SEE APPENDIX I FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS Hong Kong Initiating Coverage 16 September 2013 MGM China The Chase For Yield; Initiate at BUY Initiate at BUY; TP HKD27.40. MGM represents a solid yield play with 5% and 6% forward yields for FY13 and FY14 backed by solid cashflow. On top of decent yields, our TP implies 18% upside on a positive re- rating over the next few quarters as the Street has not fully priced in the Cotai project. As a single-casino operator, MGM is the second cheapest trading at 12.6x of FY14 EV/EBITDA vs. the sector’s 13x. However, it has the second highest daily win per mass market table that is 20% above the sector. Initiate with BUY and TP of HKD27.40, based on SOTP valuation, at 12x FY14F EV/EBITDA for MGM Macau while MGM Cotai is expected to be worth HKD5.1 per share or 19% of our NAV estimate, based on 20% ROIC and 9% WACC. Generous dividends, solid cashflow. MGM paid out 95% of net profit in 2011 and 86% in 2012, compared to competitors such as Galaxy and Melco Crown that have yet to start paying dividends to shareholders. As at Jun 2013 it has net cash of about HKD2.5b. With HKD11.3b of credit line still undrawn, it remains well-funded for its Cotai investment. Cotai to be a game changer. By mid-2016, its single-casino image will be history with MGM Cotai onboard. Furthermore, at these levels the upside from MGM Cotai has not been fully priced by the Street. The project will house 1,600 hotel rooms (+275%), 500 gaming tables (117%) and 2,500 slot machines (183%). The casino will also have an atrium thrice the size of Bellagio. Piling work is about 70% complete and MGM hopes to hand over the site to the contractors by year-end. Market share firm under strong management. MGM’s market share inched up 0.9ppt YoY to 10% in 1H13 despite stiff competition from Cotai, bucking the decline seen by other peninsula operators. The opening of its new VIP gaming area on the second floor at the end of last year to meet rising junket demand led to a 10% increase in VIP rolling chip turnover YTD. Management has also striven to maximise returns on its gross floor area and enhance its non-gaming facilities to capture appeal. MGM China – Summary Earnings Table FYE Dec (HKDm) 2011A 2012A 2013F 2014F 2015F Revenue 20,294 21,774 24,660 27,976 32,061 EBITDA 4,933 5,310 6,165 6,994 8,015 Recurring Net Profit 3,279 4,941 5,098 5,718 6,476 Recurring Basic EPS (HKD) 0.9 1.2 1.3 1.5 1.7 EPS growth (%) n/a 38.2 12.5 12.2 13.3 DPS (HKD) 0.8 1.0 1.2 1.4 1.5 PER (x) 11.8 11.8 17.4 15.5 13.7 EV/EBITDA (x) 7.5 9.4 13.8 12.6 11.5 Div Yield (%) 8.0 7.3 5.2 5.8 6.6 P/BV (x) 8.7 9.0 12.4 10.7 9.2 Net Gearing (%) Net Cash Net Cash Net Cash Net Cash 37.8 ROE (%) 74.3 76.6 71.5 69.2 67.5 ROA (%) 25.8 30.7 31.4 27.7 24.7 Consensus Net Profit (HKDm) 5,160 5,819 6,249 Source: Company data, Maybank Kim Eng estimates Buy (new) Share price: HKD23.30 (as at close 13 Sep 13) Target price: HKD27.40 (new) Jeremy TAN [email protected](852) 2268 0635 YIN Shao Yang [email protected](602) 2297 8916 Stock Information Description: MGM China is a casino gaming resort developer and operator in the Greater China Region. Ticker: 2282 HK Shares Issued (m): 3,800 Market Cap (US$m): 11,418 3-mth Avg Daily Turnover (US$m): 12 HSI: 22,915 Free Float (%): 22 Major Shareholders: % MGM Resorts 51 Chiu King Ho 27 Historical Chart Performance: 52-week High/Low HKD24.20/HKD12.03 1-mth 3-mth 6-mth 1-yr YTD Absolute (%) 2.9 20.7 40.4 91.6 75.5 Relative (%) 1.2 11.0 38.8 77.3 74.3 0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0 45.0 Sep 12 Nov 12 Jan 13 Mar 13 May 13 Jul 13 Sep 13 PRICE PRICE REL. TO HANG SENG INDEX Source: Bloomberg
Transcript
SEE APPENDIX I FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS
Hong KongInitiating Coverage 16 September 2013
MGM China The Chase For Yield; Initiate at BUY
Initiate at BUY; TP HKD27.40. MGM represents a solid yield play with 5% and 6% forward yields for FY13 and FY14 backed by solid cashflow. On top of decent yields, our TP implies 18% upside on a positive re-rating over the next few quarters as the Street has not fully priced in the Cotai project. As a single-casino operator, MGM is the second cheapest trading at 12.6x of FY14 EV/EBITDA vs. the sector’s 13x. However, it has the second highest daily win per mass market table that is 20% above the sector. Initiate with BUY and TP of HKD27.40, based on SOTP valuation, at 12x FY14F EV/EBITDA for MGM Macau while MGM Cotai is expected to be worth HKD5.1 per share or 19% of our NAV estimate, based on 20% ROIC and 9% WACC.
Generous dividends, solid cashflow. MGM paid out 95% of net profit in 2011 and 86% in 2012, compared to competitors such as Galaxy and Melco Crown that have yet to start paying dividends to shareholders. As at Jun 2013 it has net cash of about HKD2.5b. With HKD11.3b of credit line still undrawn, it remains well-funded for its Cotai investment.
Cotai to be a game changer. By mid-2016, its single-casino image will be history with MGM Cotai onboard. Furthermore, at these levels the upside from MGM Cotai has not been fully priced by the Street. The project will house 1,600 hotel rooms (+275%), 500 gaming tables (117%) and 2,500 slot machines (183%). The casino will also have an atrium thrice the size of Bellagio. Piling work is about 70% complete and MGM hopes to hand over the site to the contractors by year-end.
