Khmer Gaming King

Transcription

Khmer Gaming King

Gaming HONG KONG
March 21, 2013
COMPANY NOTE
NagaCorp Ltd
3918 HK / 3918.HK
Market Cap
Avg Daily Turnover
Free Float
Current
HK$6.13
Target
HK$7.81
US$1,802m
US$8.42m
58.0%
Previous Target
HK$13,989m
HK$65.30m
2,282 m shares
Up/downside
LONG TERM
N/A
27.4%
Conviction|
Notes from the Field
SHORT TERM (3 MTH)
|
Khmer Gaming King
NagaCorp operates the leading casino in Cambodia and has
multi-year rerating potential from its monopoly in Phnom Penh
supported by strong economic growth in Indochina and new capacity
from 2016 to boost its gaming and non-gaming businesses.
We initiate coverage with an
Outperform rating and a target price
based on 14x CY14 EV/EBITDA, on
par with our target for Sands China.
Including a dividend yield of 7%,
returns could total 34%. Strongerthan-expected gaming revenue and
EBITDA growth are catalysts.
Michael Ting
T (852) 25321121
E [email protected]
Company Visit
Expert Opinion
Channel Check
Customer Views
Casino monopoly
“The company’s corporate
vision is to become the
undisputed entertainment
destination in Indochina.”
– Timothy McNally,
Chairman
NagaCorp operates NagaWorld, an
integrated gaming resort in central
Phnom Penh. It has a 70-year casino
licence until 2065 and a 40-year
casino monopoly within a 200 km
radius of Phnom Penh until 2035.
NagaWorld offers diversified gaming
with 60% of its gaming revenue
coming from mass+slots, 34% from
VIP and the remainder from F&B,
hotel, retail and entertainment
facilities. NagaCorp is continuously
extending its junket outreach in order
to attract VIP players from outside
Indochina.
Favourable Indochina
macros
Some 35-40% of NagaWorld’s massgaming visitors are from Vietnam. We
Price Close
193
181
169
157
145
133
121
109
97
85
73
6.2
5.2
4.2
Vol m
3.2
400
2.2
300
200
100
Sep-12
Dec-12
52-week share price range
6.13
6.85
2.68
7.81
Current
Target
Naga2 to fuel growth
NagaCorp is expected to open its
second property, Naga2, in 2016.
Naga2 is being built next to the
current NagaWorld complex and will
result in a 200% increase in gaming
tables, 145% increase in hotel rooms,
50x increase in retail space, and 6x
increase in MICE facilities. Naga2’s
US$369m capex will be privately
funded by NagaCorp’s founder and
CEO, Dr. Chen Lip Keong, sparing the
listed company from capex costs and
keeping it debt-free. Naga2 forms
roughly 26% of our equity value for
the company, at HK$2.05/share.
Financial Summary
Relative to HSI (RHS)
7.2
Mar-12
Jun-12
Source: Bloomberg
believe that continued tourism
growth to Cambodia (+24% in 2012)
along with strong economic growth in
Indochina (7.1% average growth from
2013 to 2015) bodes well for gaming
operations in the region. Travel
convenience
and
infrastructure
improvements in Phnom Penh, along
with an established gaming and
non-gaming track record should
continue to shape NagaWorld into a
preferred gaming destination in the
region.
Revenue (US$m)
Operating EBITDA (US$m)
Net Profit (US$m)
Core EPS (US$)
Core EPS Growth
FD Core P/E (x)
DPS (US$)
Dividend Yield
EV/EBITDA (x)
P/FCFE (x)
Net Gearing
P/BV (x)
Recurring ROE
% Change In Core EPS Estimates
CIMB/consensus EPS (x)
Dec-11A
223.8
110.3
92.0
0.044
109%
17.87
0.031
3.91%
14.32
30.08
(18.4%)
4.66
27.8%
Dec-12A
278.8
138.6
113.1
0.054
23%
20.00
0.038
4.86%
11.34
24.41
(18.2%)
4.09
30.0%
Dec-13F
333.2
165.3
138.5
0.063
17%
21.37
0.043
5.43%
8.87
22.83
(43.7%)
3.07
28.0%
Dec-14F
404.5
200.0
171.2
0.075
18%
17.75
0.053
6.71%
7.46
18.62
(47.8%)
2.77
27.7%
Dec-15F
491.9
242.1
211.2
0.093
23%
14.39
0.065
8.28%
5.88
14.89
(52.2%)
2.48
30.7%
0.93
SOURCE: CIMB, COMPANY REPORTS
IMPORTANT DISCLOSURES, INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT.
Designed by Eight, Powered by EFA
NagaCorp Ltd
March 21, 2013
PEER COMPARISON
Research Coverage
Bloomberg Code
1128 HK
880 HK
1928 HK
3918 HK
2282 HK
27 HK
Wynn Macau
SJM Holdings
Sands China
NagaCorp Ltd
MGM China Holdings
Galaxy Entertainment
Market
HK
HK
HK
HK
HK
HK
Recommendation
NEUTRAL
OUTPERFORM
OUTPERFORM
OUTPERFORM
OUTPERFORM
OUTPERFORM
Rolling P/BV (x)
Mkt Cap US$m
13,699
13,665
39,693
1,802
8,194
17,854
Price
20.50
19.12
38.25
6.13
16.74
32.95
Jan-11
Jan-12
Target Price
22.42
23.62
41.95
7.81
19.81
36.81
Upside
9.4%
23.5%
9.7%
27.4%
18.4%
11.7%
Rolling FD P/E (x)
40
50
35
45
40
30
35
25
30
20
25
15
20
15
10
10
5
5
0
Jan-09
Jan-10
Jan-11
Jan-12
0
Jan-09
Jan-13
Wynn Macau
SJM Holdings
Sands China
NagaCorp Ltd
MGM China Holdings
Peer Aggregate: P/BV vs Recurring ROE
Jan-10
Jan-13
Wynn Macau
SJM Holdings
NagaCorp Ltd
MGM China Holdings
Sands China
Peer Aggregate: FD P/E vs FD EPS Growth
9
45%
200
1,500%
8
40%
180
1,050%
7
35%
160
600%
6
30%
140
150%
120
-300%
100
-750%
5
25%
4
20%
3
15%
2
1
0
Jan-09
80
-1,200%
60
-1,650%
10%
40
-2,100%
5%
20
0%
Jan-10
Jan-11
Rolling P/BV (x) (lhs)
Jan-12
Jan-13
0
Jan-09
Jan-14
Recurring ROE (rhs)
-2,550%
-3,000%
Jan-10
Jan-11
Jan-12
Rolling FD P/E (x) (lhs)
Jan-13
Jan-14
Fully Diluted EPS Growth (rhs)
Valuation
Wynn Macau
SJM Holdings
Sands China
NagaCorp Ltd
MGM China Holdings
P/E (FD) (x)
Dec-12
Dec-13
15.94
14.33
15.83
13.51
32.22
21.74
20.00
21.37
14.04
12.45
19.51
16.32
P/BV (x)
Dec-13
9.60
4.63
6.68
3.07
7.38
4.48
Dec-14
13.85
12.17
16.22
17.75
11.11
14.31
Dec-12
14.44
5.31
7.13
4.09
10.76
6.22
Dec-14
3.4%
11.0%
34.0%
20.4%
12.1%
14.0%
Recurring ROE
Dec-12
Dec-13
117.1%
80.5%
36.3%
36.9%
22.2%
31.7%
30.0%
28.0%
87.8%
70.3%
40.6%
33.3%
Dec-14
7.13
4.12
5.81
2.77
5.39
3.40
Dec-12
12.92
11.75
22.28
11.34
11.52
14.16
EV/EBITDA (x)
Dec-13
11.67
9.74
17.05
8.87
9.37
11.56
Dec-14
11.14
8.66
13.19
7.46
8.02
9.26
Dec-14
59.1%
36.1%
38.3%
27.7%
56.1%
28.1%
Dividend Yield
Dec-12
Dec-13
3.14%
3.49%
4.71%
5.67%
3.66%
3.91%
4.86%
5.43%
6.09%
4.01%
0.00%
0.00%
Dec-14
3.61%
6.29%
4.01%
6.71%
4.50%
0.00%
Growth and Returns
Wynn Macau
SJM Holdings
Sands China
NagaCorp Ltd
MGM China Holdings
Fully Diluted
Dec-12
12.7%
29.7%
8.6%
-10.7%
38.2%
136.6%
EPS Growth
Dec-13
11.2%
17.2%
48.2%
-6.4%
12.7%
19.6%
Calculations are performed using EFA™ Monthly Interpolated Annualisation and Aggregation algorithms to December year ends
2
NagaCorp Ltd
March 21, 2013
BY THE NUMBERS
Share price info
Share px perf. (%)
Relative
Absolute
1M
9.2
6.2
3M
32.3
31
Major shareholders
Dr. Chen Lip Keong
12M
60.4
67
% held
41.7
OSK Investment Bank
7.0
Ameriprise Financial
4.6
P/BV vs Recurring ROE
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
Jan-09
FD Core P/E vs FD Core EPS Growth
30.5%
30.0%
29.5%
29.0%
28.5%
28.0%
27.5%
27.0%
26.5%
26.0%
Jan-10
Jan-11
Jan-12
Jan-13
Rolling P/BV (x) (lhs)
Jan-14
Recurring ROE (rhs)
25
120%
20
92%
15
64%
10
36%
5
8%
0
Jan-09
-20%
Jan-10
Jan-11
Jan-12
Rolling FD Core P/E (x) (lhs)
Jan-13
Jan-14
FD Core EPS Growth (rhs)
Profit & Loss
Revenue growth fuelled by
stronger visitor arrivals in
Cambodia, capacity
expansion, and higher
per-table buy-ins.
(US$m)
Total Net Revenues
Gross Profit
Operating EBITDA
Depreciation And Amortisation
Operating EBIT
Total Financial Income/(Expense)
Total Pretax Income/(Loss) from Assoc.
Total Non-Operating Income/(Expense)
Profit Before Tax (pre-EI)
Exceptional Items
Pre-tax Profit
Taxation
Exceptional Income - post-tax
Profit After Tax
Minority Interests
Preferred Dividends
FX Gain/(Loss) - post tax
Other Adjustments - post-tax
Net Profit
Recurring Net Profit
Fully Diluted Recurring Net Profit
Dec-11A
223.8
163.8
110.3
(15.8)
94.5
1.7
0.0
(0.2)
96.0
Dec-12A
278.8
203.2
138.6
(20.2)
118.4
0.5
0.0
(1.2)
117.6
Dec-13F
333.2
244.2
165.3
(20.8)
144.5
0.6
0.0
(1.2)
143.9
Dec-14F
404.5
298.5
200.0
(21.8)
178.3
0.7
0.0
(1.2)
177.7
Dec-15F
491.9
365.0
242.1
(22.6)
219.5
0.8
0.0
(1.2)
219.1
96.0
(4.0)
117.6
(4.5)
143.9
(5.3)
177.7
(6.5)
219.1
(7.9)
92.0
113.1
138.5
171.2
211.2
92.0
92.0
92.0
113.1
113.1
113.1
138.5
138.5
138.5
171.2
171.2
171.2
211.2
211.2
211.2
Dec-13F
165.3
Dec-14F
200.0
Dec-15F
242.1
0.3
0.3
0.3
Cash Flow
No significant capex as
Naga2 will be privately
financed by founder Dr.
Chen.
(US$m)
EBITDA
Cash Flow from Invt. & Assoc.
Change In Working Capital
(Incr)/Decr in Total Provisions
Other Non-Cash (Income)/Expense
Other Operating Cashflow
Net Interest (Paid)/Received
Tax Paid
Cashflow From Operations
Capex
Disposals Of FAs/subsidiaries
Acq. Of Subsidiaries/investments
Other Investing Cashflow
Cash Flow From Investing
Debt Raised/(repaid)
Proceeds From Issue Of Shares
Shares Repurchased
Dividends Paid
Preferred Dividends
Other Financing Cashflow
Cash Flow From Financing
Dec-11A
110.3
5.9
Dec-12A
138.6
16.0
0.5
(0.2)
0.0
(3.6)
112.8
(45.5)
(0.2)
2.3
0.0
(4.5)
152.2
(60.0)
0.0
(1.2)
0.0
(5.3)
159.1
(30.0)
0.0
(1.2)
0.0
(6.5)
192.6
(30.0)
0.0
(1.2)
0.0
(7.9)
233.3
(30.0)
(12.7)
(58.2)
0.5
(59.5)
0.6
(29.4)
0.7
(29.3)
0.8
(29.2)
156.0
0.0
0.0
(48.2)
(63.7)
(102.1)
(109.4)
(135.1)
(0.0)
(48.2)
0.0
(63.7)
0.0
53.9
0.0
(109.4)
0.0
(135.1)
3
NagaCorp Ltd
March 21, 2013
BY THE NUMBERS
Balance Sheet
NagaCorp carries no debt as
internal cash flows are
sufficient for funding working
capital needs.
(US$m)
Total Cash And Equivalents
Total Debtors
Inventories
Total Other Current Assets
Total Current Assets
Fixed Assets
Total Investments
Intangible Assets
Total Other Non-Current Assets
Total Non-current Assets
Short-term Debt
Current Portion of Long-Term Debt
Total Creditors
Other Current Liabilities
Total Current Liabilities
Total Long-term Debt
Hybrid Debt - Debt Component
Total Other Non-Current Liabilities
Total Non-current Liabilities
Total Provisions
Total Liabilities
Shareholders' Equity
Minority Interests
Total Equity
Dec-11A
64.8
24.4
1.2
5.2
95.5
187.7
0.0
83.9
4.4
276.1
Dec-12A
73.2
20.9
1.1
0.0
95.3
238.2
0.0
80.4
14.4
333.0
Dec-13F
256.8
25.0
1.3
0.0
283.1
243.5
0.0
77.9
14.4
335.9
Dec-14F
310.6
30.3
1.6
0.0
342.5
255.1
0.0
74.9
14.4
344.5
Dec-15F
379.6
36.9
1.9
0.0
418.4
265.9
0.0
71.9
14.4
352.2
18.8
0.3
19.1
26.0
0.4
26.4
30.6
0.4
31.0
36.5
0.4
36.9
43.7
0.4
44.1
0.0
0.0
0.0
19.1
352.5
0.0
0.0
0.0
26.4
401.9
0.0
0.0
0.0
31.0
587.9
0.0
0.0
0.0
36.9
650.1
0.0
0.0
0.0
44.1
726.6
352.5
401.9
587.9
650.1
726.6
Dec-11A
48.7%
60.2%
49.3%
0.03
0.17
N/A
4.14%
69.9%
40.23
5.51
99.2
35.7%
29.1%
Dec-12A
24.6%
25.6%
49.7%
0.04
0.19
N/A
3.81%
70.7%
29.73
5.77
108.5
41.1%
31.5%
Dec-13F
19.5%
19.3%
49.6%
0.11
0.26
N/A
3.72%
70.7%
25.12
5.10
116.2
44.0%
29.3%
Dec-14F
21.4%
21.0%
49.4%
0.14
0.28
N/A
3.66%
70.7%
24.94
5.07
115.5
53.8%
28.9%
Dec-15F
21.6%
21.0%
49.2%
0.17
0.32
N/A
3.61%
70.7%
24.92
5.06
115.3
64.6%
32.0%
Dec-11A
36.2%
2.5%
27.4%
24.1%
44.4%
12.0%
79.9%
49.3%
1,130
116
Dec-12A
16.9%
2.5%
34.4%
22.4%
28.1%
11.5%
-1.6%
1.8%
1,470
138
Dec-13F
14.0%
2.5%
35.0%
22.0%
25.0%
11.5%
11.6%
-0.7%
1,500
170
Dec-14F
13.0%
2.5%
32.0%
22.0%
22.0%
11.5%
22.0%
22.3%
1,500
170
Dec-15F
16.0%
2.5%
30.0%
22.0%
20.0%
11.5%
20.0%
23.4%
1,500
170
Key Ratios
Revenue Growth
Operating EBITDA Growth
Operating EBITDA Margin
Net Cash Per Share (US$)
BVPS (US$)
Gross Interest Cover
Effective Tax Rate
Net Dividend Payout Ratio
Accounts Receivables Days
Inventory Days
Accounts Payables Days
ROIC (%)
ROCE (%)
Key Drivers
VIP Chip Volume (% Change)
VIP Chip Win Percentage (%)
Mass mkt chip drop (% chg.)
Mass mkt chip win (%-tage)
Slot Handle (% Change)
Slot Hold Percentage (%)
Net Win Per Slot (% Change)
Net Win Per Table (% Change)
No. Of Slots
No. Of Tables
4
NagaCorp Ltd
March 21, 2013
Khmer Gaming King
1. BACKGROUND
Table of Contents
1. BACKGROUND
p.5
2. OUTLOOK
p.12
3. RISKS
p.22
4. FINANCIALS
p.25
5. VALUATION AND RECOMMENDATION
p.33
1.1 Leading casino operator in Cambodia
NagaCorp is the leading gaming operator in Cambodia and operates
NagaWorld, the only integrated casino-hotel in Cambodia’s capital city of
Phnom Penh. NagaWorld is centrally located next to the Ministry of Foreign
Affairs near the Bassac River, and is close to the streets and the riverside in the
popular Sisowath Quay area. The property is 1km away from the Royal Palace,
4km from the city centre, and 12km from the airport.
Figure 1: NagaWorld’s location in Phnom Penh
Figure 2: Close-up aerial view of NagaWorld
SOURCES: Google Map
SOURCES: Google Map
The property sits on 14.2k sq m of land with 660 hotel rooms, 15 food and
beverage outlets, one spa, one night club, one karaoke lounge, meeting facilities,
and club lounges featuring live music. Its MICE facilities include 25k sq m of
meeting and ballroom space along with a 60-seat auditorium. At end-2012,
NagaWorld operated 1,470 electronic-gaming machines and 138 gaming tables,
targeted at the mass, premium-mass and VIP markets. NagaCorp does not have
limits on the amount of its gaming space, tables or types of games.
Figure 3: NagaWorld’s exterior view
Figure 4: Hotel lobby view
SOURCES: vn.nagaworld.com
5
SOURCES: tnktravelvietnam.com
NagaCorp Ltd
March 21, 2013
NagaWorld has a public gaming hall to serve the mass crowd. The minimum
bet size for its mass-gaming tables is US$30. The hall, measuring roughly 7,000
sq m, features 946 slot machines (minimum bet of 10 UScts to US$1) along
with 59 tables for six types of card games including baccarat, blackjack and
poker. NagaWorld also offers two exclusive areas with gaming machines called
Rapid1 (open since Sep 11) and Rapid2 (open since Jun 12). Rapid 1 has 99
machines and Rapid2 has 92. Their electronic games include multi-player
terminals for roulette, baccarat and sicbo featuring a live operator. They are
targeted at lower-end mass players with lower minimum bet sizes.
Figure 5: Public gaming floor
Figure 6: Rapid2’s electronic gaming
SOURCES: COMPANY REPORTS
In the more premium-mass market, NagaWorld offers two areas. NagaRock
was opened in Feb 12 for higher-end integrated gaming and entertainment. It
offers live music, gaming facilities and food & beverages. NagaRock has 13
tables and 213 machines. The minimum bet size in NagaRock is US$200.
In Dec 12, NagaCorp opened Saigon Palace, which has a layout designed with
the Vietnamese customer in mind. The minimum bet size at Saigon Place is
