Melco Crown Opens Macau's Next Casino Resort October 27 · Melco Crown Opens Macau's Next Casino Resort October 27 10月27日，新濠博亚将新开澳门下一家博彩度假村

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See the last page for disclaimer Page 1 of 46

Company Report: Melco Crown (MPEL US) Noah Hudson

公司报告：新濠博亚 (MPEL US) +86 755 23976684

[email protected]

20 October 2015

Melco Crown Opens Macau's Next Casino Resort October 27 10月27日，新濠博亚将新开澳门下一家博彩度假村

On Oct. 27, Melco Crown will open Macau's next major integrated casino

and entertainment resort, Studio City, in which the Company has a

60.0% interest. The Company also has a 68.6% interest in City of Dreams

Manila, which began operations in December 2014. The Company's other

current properties include: 1) City of Dreams (Macau), which currently has

approximately 500 gaming tables and 1,400 gaming machines, 2) The Altira

Macau, which mainly targets the VIP market with its approximately 120

gaming tables; and 3) Eight Mocha Clubs, which have a total of 1,200 gaming

machines, equivalent to 8.5% of the total machine installation in Macau.

We forecast 2015-2017 adjusted Property EBITDA of US$1,027 million,

US$1,185 million and US$1,248 million, representing growth of -20.1%,

15.4% and 5.4%, respectively. We forecast the Company's 2015 net

revenue to decline by just 4.3%, much better than our forecast for Macau's

2015 GGR to decline by 34.6% as the Company's new casinos take market

share from competitors.

We initiate with target price of US$19.10 and recommend to

"Accumulate" on price dips. We expect weak Macau GGR results for the

remainder of this year due to tight liquidity in the VIP segment, which we

expect will in turn drive share prices lower, creating a better entry point.

However, we expect the Macau gaming market to begin to recover going into

2016, pushing valuations up, especially for Melco Crown, whose new Studio

City targets the higher margin mass segment.

10 月 27 日，新濠博亚持有 60.0%股份的新濠影汇将开幕，是澳门的下一个综合型赌场娱

乐度假村。另外，公司持有 68.6%股份的新濠天地马尼拉在 2014 年 12 月开始经营。公司

其他物业包括：1）新濠天地（澳门），目前有约 500 张赌台以及 1,400 台角子机；2）澳

门新濠锋，以约 120 张赌台主要瞄准贵宾分部；以及 3）8 家摩卡俱乐部，总共经营 1,200

台角子机，相当于澳门总经营角子机的 8.5%。

我们分别预期 2015 年至 2017 年调整后物业 EBITDA 为 10.27 亿美元、11.85 亿美元和

12.48 亿美元，相当于-20.1%、15.4%和 5.4%的增长。由于公司的新赌场从对手取得市场

份额，我们预期公司 2015 年收入只略下降 4.3%，大幅度好于我们对澳门 2015 年总博彩

收入下跌 34.6%的预期。

我们首次覆盖目标价为 19.10 美元，建议逢低“收集”。我们预期由于贵宾场的现金流收

紧今年剩下的几个月澳门总博彩收入仍较弱，股价会有进一步下降的机会，创造更有吸引

力的买入点。尽管如此，我们预期澳门博彩业在 2016 年将恢复，而估值也将提升，尤其

是新濠博亚的估值，因为它新开的新濠影汇瞄准较高利润率的中场。

Rating: Accumulate

Initial

评级：收集 (首次研究)

6-18m TP 目标价: US$19.10

ADS price 股价： US$17.440

Stock performance 股价表现

(60)

(50)

(40)

(30)

(20)

(10)

0

10

20

Oct-14 Dec-14 Feb-15 Apr-15 Jun-15 Aug-15 Oct-15

% change

NASDAQ COMP Index Melco Crown

Change in ADS Price

ADS 价变动

1 M

1 个月

3 M

3 个月

1 Y

1 年

Abs. %

绝对变动 % (1.7) (16.0) (31.6)

Rel. % to CCMP index

相对纳指变动 % (3.4) (10.0) (45.2)

Avg. ADS price (US$)

平均 ADS 价（美元） 16.6 18.6 21.8

Source: Bloomberg, Guotai Junan In ternational .