Market share firm under strong management. MGM’s market share inched up 0.9ppt YoY to 10% in 1H13 despite stiff competition from Cotai, bucking the decline seen by other peninsula operators. The opening of its new VIP gaming area on the second floor at the end of last year to meet rising junket demand led to a 10% increase in VIP rolling chip turnover YTD. Management has also striven to maximise returns on its gross floor area and enhance its non-gaming facilities to capture appeal.
MGM China – Summary Earnings Table FYE Dec (HKDm) 2011A 2012A 2013F 2014F 2015F Revenue 20,294 21,774 24,660 27,976 32,061 EBITDA 4,933 5,310 6,165 6,994 8,015 Recurring Net Profit 3,279 4,941 5,098 5,718 6,476 Recurring Basic EPS (HKD) 0.9 1.2 1.3 1.5 1.7 EPS growth (%) n/a 38.2 12.5 12.2 13.3 DPS (HKD) 0.8 1.0 1.2 1.4 1.5 PER (x) 11.8 11.8 17.4 15.5 13.7 EV/EBITDA (x) 7.5 9.4 13.8 12.6 11.5 Div Yield (%) 8.0 7.3 5.2 5.8 6.6 P/BV (x) 8.7 9.0 12.4 10.7 9.2 Net Gearing (%) Net Cash Net Cash Net Cash Net Cash 37.8 ROE (%) 74.3 76.6 71.5 69.2 67.5 ROA (%) 25.8 30.7 31.4 27.7 24.7 Consensus Net Profit (HKDm) 5,160 5,819 6,249 Source: Company data, Maybank Kim Eng estimates
Buy (new)
Share price: HKD23.30 (as at close 13 Sep 13) Target price: HKD27.40 (new)
Description: MGM China is a casino gaming resort developer and operator in the Greater China Region. Ticker: 2282 HK Shares Issued (m): 3,800 Market Cap (US$m): 11,418 3-mth Avg Daily Turnover (US$m): 12 HSI: 22,915 Free Float (%): 22 Major Shareholders: % MGM Resorts 51 Chiu King Ho 27 Historical Chart
Cotai a game changer to help shed single-casino image. MGM Cotai spans over 71.8k sq m, which is more than 50% the size of MGM China’s casino in Macau. The project, estimated to cost HKD20b (USD2.6b), will house 1,600 hotel rooms (+275%), 500 gaming tables (+117%) and 2,500 slot machines (183%). Piling work at the site, which is east of the Sands Cotai Central site, is about 70% complete and MGM aims to hand over to the contractors by year-end. It has appointed China State Construction to build the complex at a cost of USD1.35b. MGM Cotai will include a large-scale atrium, which is three times the size of Las Vegas’s Bellagio, as well as an ultra-luxury and exclusive hotel called the Mansion. We view the development as positive for MGM, as its growth would no longer be constrained by just a single casino on the peninsula. It would also be able to capture a slice of the Cotai gaming pie with 85% of the new casino’s gross area being devoted to mass market amenities.
Figure 1: MGM gaming and hotel supply MGM Macau MGM Cotai Increase (%)Gaming table 427 500 117Slot machines 1,367 2,500 183Hotel rooms 582 1,600 275Source: Company, Maybank Kim Eng
Figure 2: MGM Cotai – view of construction site Figure 3: MGM Cotai – view from City of Dreams
Source: Macau Daily Times Source: APG Macau
Figure 4: Projected supply under development in Macau
Operator Ticker Property Hotel rooms Tables Slots Total cost
Strong yield. MGM has a dividend policy of semi-annual distribution of 35% of anticipated annual profits. On top of this, the company will consider distributing a special dividend subject to its cash flow requirements. Given the parent company MGM Resorts International (MGM US, Not Rated) 51% ownership of MGM China, from a dividend perspective, its interest is aligned with that of minority shareholders. The company has been a generous dividend payer, paying out 95% and 86% of net profit in 2011 and 2012, respectively. We forecast a 90% payout ratio, translating to FY13 and FY14 yields of 5% and 6%. We expect MGM’s dividend to be sustainable, supported by strong net cash hoard of HKD2.5b (as at Jun 2013) and an HKD11.3b credit line which could tapped for its Cotai expansion plans.
Figure 5: MGM yield spread over 10 year treasuries (%) Figure 6: MGM dividend yield and free cash flow yield (%)
Source: Bloomberg, Maybank Kim Eng Source: Bloomberg, Maybank Kim Eng
EV/EBITDA second cheapest in sector. MGM has traded in a wide band between 6x and 13x consensus forward EV/EBITDA since its IPO. While MGM currently trades on the high range of its historical EV/EBITDA and largely in line with the sector’s average of 13x, it remains the second cheapest stock in the sector on an EV/EBITDA yardstick. Having displayed strong operational performance and consistent dividend yield the stock has since re-rated from its trough. Hurdles from further positive re-rating include : i) MGM operates a single casino property which lacks mass market amenities, ii) the location of property on the Macau peninsula means MGM lacks exposure to growth in Cotai, and iii) it had to pay a hefty sub-concession premium to SJM.
Figure 7: MGM and Macau sector average forward EV/EBITDA (x)
Source: Bloomberg, Maybank Kim Eng
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A highly efficient operator. Average daily win per mass table, a key metric indicating a casino’s efficiency, shows that MGM ranks the second in the industry despite being a single casino operator. With table supply scarce due to the cap imposed by the Macau government, we note that MGM’s mass market table is 20% higher than the sector average. We see this as a key strength of MGM, as it is identifying and attracting clientele who are generating greater turnover at each table compared to its competitors. Given that MGM have room to raise minimum table bets and that not all tables are operating at full capacity, we think there is still capacity for growth in raising its table’s efficiency.
Figure 9: Average win per table per day (USD’000)
Source: Company data, Maybank Kim Eng estimates
Strong VIP networks, rolling chip up 10% YTD. MGM’s strength in the VIP segment lies in its strong relationship with junket operators and its direct VIP clientele. The company is now in cooperation with 14 junket operators and has been meticulously replacing the underperforming ones. It has successfully captured strong VIP demand (which beat consensus growth estimates) YTD, thanks to its newly expanded VIP gaming area on the second level of its casino floor. The VIP gaming floor was completed in Oct 2012 and has been well received by clients and junkets alike. In fact, MGM recorded a 10% increase in VIP rolling chip volume YTD August. This should help MGM offset short-term competition from Cotai, as VIP players still make up the majority of Macau’s GGR. MGM grew its GGR share despite increasing competition, and management is confident that its strategy of capturing premium customers will help it maintain its market share above 10%. Management has also consistently implemented strategies to maximise returns on its property and upgraded its facilities to appeal to customer tastes.