US$100. Saigon Palace has nine tables and 120 machines. It offers
Vietnamese-speaking dealers and Vietnamese music and food.
To further target the premium-mass market, the company will be opening an
Aristocrat Private Club on its public-gaming floor in 1H13. This is a
membership-based club for players seeking greater privacy away from the
mass-gaming crowd. There will be higher table limits, with five incremental
tables.
Figure 7: NagaRock
Figure 8: Saigon Palace
6
NagaCorp Ltd
March 21, 2013
To serve higher-end VIPs, NagaWorld has junket VIP floors where the average
buy-in is US$150k with a maximum bet size of US$24k per hand. The company
also recently completed five VIP private suites with six gaming tables. The
suites are designed for high rollers and will have a higher check-in amount as
compared to the normal VIP check-in requirement. The customer is expected to
roll a few times per stay with a higher table limit. These suites are available for
sale and we expect NagaCorp to also operate the suites under the junkets
profit-sharing scheme. The company also aims to create a new VIP-gaming area
on the rooftop where its existing swimming pool is located. This new area could
include up to 19 or 20 tables with a targeted opening by 2H13.
Figure 9: VIP suite
Figure 10: VIP junket floor
Figure 11: NagaWorld gaming areas
# tables # machines table min bet (US$)
target market
Opening date
Public gaming area
59
946
30
mass market
2003
VIP area
57
0
300
VIP
2003
Rapid 1
0
99
10
mass market
Sept 2011
Rapid 2
0
92
5
mass market
June 2012
13
213
200
Premium mass
Feb 2012
Saigon Palace
9
120
100
Premium mass - Vietnamese
customers
Dec 2012
VIP suites
6
0
not yet determined
Ultra high end VIP through
junkets
1Q13
Aristocrat Private Club
5
13
not yet determined
Premium mass
2013
Nagarock
SOURCES: CIMB, COMPANY REPORTS
The total number of gaming tables listed in figure 11 is just an approximate as
the company can move tables around on a daily basis depending on demand.
NagaWorld offers 660 hotel rooms, including a recently-built 200-room wing
catering to Vietnamese customers (completed in 2012). This wing is targeted at
budget customers with an average cost per room of US$70.
7
NagaCorp Ltd
March 21, 2013
Figure 12: A typical hotel room
Figure 13: Hotel restaurant
SOURCES: CIMB, COMPANY website
1.2 Corporate structure
Figure 14: NagaCorp’s corporate structure
1.3 Senior Management
Tim McNally - Chairman and Non-Executive Director. Mr. McNally has
been the Chairman of the Board since 2005. Prior to NagaCorp, Mr. McNally
was an Executive Director of Security and Corporate Legal Services for the
Hong Kong Jockey Club and was responsible for corporate governance-related
issues for the Club. Prior to Mr. McNally’s role at the Hong Kong Jockey Club,
he was a Special Agent for the Federal Bureau of Investigation (FBI) where he
investigated and prosecuted crimes such as drug trafficking, corruption, fraud
and organised crimes. Mr. McNally concluded his career at the FBI as head of
the Los Angeles field division.
8
NagaCorp Ltd
March 21, 2013
Tan Sri Dr. Chen Lip Keong – Chief Executive Officer and Executive
Director. Dr. Chen is the founder of NagaCorp and is the controlling
shareholder of the company. Dr. Chen has a Bachelor of Medicine and Surgery
and has had over 30 years of entrepreneurial and business experience. He
founded NagaCorp in 1995. He is also the controlling shareholder and president
of Karambunai Corp Bhd. which is involved in tourism in Sabah, East Malaysia,
FACB Industries Incorporated Bhd. which manufactures and fits stainless steel
pipes, and Petaling Tin Bhd. which is involved in property development.
Philip Lee Wai Tuck- Chief Financial Officer and Executive Director. Mr. Lee
is the Chief Financial Officer of NagaWorld Limited which is an indirect
wholly-owned subsidiary of the company. Mr. Lee, who is a CPA, is responsible
for the financial, overseas and business operations of the company. He has over
17 years of experience in various industries.
Chen Yepern – Executive Director. Mr. Chen is currently a director of
NagaCorp (HK) Limited, a wholly-owned subsidiary of NagaCorp Limited. Mr.
Chen graduated with a Bachelor of Science degree in Finance from the
California State University Northridge, and has previous working experience at
Caesar’s Palace. Mr. Chen is the son of Tan Sri Dr. Chen Lip Keong, the CEO
and founder of NagaCorp.
1.4 NagaCorp history
NagaCorp was created as a result of a tender issued by the Royal Government of
Cambodia in 1994. The tender was for the construction of a casino on Naga
Island in southern Cambodia. Dr. Chen’s company Ariston Sdn Bhd., which is a
Malaysian developer/construction firm and a member of the conglomerate
Lipkland Group, outbid rivals such as Landmarks Bhd, Unicentral Corporation
(Singapore) and Hyatt International Group.
In addition to the casino development, Ariston also included infrastructure
investments into Cambodia to make the country a more desirable place for
future foreign investment. The total value of the Cambodian projects that
Ariston agreed to participate in was around US$1bn. Ariston also received
support of the Malaysian government for its proposed Cambodia investments
as this would make the entire ASEAN region more stable for future business
investments.
In 1995, the Cambodian government granted Ariston a 20-year exclusive
licence to operate a casino in Cambodia. Upon receiving the licence, Ariston
opened a gaming operation featuring a gambling cruise liner which went into
operation in 1995.
However, between 1995 and 1999, many unlicensed casinos opened up in
Phnom Penh which adversely affected the gaming business on Ariston’s barge.
After a series of legal suits, the gaming licence for Ariston was extended from
20 years to 70 years starting from 2 Jan 1995, thus allowing the company to run
a casino in Cambodia until 2065.
In 2000, the company formalised a 70-year lease for the current land
operations of NagaWorld. Construction commenced in December 2000 and the
property opened in 2003 as the gaming operations were moved from the barge
onto the current land-based site where the NagaWorld complex currently sits.
NagaCorp applied for a listing on the Singapore Stock Exchange in 2003
was rejected as the company did not have an established track record
internal anti-money laundering controls. The company did not appeal
Singapore Stock Exchange’s ruling, and subsequently decided to list on
Hong Kong Stock Exchange, which it did in 4Q06.
but
for
the
the
In 2005, Ariston was granted an exclusive licence as the only casino to be
operated within a 200km radius of Phnom Penh until 2035. In return, the
development rights of certain projects such as the Naga Island Resort and
Sinhanoukville Airport were given back to the government. These projects had
a total value of US$155m.
9
NagaCorp Ltd
March 21, 2013
In November 2012, NagaCorp conducted ground-breaking ceremonies for its
second gaming complex, Naga2, located adjacent to the current NagaWorld
Complex. Naga2 is targeted to open in late-2015 or early-2016.
Figure 15: NagaCorp development history
1994
Royal Government of Cambodia tenders the right to develop a casino on Naga Island which is 800 meters off the coast of Sihanoukville in Southern
Cambodia
1995
Ariston Sdn Bhd, won the tender to build a US$1 billion infrastructure and tourism project. Ariston is a subsidiary of Lipkland Group whose CEO is Datuk
Dr. Chen Lip Keong
1995
Naga Resorts which is a gaming barge started gaming operations
1999
Ariston sues the Cambodian government for breaching the contract of gaming exclusivity in Cambodia as unauthorized casinos opened in Phnom Penh
2000
As part of the settlement, the government extends Ariston's gaming license until 2065
2000
Formalized a 70 year lease for the current 14.2k sqm site of NagaWorld
2000
NagaWorld construction commences
2003
Casino operations were moved from the barge to a new on-land hotel and entertainment complex, NagaWorld
2003
Singapore Stock Exchange refused the public listing for the Company
2005
Government grants Ariston a gaming exclusivity around a 200km radius of Phnom Penh until 2035 in return for the development rights of certain
infrastructure projects valued at $155m
2006
NagaCorp listed on HK stock exchange
2012
Ground breaking for new property Naga2 to be opened in late 2015 / early 2016
1.5 Recent timeline of Cambodia
Figure 16: Cambodia map
SOURCES: ENCYCLOPEDIA BRITANNICA
10
NagaCorp Ltd
March 21, 2013
Cambodia’s recent history has been plagued by war, starting with the Vietnam
War in the 1960s, followed by a civil war and military conflicts with Vietnam
when the country was under the oppressive rule of the Khmer Rouge. It was not
until 1991 that Cambodia saw relative peace. Cambodia today is a young nation,
with a median age of 23 years and an economy that is fuelled by foreign direct
investment. The country, along with the Indochina region, is forecast to
experience strong economic growth over the coming years.
Figure 17: Cambodian history
1863
The beginnings of French colonial rule in Cambodia
1953
King Sihanouk declared independence from the French
mid 1960's
Eastern provinces of Cambodia are bombed by the United States on suspicions that the North
Vietnamese had established bases there. King Sihanouk did not support the US in the Vietnam
War
1970
King Sinanouk was overthrown by a military coup led by General Lon Nol. Lon Nol assumed
power and sided with the United States in the Vietnam conflict
1970
Lon Nol's government faced conflict from the North Vietnamese in addition to insurgency from
the CPK (Communist Party of Kampuchea)
1970
North Vietnamese army infiltrated deeper into Cambodia and over-ran Lon Nol's forces. US
military had difficulty in countering North Vietnamese forces located inside Cambodia
1973
CPK military is growing stronger and controlled 60% of the land mass in Cambodia during its
insurgency against Lon Nol
1975
Lon Nol's government falls to the CPK
1975-1979
Democratic Kampuchea (Khemer Rouge) - restructuring of Cambodian society by means such
as but not limited to outlawing religion, collectivizing architecture and abolishing the banking
system. 2 million people estimated to have died during the period of starvation, disease and
executions under Pol Pot
1978
Increased conflicts with Vietnam led to a Cambodian invasion by Vietnamese military
1979
People's Republic of Kampuchea (PRK) was established after the Vietnamese invasion. Heng
Samrin was the chairman of the pro-Vietnamese Communist government. Khemer Rouge was
forced to the Thailand border and still lead insurgency attacks against the new government.
600k displaced; 100k Cambodians killed by the Vietnamese; Cambodians were forced to the
Thai border due to the 12 year civil war
1991
UN reached a settlement to disarm factional armies, repatriate displaced citizens and help with
free elections in Cambodia
1993
Free elections held in Cambodia
1993
New constitution was formed with a multiparty liberal democracy. Prince Sihanouk was named
the King and Prince Ranariddh and Hun Sen became the first and second Prime Ministers
1997
Fighting broke out between the parties of Prince Ranariddh and Hun Sen. Prince Ranariddh was
exiled
1998
National assembly elections held where Hun Sen's Cambodian People's Party won the majority.
Hun Sen became the first Prime Minister
2003
Prime Minister voting - Cambodian People's Party of Hun Sen won a majority of the votes
SOURCES: CIMB
11
NagaCorp Ltd
March 21, 2013
2. OUTLOOK
2.1 Indochina economic outlook
Indochina historically comprises the former French colonies of Cambodia, Laos
and Vietnam with a combined population of roughly 110 million. We note that
the broader geographical definition of Indochina today also includes Burma
and Thailand but for this report, we use the historical definition of Indochina
for our analysis. According to the International Monetary Fund (IMF), the
economies of Cambodia, Lao and Vietnam are expected to see an average of
7%+ GDP growth until 2017, making Indochina one of the fastest growing
regions in East Asia.
Figure 18: GDP % change forecast
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Cambodia
6.7
0.1
6.1
7.1
6.5
6.7
7.2
7.4
7.6
7.7
Lao
7.8
7.5
8.1
8.0
8.3
8.1
7.7
7.8
7.9
7.8
Vietnam
6.3
5.3
6.8
5.9
5.1
5.9
6.4
6.8
7.2
7.5
Indochina average
6.9
4.3
7.0
7.0
6.6
6.9
7.1
7.3
7.6
7.7
Thailand
2.6
-2.3
7.8
0.1
5.6
6.0
4.5
4.6
4.8
5.0
China
9.6
9.2
10.4
9.2
7.8
8.2
8.5
8.5
8.5
8.5
Malaysia
4.8
-1.5
7.2
5.1
4.4
4.7
5.0
5.0
5.0
5.0
Singapore
1.7
-1.0
14.8
4.9
2.1
2.9
3.6
3.7
3.8
3.9
SOURCES: IMF, October 2012
Figure 19: GDP per capita US$
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Cambodia
711
703
753
853
934
1,018
1,111
1,215
1,331
1,459
Lao
879
916
1,105
1,320
1,454
1,588
1,709
1,852
2,007
2,175
Vietnam
1,048
1,068
1,174
1,374
1,523
1,660
1,783
1,913
2,044
2,180
Indochina average
879
896
1,011
1,183
1,304
1,422
1,534
1,660
1,794
1,938
Thailand
4,300
4,151
4,992
5,395
5,848
6,364
6,704
7,024
7,345
7,708
China
3,404
3,740
4,423
5,417
6,094
6,644
7,262
7,957
8,710
9,528
Malaysia
8,390
7,252
8,737
10,085
10,578
11,513
12,243
13,020
13,846
14,724
Singapore
38,087
36,567
43,865
49,271
49,936
50,899
52,050
53,348
54,717
56,198
Figure 20: Export volume yoy% change
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Cambodia
2.1
2.6
23.6
14.8
23.0
11.1
10.8
13.4
12.6
12.7
Lao
15.4
7.0
17.5
1.0
12.9
8.0
5.4
5.3
13.4
3.3
Vietnam
3.7
3.7
4.7
3.6
20.2
13.2
12.7
13.8
11.3
5.8
Indochina average
7.1
4.4
15.3
6.5
18.7
10.8
9.6
10.8
12.4
7.2
Thailand
5.1
-14.4
17.9
10.2
6.8
8.4
8.2
6.7
6.5
6.2
China
8.2
-10.7
28.4
9.4
5.0
7.2
10.9
11.4
11.5
11.7
Malaysia
-6.0
-13.0
10.1
4.9
1.2
8.2
8.9
8.6
8.6
8.0
Singapore
3.7
-10.1
19.9
3.0
2.9
3.8
4.1
4.3
4.3
4.3
Indochina’s economic growth will, in part, be driven by relative political peace