Year End 年结

Turnover 收入

Net Profit 股东净利

Earnings / ADS 每份 ADS 净利

Earnings / ADS 每份 ADS 净利变动

PER 市盈率

BV/ADS 每份 ADS 净资产

PBR 市净率

DP ADS 每份 ADS 股息

Yield 股息率

ROE 净资产收益率

12/31 (US$ m) ( US$ m) (US$) (△%) (x) (US$) (x) (US$) (%) (%)

2013A 5,087 637 1.159 52.3 15.0 7.723 2.3 0.000 0.0 14.7

2014A 4,802 608 1.108 (4.4) 15.7 7.804 2.2 0.208 1.2 12.2

2015F 4,594 257 0.463 (58.2) 37.6 7.825 2.2 0.062 0.4 5.1

2016F 5,042 267 0.476 2.7 36.7 7.627 2.3 0.095 0.5 5.3

2017F 5,095 277 0.490 3.0 35.6 7.476 2.3 0.098 0.6 5.5

ADS in issue (m) ADS 总数 (m) 544.6 Major shareholders 大股东 Melco Int & Crown Resorts 68.6%

Market cap. (US$ m) 市值 (US$ m) 9,497.3 Free float (%) 自由流通比率 (%) 45.5

3 month average vol. 3 个月平均成交股数 („000) 3,696.7 2015 Net gearing (%) 2015 净负债/股东资金 (%) 79.3

52 Weeks high/low (US$) 52 周高/低 28.170 / 12.800 2015 Est. NAV (US$) 2015 每份 ADS 估值（美元） 23.0

Source: the Company, Guotai Junan International.

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INDUSTRY UPDATE ..................................................................................................................................... 3

S.E. Asia Casino Development ........................................................................................................................ 3

Anti-corruption and RMB Depreciation .......................................................................................................... 4

Smoking Ban.................................................................................................................................................. 4

Low Number of Gaming Tables Allowed at New Casinos ................................................................................ 5

Macau Visitors ............................................................................................................................................... 7

Planned Infrastructure Improvements ......................................................................................................... 13

Gross Gaming Revenue ................................................................................................................................ 15

COMPANY .................................................................................................................................................... 17

History and Background .............................................................................................................................. 17

Company Business ....................................................................................................................................... 20

FINANCIAL ANALYSIS ................................................................................................................................ 25

Revenue ...................................................................................................................................................... 25

Operating Expenses ..................................................................................................................................... 31

Non Operating Expenses ............................................................................................................................. 32

Operating Income, EBITDA & Net Profit ....................................................................................................... 33

Dividends .................................................................................................................................................... 34

RISKS ............................................................................................................................................................ 35

VALUATION .................................................................................................................................................. 36

FINANCIAL STATEMENTS AND RATIOS ................................................................................................ 38

APPENDIX .................................................................................................................................................... 40

Property Revenue Models ........................................................................................................................... 40

Macau Gaming Operators Comparison ........................................................................................................ 44

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INDUSTRY UPDATE

S.E. Asia Casino Development

Up to US$38 billion in casino capex is tentatively being planned in Macau's neighbouring gaming jurisdictions, which

are specifically targeting mainland visitors. The Philippines, South Korea and Vietnam are all planning to develop into

major gaming destinations. Moreover, they're specifically targeting mainland gamers and working with junkets on how to get

mainland VIP players into their casinos.

Table-1: South-East Asia Regional Casino Recent Casino Additions and Development Plans Planned Opening

Developer Project Name or Location Current Status Capex (US$ bn)

Casino Tables

Slots

Philippines 2015/3/13 Bloombery Resorts Corp Solaire Resort and Casino Operating 1.2 361 1,711

2015/2/2 Melco Crown (Philippines) City of Dreams Manila Operating 1.3 380 3,400

4Q 2016 Universal Entertainment Manila Bay Resorts Under Construction ($750 Million Spent)

2.0 500 3,000

2017 Travellers International Resorts World Manila Phase II & III

Under Construction 0.2 54* 353*

4Q 2018 Alliance Global Group Inc & Genting Hong Kong

Bayshore City Resorts World Under Construction 1.1 303* 1,983*

n.a. Leisure and Resorts World 10 to 15 Retail Gaming Outlets

Planning 0.1 24* 157*

Sub-Total 5.8 1,622 10,604

South Korea

2017 Genting Singapore and Landing International Development

In Jeju island Under Construction 2.2 321* 1,043*

2017 Paradise Co. and Sega Sammy In Paradise City Under Construction 1.7 248* 806*

2018 Caesars Ent., Genting Sing., & Bloomberry Corp.

Near the Incheon International airport

Government Approved

1.0 146* 474*

n.a. Mohegan Tribal Gaming Authority Near the Incheon airport with private jet terminals