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MGM China Holdings Limited
Figure 10: MGM - VIP Rolling Chip (HKDm)
Source: Company data, Maybank Kim Eng
Securing the premium mass segment with exclusivity. Despite being a single casino operator, MGM has managed to capture an impressive share of the mass market. Its market share stood at 7.7% in 2Q13, up 0.6ppts YoY. It will be a challenge to maintain its share of the mass market given the lack of mass attractions, a small 1,593-sqm MICE floor area and a shift towards newly-opened Galaxy Macau and Sands Cotai Central. MGM has maintained its appeal by expanding its product offering through the opening of a new concept Chinese restaurant and constantly upgrading its mass market entertainment areas. Furthermore, MGM aims to retain its mass market base by targeting the premium mass segment through the Golden Lion Club, which segregates gamers into four different tiers, namely Supreme, Platinum, Elite and Gold members. Segmentation allows MGM to better manage its players by offering a more personalised service, thereby increasing customer loyalty. The Supreme Lounge offers a sense of private exclusivity for its premium mass customers. Targeted promotions to entice mass market patrons have been known to increase table drops. The company has also added 60 units of “Live Table Games” at its mass market floors.
Figure 11: Golden Lion rewards advertisement
Source: Company
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MGM China Holdings Limited
Figure 12: Total revenue breakdown, FY13F (HKDm) Figure 13: Total EBITDA breakdown, FY13F (HKDm)
Source: Company data, Maybank Kim Eng Source: Company data, Maybank Kim Eng
Holding firm against competition. MGM China’s market share remained steady at 10% in 1H13, up 1ppt YoY from 9.0%, despite competition from newly opened large-scale integrated resorts at Cotai. In contrast, its counterparts on the peninsula such as Wynn Macau (1128 HK, SELL, TP HKD18.60) and SJM Holdings (880 HK, BUY, TP HKD26.30) saw their market share decline. In our view, MGM’s focus on organic growth and operational efficiency has helped it withstand the intense rivalry. Its VIP business has also been a key area of growth despite a slowdown in the segment, with market share for 2Q13 rising to 11.3% from 9.9% in 1Q13. In the mass market segment, MGM’s market share was stable with a 0.6ppt increase to 7.7% in 2Q13. The company’s operational performance has also been consistently ranked among the top in the sector, judging from its high average daily win per mass market table.
Constant appeal. Despite operating a single casino, management has striven to maximise returns on its gross floor area and upgrade its non-gaming facilities to capture appeal. Some of the well-received projects include the renovation of the mass gaming floor, opening of VIP Sky Casino and Supreme Lounge. The expansion of the second-floor VIP gaming area, which was completed in Oct 2012, has drawn droves of high rollers to its property. The company is also looking to refurbish its high-limit Las Vegas room at its mass market gaming floor beginning in 3Q13, for completion in 4Q13.
Source: Company data, Maybank Kim Eng Source: Company data, Maybank Kim Eng
Figure 17: Market share by operator (%) Figure 18: Market share by geography (%)
Source: Company data, Maybank Kim Eng Source: Company data, Maybank Kim Eng
Riding on the MGM Hospitality’s luxury brand in China. MGM Hospitality’s (a subsidiary of MGM Resorts International) partnership with Diaoyutai, a renowned 300-year-old luxury hotel brand, to develop non-gaming luxury hotels with the MGM Resorts brand name, will help it reach out to the increasingly brand-conscious mainland consumers. The current brands under MGM Hospitality wing include Diaoyutai, Bellagio, MGM Grand and Skylofts. Latest projects include the completed MGM Grand Sanya and Diaoyutai Lama Temple. Other highly anticipated projects that will be rolled out in the next few years include the Bellagio in Shanghai and MGM Grand in Chengdu. We believe that the mainland clientele’s awareness of MGM Hospitality’s luxury brand will be positively influenced with a growing presence in China, which could consequently be beneficial to MGM China’s gaming properties in Macau (as direct casino advertising in China is not allowed).
Figure 19: MGM Hospitality’s expansion plans in China Project Details CompletionMGM Grand Sanya 675 rooms 2011Diaoyutai Beijing, Lama Temple 103 rooms 2012Bellagio Chengdu & Skyloft & Diaoyutai 45 suites 2014MGM Grand Tianjing & Skyloft 450 rooms, 50 suites 2015Bellagio Shanghai Bund hotel 200 rooms 2015Diaoyutai Hotel Huairou 120 rooms TBDMGM Grand Hangzhou & Skyloft 400 rooms TBDMGM Grand Chongqing 350 rooms TBDSource: Company, Maybank Kim Eng
Sands China, 17,874 , 21.0%
Galaxy, 15,760 , 18.5%
Wynn Macau, 9,720 , 11.4%
SJM, 22,410 , 26.3%
Melco Crown, 11,491 , 13.5%
MGM, 8,029 , 9.4%
Sands China, 18,194 , 21.1%
Galaxy, 16,002 , 18.6%
Wynn Macau, 9,104 , 10.6%
SJM, 21,025 , 24.4%
Melco Crown, 12,825 , 14.9%
MGM, 9,013 , 10.5%
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MGM China Holdings Limited
Figure 20: MGM Grand Sanya
Source: MGM Hospitality
Figure 21: Diaoyutai MGM Grand Lama Temple
Source: MGM Hospitality
Figure 22: Bellagio by MGM Shanghai
Source: MGM Hospitality
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MGM China Holdings Limited
Earnings forecasts
We forecast MGM’s EBITDA CAGR at 14.7% for the three years from FY13 to FY15, driven by organic growth and the completion of its second-floor VIP area as well as mass market floor enhancements. Our projections are in line with Bloomberg consensus estimates. We also expect EBITDA margins to remain stable at 25% with growth from the more profitable mass market segment offsetting the decline in earnings from the VIP segment. Management, too, has shown consistency in maintaining cost efficiency and profitability.