after decades of external and internal conflict. As these countries rebuild,
foreign direct investment will continue to pour in, leading to improved
infrastructure, industrial development and hence, stronger export volume. If
we use Thailand, which is the closest country to the Indochina region, as a
12
NagaCorp Ltd
March 21, 2013
comparison, we see that Indochina’s GDP per capita is, on average, only 22% of
the GDP per capita of Thailand during 2012, but this ratio is expected to
improve to 25% by 2017.
In addition, the average export volume percentage growth of Cambodia and
Vietnam are expected to outgrow China’s in 2013-2016 according to the
International Monetary Fund (IMF). The higher export volume of Indochina
can help to sustain the growth of these economies and boost domestic
consumption. According to the World Bank, Vietnam’s gross national income
(GNI) per capita has increased from US$396 in year 2000 to US$719 in 2011.
Similarly, Cambodia’s GNI per capita has increased from $284 in 2000 to
US$555 in 2011.
Figure 21: Vietnam’s Gross National Income per capita (US$)
Figure 22: Cambodia’s Gross National Income per capita (US$)
800
Title:
Source:
600
700
500
Please fill in the values above to have them entered in your rep
600
400
500
400
300
300
200
200
100
100
0
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
2000 2001 2002 2003
2004 2005 2006 2007 2008 2009 2010 2011
SOURCES: WORLD BANK
SOURCES: WORLD BANK
A big driver for Cambodia’s economy is foreign direct investment into the
country. In 2012, Cambodia saw US$768m of foreign direct investment which
was a 13% yoy increase compared to 2011. Foreign direct investment into
Cambodia has increased from US$121m in 2004 to US$768m in 2012 which
represents a CAGR of 26%. Industries that attract foreign direct investment
dollars include garment, agriculture, tourism and construction. South Korea,
China and Japan are the largest investors in Cambodia.
Figure 23: Foreign Direct Investment into Cambodia (US$m)
1000
900
800
700
600
500
400
300
200
100
0
2004
2005
2006
2007
2008
2009
2010
2011
2012
SOURCES: CAMBODIA BUSINESS REVIEW, JAN 2013
13
NagaCorp Ltd
March 21, 2013
2.2 Tourism to Cambodia
Cambodia has experienced an increase in tourism from 286k in 1998 to 3.6
million in 2012 which represents a CAGR of 20%. For the full year 2012,
Cambodia experienced a 24% increase in tourism to 3.6 million visitors.
Visitors from Vietnam made up the largest percentage of tourists to Cambodia
at 21% during 2012. South Korea and China comprised the next two largest
groups at 12% and 9% respectively, followed by Laos and Thailand.
The rise in tourism is supported by the country’s improving infrastructure and
services such as airports enhancements, along with improved roads and hotels
around popular destinations such as Angkor Wat and Phnom Penh. Another
draw is cost: attractions and entertainment are generally cheaper in Cambodia
than in surrounding countries.
Figure 24: Tourist arrivals in Cambodia
Figure 25: Top visitors to Cambodia by origin 2012
4,000,000
60%
3,500,000
50%
3,000,000
40%
2,500,000
30%
2,000,000
20%
1,500,000
10%
1,000,000
0%
500,000
-10%
0
-20%
Title:
Source:
21%
45%
12%
9%
7%
6%
Number
yoy %
Vietnam
Korea
China
SOURCES: CAMBODIA MINISTRY OF TOURISM
Lao
Thailand
Others
Overall tourism receipts in Cambodia increased to US$1.9 billion in 2011 from
US$100 million in 1995, while average spending per visitor increased to
US$663 in 2011 from US$455 in 1995. Since 1995, tourism spending per visitor
has increased by an average of 2% per year. In addition, the average hotel
occupancy rates have increased from 37% in 1997 to 66% in 2011.
Figure 26: Spending per visitor US$
Figure 27: Hotel occupancy rates
800
70%
700
60%
Title:
Source:
600
50%
500
40%
400
30%
300
20%
200
100
10%
0
0%
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
14
1996
1995
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
NagaCorp Ltd
March 21, 2013
2.3 Gaming in Cambodia
NagaWorld is the only casino operator allowed within a 200km radius of
Phnom Penh until 2035. Besides NagaWorld, around 30 smaller casinos exist
in Cambodia near its border with Thailand, in towns such as Poipet. These
casinos that feature common games such as blackjack, poker, roulette and slots
cater mainly to the lower-end, day-tripper crowd who cross the border from
Thailand, where gambling is illegal. No official statistics are available on the
size of the Cambodian border casino market, but based on our channel checks,
we estimate that the border casinos represent only about 20-30% of the overall
revenue in the Cambodian casino market.
Globally, the proliferation of gaming activities has often been historically
correlated to gaming capacity and economic growth. Gaming can be considered
a consumer discretionary activity which proliferates during times of economic
boom. Taking both Las Vegas and Macau as examples, gaming revenue within
these respective markets is highly correlated with key economic factors such as
GDP growth in the United States and in China. As Indochina GDP growth is
still forecasted to expand from 2013-2017 according to the IMF, gaming
activities in Cambodia should also see a similar expansion.
Figure 28: Macau GGR and China GDP
Figure 29: Las Vegas gaming revenue vs. US GDP
90%
80%
16%
30%
14%
25%
Title:
Source:
8.0%
6.0%
70%
12%
60%
20%
Please fill in the values above to have them entered i
15%
50%
4.0%
10%
10%
40%
8%
2.0%
30%
5%
6%
20%
0%
10%
4%
-5%
1Q06
2Q06
3Q06
4Q06
1Q07
2Q07
3Q07
4Q07
1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
0%
-10%
-20%
GGR (lhs)
0.0%
-2.0%
2%
-10%
0%
-15%
GDP (rhs)
-4.0%
Gaming rev
SOURCES: CIMB, DICJ, CHINA NBS
GDP yoy
SOURCES: CIMB, BEA, LAS VEGAS CONVENTION AND VISITORS AUTHORITY
Another factor that drives gaming growth is additional capacity such as hotel
rooms and gaming tables. Using Las Vegas as an example, gaming revenue is
often correlated with hotel room inventory on a yoy basis. As Las Vegas added
capacity in terms of rooms, this has allowed more visitors to visit the city and
spend more nights in Las Vegas which has translated into higher gaming
revenue. This is especially true during the beginning periods of gaming growth
in Las Vegas.
Furthermore, an increase in hotel room inventory has also resulted in an
increase in hotel occupancy rates. Hence over time, increased room inventory
does not translate into an oversupply situation but instead allows more visitors
to spend more time in Las Vegas. As Indochina is still in its infancy in terms of
hotel and gaming capacity, we believe that the region would see similar gaming
growth patterns brought about by additional room capacity as that of an early
Las Vegas.
Another driver for long-term visitation growth into Cambodia are
infrastructure improvements to the existing airports such as runway additions,
terminal enhancements or an increase in the number of routes which can all
add to visitation growth.
For example, airlines are expected to add new routes into Cambodia from areas
such as Doha, Manila, Jakarta, and Dubai, along with several cities in India.
Also, the airports in Cambodia will seek to double passenger capacity from 5
million to 10 million by 2015. A new international airport for Phnom Penh is
15
NagaCorp Ltd
March 21, 2013
also being planned. Currently, about 360 weekly flights operate into Cambodia,
compared to 160 weekly flights in 2010.
As a comparison, Las Vegas McCarran International Airport undertook a major
renovation in 1985-1987 (known as McCarran 2000), which included a new
central terminal, new parking facility, additional runways, additional gates,
enhanced passenger assistance points, along with better infrastructure leading
into the airport. At the end of the renovation in 1987, passenger volume spiked
25% yoy at McCarran.
Furthermore, in 1998, the D Gates SE and SW wings opened which added 28
additional gates at McCarran. Passenger volume increased 12% in 1999 and 9%
in 2000 vs. 0% passenger volume in the preceding years.
Figure 30: Las Vegas McCarran International Airport passenger volume growth
Volume increase
during McCarran
2000 airport
expansion
60
50
Volume spiked
after 28
additional
gates
30%
25%
20%
40
15%
30
10%
5%
20
0%
10
-5%
-10%
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
0
Passenger
yoy
SOURCES: LAS VEGAS CONVENTION AND VISITORS AUTHORITY
Figure 31: Las Vegas room supply and gaming growth yoy
Figure 32: Las Vegas hotel occupancy and inventory growth
rates
30.0%
100.0%
25.0%
Title:
Source:
30.0%
25.0%
95.0%
Please fill in the values above to have them 20.0%
entered in your rep
20.0%
90.0%
15.0%
10.0%
15.0%
85.0%
10.0%
5.0%
5.0%
80.0%
0.0%
0.0%
75.0%
-5.0%
-10.0%
-5.0%
70.0%
-10.0%
-15.0%
hotel
rev
occupancy rate (lhs)
hotel yoy (rhs)
2.4 Naga2 – the next growth driver
During November 2012, NagaCorp broke ground on its newest property, Naga2,
which is expected to open in late-2015 or early-2016. Naga2 (called TSCLK
complex) is located about 200 metres from the current NagaWorld complex.
Naga2 will include two 5-star hotel towers with a total of 1,033 hotel rooms. In
addition, an expected 50 VIP gaming suites will be included to cater to
high-end VIP players. The GFA for the hotel is 43k sq m.
16
NagaCorp Ltd
March 21, 2013
A total of 500 gaming machines and 200-300 gaming tables are expected to be
added and the property will also include retail space along with MICE/theatre
facilities. The GFA for the retail/gaming and MICE/theatre is 21.6k and 2.3k sq
m respectively. Naga2 and NagaWorld will be connected via a shopping tunnel
called NagaCity Walk. The total NagaCity Walk GFA is 15.8k sqm.
Figure 33: Naga2 sq m breakdown
GFA (sqm)
Figure 34: Naga2 construction site
Net floor area (sq m)
Hotel
43,003
32,705
Retail/gaming
21,647
16,705
VIP suites
9,276
7,026
MICE/Theatre
2,325
2,134
Carpark
21,369
19,317
NagaCity Walk (street level)
7,889
1,568
NagaCity Walk (underground level)
7,889
4,553
Figure 35: Entire Naga Complex
Figure 36: Naga2 complex
Figure 37: NagaWalk
Figure 38: Naga2 location
17
NagaCorp Ltd
March 21, 2013
Figure 39: 2015/2016 Naga Complex
NagaWorld (Dec 2012)
NagaWorld (Dec 2013)
Naga2
Combined
% change from 2012
138
170
250
420
204%
1,470
1,500
500
2,000
36%
690
660
1,033
1,693
145%
Private VIP suites
0
7
50
57
-
Retail space (sqm)
381
381
18,738
19,119
4918%
MICE/Theatre facilities (seating capacity)
750
750
4,000
4,750
533%
60
60
533
593
Gaming tables
Gaming machines
Hotel rooms
Parking spaces
888%
Naga 2 will be constructed at a total cost of US$369m (US$275m for the TSCLK
Complex and US$94m for NagaCity Walk). NagaCorp will not bear any of the
capex for this project as founder and CEO Dr. Chen has agreed to fund the
venture independently, via a special vehicle. Upon completion of the project,
the properties will be transferred to NagaCorp and the company will issue new
shares and / or convertible bonds to Dr. Chen worth US$369m. The convertible
bonds can be exchanged into 1.56 billion shares (current shares outstanding at
2.3 bn) at a price of HK$1.84 each. Assuming full conversion of the shares, Dr.
Chen would then hold roughly 65% of the total shares of NagaCorp compared to
his 42% holding currently. We have already factored in the share dilution into
our target price which is based on an EV/EBITDA multiple.
Naga2 currently comprises 26% of our target price for NagaCorp at HK$2.05
per share. This is assuming a 15% discount rate, a 30% ROIC and a target
EV/EBITDA multiple of 14x.
2.5 NagaCorp mass gaming strategy
During 2012, NagaCorp’s mass market revenue grew 26% yoy to US$165.8m,
making up 60% of the company’s total revenue. This was driven by a 24% yoy
increase in public floor gaming table revenue and a 28% yoy increase in
electronic gaming revenue. Public floor buy-ins increased by 34% yoy, and
electronic gaming machine bill-ins increased by 28% yoy.
We believe that the increase in mass gaming was primarily driven by a
combination of stronger visitations to Cambodia (up 24% yoy in 2012 vs. 15% in
2011), an increase in the number of gaming machines (an increase of 340
machines in 2012), an increase in the number of gaming tables (22 tables from
NagaRock and Saigon Palace combined) along with an increase in the
minimum bet size limits on the mass gaming floors from US$20 to US$30.
NagaCorp does not offer any comps to mass players, with the exception of
complimentary food.
NagaWorld’s mass gaming growth will be driven by continued tourism growth
in Cambodia, in both the short-term and long-term, from improved
infrastructure along with increased capacity from Naga2. Besides the macro
factors, the higher table limits, along with the continued ramp-up of segmented
premium mass focused areas such as NagaRock, Saigon Palace and the
Aristocrat Private Club will help to drive total mass gaming revenue. Aristocrat
is expected to add 5 tables this year.
NagaCorp has set up sales offices in Bangkok (September 2012) and Ho Chi
Minh City (May 2012) in order to market NagaWorld to mass market gamers in
those countries. While they have gotten off to a slow start in 2012, we expect
18
NagaCorp Ltd
March 21, 2013
these offices to see gradual and improved traction in 2013 in terms of bringing
additional visitors to NagaWorld. The Thailand marketing efforts should pay off
in the form of strong premium-mass gaming flow due to the higher spending
power of Thais relative to visitors from Indochina.
In addition, in May 2012, the company had set up a luxury bus service from Ho
Chi Minh City to NagaWorld directly. These luxury buses ran 4-6 times per
week in 2012; the company plans to increase the frequency to 10 buses per
week in 2013. On average, NagaWorld receives about 25 tour buses daily both
self-owned and non-owned. NagaCorp often offers various bus+hotel
promotions for Vietnamese tourists.