Planning Phase n.a. 250 1,500

n.a. Grand Korea Leisure Co.Ltd Yeongjongdo Casino Resort, Incheon Area

Feasibility study n.a. n.a. n.a.

n.a. Chow Tai Fook Enterprises Ltd In Incheon City Planning Phase 1.6 233* 759*

n.a. Two to three U.S. and Chinese investment funds

In North Jeolla province Planning Phase 9.1 1,328* 4,316*

n.a. Incheon International Airport In Incheon City Planning Phase 4.6 671* 2,182*

Sub-Total 20.2 3,197 11,081

Vietnam 2015/7/13 Canadian Asian Coast

Development The Grand at Ho Tram Strip Operating 0.5** 90 90*

2015/7/13 Canadian Asian Coast Development

Ho Tram Strip Operating 4.0 180 2,000

n.a. Vietnam Government In Phu Quoc Island Government Approved

4.0 200-400* 2,000

n.a. Macau's Suncity, VinaCapital and Chow Tai Fook Enterprises

In the central province of Quang Nam

Planning Phase 4.0 400* 2,000*

Sub-Total 12.0 970 6,090

Total Additions: 38.0 5,789* 27,775*

Source: Guotai Junan International, http://www.ggrasia.com/, media reports. Note: * Guotai Junan International estimates based on planned investment amount.

Note: ** 0.5 billion for the Grand at Ho Tram Strip is already included in Ho Tram Strip 4.0 billion investment.

Japan not to pass casino bill in 2015 as had previously been hoped. Japanese lawmakers re-submitted a casino

legalization bill, the "Integrated Resorts Promotion Bill ", to parliament on April 28. However, according to an Aug. 12 article

from the Japan Times, newspaper reported that Japan‟s governing Liberal Democratic Party (LDP) has given up any attempt

to push for passing the bill during the current legislative session, which ends Sept. 27. Yoshinori Oguchi, the Komeito party‟s

chief of Diet affairs said that the LDP does not anticipate Diet deliberations on the casino bill during the current session

because insufficient measures are in place yet to deal with gambling addiction. Another obstacle for the casino bill is

increasing calls among some LDP lawmakers for putting off Diet debates on the measure until after the next Upper House

election in the summer of 2016.

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Japanese lawmakers have been pushing for casino legalization already for some 10 years. The first step is for a bill to

be submitted to Parliament. Next would be for lawmakers to deliberate the bill, then it would be voted on in the lower house of

Parliament, and if passed there, voted on in the upper house where it would (or would not) be passed into law. The casino bill

would set the basic legal framework for allowing casinos. If the bill does ever pass, local governments would then develop and

propose specific casino plans which would then be debated and voted on in the parliament. Casino legalization bills were

submitted in 2013 and again in 2014, but not passed. Opposition lawmakers are concerned about the social evils casinos

might bring, such as gambling addiction and organised crime.

Anti-corruption and RMB Depreciation

People's Bank of China to work with Macau Monetary Authority to prevent money laundering. On August 21, the

People's Bank of China announced on its website that it and the Macau Monetary Authority signed a memorandum of

understanding on preventing money laundering and terrorist financing activities. We expect this to result in tightened liquidity

flows to Macau, putting downward pressure on Gross Gaming Revenue ("GGR").

We expect Beijing's anti-corruption campaign to continue. Recent media reports indicate that Beijing continues to

investigate government officials as part of its ongoing anti-corruption campaign, which began at the end of 2012. The Central

Commission for Discipline Inspection (CCDI) on October 9 posted on its website that it is not easing up on the anti-corruption

campaign.

RMB depreciation could hamper Macau's Gross Gaming Revenue ("GGR"). Bloomberg consensus forecasts the RMB to

further depreciate to 6.52 by the end of 2015. With a weaker RMB, mainland Chinese will be able to buy less MOP or HKD to

use for gambling at Macau's casinos.

Smoking Ban

Measures of the newly proposed revised Tobacco Control Bill are still subject to public consultation and

amendments and have not been finalized, but could include:

Full ban on smoking lounges in mass gaming areas.

Full ban on smoking in VIP rooms .

Full ban on smoking e-cigarettes in all public spaces, including casinos.

Full ban on sale of e-cigarettes in Macau .