Figure 23: MGM – EBITDA growth (HKDm)
Source: Company data, Maybank Kim Eng
Figure 24: Earnings estimates (HKDm) Maybank KE Consensus Difference (%)
Net cash position. Cashflow has been strong, with MGM moving from a net gearing into a net cash position in 2011. We project that the company will remain in a net cash position in 2013; it had a robust net cash pile of about HKD2.5b as of Jun 2013. Its Cotai expansion project is well funded, with a remaining undrawn HKD11.3b credit line while the HKD4.3b term loan has been fully drawn down.
Downside risks to our forecast include: 1) a worsening of China’s macroeconomic conditions, resulting in a GGR slowdown; 2) a tighter credit environment; 3) loss of market share in the face of competition; 4) delays to the Cotai expansion project; and 5) other policy risks.
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MGM China Holdings Limited
Financial assumptions
Fundamental to our estimates is the assumption that MGM’s gaming sub-concession licence will expire on 31 Mar 2020 as scheduled. Future licence extension will be subjected to the Macau government’s approval, though it is reasonable to assume that it will be extended given the investments in Cotai that will only be completed by mid-2016. We also assume that contributions from MGM Cotai will commence upon its completion in mid-2016. MGM’s share of Macau’s GGR stood at 10.3% in FY11 and 9.5% in FY12. Our forecast for MGM’s market share stands at 9.5% for FY13 and 9.0% for FY14.
VIP turnover growth. We forecast annual VIP rolling chip turnover growth of 5% in both FY13 and FY14; in-line with our sector growth estimates. We assume a theoretical win rate of 2.85% (historical average 2008-12: 2.9%) to derive our VIP gross gaming revenue.
Mass market turnover growth. We forecast a YoY growth rate of 25% for MGM’s mass market drop in both FY13 and FY14. This compares with our forecast industry mass market GGR growth rate of 25% and 30% YoY for FY13 and FY14 respectively. We assume a theoretical win rate of 32% (historical average 2008-12: 24.3%; FY12: 29.9%) to derive our mass market gross gaming revenue, we note an increase trend in win rates due to premium customers buying chips directly from the cage rather than from tables.
Slot machine handle growth. For FY13 and FY14, we assume slot handle growth of 10% YoY. We also assume an average slot machine win rate of 6% (historical average 2008-12: 6.0%).
Junket commission rates. Going forward, we assume an average junket commission rate of 1.25% of VIP turnover or 44% of net wins. Between casino properties, average junket rates ranged from 40% to 47% of net wins.
Tax rates. MGM’s gaming tax is set at 39% of GGR (35% gaming tax, 1.6% contribution to a Macau public foundation and 2.4% to the Macau government) for the entire duration of its gaming concession. MGM is exempted from paying a complementary tax set at 12% of gaming pretax profit for five years until 2016, an exemption that could be granted an extension.
Dividends. The company has a dividend policy of semi-annual distribution of 35% of anticipated annual profits. A special dividend will depend on profitability and investment capital expenditure. We forecast an 90% payout ratio, translating to FY13 and FY14 yields of 5% and 6% respectively. Every 10% reduction in dividend payout ratio would lead to an approximate 0.6ppts decline in yield. MGM has declared the payment of HKD0.23 per share representing approximately 35% of profit before tax for the six months ended 30 Jun 13.
16 September 2013 Page 12 of 20
MGM China Holdings Limited
Valuation and recommendations
MGM Macau 12x of FY14 EV/EBITDA. We use the sum-of-the-parts valuation methodology to value MGM’s core business segments. We value individual segments using EV/EBITDA, a common valuation yardstick for industries characterised by continual and heavy capital expenditure as the gaming industry in Macau is during its growth stage. We value MGM Macau at 12x EV/EBITDA, taking into account its strong market position in Macau, good management track record, superior performance despite having just one casino and its strong dividend payout.
MGM Cotai worth HKD5.1 per share. The capital expenditure for MGM’s Cotai project is estimated at HKD20b. Assuming an ROIC of 20%, discount rate of 9% and terminal growth rate of 2%, we estimate the project will add HKD5.1 per share to MGM or 19% of our NAV estimate. We believe the completion of its Cotai project will give MGM the much-desired Cotai exposure it needs and allow it to shed its single-casino image. We initiate coverage on MGM with a BUY recommendation and TP of HKD27.40.
Figure 25: MGM – sum-of-the-parts valuation EBITDA EV/EBITDA EV Value/sh (HKD m) (x) (HKD m) (HKD) CommentMGM Macau 6,994 12 83,929 22.1 14F EBITDA Add: WACC: 9%MGM Cotai 19,238 5.1 ROIC: 20%Net cash / (Debt) 803 0.2 Target Price 20,042 27.4 Source: Maybank Kim Eng estimates
Figure 26: MGM Cotai – sensitivity analysis
Return on invested capital (ROIC) 10.0% 15.0% 20.0% 25.0% 30.0%
Source: Bloomberg, Maybank Kim Eng Source: Bloomberg, Maybank Kim Eng
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MGM China Holdings Limited
Appendix
Company background. MGM, located on the Macau peninsula, was completed on 18 Dec 2007 at a cost of USD1.25b. The casino operates under the sub-concession from SJM, purchased for a consideration of USD200m by MGM Resorts International (MGM US, Not Rated) and Ms Pansy Ho, daughter of Mr Stanley Ho. MGM operates a single five-star integrated casino and luxury hotel resort in Macau with over 1,367 slot machines, 427 gaming tables and 582 hotel rooms, spanning approximately 25,677sqm in area.
MGM China benefits from the synergistic partnership between MGM Resorts and Ms Ho. MGM Resorts is one of the leading gaming and hospitality companies in the world, operating a premium portfolio of integrated resorts, including Aria at CityCenter, Bellagio, MGM Grand, Mandalay Bay and The Mirage, along with several other casino and resort properties in the United States. MGM Resorts has licensed its international trademark rights for use in the Greater China Region, and will provide development services for new properties.