For 2013 and 2014, we are currently forecasting NagaCorp’s public buy-ins to
be relatively steady at 35% and 32% yoy growth respectively. Overall mass
gaming will be mainly driven by continuous tourism growth to Cambodia along
with the continued ramp-up for the premium mass areas such as NagaRock and
Saigon Palace. NagaRock already accounts for about 20% of NagaWorld’s mass
gaming revenue. While the Aristocrat Private Club will add to NagaCorp’s
overall mass gaming revenue, we estimate that the ramp-up is likely to be
gradual. Our overall public buy-in estimate is conservative as we do not think
that NagaCorp will add significant capacity to mass gaming until Naga2 opens.
For electronic gaming, we are forecasting a 25% increase in bill-ins for 2013
which will be mainly driven by the full-year contribution of the 92 gaming
machines from Rapid 2, and the 333 machines from NagaRock and Saigon
Palace. The company also projects another 30 gaming machines to be added
this year. We are projecting a gradual decline in gaming machine bill-ins to
22% and 20% yoy growth in 2014 and 2015, respectively, assuming no
significant capacity additions.
Figure 40: NagaWorld luxury bus exterior
Figure 41: NagaWorld luxury bus interior
SOURCES: VIETNAMTRAVELGUY.COM
2.6 NagaCorp VIP strategy
During 2012, junket floor gaming revenues increased by 18% yoy to US$95m.
VIP revenue made up 34% of total revenue vs. 36% in 2011, which was helped
by a 17% yoy increase in rollings. NagaCorp pays a 1.7% commission to junkets
and has a conservative credit policy where it issues credit on a case-by-case
basis to the largest junkets.
NagaCorp currently utilises 30 junkets; the top 5 junkets contribute the
majority of the rollings. While the majority of the junkets currently target lowto middle-end VIP players from Malaysia, future junket business is likely to
come from the underpenetrated markets of Vietnam, China and Thailand. For
the current VIP business, we expect continued low volatility due to conservative
credit policies, in addition to a low VIP per hand table limit of US$24k.
19
NagaCorp Ltd
March 21, 2013
The 5 VIP suites featuring 6 gaming tables opened in January 2013. NagaCorp
may also open another 2 suites with 2 additional tables. Within these suites, the
table limit per hand will likely be higher vs. the normal table limit of US$24k
per hand at the standard VIP gaming area. The check-in at the VIP suites will
also likely be higher as compared to an average of US$150k at the typical VIP
gaming area. The final table limits and minimum check-ins will be determined
by the junkets that bring the customers into these playing areas. Finally, these
types of VIP suites will be carried over into Naga2 with an expected 50 suites in
the new building.
To manage revenue and margin volatility in the larger per hand gaming suites,
the company will likely enter into a revenue sharing payment system with the
junkets based on winnings, as opposed to a straight commission system which
NagaCorp is currently utilising. NagaCorp is still in the process of determining
the specifics of the revenue share programme with the junkets.
For 2013 and 2014, we are forecasting NagaCorp’s VIP check-in to increase by
14% and 13% yoy, respectively. Our forecasts call for decelerating VIP check-in
growth due to a higher base in previous years (up 36% and 17% yoy in 2011 and
2012 respectively). In addition, we believe that some of the VIP players may be
switching to play in more premium-mass areas such as NagaRock. We have
only factored in marginal upside from the VIP suites into our forecasts since the
suites are not yet open for gaming activities. The VIP suite minimum check-in
will be substantially higher than the standard VIP check-in; hence upside to our
VIP forecasts is possible once we see evidence of higher actual check-ins.
2.7 NagaCorp non-gaming strategy
NagaCorp’s 2012 non-gaming revenue comprising hotel, food/beverage and
entertainment increased by 46% yoy to US$18m. Specifically, room revenue
grew by 36%, food and beverage increased 54% and entertainment/others grew
by 37%. Similar to 2011, non-gaming revenue made up 6% of total group gross
revenue.
During the year, the company opened 200 new rooms targeting the lower-end
Vietnamese grind crowd. With room rates averaging around US$70 per night,
this should continue to drive increased visitation. Despite the increase in room
inventory, the average occupancy rate increased to 83% in 2012 vs. 78% in
2011.
NagaWorld has won multiple tourism awards such as the Best Leisure Resort in
Cambodia, Best 5-Star Hotel of the Year in Cambodia and Best Integrated
Entertainment Destination in Cambodia at the Vietnam International Tourism
Exhibition in 2012. These recognitions should help to drive the company to
bring in additional tourism from the region.
In 2012, NagaWorld also added two flagship luxury boutiques, Cartier and
Piaget. This is the first time that these brands have entered Cambodia. With
these anchor brands, we believe that NagaWorld can eventually attract other
world-leading brands onto its property to further enhance non-gaming revenue.
Rolex is expected to open in March with an additional two more retailers
targeted for 2H13.
For 2013 and 2014, we are forecasting a 20% and 10% yoy increase in
non-gaming revenue. Our forecasts are conservative due to capacity constraints
at the current property in terms of significant addition of additional hotel or
mass retail spaces. We believe that overall non-gaming growth will come from
the full year contribution the new lower priced hotel rooms which were opened
in 2H12.
20
NagaCorp Ltd
March 21, 2013
Figure 42: Operational forecasts
Revenue breakdown (US$m)
2010
2011
2012
2013F
2014F
2015F
Income from tables
96
143
173
211
259
319
% of total
64%
64%
62%
63%
64%
65%
Income from gaming machines
45
69
88
100
122
147
% of total
30%
31%
32%
30%
30%
30%
Hotel, food, beverage
10
12
18
22
24
26
% of total
7%
6%
6%
6%
6%
5%
Buy-ins
204
259
348
470
621
807
yoy %
35%
27%
34%
35%
32%
30%
Revenue
42
63
78
103
137
178
yoy %
69%
51%
24%
33%
32%
30%
Win rate
20%
24%
22%
22%
22%
22%
% of revenue
28%
28%
28%
31%
34%
36%
Bills-in
538
777
995
1,244
1,518
1,822
yoy %
149%
44%
28%
25%
22%
20%
Slot revenue
35
69
88
100
122
147
yoy %
144%
97%
28%
14%
22%
20%
Upfront commitment fee
10
10
10
0
0
0
Win rate
13%
12%
12%
12%
12%
12%
% of revenue
30%
31%
32%
30%
30%
30%
Win per unit $
33,806
60,804
59,812
66,779
81,470
97,765
yoy %
46%
80%
-2%
12%
22%
20%
Revenue share % to Naga
51%
74%
77%
70%
70%
70%
Rollings
2,377
3,238
3,787
4,317
4,878
5,658
yoy %
3%
36%
17%
14%
13%
16%
Revenue
54
80
95
108
122
141
yoy %
1%
48%
18%
14%
13%
16%
Win rate
2%
2%
3%
3%
3%
3%
% of revenue
36%
36%
34%
32%
30%
29%
Number of VIP visitors
7,928
16,019
25,090
26,345
27,662
29,045
Number of gaming machines
1,032
1,130
1,470
1,500
1,500
1,500
Hotel occupancy rate
60%
78%
83%
85%
85%
85%
Hotel revenue
4
4
6
7
8
8
yoy%
-33%
15%
36%
20%
10%
10%
% of revenue
2%
2%
2%
2%
2%
2%
Food, beverage and other
6
8
12
15
16
18
27%
52%
20%
10%
10%
4%
4%
4%
4%
4%
Public floor gaming tables
Electronic gaming machines
Junket floor gaming tables
Hotel
yoy%
% of revenue
4%
2.8 SWOT analysis
Figure 43: SWOT analysis
l
Strengths
Monopoly status in Phnom Penh
l
Opportunities
Strong economic growth in Indochina
l
Diverse gaming base in terms of VIP/Mass
l
Naga2 to fuel next round of growth
l
Strong government support
l
Monetization of high end VIP market
Weakness
Threats
l
Over-reliance on Vietnam mass gaming market
l
Legalization of gaming in Vietnam
l
Lack of diversification in VIP customers
l
Competition from other casinos in Cambodia
l
Capacity constrained for non gaming activities
l
Economic slowdown in the region
SOURCES: CIMB
21
NagaCorp Ltd
March 21, 2013
3. RISKS
3.1 Competition within Cambodia
As mentioned earlier, we estimate that there are roughly 30 smaller border
casinos on the border of Cambodia and Thailand. While there is no official data
on the gaming revenue from these establishments, we do not believe that the
border casinos will pose a significant competitive threat to NagaCorp. The
border casinos mainly target a lower-tiered grind market where the minimum
bet at these casinos could be less than a few dollars which is a different market
than the premium-mass segment, VIP segments and integrated entertainment
resort clientele that NagaCorp aims to attract.
Apart from the border casinos, casino projects have also been started in other
areas of Cambodia, but they have not been too successful. One such project is
the Bokor Highland Resort, two hours south of Phnom Penh near the town of
Kampot. This property opened in the middle of 2012 but has so far not received
significant traction. One reason for this could be the significant travel time from
Phnom Penh as a bus ride would take around three-and-a-half hours. In
addition, there are minimal bus facilities from the Bokor Highlands to Kampot
Town.
Also, based on various Internet reviews, travellers have noted that the resort
lacks facilities and only includes bare necessities such as two restaurants, a
children’s recreational area and the casino itself. Other common complaints
include the casino’s poor ambience, poor quality restaurants, and the absence
of any other attractions in the area apart from the casino.
While we do not rule out that places such as Bokor Highlands could become
successful once it starts to ramp up, these casinos are still far behind
NagaWorld in terms of branding, execution track record and customer traction.
For example, the Ha Tien Vegas Resort, an integrated gaming resort located in
Southern Cambodia close to the Vietnam border, recently closed its doors due
to the lack of gamblers.
In addition, while future major casino projects could be announced for other
areas of Cambodia, those projects still have to secure financing which could be
difficult given the unknown success factor of those projects. With NagaWorld
already established as a casino operator within a large centralised area, visitors
who come to Cambodia for the sole purpose of gambling have little reason to go
elsewhere, especially when factoring in travel time and customer service, along
with the non-gaming amenities that NagaWorld offers.
Figure 44: Bokor Highlands
Figure 45: Bokor Highlands rendering
SOURCES: TWICSY.COM
22
SOURCES: WSJ
NagaCorp Ltd
March 21, 2013
3.2 Competition from other markets
The closest gambling centres to Phnom Penh are Singapore and Malaysia and,
to a lesser extent, Macau. We do not believe that Phnom Penh competes with
these markets directly for gamblers as each gaming market is somewhat
mutually exclusive. We estimate that about 35-40% mass market gamers into
NagaWorld are from Southern Vietnam, 30% are Cambodians with foreign
passports, and the remaining coming from various parts of Asia. 70% of the VIP
gamers are low- to middle-end VIP players (in-terms of check-in) from
Malaysia. These visitor demographics are different from other gaming hubs
within the region
Mass market visitation from Southern Vietnam should continue to grow with
tourist arrivals from Vietnam, especially considering the ease of travel from Ho
Chi Minh City to Phnom Penh (240km, 6 hours by bus). On the VIP side, with a
minimum US$15,000 check-in, these types of players can receive the type of
VIP services that they would normally be priced out of in their home markets.
In addition, NagaCorp pays its overseas junkets a 1.7% commission to bring in
VIP players. This commission rate is higher than the 1.25% commission rate in
Macau and can incentivise junkets to bring players into Cambodia. NagaCorp is
able to offer higher commission rates and better service for low- to mid-end VIP
players due to the company’s low cost structure compared to other gaming
markets.
For example, a dealer’s salary is US$130 per month in NagaWorld vs.
US$2,500 per month in Macau. Furthermore, land costs and entertainment are
lower in Cambodia compared to other markets. Due to these factors, we believe
that NagaCorp is not targeting the same types of ultra- high end VIP players
that are being targeted in other markets and that NagaWorld has its own
specific advantages in terms of drawing in VIP crowds to its property.
Since the majority of NagaWorld’s mass gaming patrons are from Vietnam, one
competitive risk could be if Vietnam decides to open its own casino and allow
its citizens to gamble.
Figure 46: Formerly named MGM Grand Ho Tram Beach rendering
SOURCES: ASIABOOKING.COM.VN
MGM Resorts and Asian Coast Development (ACDL) have developed what was
formerly known as MGM Grand Ho Tram Beach which is an integrated resort
in the beach town of Ho Tram in Vietnam’s Ba Ria-Vung Tau province, 125 km
southeast of Ho Chi Minh City. The Ho Tram beach area is being developed into
an international resort area. However, on March 4, MGM Hospitality
terminated its management, collaboration and assistance agreement with
ACDL as the project has failed to achieve certain pre-opening milestones.
23
NagaCorp Ltd
March 21, 2013
The formerly called MGM Grand Ho Tram Beach is a US$4.2billion project
which will feature two hotel towers with 1,100 rooms, a conference centre, retail,
restaurants, 90 gaming tables and 1,000 electronic games. The first tower was
originally scheduled to open in early 2013 which will include 540 rooms, 500
electronic games and 90 gaming tables.
However, the first tower has seen a delay in terms of its licensing approval for
gaming and hence funding has been pulled from the project for the time being.
We expect the first tower to have a delayed opening past its original scheduled
opening of 1Q13. The opening will depend on government approval for the
gaming license and will also depend on the timing of the new management of
which both there is currently no visibility.
The second tower started ground breaking in 4Q12 but we have no visibility as
