 Hold, Target Price Change HKD 11,50 Karen Tang 9. 10/03/2017 Buy, Target Price Change HKD 25,00 Karen Tang5. 11/29/2016 Upgraded to Buy, Target Price Change HKD 16,50

Karen Tang10. 11/07/2017 Buy, Target Price Change HKD 25,70 Karen Tang

§§§§$$$$$§§§§§

Equity Rating Key Equity rating dispersion and banking relationships

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

Newly issued research recommendations and target pricessupersede previously published research.


11 December 2017


Macau

Additional Information

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Macroeconomic fluctuations often account for most of the risks associated with exposures to instruments that promiseto pay fixed or variable interest rates. For an investor who is long fixed-rate instruments (thus receiving these cashflows), increases in interest rates naturally lift the discount factors applied to the expected cash flows and thuscause a loss. The longer the maturity of a certain cash flow and the higher the move in the discount factor, thehigher will be the loss. Upside surprises in inflation, fiscal funding needs, and FX depreciation rates are among themost common adverse macroeconomic shocks to receivers. But counterparty exposure, issuer creditworthiness, clientsegmentation, regulation (including changes in assets holding limits for different types of investors), changes in taxpolicies, currency convertibility (which may constrain currency conversion, repatriation of profits and/or liquidation ofpositions), and settlement issues related to local clearing houses are also important risk factors. The sensitivity of fixed-income instruments to macroeconomic shocks may be mitigated by indexing the contracted cash flows to inflation, toFX depreciation, or to specified interest rates – these are common in emerging markets. The index fixings may – byconstruction – lag or mis-measure the actual move in the underlying variables they are intended to track. The choice ofthe proper fixing (or metric) is particularly important in swaps markets, where floating coupon rates (i.e., coupons indexedto a typically short-dated interest rate reference index) are exchanged for fixed coupons. Funding in a currency that differsfrom the currency in which coupons are denominated carries FX risk. Options on swaps (swaptions) the risks typical tooptions in addition to the risks related to rates movements.??Derivative transactions involve numerous risks including market, counterparty default and illiquidity risk. Theappropriateness of these products for use by investors depends on the investors' own circumstances, including theirtax position, their regulatory environment and the nature of their other assets and liabilities; as such, investors shouldtake expert legal and financial advice before entering into any transaction similar to or inspired by the contents of thispublication. The risk of loss in futures trading and options, foreign or domestic, can be substantial. As a result of thehigh degree of leverage obtainable in futures and options trading, losses may be incurred that are greater than theamount of funds initially deposited – up to theoretically unlimited losses. Trading in options involves risk and is notsuitable for all investors. Prior to buying or selling an option, investors must review the "Characteristics and Risks ofStandardized Options”, at http://www.optionsclearing.com/about/publications/character-risks.jsp. If you are unable toaccess the website, please contact your Deutsche Bank representative for a copy of this important document.??Participants in foreign exchange transactions may incur risks arising from several factors, including: (i) exchange rates canbe volatile and are subject to large fluctuations; (ii) the value of currencies may be affected by numerous market factors,including world and national economic, political and regulatory events, events in equity and debt markets and changes ininterest rates; and (iii) currencies may be subject to devaluation or government-imposed exchange controls, which couldaffect the value of the currency. Investors in securities such as ADRs, whose values are affected by the currency of anunderlying security, effectively assume currency risk.??Deutsche Bank is not acting as a financial adviser, consultant or fiduciary to you or any of your agents with respect toany information provided in this report. Deutsche Bank does not provide investment, legal, tax or accounting advice, andis not acting as an impartial adviser. Information contained herein is being provided on the basis that the recipient willmake an independent assessment of the merits of any investment decision, and is not meant for retirement accounts orfor any specific person or account type. The information we provide is directed only to persons we believe to be financiallysophisticated, who are capable of evaluating investment risks independently, both in general and with regard to particulartransactions and investment strategies, and who understand that Deutsche Bank has financial interests in the offering ofits products and services. If this is not the case, or if you or your agent are an IRA or other retail investor receiving thisdirectly from us, we ask that you inform us immediately.