MGM differentiates itself by leveraging on its luxury brand name and focuses on providing a unique and exclusive gaming experience for its VIP clients, while at the same time maintaining a diversified base of mass market patrons.
Renowned brand name Strong management Strong relationship with junkets and VIP clients
Lack of mass market amenities Single casino may lose mass appeal Increased dependence on VIP segment
Opportunities Threats
Future expansion of MGM Cotai Organic growth Increasing its junket base and direct VIP
Intensifying competition Visitor shift to Cotai Regulatory and macro risks
Source: Maybank Kim Eng
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MGM China Holdings Limited
Figure 32: Selected members of MGM’s board and management
Chiu King Pansy Catilina Ho Pansy Catilina Chiu King Ho, aged 50, is the Chairperson, an Executive Director and a member of the Remuneration Committee of MGM China Holdings Limited. Ms. Ho is the Managing Director of Shun Tak Holdings Limited, a leading business conglomerate listed on the Hong Kong Stock Exchange, a position she has held since 1999. She has served as a Director of MGM Grand Paradise since June 1, 2005. Ms. Ho is also a director of a number of privately held companies, including Grand Paradise Macau Limited, Grand Paradise Grupo S.A., New Corporate Enterprises Limited, Bright Elite Holdings Limited and Grand Paradise Group (HK) Limited. In addition, Ms. Ho is Vice Chairman of Macau International Airport Company Limited and an Independent Non-executive Director of Sing Tao News Corporation Limited which is listed on the Hong Kong Stock Exchange. She is also a Standing Committee Member of the Chinese People’s Political Consultative Conference of Beijing, a Standing Committee Member of the All-China Federation of Industry and Commerce, a Vice President of the Chamber of Tourism of the All-China Federation of Industry and Commerce and a Vice Chairperson of the China Society for Promotion of the Guangcai Program.
James Joseph Murren
James Joseph Murren, aged 51, is the Co-Chairperson and an Executive Director of MGM China Holdings Limited. Mr. Murren is the Chairman and Chief Executive Officer of MGM Resorts International. He has served as a Director of MGM Grand Paradise since January 19, 2010. In 1998, Mr. Murren joined MGM Grand Inc. (a predecessor of MGM Resorts International) as Chief Financial Officer and a member of the board. He completed significant acquisitions over the following seven years, overseeing the transformation of MGM Resorts International into one of the world’s leading gaming companies. In 1999, the board promoted Mr. Murren to President and then to Chief Operating Officer in 2007. As Chief Financial Officer, Mr. Murren directed the implementation of an extensive reorganization of MGM Grand Inc. and started the development of CityCenter. Before he joined MGM Grand Inc., Mr. Murren served as a Managing Director of US Equity Research at Deutsche Bank AG. Mr. Murren graduated with a Bachelor’s degree in art history and urban studies from Trinity College, Hartford in 1983. Prior to joining the board of MGM Grand Paradise, Mr. Murren was involved in the design, development, financing, management and operations of MGM Grand Paradise.
William Joseph Hornbuckle
William Joseph Hornbuckle, aged 55, is an Executive Director and a member of the Remuneration Committee of MGM China Holdings Limited. Mr. Hornbuckle is the President and Chief Marketing Officer for MGM Resorts International. He provides corporate oversight for all marketing functions across MGM Resorts International’s properties including MGM MACAU and executes its strategic plan that included expanding its presence domestically and internationally. Mr. Hornbuckle has served as a Director of MGM Grand Paradise since November 16, 2009. From 2005 until August 2009, Mr. Hornbuckle served as President and Chief Operating Officer of Mandalay Bay Resort & Casino in Las Vegas. He previously served as President and Chief Operating Officer of MGM MIRAGE-Europe, where he worked on the development of the company’s gaming operations in the United Kingdom. He also served as President and Chief Operating Officer of MGM Grand Hotel & Casino and of Caesars Palace, Las Vegas. He spent the majority of his earlier career with Mirage Resorts Inc. in various senior management positions, including the Vice President of Hotel Operations of Golden Nugget, the Vice President of Hotel Operations of MGM Mirage, the President of Laughlin, the Executive Vice President and Chief Operating Officer of Treasure Island and the Executive Vice President of Operations of MGM Grand, from 1986 to 1998. He obtained a Bachelor’s degree in hotel administration from the University of Nevada, Las Vegas. Prior to joining the board of MGM Grand Paradise, Mr. Hornbuckle was involved in the design, development, financing, management and operations of MGM Grand Paradise.