to when it will open. While the opening of the formerly named MGM Grand Ho
Tram would increase gaming competition within Indochina (under new
management), we do not believe that it will have a significant impact on
NagaCorp since Vietnamese citizens would not be allowed at the gaming
facilities under current Vietnamese law.
With the exception of a state-run lottery, Vietnamese citizens are prohibited
from gambling in Vietnam. There are a few resorts which run small-scale
electronic gaming machines, but these cater to foreigners only, and these
establishments are required to receive approval from the Prime Minister’s
Office. Vietnamese citizens are not allowed to enter these facilities.
We believe that the Vietnamese government could consider changing its stance
on not allowing locals to enter into casinos. If this were to occur, there could be
some negative spill-over effects to NagaCorp in terms of visitation. However,
the degree of the impact will still depend on any other potential stipulations of
the law, including the amount of a possible entry fee as is the case in Singapore.
In addition, we believe that to allow locals to gamble, Vietnam would have to
construct a regulatory framework to deal with possible side effects of gaming
such as corruption, crime and balancing social ills with benefits such as tax
receipts. Hence, we feel that Vietnam allowing its citizens to gamble
domestically, while possible, is not likely to occur for some time.
3.3 Gaming license and anti-money laundering
NagaCorp has an exclusive gaming license within a 200km radius of Phnom
Penh until 2035 and a casino license until 2065. The probability of the
government revoking these licenses is minute, in our view.
The Prime Minister of Cambodia, Hun Sen, enjoys strong support within
Cambodia, and his political party the Cambodian People’s Party (CPP) won the
National Assembly election by the widest margin of popular votes in 2008. We
expect the Cambodian People’s Party to again dominate in the 2013 National
Assembly elections as the Party continues to have strong support within
Cambodia. Dr. Chen, the CEO and founder of NagaCorp, has a close
relationship with Hun Sen and is also one of his economic advisors. With the
strong support of Cambodia’s leading political party, we do not believe that
NagaCorp is under any political risk to have its gaming license altered.
NagaCorp uses Hill & Associates which is a global risk management and
security firm to conduct independent reviews of the company’s AML policies
and internal controls. The reviews are based on compliance with the Financial
Action Task Force (FATF) guidelines. FATF guidelines are based on 36
government organisations to establish standards and to promote the
implementation of legal, regulatory and operational measures for combating
money laundering, terrorist financing and other threats to the international
financial system. Its recommendations are the international standard for
combating money laundering and the financing of terrorist activities. Hill &
Associates conducts audits on NagaCorp twice a year and after their audits have
found NagaCorp to be in full compliance with FATF recommendations.
24
NagaCorp Ltd
March 21, 2013
3.4 Economic downturn and credit extension
Gaming activities are considered a consumer discretionary activity and will
often do well during periods of economic prosperity and fall during periods of
economic weakness. NagaCorp’s gaming revenue is likely to be negatively
affected by periods of weak economic growth. However, since NagaCorp has
zero debt and issues limited credit to junkets, the company is still likely to
maintain its strong balance sheet even as gaming revenues decline during an
economic downturn.
3.5 Further share placement
NagaCorp has undergone two share placements in 2012 and one top up
placement in 2013. The share placements in 2012 were done by Dr. Chen. The
first placement occurred after market on April 2 of which 214 million shares
were placed at HK$3.04 which was a 15% discount to the previous day’s closing
price. Dr. Chen’s holdings were reduced from 60% to 50%. A second placement
was done before market hours on November 20 of which 90 million shares
were placed at HK$4.43 which was a 7% discount to the previous closing price.
Dr. Chen’s holdings were further reduced from 50% to 46%. While NagaCorp’s
share prices have shown volatility around the share placements, we note that
NagaCorp’s stock has already surpassed the placement prices.
A top up placement was done on March 13 after market close in which 200m
new shares at an 8.3% discount to the HK$6.6 closing price were issued to the
market. The total shares outstanding increased by 9.6% to 2.28bn shares
outstanding and Dr. Chen’s holdings were reduced from 45.7% to 41.7%. From
the US$156m in proceeds raised, the majority of it will be used to fund projects
such as a new private VIP airport terminal (US$15m), improved ground
transportation fleet (US$2m), NagaWorld property improvements (US$20m),
promotional and marketing projects (US$5m) and with the remaining balance
used as working capital for developing the VIP business.
As Dr. Chen’s holdings are expected to climb to 65% in late-2015/early-2016
upon the completion of Naga2, we expect Dr. Chen to sell down addition shares
in order to improve free float and to maintain his holdings below 50%.
4. FINANCIALS
4.1 Key financial metrics with other gaming markets
In the charts below, we present some key financial and operational
comparisons between NagaCorp and other gaming markets in Asia. We note
that NagaCorp is above the industry averages in terms of gaming growth rates,
mass gaming as a % of revenue, low tax rates, dividend pay-out ratios, EBITDA
margin, and ROE. NagaCorp is slightly above its industry peers for receivables
as a percentage of assets and slightly below the industry average for net cash as
a percentage of assets. NagaCorp has the highest gaming growth rate, highest
mass gaming ratio, lowest gaming tax rate, highest pay-out ratio and highest
EBITDA margin in the region.
25
NagaCorp Ltd
March 21, 2013
Figure 47: Gaming growth rates across markets
Figure 48: VIP as a % of gaming revenue 2012
25%
Title:
Source:
80%
70%
20%
60%
15%
50%
10%
40%
5%
30%
20%
0%
2012
2013
2014
2015
10%
-5%
0%
Singapore
-10%
Singapore
Malaysia
Macau
NagaCorp
Malaysia
VIP %
SOURCES: CIMB
Figure 49: Gaming tax rate 2012
Macau
NagaCorp
average
Figure 50: Dividend pay-out ratio 2012
45%
80%
40%
70%
35%
Title:
Source:
60%
30%
50%
25%
40%
20%
30%
15%
20%
10%
10%
5%
0%
0%
Singapore
Malaysia
tax rate
Macau
NagaCorp
Singapore
average
Malaysia
Macau
Payout ration
average
Figure 51: EBITDA Margin 2012
NagaCorp
Figure 52: ROE 2013
60%
Title:
Source:
50%
45%
50%
40%
35%
40%
30%
30%
25%
20%
20%
15%
10%
10%
5%
0%
0%
Singapore
Malaysia
Margin
Macau
NagaCorp
Singapore
average
Malaysia
ROE
26
Macau
NagaCorp
average
SOURCES: CIMB
NagaCorp Ltd
March 21, 2013
Figure 53: Receivables % of total assets 2012
Figure 54: Net cash % of total assets 2012
8%
18%
7%
16%
Title:
Source:
14%
6%
12%
5%
10%
4%
8%
3%
6%
2%
4%
1%
2%
0%
0%
Singapore
Malaysia
Macau
Receivables % of net current assets
NagaCorp
Singapore
average
Malaysia
Macau
Net cash % of assets
NagaCorp
average
4.2 Revenue growth
We are forecasting a 27% top-line CAGR from 2011 to 2015. For 2013, we
currently project a 20% increase in revenue to $333m (compared to 25%
growth in 2012). For 2014-2015 we project stronger revenue growth rates of
21-22% due to stronger traction at the VIP suites. We estimate 2013 sales to be
driven by a 33% increase in public gaming floor revenue, a 14% increase in slot
revenue and a 14% increase in VIP revenue. We forecast that overall casino
revenue (public gaming floor + VIP + slots) will take up 94% of sales, similar to
2012. We also project the public floor gaming segment to outperform the VIP
segment with public floor gaming at 31% of revenue in 2013 vs. 28% in 2012.
For the slot revenue, while we are currently projecting a 25% increase in bill-ins
for 2013, we estimate that only 70% of the projected revenue assuming an 11.5%
win rate will be booked to NagaCorp. The reason is due to the revenue sharing
split with slot machine operators. For example, in November 2012, NagaCorp
entered into an agreement with Zhiyou International where Zhiyou will supply
150 gaming machines in Saigon Palace and in exchange, NagaCorp will receive
a one-time $10m fee plus 70% of the revenue generated by the machines.
Figure 55: NagaCorp revenue breakdown (US$m)
600
500
26
400
24
22
300
18
200
12
80
100
69
141
122
108
147
95
122
100
88
63
78
103
2011
2012
2013F
137
178
0
Public floor
Electronic gaming
2014F
VIP
2015F
Non gaming
27
NagaCorp Ltd
March 21, 2013
Figure 56: % of revenue breakdown
2011
2012
2013F
2014F
2015F
Public floor
28%
28%
31%
34%
36%
Electronic gaming
31%
32%
30%
30%
30%
VIP
36%
34%
32%
30%
29%
6%
6%
6%
6%
5%
100%
100%
100%
100%
100%
Non gaming
Total
4.3 Margins
83% of gross profit came from the mass gaming and non-gaming segment in
2012, with the remaining 17% coming from junkets and VIP. Gross margins for
mass and non-gaming are considerably higher at 91% vs. 37% for the junket
and VIP side. The margin differential is mainly due to the commission that is
paid out to junkets on the VIP side.
Gross and EBITDA margins have been relatively steady since 2011 at 73% and
50% respectively. On the VIP side, NagaCorp has historically used a fixed
commission model of 1.7% of rolling chip turnover to the junkets. In order to
manage risk for the higher table limit VIP suites, NagaCorp is considering
moving to a revenue sharing model with the junkets. A revenue sharing model
would protect margins in the case of low hold rates. For example in a revenue
sharing model, if the casino wins less, the commission paid out to the junket is
also less. In a fixed commission model, if the casino wins less, the commission
does not decline since the commission is based on rolling chip turnover and not
on the revenue.
We are currently forecasting gross and EBITDA margins to remain relatively
steady over the next few years at 73-74% for gross and 49-50% for EBITDA
respectively. Our margin forecasts could be conservative especially considering
the fact that the higher margin public gaming floor is projected to take up a
higher percentage of overall revenue.
NagaCorp has a tax agreement with the Cambodian government that extends
until 2018. Under this scheme, NagaCorp pays a fixed tax per year. In 2012, the
company paid US$370k in tax per month and this amount increases by 12.5%
every year until 2018. The effective tax rate for the company was approximately
4.1% and 3.8% in 2011 and 2012 respectively. NagaCorp is currently in
discussions with the government on extending the tax agreement beyond 2018.
Figure 57: Margins breakdown
2010
2011
2012
2013F
2014F
2015F
Gross margin
70.9%
73.2%
72.9%
73.3%
73.8%
74.2%
EBITDA margin
45.7%
49.3%
49.7%
49.6%
49.4%
49.2%
Pretax profit margin
31.8%
42.9%
42.2%
43.2%
43.9%
44.5%
Net profit margin
41.3%
56.2%
55.7%
56.7%
57.4%
57.9%
28
NagaCorp Ltd
March 21, 2013
Figure 58: Gross profit US$m
Figure 59: EBITDA US$m
400
Title:
Source:
300
100%
90%
350
90%
250
80%
80%
300
70%
250
100%
70%
200
60%
60%
200
150
50%
50%
40%
40%
150
100
30%
30%
100
20%
50
20%
50
10%
10%
0
0
0%
2011
2012
2013F
2014F
Gross profit
0%
2011
2015F
2012
2013F
2014F
EBITDA
yoy
2015F
yoy
Figure 60: Income statement (US$m)
2010
2011
2012
2013F
2014F
2015F
Revenue
150.5
223.8
278.8
333.2
404.5
491.9
Cost of sales
-43.8
-60.0
-75.6
-89.0
-106.0
-126.9
Gross profit
106.7
163.8
203.2
244.2
298.5
365.0
Other income
3.8
0.2
0.9
1.1
1.3
1.6
Administrative expenses
-27.4
-28.3
-37.1
-43.3
-52.6
-63.9
Amortization of casino license premium
-3.5
-3.5
-3.5
-3.5
-3.5
-3.5
Other operating expenses
-32.2
-37.9
-46.3
-55.4
-67.3
-81.8
+ Amortization of casino license premium
3.5
3.5
3.5
3.5
3.5
3.5
+ Depreciation and amortization
10.4
12.2
16.6
17.3
18.2
19.1
+ Other gain / loss adjustments
7.6
0.2
1.2
1.5
1.8
2.2
EBITDA
68.8
110.3
138.6
165.3
200.0
242.1
Amortization of casino license premium
-3.5
-3.5
-3.5
-3.5
-3.5
-3.5
Depreciation and amortization
-10.4
-12.2
-16.6
-17.3
-18.2
-19.1
EBIT
54.9
94.5
118.4
144.5
178.3
219.5
Finance revenues
0.7
1.7
0.5
0.6
0.7
0.8
Finance costs
0.0
0.0
0.0
0.0
0.0
0.0
Gain/(loss) on disposal of PPE
-0.2
-0.2
-1.5
-1.5
-1.5
-1.5
Impairment loss on trade receivables
-7.2
0.0
0.6
0.6
0.6
0.6
Exchange gain/(loss)
-0.1
0.0
-0.3
-0.3
-0.3
-0.3
Profit before income tax
47.9
96.0
117.6
143.9
177.7
219.1
Income tax (expenses)/credits
-3.9
-4.0
-4.5
-5.3
-6.5
-7.9
Profit attributable to equity holders
44.1
92.0
113.1
138.5
171.2
211.2
DPS (US$ cents) (declared)
1.48
3.09
3.84
4.29
5.30
6.54
EPS (US$ cents)
2.12
4.42
5.43
6.07
7.50
9.25
Payout ratio
70%
70%
71%
71%
71%
71%
Gaming tax % of gross gaming revenues
-3%
-2%
-2%
-2%
-2%
-2%
Admin % of net revenues
-18%
-13%
-13%
-13%
-13%
-13%
Other income % of net revenues
3%
0%
0%
0%
0%
0%
Other operating expenses % of net revenues
-21%
-17%
-17%
-17%
-17%
-17%
Other gains/adjustments % of net revnue
5%
0%
0%
0%
0%
0%
Interest income % of sales
0%
1%
0%
0%
0%
0%
Gross margin
71%
73%
73%
73%
74%
74%
EBITDA margin
46%
49%
50%
50%
49%
49%
Pretax profit margin
32%
43%
42%
43%
44%
45%
Net profit margin
41%
56%
56%
57%
57%
58%
Net revenues
28%
49%
25%
20%
21%
22%
COGS
-6%
37%
26%
18%
19%
20%
EBITDA
73%
60%
26%
19%
21%
21%
Net profit
73%
109%
23%
22%
24%
23%
Other
YOY % growth
29
NagaCorp Ltd
March 21, 2013
4.4 Balance sheet metrics
Due to stringent credit terms to junkets, NagaCorp does not have a high
receivables balance. Receivables have averaged only US$23m over the past
three years and have only comprised 6% of total assets on average. NagaCorp
also has not had any debt on its balance sheet over the past three years. We