Tobacco sales tax increase and smoking fine increase from MOP400 to MOP1,500 (US$188).

The Macau Gaming Inspection and Co-ordination Bureau estimates that a full smoking ban would reduce GGR by

between 2.76% to 4.6 %. The regulator‟s estimate was based on data indicating that 23% of visitors to Macau smoke and

that between 30% and 50% smoke while gambling.

We think the revised Tobacco Control Bill could decrease GGR by up to 12% to 16%. QoQ net revenue growth at Melco

Crown (MPEL US)'s eight Mocha Clubs was essentially flat at -1.9% and -0.3% in 2Q14 and 3Q14, respectively, when

smoking was allowed. Then starting in October of last year, smoking was banned at the Mocha Clubs and their net revenue

fell 15.5% and 11.6% QoQ in 4Q14 and 1Q15, respectively. We think the city-wide full smoking ban in casinos would have a

negative effect on Macau's total GGR for some time.

Macau government has reversed position and is now open to possibly allowing smoking lounges in casinos. On July

31, Macau's Secretary for Social Affairs and Culture, Alexis Tam Chon Weng ("Tam") said in a statement that the Macau

government remained committed to its proposal for a full smoking ban inside casinos. However, Tam has softened his stance

since then. Tam was quoted in the Macau Business Daily (Oct. 6) as saying “The industry and the operators said it is possible

to create a very good smoking lounge. We don‟t know. It will be depend upon the conditions. If they really have good

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proposals, if the workers agree with it, it will be fine”.

We reverse our previous assumption and now expect that smoking lounges will continue to be allowed in casinos.

Up till now, our expectation was that a full smoking ban would be implemented and go into effect around mid or late 2016. Now

that the Macau government is open to allowing smoking lounges if they are effective, we think that the highly motivated casino

operators will be able to deliver such lounges. If airports around the world can build workable smoking lounges, we think that

with billions of dollars potentially at stake, the highly motivated Macau casino operators will be able to deliver effective

smoking lounges.

We expect that the revised Tobacco Control Bill will allow smoking lounges and will go into effect around mid or late

2016. In the beginning of the year, government officials stated that they expected the bill to be passed in early 2016. However,

on July 22, Mr Chan Chak Mo, who oversees the committee in charge of the smoking bill, said that it "“may take about a year”

to finish its report". Only after the committee has issued a report on the bill will the document return to the full assembly for its

second and final reading.

Table-2: Macau Casinos Smoking Ban Development

Date

6-Oct-14 Smoking Bill enacted restricted smoking to VIP rooms and enclosed non-gaming smoking lounges on main gaming

floors.

29-Jan-15 Macau‟s Secretary for Social Affairs and Culture, Alexis Tam Chon Weng, announced that the government would

propose a Revised Tobacco Control Bill that would fully ban smoking inside casinos.

29-Jan-15 58.4% of casino workers do not like working in VIP rooms where smoking is allowed; 75% of Macau residents

support a full smoking ban in casinos (Macau Health Bureau 4-year review).

16-Jun-15 66% of surveyed casino workers support casino smoking lounges Casino operators' survey).

30-Jun-15 Macau proposed Revised Tobacco Control Bill.

10-Jul-15 Macau‟s Legislative Assembly approved the first reading of the Revised Tobacco Control Bill (26 for votes, 2 against).

10-Jul-15 Social Affairs and Culture, Alexis Tam Chon Weng, said smoking lounges could still be a possibility if gaming operators could scientifically prove that smoking lounges could effectively prevent tobacco harm.

10-Jul-15 Macau‟s Secretary for Social Affairs and Culture, Alexis Tam Chong Weng, reiterated that smoking lounges inside casinos would prevent proper control of secondhand smoke; “We have a very firm stance on this matter [a full smoking ban] and our intention is to protect the health of Macau‟s population”.

10-Jul-15 Bill sent to second committee of Macau‟s Legislative Assembly for further debate.

22-Jul-15 Mr. Chan Chak Mo, who oversees the Second Committee of Macau‟s Legislative Assembly: "“may take about a year”

to finish its report"

22-Jul-15 According to Legislator Chan, the members of the committee are divided on the casino smoking lounges issue.

Aug 1 - Sept. 31, 2015 Public Consultation Period

Mid 2016 (estimate) Only after the committee has issued a report on the bill will the document return to the full assembly for its second and final reading.

Source: http://www.ggrasia.com, http://macaubusinessdaily.com, Guotai Junan International.