Grant R. Bowie
Grant R. Bowie, aged 55, is the Chief Executive Officer and an Executive Director of MGM China Holdings Limited. He has been the President of MGM Grand Paradise since August 1, 2008. With over two decades of experience working in the hospitality industry, Mr. Bowie joined our Company after approximately four years as the President and General Manager of Wynn Resorts (Macau) S.A.. Prior to that, he contributed to the growth and development of Park Place Entertainment Corporation’s Jupiter operations in Australia from 1987 to 2003. In his 16 years with Park Place Entertainment, he held senior positions in casino, general finance and hotel operations before being appointed General Manager of both Park Place Entertainment’s properties in Australia. Mr. Bowie is also an AdjunctProfessor in Tourism and Leisure Management at the University of Queensland. Mr. Bowie holds a Bachelor’s degree in commerce from the University of Otago in New Zealand. Source: Company
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MGM China Holdings Limited
Figure 33: Location of MGM casinos
Source: Various, Maybank Kim Eng Legend: Yellow – completed; Red – under development
HONG KONG / CHINA Howard WONG Head of Research (852) 2268 0648 [email protected] Oil & Gas - Regional Alexander LATZER (852) 2268 0647 [email protected] Metals & Mining - Regional Jacqueline KO, CFA (852) 2268 0633 [email protected] Consumer Terence LOK (852) 2268 0630 [email protected] Consumer Jeremy TAN (852) 2268 0635 [email protected] Gaming Karen KWAN (852) 2268 0640 [email protected] HK & China Property Philip TSE (852) 2268 0643 [email protected] HK & China Property Warren LAU (852) 2268 0644 [email protected] Technology – Regional
INDIA Jigar SHAH Head of Research (91) 22 6623 2601 [email protected] Oil & Gas Automobile Cement Anubhav GUPTA (91) 22 6623 2605 [email protected] Metal & Mining Capital goods Property Urmil SHAH (91) 22 6623 2606 [email protected] Technology Media Varun VARMA (91) 226623 2611 [email protected] Banking
SINGAPORE Gregory YAP Head of Research (65) 6432 1450 [email protected] Technology & Manufacturing Telcos Wilson LIEW (65) 6432 1454 [email protected] Property Developers James KOH (65) 6432 1431 [email protected] Consumer - Regional YEAK Chee Keong, CFA (65) 6432 1460 [email protected] Offshore & Marine Alison FOK (65) 6432 1447 [email protected] Small & Mid Caps Construction ONG Kian Lin (65) 6432 1470 [email protected] S-REITs Wei Bin (65) 6432 1455 [email protected] Commodity Logistics S-chips Derrick HENG (65) 6432 1446 [email protected] Transport (Land, Shipping & Aviation) John CHEONG (65) 6432 1461 [email protected] Small & Mid Caps Healthcare
INDONESIA Lucky ARIESANDI, CFA (62) 21 2557 1127 [email protected] Base metals Mining Oil & Gas Wholesale Pandu ANUGRAH (62) 21 2557 1137 [email protected] Automotive Heavy equipment Plantation Toll road Rahmi MARINA (62) 21 2557 1128 [email protected] Banking Multifinance Adi N. WICAKSONO (62) 21 2557 1128 [email protected] Generalist Anthony YUNUS (62) 21 2557 1139 [email protected] Cement Infrastructure Property
PHILIPPINES Luz LORENZO Head of Research (63) 2 849 8836 [email protected] Strategy Laura DY-LIACCO (63) 2 849 8840 [email protected] Utilities Conglomerates Telcos Lovell SARREAL (63) 2 849 8841 [email protected] Consumer Media Cement Luz LORENZO (63) 2 849 8836 [email protected] Conglomerates Property Ports/ Logistics Gaming Katherine TAN (63) 2 849 8843 [email protected] Banks Construction Ramon ADVIENTO (63) 2 849 8845 [email protected] Mining
THAILAND Sukit UDOMSIRIKUL Head of Research (66) 2658 6300 ext 5090 [email protected]
Maria LAPIZ Head of Institutional Research Dir (66) 2257 0250 | (66) 2658 6300 ext 1399 [email protected] Consumer/ Big Caps
VIETNAM Michael KOKALARI, CFA Head of Research (84) 838 38 66 47 [email protected] Strategy Nguyen Thi Ngan Tuyen (84) 844 55 58 88 x 8081 [email protected] Food and Beverage Oil and Gas Hang Vu (84) 844 55 58 88 x 8087 [email protected] Banking Trinh Thi Ngoc Diep (84) 844 55 58 88 x 8242 [email protected] Technology Utilities Construction Dang Thi Kim Thoa (84) 844 55 58 88 x 8083 [email protected] Consumer Nguyen Trung Hoa +84 844 55 58 88 x 8088 [email protected] Steel Sugar Resources
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MGM China Holdings Limited
APPENDIX I: TERMS FOR PROVISION OF REPORT, DISCLAIMERS AND DISCLOSURES
DISCLAIMERS
This research report is prepared for general circulation and for information purposes only and under no circumstances should it be considered or intended as an offer to sell or a solicitation of an offer to buy the securities referred to herein. Investors should note that values of such securities, if any, may fluctuate and that each security’s price or value may rise or fall. Opinions or recommendations contained herein are in form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related information extracted from the relevant jurisdiction’s stock exchange in the equity analysis. Accordingly, investors’ returns may be less than the original sum invested. Past performance is not necessarily a guide to future performance. This report is not intended to provide personal investment advice and does not take into account the specific investment objectives, the financial situation and the particular needs of persons who may receive or read this report. Investors should therefore seek financial, legal and other advice regarding the appropriateness of investing in any securities or the investment strategies discussed or recommended in this report.
The information contained herein has been obtained from sources believed to be reliable but such sources have not been independently verified by Maybank Investment Bank Berhad, its subsidiary and affiliates (collectively, “MKE”) and consequently no representation is made as to the accuracy or completeness of this report by MKE and it should not be relied upon as such. Accordingly, MKE and its officers, directors, associates, connected parties and/or employees (collectively, “Representatives”) shall not be liable for any direct, indirect or consequential losses or damages that may arise from the use or reliance of this report. Any information, opinions or recommendations contained herein are subject to change at any time, without prior notice.
This report may contain forward looking statements which are often but not always identified by the use of words such as “anticipate”, “believe”, “estimate”, “intend”, “plan”, “expect”, “forecast”, “predict” and “project” and statements that an event or result “may”, “will”, “can”, “should”, “could” or “might” occur or be achieved and other similar expressions. Such forward looking statements are based on assumptions made and information currently available to us and are subject to certain risks and uncertainties that could cause the actual results to differ materially from those expressed in any forward looking statements. Readers are cautioned not to place undue relevance on these forward-looking statements. MKE expressly disclaims any obligation to update or revise any such forward looking statements to reflect new information, events or circumstances after the date of this publication or to reflect the occurrence of unanticipated events.
MKE and its officers, directors and employees, including persons involved in the preparation or issuance of this report, may, to the extent permitted by law, from time to time participate or invest in financing transactions with the issuer(s) of the securities mentioned in this report, perform services for or solicit business from such issuers, and/or have a position or holding, or other material interest, or effect transactions, in such securities or options thereon, or other investments related thereto. In addition, it may make markets in the securities mentioned in the material presented in this report. MKE may, to the extent permitted by law, act upon or use the information presented herein, or the research or analysis on which they are based, before the material is published. One or more directors, officers and/or employees of MKE may be a director of the issuers of the securities mentioned in this report.