estimate that its operating cash flow is sufficient for funding capex
requirements.
Figure 61: Receivables (US$m) % of assets
900
9%
800
8%
700
7%
600
6%
500
5%
400
4%
300
3%
200
2%
100
1%
0
0%
2010
2011
2012
Receivables
2013
2014
Assets
2015
%
NagaCorp had a cash balance of US$58m at the end of 2012. Cash as a
percentage of assets has increased from 7% in 2010 to 14% in 2012. Due to
limited capex requirements from Naga2, the recent top up share placement of
US$156m and strong net income growth, we estimate that cash as a percentage
of assets can increase to 47% by 2015.
Figure 62: Cash (US$m) % of assets
900
50%
800
45%
40%
700
35%
600
30%
500
25%
400
20%
300
15%
200
10%
100
5%
0
0%
2010
2011
2012
Cash
2013
Assets
2014
2015
%
30
NagaCorp Ltd
March 21, 2013
Figure 63: Balance sheet (US$m)
2010
2011
2012
2013F
2014F
2015F
Investment properties
0.6
0.6
0.6
0.6
0.6
0.6
Property and equipment
155.8
187.1
237.6
242.9
254.5
265.3
Intangible assets
87.5
83.9
80.4
77.9
74.9
71.9
Financial assets
0.0
0.0
0.0
0.0
0.0
0.0
Interest in associates
0.0
0.0
0.0
0.0
0.0
0.0
Deferred tax assets
0.0
0.0
0.0
0.0
0.0
0.0
Other non-current assets
3.4
4.4
14.4
14.4
14.4
14.4
Total non current assets
247.3
276.1
333.0
335.9
344.5
352.2
Inventories
0.6
1.2
1.1
1.3
1.6
1.9
Trade and other receivables
24.9
24.4
20.9
25.0
30.3
36.9
Amounts due from related companies
0.0
0.0
0.0
0.0
0.0
0.0
Investments
0.0
0.0
0.0
0.0
0.0
0.0
Restricted cash
21.1
35.5
15.0
15.0
15.0
15.0
Bank balances and cash
22.9
29.3
58.2
241.8
295.6
364.6
Other current assets
5.7
5.2
0.0
0.0
0.0
0.0
Total current assets
75.2
95.5
95.3
283.1
342.5
418.4
Total assets
322.5
371.6
428.3
618.9
687.0
770.6
Long-term borrowings
0.0
0.0
0.0
0.0
0.0
0.0
Minority interests
0.0
0.0
0.0
0.0
0.0
0.0
Deferred tax liabilities
0.0
0.0
0.0
0.0
0.0
0.0
Other long-term liabilities
0.0
0.0
0.0
0.0
0.0
0.0
Total non current liabilities
0.0
0.0
0.0
0.0
0.0
0.0
Accounts payable
13.8
18.8
26.0
30.6
36.5
43.7
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
Dividends payable
0.0
0.0
0.0
0.0
0.0
Income tax payable
0.0
0.0
0.0
0.0
0.0
Assets
Liabilities
Short-term borrowings
Amount due to related companies
0.0
Other current liabilities
0.0
0.3
0.4
0.4
0.4
0.4
Total current liabilities
13.8
19.1
26.4
31.0
36.9
44.1
Total liabilities
13.8
19.1
26.4
31.0
36.9
44.1
Total shareholder's equity
308.7
352.5
401.9
587.9
650.1
726.6
4.5 Cash flow metrics
NagaCorp has a steady cash flow, where the main cash outlays are capital
expenditure and dividend payments. Capital expenditure was US$60m in 2012
mainly due to the opening of new casino cell areas such as NagaRock and
Saigon Palace. For 2013, we are currently forecasting US$30m of capex mainly
due to maintenance and the opening of the VIP suites and the Aristocrat Private
Club. For 2014 and 2015, we are projecting capex staying at US$30m as the
capex for Naga2 will be privately funded by Dr. Chen. The US$30m capex will
be mainly used for maintenance along with the projects outlined during the
recent top up placement.
In terms of operating cash flow, we are forecasting a CAGR of 25% from
US$78m in 2010 to US$233m in 2015. This increase will mainly be driven by
an increase in pre-tax profit from US$48m in 2010 to US$219m by 2015. Due
to the steady cash flow, we also project NagaCorp to maintain its dividend
pay-out ratio of around 70%. In 2012, NagaCorp’s absolute dividend increased
by 24% yoy to 3.84UScts. This compares to the 109% increase in absolute
dividend in 2011. From 2010, to 2015, we currently project absolute dividend
CAGR of 35% from 1.48UScts in 2010 to 6.54UScts by 2015.
31
NagaCorp Ltd
March 21, 2013
Figure 64: Cashflow metrics (US$m)
Figure 65: Dividend (US cents) payout ratio
Title:
Source:
7
300
250
71%
6
71%
200
5
150
100
50
70%
4
70%
3
70%
2
70%
1
70%
0
2010
2011
2012
2013
2014
2015
-50
-100
-150
0
69%
2010
-200
Operating
Investing
2011
2012
2013
Dividend US cts
Financing
2014
2015
Payout ratio
Figure 66: Cashflow statement (US$m)
2010
2011
2012
2013F
2014F
2015F
47.9
96.0
117.6
143.9
177.7
219.1
Depreciation of property and equipment
10.4
12.2
16.6
17.3
18.2
19.1
Amortization of intangible assets
3.5
3.5
3.5
3.5
3.5
3.5
Gains and losses
7.4
0.3
0.0
0.0
0.0
0.0
Finance revenues
-0.7
-1.7
-0.5
-0.6
-0.7
-0.8
Finance costs
0.0
0.0
0.0
0.0
0.0
Other non-cash adjustments
-3.2
0.2
-0.2
0.0
0.0
0.0
Decrease/(increase) in inventories
-0.3
-0.7
0.1
-0.2
-0.3
-0.3
(Increase) in trade and other receivables
15.6
3.7
3.5
-4.1
-5.3
-6.5
5.2
0.0
0.0
0.0
7.2
4.6
5.9
7.2
0.0
0.0
0.0
0.0
Cash flows from operating activities
Profit before tax
Adjustment to reconcile profit before tax to net cash flow
Non-Cash
Working capital adjustment
Decrease/(increase) in other current assets
Increase/(decrease) in accounts payable
1.2
2.9
Increase/(decrease) in other current liabilities
Cash generated from operations
81.9
116.5
153.1
164.5
199.1
241.2
Income tax paid
-4.1
-3.6
-4.5
-5.3
-6.5
-7.9
Other adjustment
Net cash generated from operating activities
3.5
77.8
112.8
152.2
159.1
192.6
233.3
Purchase of property and equipment
-23.5
-45.5
-60.0
-30.0
-30.0
-30.0
Net Investments and proceeds from sale of assets
0.0
0.0
0.0
0.0
0.0
0.0
Purchase of other non-current assets
0.0
0.0
0.0
0.0
0.0
0.0
Interest received
0.7
1.7
0.5
0.6
0.7
0.8
Others
-17.1
-14.4
0.0
0.0
0.0
0.0
Net cash generated from/(used in) investing activities
-39.9
-58.2
-59.5
-29.4
-29.3
-29.2
Proceeds from borrowing
0.0
0.0
0.0
0.0
0.0
0.0
Repayments of borrowings
0.0
0.0
0.0
0.0
0.0
0.0
Proceeds from issue of shares
0.0
0.0
0.0
156.0
0.0
0.0
Interest paid
0.0
0.0
0.0
0.0
0.0
0.0
Dividends paid
-30.0
-48.2
-63.7
-102.1
-109.4
-135.1
Others
0.0
0.0
0.0
0.0
0.0
0.0
Net cash generated from/(used in) financing activities
-30.0
-48.2
-63.7
53.9
-109.4
-135.1
Net increase/(decrease) in cash and cash equivalents
7.9
6.4
29.0
183.5
53.8
69.0
Cash and cash equivalents at beginning of the year/period
15.0
22.9
29.3
58.2
241.8
295.6
Adjustments
0.0
0.0
0.0
0.0
0.0
0.0
Cash and cash equivalents at end of the year/period
22.9
29.3
58.2
241.8
295.6
Cash flow from investing activities
Cash flow from financing activities
364.6
32
NagaCorp Ltd
March 21, 2013
5. VALUATION AND RECOMMENDATION
5.1 Valuation expansion
NagaCorp’s share price has risen by 2x since the beginning of 2012 vs. a 75%
average increase in Macau gaming shares, a 3% decline in Singapore gaming
shares and a 11% decline in Malaysian gaming shares. For YTD 2013,
NagaCorp’s share price has risen by 30% vs. a 12% increase in Macau, a 6%
increase in Singapore and a 5% decline for Malaysia.
On a consensus forward EV/EBITDA basis, NagaCorp has seen a strong
rerating from 3x in 2010 to 9.7x currently vs. its 3-year historical average of
5.5x. In 2013 alone, NagaCorp has seen a 37% increase in its multiple vs. a 5%
increase in Macau, a 7% decline in Malaysia, and a 2% increase in Singapore.
We believe that the reason for NagaCorp’s strong rerating is due to increased
liquidity from Dr. Chen’s previous share placements, along with Cambodia’s
relative immunity to the macro and micro issues that have plagued other
gaming markets. For example, since NagaWorld mainly targets lower-end VIP
players from Malaysia, NagaWorld’s gaming revenue is not greatly affected by a
possible economic slowdown in China.
Furthermore, NagaCorp is also somewhat immune to the anti-corruption news
flow in China which has plagued the Macau gaming shares in 2013.
Furthermore, as the Macau, Singapore and Malaysian gaming markets are
entering into a period of more moderate growth, NagaCorp’s gaming growth is
still likely to be sustained at around 20% due to a strong Indochina economy.
Figure 67: Regional gaming share prices
Figure 68: Consensus forward EV/EBITDA
300%
Title:
Source:
25
250%
20
200%
15
150%
10
100%
5
50%
0%
0
-50%
Macau
NagaCorp
Singapore
Malaysia
Macau
SOURCES: CIMB
NagaCorp
Singapore
Malaysia
SOURCES: CIMB
5.2 Where to go from here?
We believe that NagaCorp is a long-term rerating story driven by a strong
Indochina economy and its monopoly status in Phnom Penh, along with the
opening of Naga2. A common way to value NagaCorp is through a peg to the
Macau gaming sector in terms of a percentage discount on a EV/EBITDA basis.
However, due to NagaCorp’s superior margins, strong balance sheet, diversified
gaming base along with an emphasis on non-gaming, we believe that NagaCorp
should not be compared to the Macau gaming sector as a whole since many
operators in Macau do not share NagaCorp’s strengths in terms of margins and
growth.
We believe that while not a perfect comparison, Sands China shares the most
direct characteristics with NagaCorp in that Sands has the highest margins in
Macau, has the most diversified gaming segment (in terms of the mass, VIP and
slot split), and also has a strong emphasis on non-gaming such as MICE, retail
and F&B. Sands’ percentage of revenue from non-gaming is 12% vs. an average
33
NagaCorp Ltd
March 21, 2013
of 4% from non-gaming from the other operators. Also VIP as a percentage of
gaming revenue in 4Q12 was only 57% for Sands China vs. an average of 71% for
the other gaming operators. Finally, on a US GAAP basis, Sands has one of the
highest EBITDA margins at 30% vs. an average of 24% for the other operators.
Sands China has historically traded on an average forward EV/EBITDA of 14x,
which is the long term multiple that we assign to NagaCorp.
Figure 69: Sands China consensus forward EV/EBITDA
18
16
14
12
10
8
6
4
2
Feb-13
Jan-13
Dec-12
Nov-12
Oct-12
Sep-12
Aug-12
Jul-12
Jun-12
May-12
Apr-12
Mar-12
Feb-12
Jan-12
Dec-11
Nov-11
Oct-11
Sep-11
Aug-11
Jul-11
Jun-11
May-11
Apr-11
Mar-11
Feb-11
Jan-11
Dec-10
Nov-10
Oct-10
Sep-10
Aug-10
Jul-10
Jun-10
May-10
Apr-10
Mar-10
Feb-10
Jan-10
Dec-09
Nov-09
0
EV/EBITDA
Avg.
+1 stdev
-1 stdev
SOURCES: CIMB
Our valuation for Naga2 assumes an EBITDA of US$111m in 2016 which
represents an ROIC of 30%. Discounted back three years at 15% gives us an
equity value of 26UScts or 2.05HKD in FY13. Naga2 represents 26% of our total
equity value for NagaCorp. Our target price of HK$7.81 coupled with a 7% yield
represents 34% upside from current levels.
Figure 70:
Naga2 valuation
Figure 71:
NagaCorp valuation
US$m
Invested capital
ROIC in FY16
EBITDA
FY14 EV/EBITDA
Enterprise value
Net debt
Equity value
# shares fully diluted
Equity value/share in FY16 (US$)
US$m
369
EBITDA in FY14
30%
EV in FY14
Total debt
110.70
14.0
FY12 cash
1,550
Equity value
1,550
3,848,360,982
2,800
58
2,858
0.74
Naga 2 contribution
0.26
Total equity value (US$)
1.01
Total equity value (HK$)
7.81
0.40
Price on 21 March 2012
Discount rate
Per share
200
Equity value/share in FY13 (US$)
0.26
Equity value/share in FY13 (HK$)
2.05
6.13
% Upside
15.0%
SOURCES: CIMB
34
27.4%
Dividend yield
6.7%
Total upside
34.1%
# shares fully diluted
3,848,360,982
EV/EBITDA multiple
14.0
SOURCES: CIMB
NagaCorp Ltd
March 21, 2013
Figure 72: Tgt. Price sensitivity to discount rate and multiple
Figure 73: Tgt. Price sensitivity to ROIC and multiple
Naga2 discount rate (horizontal) / EV/EBITDA (vertical)
10%
Naga2 ROIC (horizontal) / EV/EBITDA (vertical)
12%
15%
17%
20%
20%
25%
30%
35%
40%
8 7.1
7.03
6.93
6.87
6.79
8 6.5
6.73
6.93
7.12
7.32
10 7.4
7.34
7.22
7.15
7.05
10 6.7
6.98
7.22
7.47
7.71
12 7.8
7.66
7.52
7.43
7.3
12 6.9
7.22
7.52
7.81
8.1
14 8.1
7.98
7.81
7.71
7.56
14 7.1
7.47
7.81
8.15
8.49
16 8.4
8.3
8.1
7.98
7.82
16 7.3
7.71
8.1
8.49
8.88
SOURCES: CIMB
SOURCES: CIMB
Figure 74: DCF Valuation
US$m
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
EBITDA (Naga1)
200
242
319
366
421
464
487
511
537
547
yoy growth
21%
21%
15%
15%
15%
10%
5%
5%
5%
2%
111
144
180
216
248
273
300
315
30%
25%
20%
15%
10%
10%
5%
EBITDA (Naga2)
yoy growth
Total EBITDA
200
242
429
510
601
679
735
784
837
863
yoy growth
21%
21%
77%
19%
18%
13%
8%
7%
7%
3%
Capital expenditures
-30
-30
-30
-30
-30
-30
-30
-30
-30
-30
Change in working capital
0
0
1
1
1
1
1
2
2
2
Taxes
-6
-8
-10
-13
-15
-17
-18
-20
-21
-22
Free cashflow
164
205
389
468
557
633
688
736
788
814
Shares outstanding (m)
3,848
3,848
3,848
3,848
3,848
3,848
3,848
3,848
3,848
3,848
FCF/share
0.043
0.053
0.101
0.122
0.145
0.165
0.179
0.191
0.205
0.211
Discount rate
15%
15%
15%
15%
15%
15%
15%
15%
15%
15%
Discounted FCF/share
0.037
0.040
0.067
0.070
0.072
0.071
0.067
0.063
0.058
0.052
2024 FCF/share @ 2% growth 0.22
Discount rate
15%
Growth rate
2%
Terminal value
1.66
PV of Terminal Value
0.41
Total DCF (USD)
1.01
Total DCF (HKD)
7.81
SOURCES: CIMB
35
NagaCorp Ltd
March 21, 2013
5.3 Peers valuations
Figure 75: Sector Comparisons
Bloomberg
Price
Target
Price
Market
Cap
Ticker
Recom.
(local
curr)
(local
curr)
(US$
m)
27 HK
OUTPERFORM
32.95
36.81
17,854
15.7
13.8
15%
4.5
3.4
11.5
9.2
33%
28%
0.0%
0.0%
MGM China Holdings
2282 HK
OUTPERFORM
16.74
19.81
8,194
12.5
11.1
14%
7.4
5.4
9.4
8.1
70%
56%
4.0%
4.5%
Sands China
1928 HK
OUTPERFORM
38.25
41.95
39,693
21.7
16.2
33%
6.7
5.8
17.0
13.2
32%
38%
3.9%
4.0%
SJM Holdings
880 HK
OUTPERFORM
19.12
23.62
13,665
13.4
12.1
10%
4.6
4.1
9.7
8.6
37%
36%
5.7%
6.3%
Wynn Macau
1128 HK
NEUTRAL
20.50
22.42
13,699
14.3
13.9
0%
9.6
7.1
11.7
11.2
80%
59%
3.5%
3.6%
Melco Crown
MPEL US
NOT RATED
20.24
n.a.
11,186
20.7
16.6
29%
2.8
2.4
12.3
11.1
14%
14%
0.0%
0.0%
16.39
13.94
17%
5.9
4.7
11.9
10.2
44%
39%
2.8%
3.1%
Company
Macau average
Core P/E (x)
3-year
EPS
CAGR
CY2013 CY2014
(%)
P/BV (x)
CY2013 CY2014
EV/EBITDA (x)
ROE (%)
Yield (%)
CY2013 CY2014 CY2013 CY2014 CY2013
CY2014
Genting Hong Kong
GENHK SP
OUTPERFORM
0.45
0.55
3,498
16.7
10.9
n.a.
1.4
1.2
13.5
9.9
9%
12%
0.0%
0.0%
Genting Singapore
GENS SP
UNDERPERFORM
1.46
1.20
14,203
22.3
18.3
19%
1.8
1.6
10.5
8.6
8%
9%
0.7%
0.7%
19.5
14.6
n.a.
1.6
1.4
12.0
9.2
9%
11%
0.3%
0.3%
Singapore average
Berjaya Sports Toto
BST MK
OUTPERFORM
4.18
5.80
1,808
13.4
13.0
2%
7.8
6.9
8.7
8.4
63%
56%
6.0%
6.1%
Genting Bhd
GENT MK
OUTPERFORM
9.61
10.90
11,373
13.7
11.9
9%
1.4
1.3
5.9