Low Number of Gaming Tables Allowed at New Casinos

Going forward, we expect the actual number of gaming tables allowed by the Macau government at new casinos to

be far less than their built for capacities. Galaxy Macau Phase II opened on May 27 this year with capacity for 500 tables

but was only allowed 150 new tables. Gaming table additions are capped by the Macau government such that total gaming

tables cannot exceed 7,150 by 2023. With 5,704 gaming tables in operation as at 1Q15 plus the additional 150 tables already

added at Galaxy Macau Phase II, that leaves room for only 1,296 more additions through 2023, which is just 46.9% of the total

2,761 tables planned to be added through 2018.

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Table-3: Macau Gaming Tables Capacity*, Slots Machines and Hotel Rooms, 2012-2017F

2012A 2013A 2014A 2015F 2016F 2017F

Total Growth 2014 to 2017

14-17 CAGR

Gaming Tables Capacity* 5,485 5,750 5,711 6,711 8,227 8,927 57.1%* 16.2%

yoy Growth 3.5% 4.8% -0.7% 17.5% 22.6% 8.5%

Slot Machines 16,585 13,106 13,018 15,518 20,593 21,593 65.9% 18.4%

yoy Growth 3.3% -21.0% -0.7% 19.2% 32.7% 4.9%

Casino Hotel Rooms 13,859 16,690 16,790 19,960 26,790 28,790 71.5% 19.7%

yoy Growth 35.2% 20.4% 0.6% 18.9% 33.6% 7.5%

Source: Gaming Inspection and Coordination Bureau Macao SAR, Government of Macao Special Administrative Region Statistics and Census Service. Note*: Due to Macau government restrictions on the number of gaming tables, actual gaming tables added will be significantly less than gaming tables capacity.

Table-3: Macau Total Number of Casinos by Company, 2012-2017F

Operators 2012 2013 2014 2015F 2016F 2017F

S.J.M. (00880 HK) 20 20 20 20 20 21

Sands China (01928 HK) 4 4 4 4 5 5

Galaxy (00027 HK) 6 6 6 7 7 7

Wynn Macau (01128 HK) 1 1 1 1 2 2

Melco Crown (MPEL US) 3 3 3 4 4 4

MGM China (02282 HK) 1 1 1 1 2 2

Louis XIII Holdings (00577 HK) 0 0 0 0 1 1

TOTAL 35 35 35 37 41 42

Source: Gaming Inspection and Coordination Bureau Macao SAR, the Companies, Guotai Junan International.

Table-4: Macau Development Timeline 2015-2018

Expected Opening

Developer Project Name Current Status

Investment (Billion)

Casino Tables

Capacity*

Slots Hotel

Rooms

27-May-15 Galaxy Ent. (00027 HK)

Broadway at Galaxy Macau

Opened

US$1.1 0 0 320

27-May-15 Galaxy Ent.

(00027 HK) Galaxy Macau Phase II

Opened US$3.0 500** 1,000 1,250

27-Oct-15 Melco Crown

(MPEL US) Studio City (Melco Crown)

Under Construction

US$3.2 500 1,500 1,600

2015 Total: US$7.3 1,000 2,500 3,170

1H 2016 Wynn Macau

(01128 HK) Wynn Palace Under

Construction US$4.1 550 1,000 1,700

July or later 2016 Sands China

(1928 HK) The Parisian Macao (Sands)

Under Construction

US$2.7 350-450 2,500 3,300

Mid-2016 Louis XIII Hds. (00577 HK)

Louis XIII Under Construction

US$1.0 66 75 200

Fall 2016 MGM China

(02282 HK)

MGM Cotai Under

Construction

US$2.9 500 1,500 1,500

2016 Total: US$10.7 1,516 5,075 6,700

2017 SJM Hds.

(00880 HK) Lisboa Palace (SJM)

Under construction

US$3.9 700 1,000 2,000

2017 Total: US$3.9 700 1,000 2,000

Galaxy Ent.

(00027 HK) Galaxy Macau Phases 3 & 4

Site investigation

US$6.4-US$7.7 n.a. n.a. n.a.

Not Determined

US$6.4-US$7.7 n.a. n.a. n.a.

Total Additions: US$29.0 3,261 8,575 12,000 Source: Guotai Junan International, the Companies: Wynn Macau (01128 HK), MGM China (02282 HK), Sands China (01928 HK), SJM (00880 HK), Galaxy Entertainment (00027 HK), Louis XIII Hds. (00577 HK) and Melco Crown Entertainment (MPEL US).