This report is prepared for the use of MKE’s clients and may not be reproduced, altered in any way, transmitted to, copied or distributed to any other party in whole or in part in any form or manner without the prior express written consent of MKE and MKE and its Representatives accepts no liability whatsoever for the actions of third parties in this respect.
This report is not directed to or intended for distribution to or use by any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. This report is for distribution only under such circumstances as may be permitted by applicable law. The securities described herein may not be eligible for sale in all jurisdictions or to certain categories of investors. Without prejudice to the foregoing, the reader is to note that additional disclaimers, warnings or qualifications may apply based on geographical location of the person or entity receiving this report.
Malaysia
Opinions or recommendations contained herein are in the form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related information extracted from Bursa Malaysia Securities Berhad in the equity analysis.
Singapore
This report has been produced as of the date hereof and the information herein may be subject to change. Maybank Kim Eng Research Pte. Ltd. (“Maybank KERPL”) in Singapore has no obligation to update such information for any recipient. For distribution in Singapore, recipients of this report are to contact Maybank KERPL in Singapore in respect of any matters arising from, or in connection with, this report. If the recipient of this report is not an accredited investor, expert investor or institutional investor (as defined under Section 4A of the Singapore Securities and Futures Act), Maybank KERPL shall be legally liable for the contents of this report, with such liability being limited to the extent (if any) as permitted by law.
Thailand
The disclosure of the survey result of the Thai Institute of Directors Association (“IOD”) regarding corporate governance is made pursuant to the policy of the Office of the Securities and Exchange Commission. The survey of the IOD is based on the information of a company listed on the Stock Exchange of Thailand and the market for Alternative Investment disclosed to the public and able to be accessed by a general public investor. The result, therefore, is from the perspective of a third party. It is not an evaluation of operation and is not based on inside information. The survey result is as of the date appearing in the Corporate Governance Report of Thai Listed Companies. As a result, the survey may be changed after that date. Maybank Kim Eng Securities (Thailand) Public Company Limited (“MBKET”) does not confirm nor certify the accuracy of such survey result.
Except as specifically permitted, no part of this presentation may be reproduced or distributed in any manner without the prior written permission of MBKET. MBKET accepts no liability whatsoever for the actions of third parties in this respect.
US
This research report prepared by MKE is distributed in the United States (“US”) to Major US Institutional Investors (as defined in Rule 15a-6 under the Securities Exchange Act of 1934, as amended) only by Maybank Kim Eng Securities USA Inc (“Maybank KESUSA”), a broker-dealer registered in the US (registered under Section 15 of the Securities Exchange Act of 1934, as amended). All responsibility for the distribution of this report by Maybank KESUSA in the US shall be borne by Maybank KESUSA. All resulting transactions by a US person or entity should be effected through a registered broker-dealer in the US. This report is not directed at you if MKE is prohibited or restricted by any legislation or regulation in any jurisdiction from making it available to you. You should satisfy yourself before reading it that Maybank KESUSA is permitted to provide research material concerning investments to you under relevant legislation and regulations.
UK
This document is being distributed by Maybank Kim Eng Securities (London) Ltd (“Maybank KESL”) which is authorized and regulated, by the Financial Services Authority and is for Informational Purposes only. This document is not intended for distribution to anyone defined as a Retail Client under the Financial Services and Markets Act 2000 within the UK. Any inclusion of a third party link is for the recipients convenience only, and that the firm does not take any responsibility for its comments or accuracy, and that access to such links is at the individuals own risk. Nothing in this report should be considered as constituting legal, accounting or tax advice, and that for accurate guidance recipients should consult with their own independent tax advisers.
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MGM China Holdings Limited
DISCLOSURES Legal Entities Disclosures
Malaysia: This report is issued and distributed in Malaysia by Maybank Investment Bank Berhad (15938-H) which is a Participating Organization of Bursa Malaysia Berhad and a holder of Capital Markets and Services License issued by the Securities Commission in Malaysia. Singapore: This material is issued and distributed in Singapore by Maybank KERPL (Co. Reg No 197201256N) which is regulated by the Monetary Authority of Singapore. Indonesia: PT Kim Eng Securities (“PTKES”) (Reg. No. KEP-251/PM/1992) is a member of the Indonesia Stock Exchange and is regulated by the BAPEPAM LK. Thailand: MBKET (Reg. No.0107545000314) is a member of the Stock Exchange of Thailand and is regulated by the Ministry of Finance and the Securities and Exchange Commission. Philippines: Maybank ATRKES (Reg. No.01-2004-00019) is a member of the Philippines Stock Exchange and is regulated by the Securities and Exchange Commission. Vietnam: Maybank Kim Eng Securities JSC (License Number: 71/UBCK-GP) is licensed under the State Securities Commission of Vietnam. Hong Kong: KESHK (Central Entity No AAD284) is regulated by the Securities and Futures Commission. India: Kim Eng Securities India Private Limited (“KESI”) is a participant of the National Stock Exchange of India Limited (Reg No: INF/INB 231452435) and the Bombay Stock Exchange (Reg. No. INF/INB 011452431) and is regulated by Securities and Exchange Board of India. KESI is also registered with SEBI as Category 1 Merchant Banker (Reg. No. INM 000011708) US: Maybank KESUSA is a member of/ and is authorized and regulated by the FINRA – Broker ID 27861. UK: Maybank KESL (Reg No 2377538) is authorized and regulated by the Financial Services Authority.
Disclosure of Interest Malaysia: MKE and its Representatives may from time to time have positions or be materially interested in the securities referred to herein and may further act as market maker or may have assumed an underwriting commitment or deal with such securities and may also perform or seek to perform investment banking services, advisory and other services for or relating to those companies.
Singapore: As of 16 September 2013, Maybank KERPL and the covering analyst do not have any interest in any companies recommended in this research report.
Thailand: MBKET may have a business relationship with or may possibly be an issuer of derivative warrants on the securities /companies mentioned in the research report. Therefore, Investors should exercise their own judgment before making any investment decisions. MBKET, its associates, directors, connected parties and/or employees may from time to time have interests and/or underwriting commitments in the securities mentioned in this report.