5.2
11%
11%
0.9%
0.9%
Genting Malaysia
GENM MK
NEUTRAL
3.47
3.98
6,305
12.3
11.3
6%
1.4
1.3
6.3
5.5
12%
12%
2.7%
2.8%
13.1
12.1
6%
3.5
3.2
7.0
6.4
29%
26%
3.2%
3.3%
12.4
10.5
19%
3.07
2.77
9.3
7.5
28%
28%
5.4%
6.7%
Malaysia average
NagaCorp
3918 HK
OUTPERFORM
6.13
7.81
1,802
SOURCES: CIMB
36
NagaCorp Ltd
March 21, 2013
DISCLAIMER
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.
By accepting this report, the recipient hereof represents and warrants that he is entitled to receive such report in accordance with the restrictions set forth below and agrees to be bound by
the limitations contained herein (including the “Restrictions on Distributions” set out below). Any failure to comply with these limitations may constitute a violation of law. This publication is
being supplied to you strictly on the basis that it will remain confidential. No part of this report may be (i) copied, photocopied, duplicated, stored or reproduced in any form by any means or
(ii) redistributed or passed on, directly or indirectly, to any other person in whole or in part, for any purpose without the prior written consent of CIMB.
Unless otherwise specified, this report is based upon sources which CIMB considers to be reasonable. Such sources will, unless otherwise specified, for market data, be market data and
prices available from the main stock exchange or market where the relevant security is listed, or, where appropriate, any other market. Information on the accounts and business of
company(ies) will generally be based on published statements of the company(ies), information disseminated by regulatory information services, other publicly available information and
information resulting from our research.
Whilst every effort is made to ensure that statements of facts made in this report are accurate, all estimates, projections, forecasts, expressions of opinion and other subjective judgments
contained in this report are based on assumptions considered to be reasonable as of the date of the document in which they are contained and must not be construed as a representation
that the matters referred to therein will occur. Past performance is not a reliable indicator of future performance. The value of investments may go down as well as up and those investing
may, depending on the investments in question, lose more than the initial investment. No report shall constitute an offer or an invitation by or on behalf of CIMB or its affiliates to any person
to buy or sell any investments.
CIMB, its affiliates and related companies, their directors, associates, connected parties and/or employees may own or have positions in securities of the company(ies) covered in this
research report or any securities related thereto and may from time to time add to or dispose of, or may be materially interested in, any such securities. Further, CIMB, its affiliates and its
related companies do and seek to do business with the company(ies) covered in this research report and may from time to time act as market maker or have assumed an underwriting
commitment in securities of such company(ies), may sell them to or buy them from customers on a principal basis and may also perform or seek to perform significant investment banking,
advisory, underwriting or placement services for or relating to such company(ies) as well as solicit such investment, advisory or other services from any entity mentioned in this report.
CIMB or its affiliates may enter into an agreement with the company(ies) covered in this report relating to the production of research reports. CIMB may disclose the contents of this report
to the company(ies) covered by it and may have amended the contents of this report following such disclosure.
The analyst responsible for the production of this report hereby certifies that the views expressed herein accurately and exclusively reflect his or her personal views and opinions about any
and all of the issuers or securities analysed in this report and were prepared independently and autonomously. No part of the compensation of the analyst(s) was, is, or will be directly or
indirectly related to the inclusion of specific recommendations(s) or view(s) in this report. CIMB prohibits the analyst(s) who prepared this research report from receiving any compensation,
incentive or bonus based on specific investment banking transactions or for providing a specific recommendation for, or view of, a particular company. Information barriers and other
arrangements may be established where necessary to prevent conflicts of interests arising. However, the analyst(s) may receive compensation that is based on his/their coverage of
company(ies) in the performance of his/their duties or the performance of his/their recommendations and the research personnel involved in the preparation of this report may also
participate in the solicitation of the businesses as described above. In reviewing this research report, an investor should be aware that any or all of the foregoing, among other things, may
give rise to real or potential conflicts of interest. Additional information is, subject to the duties of confidentiality, available on request.
Reports relating to a specific geographical area are produced by the corresponding CIMB entity as listed in the table below. The term “CIMB” shall denote, where appropriate, the relevant
entity distributing or disseminating the report in the particular jurisdiction referenced below, or, in every other case, CIMB Group Holdings Berhad ("CIMBGH") and its affiliates, subsidiaries
and related companies.
Country
CIMB Entity
Regulated by
Australia
CIMB Securities (Australia) Limited
Australian Securities & Investments Commission
Hong Kong
CIMB Securities Limited
Securities and Futures Commission Hong Kong
Indonesia
PT CIMB Securities Indonesia
Badan Pengawas Pasar Modal & Lembaga Keuangan (Bapepam)
Malaysia
CIMB Investment Bank Berhad
Securities Commission Malaysia
Singapore
CIMB Research Pte. Ltd.
Monetary Authority of Singapore
Thailand
CIMB Securities (Thailand) Co. Ltd.
Securities and Exchange Commission Thailand
(i) As of March 21, 2013 CIMB has a proprietary position in the securities (which may include but not limited to shares, warrants, call warrants and/or any other derivatives) in the following
company or companies covered or recommended in this report:
(a) Berjaya Sports Toto, Galaxy Entertainment, Genting Bhd, Genting Hong Kong, Genting Malaysia, Genting Singapore, MGM China Holdings, Sands China, SJM Holdings, Wynn Macau
(ii) As of March 21, 2013, the analyst(s) who prepared this report, has / have an interest in the securities (which may include but not limited to shares, warrants, call warrants and/or any
other derivatives) in the following company or companies covered or recommended in this report:
(a) -
The information contained in this research report is prepared from data believed to be correct and reliable at the time of issue of this report. CIMB may or may not issue regular reports on
the subject matter of this report at any frequency and may cease to do so or change the periodicity of reports at any time. CIMB is under no obligation to update this report in the event of
a material change to the information contained in this report. This report does not purport to contain all the information that a prospective investor may require. CIMB or any of its affiliates
does not make any guarantee, representation or warranty, express or implied, as to the adequacy, accuracy, completeness, reliability or fairness of any such information and opinion
contained in this report. Neither CIMB nor any of its affiliates nor its related persons shall be liable in any manner whatsoever for any consequences (including but not limited to any direct,
indirect or consequential losses, loss of profits and damages) of any reliance thereon or usage thereof.
This report is general in nature and has been prepared for information purposes only. It is intended for circulation amongst CIMB and its affiliates’ clients generally and does not have regard
to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. The information and opinions in this report are not and
should not be construed or considered as an offer, recommendation or solicitation to buy or sell the subject securities, related investments or other financial instruments thereof.
Investors are advised to make their own independent evaluation of the information contained in this research report, consider their own individual investment objectives, financial situation
and particular needs and consult their own professional and financial advisers as to the legal, business, financial, tax and other aspects before participating in any transaction in respect of
the securities of company(ies) covered in this research report. The securities of such company(ies) may not be eligible for sale in all jurisdictions or to all categories of investors.
Australia: Despite anything in this report to the contrary, this research is provided in Australia by CIMB Securities (Australia) Limited (“CSAL”) (ABN 84 002 768 701, AFS Licence number
240 530). CSAL is a Market Participant of ASX Ltd, a Clearing Participant of ASX Clear Pty Ltd, a Settlement Participant of ASX Settlement Pty Ltd, and, a participant of Chi X Australia Pty
Ltd. This research is only available in Australia to persons who are “wholesale clients” (within the meaning of the Corporations Act 2001 (Cth)) and is supplied solely for the use of such
wholesale clients and shall not be distributed or passed on to any other person. This research has been prepared without taking into account the objectives, financial situation or needs of the
individual recipient.
France: Only qualified investors within the meaning of French law shall have access to this report. This report shall not be considered as an offer to subscribe to, or used in connection with,
any offer for subscription or sale or marketing or direct or indirect distribution of financial instruments and it is not intended as a solicitation for the purchase of any financial instrument.
Hong Kong: This report is issued and distributed in Hong Kong by CIMB Securities Limited (“CHK”) which is licensed in Hong Kong by the Securities and Futures Commission for Type 1
(dealing in securities), Type 4 (advising on securities) and Type 6 (advising on corporate finance) activities. Any investors wishing to purchase or otherwise deal in the securities covered in
this report should contact the Head of Sales at CIMB Securities Limited. The views and opinions in this research report are our own as of the date hereof and are subject to change. If the
Financial Services and Markets Act of the United Kingdom or the rules of the Financial Services Authority apply to a recipient, our obligations owed to such recipient therein are unaffected.
37
NagaCorp Ltd
March 21, 2013
CHK has no obligation to update its opinion or the information in this research report.
This publication is strictly confidential and is for private circulation only to clients of CHK. This publication is being supplied to you strictly on the basis that it will remain confidential. No part
of this material may be (i) copied, photocopied, duplicated, stored or reproduced in any form by any means or (ii) redistributed or passed on, directly or indirectly, to any other person in whole
or in part, for any purpose without the prior written consent of CHK. Unless permitted to do so by the securities laws of Hong Kong, no person may issue or have in its possession for the
purposes of issue, whether in Hong Kong or elsewhere, any advertisement, invitation or document relating to the securities covered in this report, which is directed at, or the contents of
which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the securities laws of Hong Kong).
Indonesia: This report is issued and distributed by PT CIMB Securities Indonesia (“CIMBI”). The views and opinions in this research report are our own as of the date hereof and are subject
to change. If the Financial Services and Markets Act of the United Kingdom or the rules of the Financial Services Authority apply to a recipient, our obligations owed to such recipient therein
are unaffected. CIMBI has no obligation to update its opinion or the information in this research report.
This publication is strictly confidential and is for private circulation only to clients of CIMBI. This publication is being supplied to you strictly on the basis that it will remain confidential. No part
or in part, for any purpose without the prior written consent of CIMBI. Neither this report nor any copy hereof may be distributed in Indonesia or to any Indonesian citizens wherever they are
domiciled or to Indonesia residents except in compliance with applicable Indonesian capital market laws and regulations.
Malaysia: This report is issued and distributed by CIMB Investment Bank Berhad (“CIMB”). The views and opinions in this research report are our own as of the date hereof and are subject
to change. If the Financial Services and Markets Act of the United Kingdom or the rules of the Financial Services Authority apply to a recipient, our obligations owed to such recipient therein
are unaffected. CIMB has no obligation to update its opinion or the information in this research report.
This publication is strictly confidential and is for private circulation only to clients of CIMB. This publication is being supplied to you strictly on the basis that it will remain confidential. No part
or in part, for any purpose without the prior written consent of CIMB.
New Zealand: In New Zealand, this report is for distribution only to persons whose principal business is the investment of money or who, in the course of, and for the purposes of their
business, habitually invest money pursuant to Section 3(2)(a)(ii) of the Securities Act 1978.