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Germany: Approved and/or distributed by Deutsche Bank AG, a joint stock corporation with limited liability incorporatedin the Federal Republic of Germany with its principal office in Frankfurt am Main. Deutsche Bank AG is authorized underGerman Banking Law and is subject to supervision by the European Central Bank and by BaFin, Germany ’ s FederalFinancial Supervisory Authority.??United Kingdom: Approved and/or distributed by Deutsche Bank AG acting through its London Branch at WinchesterHouse, 1 Great Winchester Street, London EC2N 2DB. Deutsche Bank AG in the United Kingdom is authorised by thePrudential Regulation Authority and is subject to limited regulation by the Prudential Regulation Authority and FinancialConduct Authority. Details about the extent of our authorisation and regulation are available on request.??Hong Kong: Distributed by Deutsche Bank AG, Hong Kong Branch or Deutsche Securities Asia Limited.??India: Prepared by Deutsche Equities India Private Limited (DEIPL) having CIN: U65990MH2002PTC137431 and registeredoffice at 14th Floor, The Capital, C-70, G Block, Bandra Kurla Complex Mumbai (India) 400051. Tel: + 91 22 71804444. It is registered by the Securities and Exchange Board of India (SEBI) as a Stock broker bearing registrationnos.: NSE (Capital Market Segment) - INB231196834, NSE (F&O Segment) INF231196834, NSE (Currency DerivativesSegment) INE231196834, BSE (Capital Market Segment) INB011196830; Merchant Banker bearing SEBI Registrationno.: INM000010833 and Research Analyst bearing SEBI Registration no.: INH000001741. DEIPL may have receivedadministrative warnings from the SEBI for breaches of Indian regulations. Deutsche Bank and/or its affiliate(s) mayhave debt holdings or positions in the subject company. With regard to information on associates, please refer to the“Shareholdings” section in the Annual Report at: https://www.db.com/ir/en/annual-reports.htm.??Japan: Approved and/or distributed by Deutsche Securities Inc.(DSI). Registration number - Registered as a financialinstruments dealer by the Head of the Kanto Local Finance Bureau (Kinsho) No. 117. Member of associations: JSDA, TypeII Financial Instruments Firms Association and The Financial Futures Association of Japan. Commissions and risks involvedin stock transactions - for stock transactions, we charge stock commissions and consumption tax by multiplying thetransaction amount by the commission rate agreed with each customer. Stock transactions can lead to losses as a resultof share price fluctuations and other factors. Transactions in foreign stocks can lead to additional losses stemming fromforeign exchange fluctuations. We may also charge commissions and fees for certain categories of investment advice,products and services. Recommended investment strategies, products and services carry the risk of losses to principaland other losses as a result of changes in market and/or economic trends, and/or fluctuations in market value. Beforedeciding on the purchase of financial products and/or services, customers should carefully read the relevant disclosures,prospectuses and other documentation. "Moody's", "Standard & Poor's", and "Fitch" mentioned in this report are notregistered credit rating agencies in Japan unless Japan or "Nippon" is specifically designated in the name of the entity.Reports on Japanese listed companies not written by analysts of DSI are written by Deutsche Bank Group's analysts withthe coverage companies specified by DSI. Some of the foreign securities stated on this report are not disclosed accordingto the Financial Instruments and Exchange Law of Japan. Target prices set by Deutsche Bank's equity analysts are basedon a 12-month forecast period..??Korea: Distributed by Deutsche Securities Korea Co.??South Africa: Deutsche Bank AG Johannesburg is incorporated in the Federal Republic of Germany (Branch RegisterNumber in South Africa: 1998/003298/10).??Singapore: This report is issued by Deutsche Bank AG, Singapore Branch or Deutsche Securities Asia Limited, SingaporeBranch (One Raffles Quay #18-00 South Tower Singapore 048583, +65 6423 8001), which may be contacted in respectof any matters arising from, or in connection with, this report. Where this report is issued or promulgated by DeutscheBank in Singapore to a person who is not an accredited investor, expert investor or institutional investor (as defined in theapplicable Singapore laws and regulations), they accept legal responsibility to such person for its contents.??Taiwan: Information on securities/investments that trade in Taiwan is for your reference only. Readers shouldindependently evaluate investment risks and are solely responsible for their investment decisions. Deutsche Bank researchmay not be distributed to the Taiwan public media or quoted or used by the Taiwan public media without written consent.Information on securities/instruments that do not trade in Taiwan is for informational purposes only and is not to be


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construed as a recommendation to trade in such securities/instruments. Deutsche Securities Asia Limited, Taipei Branchmay not execute transactions for clients in these securities/instruments.??Qatar: Deutsche Bank AG in the Qatar Financial Centre (registered no. 00032) is regulated by the Qatar Financial CentreRegulatory Authority. Deutsche Bank AG - QFC Branch may undertake only the financial services activities that fall withinthe scope of its existing QFCRA license. Its principal place of business in the QFC: Qatar Financial Centre, Tower, WestBay, Level 5, PO Box 14928, Doha, Qatar. This information has been distributed by Deutsche Bank AG. Related financialproducts or services are only available only to Business Customers, as defined by the Qatar Financial Centre RegulatoryAuthority.??Russia: The information, interpretation and opinions submitted herein are not in the context of, and do not constitute, anyappraisal or evaluation activity requiring a license in the Russian Federation.

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David Folkerts-LandauGroup Chief Economist and Global Head of Research

Raj HindochaGlobal Chief Operating Officer

Research

Michael SpencerHead of APAC Research

Global Head of Economics

Steve PollardHead of Americas Research

Global Head of Equity Research

Anthony KlarmanGlobal Head ofDebt Research

Paul ReynoldsHead of EMEA

Equity Research

Dave ClarkHead of APAC

Equity Research

Pam FinelliGlobal Head of

Equity Derivatives Research

Andreas NeubauerHead of Research - Germany

Spyros MesomerisGlobal Head of Quantitative

and QIS Research

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