Hong Kong: KESHK may have financial interests in relation to an issuer or a new listing applicant referred to as defined by the requirements under Paragraph 16.5(a) of the Hong Kong Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission.
As of 16 September 2013, KESHK and the authoring analyst do not have any interest in any companies recommended in this research report.
MKE may have, within the last three years, served as manager or co-manager of a public offering of securities for, or currently may make a primary market in issues of, any or all of the entities mentioned in this report or may be providing, or have provided within the previous 12 months, significant advice or investment services in relation to the investment concerned or a related investment and may receive compensation for the services provided from the companies covered in this report.
OTHERS Analyst Certification of Independence
The views expressed in this research report accurately reflect the analyst’s personal views about any and all of the subject securities or issuers; and no part of the research analyst’s compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in the report.
Reminder
Structured securities are complex instruments, typically involve a high degree of risk and are intended for sale only to sophisticated investors who are capable of understanding and assuming the risks involved. The market value of any structured security may be affected by changes in economic, financial and political factors (including, but not limited to, spot and forward interest and exchange rates), time to maturity, market conditions and volatility and the credit quality of any issuer or reference issuer. Any investor interested in purchasing a structured product should conduct its own analysis of the product and consult with its own professional advisers as to the risks involved in making such a purchase.
No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior consent of MKE.
Definition of Ratings
Maybank Kim Eng Research uses the following rating system:
BUY Return is expected to be above 10% in the next 12 months (excluding dividends)
HOLD Return is expected to be between - 10% to +10% in the next 12 months (excluding dividends)
SELL Return is expected to be below -10% in the next 12 months (excluding dividends)
Applicability of Ratings
The respective analyst maintains a coverage universe of stocks, the list of which may be adjusted according to needs. Investment ratings are only applicable to the stocks which form part of the coverage universe. Reports on companies which are not part of the coverage do not carry investment ratings as we do not actively follow developments in these companies.
Some common terms abbreviated in this report (where they appear):
Adex = Advertising Expenditure FCF = Free Cashflow PE = Price Earnings BV = Book Value FV = Fair Value PEG = PE Ratio To Growth CAGR = Compounded Annual Growth Rate FY = Financial Year PER = PE Ratio Capex = Capital Expenditure FYE = Financial Year End QoQ = Quarter-On-Quarter CY = Calendar Year MoM = Month-On-Month ROA = Return On Asset DCF = Discounted Cashflow NAV = Net Asset Value ROE = Return On Equity DPS = Dividend Per Share NTA = Net Tangible Asset ROSF = Return On Shareholders’ Funds EBIT = Earnings Before Interest And Tax P = Price WACC = Weighted Average Cost Of Capital EBITDA = EBIT, Depreciation And Amortisation P.A. = Per Annum YoY = Year-On-Year EPS = Earnings Per Share PAT = Profit After Tax YTD = Year-To-Date EV = Enterprise Value PBT = Profit Before Tax
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MGM China Holdings Limited
Malaysia Maybank Investment Bank Berhad (A Participating Organisation of Bursa Malaysia Securities Berhad) 33rd Floor, Menara Maybank, 100 Jalan Tun Perak, 50050 Kuala Lumpur Tel: (603) 2059 1888; Fax: (603) 2078 4194
Singapore Maybank Kim Eng Securities Pte Ltd Maybank Kim Eng Research Pte Ltd 9 Temasek Boulevard #39-00 Suntec Tower 2 Singapore 038989 Tel: (65) 6336 9090 Fax: (65) 6339 6003
London Maybank Kim Eng Securities (London) Ltd 6/F, 20 St. Dunstan’s Hill London EC3R 8HY, UK Tel: (44) 20 7621 9298 Dealers’ Tel: (44) 20 7626 2828 Fax: (44) 20 7283 6674
New York Maybank Kim Eng Securities USA Inc 777 Third Avenue, 21st Floor New York, NY 10017, U.S.A. Tel: (212) 688 8886 Fax: (212) 688 3500
Stockbroking Business: Level 8, Tower C, Dataran Maybank, No.1, Jalan Maarof 59000 Kuala Lumpur Tel: (603) 2297 8888 Fax: (603) 2282 5136
Hong Kong Kim Eng Securities (HK) Ltd Level 30, Three Pacific Place, 1 Queen’s Road East, Hong Kong Tel: (852) 2268 0800 Fax: (852) 2877 0104
Indonesia PT Kim Eng Securities Plaza Bapindo Citibank Tower 17th Floor Jl Jend. Sudirman Kav. 54-55 Jakarta 12190, Indonesia
Tel: (62) 21 2557 1188 Fax: (62) 21 2557 1189
India Kim Eng Securities India Pvt Ltd 2nd Floor, The International 16, Maharishi Karve Road, Churchgate Station, Mumbai City - 400 020, India Tel: (91).22.6623.2600 Fax: (91).22.6623.2604
Philippines Maybank ATR Kim Eng Securities Inc. 17/F, Tower One & Exchange Plaza Ayala Triangle, Ayala Avenue Makati City, Philippines 1200 Tel: (63) 2 849 8888 Fax: (63) 2 848 5738
Thailand Maybank Kim Eng Securities (Thailand) Public Company Limited 999/9 The Offices at Central World, 20th - 21st Floor, Rama 1 Road Pathumwan, Bangkok 10330, Thailand Tel: (66) 2 658 6817 (sales) Tel: (66) 2 658 6801 (research)
Vietnam In association with
Maybank Kim Eng Securities JSC 1st Floor, 255 Tran Hung Dao St. District 1 Ho Chi Minh City, Vietnam Tel : (84) 844 555 888 Fax : (84) 838 38 66 39
Saudi Arabia In association with
Anfaal Capital Villa 47, Tujjar Jeddah Prince Mohammed bin Abdulaziz Street P.O. Box 126575 Jeddah 21352 Tel: (966) 2 6068686 Fax: (966) 26068787
South Asia Sales Trading Kevin FOY [email protected] Tel: (65) 6336-5157 US Toll Free: 1-866-406-7447
North Asia Sales Trading Eddie LAU [email protected] Tel: (852) 2268 0800 US Toll Free: 1 866 598 2267