Singapore: This report is issued and distributed by CIMB Research Pte Ltd (“CIMBR”). Recipients of this report are to contact CIMBR in Singapore in respect of any matters arising from, or
in connection with, this report. The views and opinions in this research report are our own as of the date hereof and are subject to change. If the Financial Services and Markets Act of the
United Kingdom or the rules of the Financial Services Authority apply to a recipient, our obligations owed to such recipient therein are unaffected. CIMBR has no obligation to update its
opinion or the information in this research report.
This publication is strictly confidential and is for private circulation only. If the recipient of this research report is not an accredited investor, expert investor or institutional investor, CIMBR
accepts legal responsibility for the contents of the report without any disclaimer limiting or otherwise curtailing such legal responsibility. This publication is being supplied to you strictly on the
basis that it will remain confidential. No part of this material may be (i) copied, photocopied, duplicated, stored or reproduced in any form by any means or (ii) redistributed or passed on,
directly or indirectly, to any other person in whole or in part, for any purpose without the prior written consent of CIMBR..
As of March 21, 2013, CIMBR does not have a proprietary position in the recommended securities in this report.
Sweden: This report contains only marketing information and has not been approved by the Swedish Financial Supervisory Authority. The distribution of this report is not an offer to sell to
any person in Sweden or a solicitation to any person in Sweden to buy any instruments described herein and may not be forwarded to the public in Sweden.
Taiwan: This research report is not an offer or marketing of foreign securities in Taiwan. The securities as referred to in this research report have not been and will not be registered with the
Financial Supervisory Commission of the Republic of China pursuant to relevant securities laws and regulations and may not be offered or sold within the Republic of China through a public
offering or in circumstances which constitutes an offer within the meaning of the Securities and Exchange Law of the Republic of China that requires a registration or approval of the Financial
Supervisory Commission of the Republic of China.
Thailand: This report is issued and distributed by CIMB Securities (Thailand) Company Limited (CIMBS). The views and opinions in this research report are our own as of the date hereof
and are subject to change. If the Financial Services and Markets Act of the United Kingdom or the rules of the Financial Services Authority apply to a recipient, our obligations owed to such
recipient therein are unaffected. CIMBS has no obligation to update its opinion or the information in this research report.
This publication is strictly confidential and is for private circulation only to clients of CIMBS. This publication is being supplied to you strictly on the basis that it will remain confidential. No part
or in part, for any purpose without the prior written consent of CIMBS.
Corporate Governance Report:
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 result may be changed after that date. CIMBS does not
confirm nor certify the accuracy of such survey result.
Score Range
90 – 100
80 – 89
70 – 79
Below 70 or No Survey Result
Description
Excellent
Very Good
Good
N/A
United Arab Emirates: The distributor of this report has not been approved or licensed by the UAE Central Bank or any other relevant licensing authorities or governmental agencies in the
United Arab Emirates. This report is strictly private and confidential and has not been reviewed by, deposited or registered with UAE Central Bank or any other licensing authority or
governmental agencies in the United Arab Emirates. This report is being issued outside the United Arab Emirates to a limited number of institutional investors and must not be provided to
any person other than the original recipient and may not be reproduced or used for any other purpose. Further, the information contained in this report is not intended to lead to the sale of
investments under any subscription agreement or the conclusion of any other contract of whatsoever nature within the territory of the United Arab Emirates.
United Kingdom and Europe: In the United Kingdom and European Economic Area, this report is being disseminated by CIMB Securities (UK) Limited (“CIMB UK”). CIMB UK is authorised
and regulated by the Financial Services Authority and its registered office is at 27 Knightsbridge, London, SW1X 7YB. This report is for distribution only to, and is solely directed at, selected
persons on the basis that those persons: (a) are persons that are eligible counterparties and professional clients of CIMB UK; (b) have professional experience in matters relating to
investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended, the “Order”); (c) are persons falling within Article 49
(2) (a) to (d) (“high net worth companies, unincorporated associations etc”) of the Order; (d) are outside the United Kingdom; or (e) are persons to whom an invitation or inducement to
engage in investment activity (within the meaning of section 21 of the Financial Services and Markets Act 2000) in connection with any investments to which this report relates may otherwise
lawfully be communicated or caused to be communicated (all such persons together being referred to as “relevant persons”). This report is directed only at relevant persons and must not
be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this report relates is available only to relevant persons and will be engaged
in only with relevant persons.
Only where this report is labelled as non-independent, it does not provide an impartial or objective assessment of the subject matter and does not constitute independent "investment
research" under the applicable rules of the Financial Services Authority in the UK. Consequently, any such non-independent report will not have been prepared in accordance with legal
requirements designed to promote the independence of investment research and will not subject to any prohibition on dealing ahead of the dissemination of investment research.
United States: This research report is distributed in the United States of America by CIMB Securities (USA) Inc, a U.S.-registered broker-dealer and a related company of CIMB Research
Pte Ltd, CIMB Investment Bank Berhad, PT CIMB Securities Indonesia, CIMB Securities (Thailand) Co. Ltd, CIMB Securities Limited, and is distributed solely to persons who qualify as "U.S.
Institutional Investors" as defined in Rule 15a-6 under the Securities and Exchange Act of 1934. This communication is only for Institutional Investors whose ordinary business activities
involve investing in shares, bonds and associated securities and/or derivative securities and who have professional experience in such investments. Any person who is not a U.S.
Institutional Investor or Major Institutional Investor must not rely on this communication. The delivery of this research report to any person in the United States of America is not a
recommendation to effect any transactions in the securities discussed herein, or an endorsement of any opinion expressed herein. CIMB Securities (USA) Inc, is a FINRA/SIPC member and
takes responsibility for the content of this report. For further information or to place an order in any of the above-mentioned securities please contact a registered representative of CIMB
38
NagaCorp Ltd
March 21, 2013
Securities (USA) Inc.
Other jurisdictions: In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is only for distribution to professional, institutional or sophisticated investors as
defined in the laws and regulations of such jurisdictions.
Spitzer Chart for stock being researched ( 2 year data )
Price Close
7.9
6.9
5.9
4.9
3.9
2.9
1.9
0.9
Mar-11
Jul-11
Nov-11
Mar-12
Jul-12
Nov-12
Distribution of stock ratings and investment banking clients for quarter ended on 28 February 2013
958 companies under coverage
Rating Distribution (%)
Investment Banking clients (%)
Outperform/Buy/Trading Buy
51.7%
8.6%
Neutral
35.0%
4.3%
Underperform/Sell/Trading Sell
13.3%
7.1%
Recommendation Framework #1 *
Stock
OUTPERFORM: The stock's total return is expected to exceed a
benchmark's total return by 5% or more over the next 12 months.
NEUTRAL: The stock's total return is expected to be within +/-5% of a
benchmark's total return.
UNDERPERFORM: The stock's total return is expected to be below a
TRADING BUY: The stock's total return is expected to exceed a
TRADING SELL: The stock's total return is expected to be below a
Sector
relevant
OVERWEIGHT: The industry, as defined by the analyst's coverage universe, is
expected to outperform the relevant primary market index over the next 12 months.
NEUTRAL: The industry, as defined by the analyst's coverage universe, is expected
to perform in line with the relevant primary market index over the next 12 months.
UNDERWEIGHT: The industry, as defined by the analyst's coverage universe, is
expected to underperform the relevant primary market index over the next 12 months.
TRADING BUY: The industry, as defined by the analyst's coverage universe, is
expected to outperform the relevant primary market index over the next 3 months.
TRADING SELL: The industry, as defined by the analyst's coverage universe, is
expected to underperform the relevant primary market index over the next 3 months.
relevant
relevant
relevant
relevant
* This framework only applies to stocks listed on the Singapore Stock Exchange, Bursa Malaysia, Stock Exchange of Thailand, Jakarta Stock Exchange, Australian Securities Exchange, Korea Exchange, Taiwan
Stock Exchange and National Stock Exchange of India/Bombay Stock Exchange. Occasionally, it is permitted for the total expected returns to be temporarily outside the prescribed ranges due to extreme market
volatility or other justifiable company or industry-specific reasons.
CIMB Research Pte Ltd (Co. Reg. No. 198701620M)
39
NagaCorp Ltd
March 21, 2013
Recommendation Framework #2 **
Stock
Sector
OUTPERFORM: Expected positive total returns of 10% or more over the next 12
months.
OVERWEIGHT: The industry, as defined by the analyst's coverage universe, has a
high number of stocks that are expected to have total returns of +10% or better over
the next 12 months.
NEUTRAL: The industry, as defined by the analyst's coverage universe, has either (i)
an equal number of stocks that are expected to have total returns of +10% (or better)
or -10% (or worse), or (ii) stocks that are predominantly expected to have total returns
that will range from +10% to -10%; both over the next 12 months.
UNDERWEIGHT: The industry, as defined by the analyst's coverage universe, has a
high number of stocks that are expected to have total returns of -10% or worse over
the next 12 months.
TRADING BUY: The industry, as defined by the analyst's coverage universe, has a
high number of stocks that are expected to have total returns of +10% or better over
the next 3 months.
TRADING SELL: The industry, as defined by the analyst's coverage universe, has a
high number of stocks that are expected to have total returns of -10% or worse over
the next 3 months.
NEUTRAL: Expected total returns of between -10% and +10% over the next 12
months.
UNDERPERFORM: Expected negative total returns of 10% or more over the next 12
months.
TRADING BUY: Expected positive total returns of 10% or more over the next 3
months.
TRADING SELL: Expected negative total returns of 10% or more over the next 3
months.
** This framework only applies to stocks listed on the Hong Kong Stock Exchange and China listings on the Singapore Stock Exchange. Occasionally, it is permitted for the total expected returns to be temporarily
outside the prescribed ranges due to extreme market volatility or other justifiable company or industry-specific reasons.
Corporate Governance Report of Thai Listed Companies (CGR). CG Rating by the Thai Institute of Directors Association (IOD) in 2011.
AAV – not available, ADVANC - Excellent, AMATA - Very Good, AOT - Excellent, AP - Very Good, BANPU - Excellent , BAY - Excellent , BBL - Excellent, BCH - Good, BEC - Very
Good, BECL - Very Good, BGH - not available, BH - Very Good, BIGC - Very Good, BTS - Very Good, CCET - Good, CK - Very Good, CPALL - Very Good, CPF - Very Good, CPN Excellent, DELTA - Very Good, DTAC - Very Good, GLOBAL - not available, GLOW - Very Good, GRAMMY – Excellent, HANA - Very Good, HEMRAJ - Excellent, HMPRO - Very
Good, INTUCH – Very Good, ITD - Good, IVL - Very Good, JAS – Very Good, KAMART – not available, KBANK - Excellent, KK – Excellent, KTB - Excellent, LH - Very Good, LPN
- Excellent, MAJOR - Very Good, MCOT - Excellent, MINT - Very Good, PS - Excellent, PSL - Excellent, PTT - Excellent, PTTGC - not available, PTTEP - Excellent, QH - Excellent,
RATCH - Excellent, ROBINS - Excellent, RS – Excellent, SC – Excellent, SCB - Excellent, SCC - Excellent, SCCC - Very Good, SIRI - Very Good, SPALI - Very Good, STA - Very
Good, STEC - Very Good, TCAP - Very Good, THAI - Very Good, THCOM – Very Good, TICON – Good, TISCO - Excellent, TMB - Excellent, TOP - Excellent, TRUE - Very Good,
TUF - Very Good, WORK – Good.
40

Khmer Gaming King

Transcription

Similar documents

Instructions for selling paysafecard in PreCash locations

Julien Descurieux

Own a piece of history, with CIMB.

Adayana GameWare Learning Solutions

Lottery $1.189B Retail $727.5M $461.5M Profit $431.6M

What Happened Matilda Björkne

Ready to book the coolest Party in Town?

Payment Guidelines - Cimb Clicks Internet Banking

22-23 october 2013 - Eastern European gaming summit

2016 PowerPoint - Finger Lakes Library System