Note*: Due to Macau government restrictions on the number of gaming tables, actual gaming tables added will be significantly less than gaming tables capacity. Note**: Galaxy Macau Phase II was granted permission from the government for just 150 gaming tables, much less than its 500 table capacity.

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Table-5: Macau Casino Operators' Number of Gaming Tables

2012 2013 2014 1Q15 2Q15

Galaxy Ent. (00027 HK) 746 928 905 911 1,059

Melco Crown (MPEL US) 625 622 624 627 619

MGM China (02282 HK) 419 422 423 424 420

SJM (00880 HK) 1,769 1,775 1,765 1,739 1,733

Sands China (01928 HK) 1,383 1,510 1,527 1,537 1,513

Wynn Macau (01128 HK) 489 491 461 466 470

Total 5,431 5,748 5,705 5,704 5,814

Source: the Companies, Gaming Inspection and Coordination Bureau of Macao SAR.

Table-6: Macau Casino Operators' Number of Slot Machines

2012 2013 2014 1Q15 2Q15

Galaxy Ent. (00027 HK) 1,540 907 2,028 1,911 3,542

Melco Crown (MPEL US) 3,467 2,838 1,331 1,324 1,138

MGM China (02282 HK) 1,272 1,368 1,197 1,126 1,144

SJM (00880 HK) 3,776 3,308 2,856 2,793 2,751

Sands China (01928 HK) 4,992 5,612 4,841 4,885 4,910

Wynn Macau (01128 HK) 941 866 679 649 707

Total 16,688 14,899 12,932 12,688 14,192


Macau Visitors

Mainland China visitors on transit visas can now stay in Macau for seven days instead of five; however, we think this

won't have much impact on GGR since the average length of stay of overnight mainland visitors is only around two

days. Starting from July 1, the Macau government began allowing Chinese passport holders with a transit visa to stay in

Macau for seven days, up from five days previously. The transit stay limit for a second visit remains the same, namely, if a

Chinese passport holder with a transit visa enters Macau a second time within 60 days he/she can only stay for one day. Since

overnight visitors to Macau from mainland China only stayed for on average 2.2 days in June, we think the increase from 5 to

7 days will not have a significant impact on increasing GGR.

Figure-1: Average Stay Duration of Macau Visitors from

All Origins

Figure-2: Average Stay Duration of Macau Visitors from

Mainland China

1.0 1.0 1.0 1.0 0.9 0.9 0.9 0.9 0.9 0.9 1.1 1.2

1.9 1.9 1.9 2.0 1.9 1.9 1.9 1.8 1.9 1.8 2.0

2.2

0.0

0.5

1.0

1.5

2.0

2.5

All Visitors All Overnight Visitors

Days

1.0 1.0 1.1 1.0 1.0 1.0 1.0 0.9 1.0 0.9 1.1 1.1

2.0 2.0 2.1 2.1 1.9 2.0 2.0 1.9 2.0 1.9

2.1 2.2

0.0

0.5

1.0

1.5

2.0

2.5

Mainland China VisitorsMainland China Overnight Visitors

Days

Source: Gaming Inspection and Coordination Bureau of Macao SAR. Source: Gaming Inspection and Coordination Bureau of Macao SAR.

More visitors to Macau are going for day trips instead of overnight stays, leading to lower hotel occupancy. The

proportion of overnight visitors to Macau decreased from 46.2% in 2014 to 44.6% in 1H15. The number of overnight visitors

declined by 7.6% YoY in 1H15, compared to a 0.7% decrease in the number of day-trippers.

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Figure-3: Same Day Vs. Overnight Visitors Figure-4: Same Day Vs. Overnight Visitors, Growth (YoY)

51.7% 51.3% 53.8% 53.6% 55.4%

48.3% 48.7% 46.2% 46.4% 44.6%

0%

20%

40%

60%

80%

100%

2012 2013 2014 1H14 1H15

Same-day Visitors Overnight Visitors

15.6%

-3.8%

3.8%

12.6%

-0.7%8.4%

5.0%

5.1%

2.1%

-7.6%

-10%

-5%

0%

5%

10%

15%

20%

2011 2012 2013 2014 1H15

Same-day Visitors Overnight Visitors

Growth (YoY)

Source: Government of Macao Special Administrative Region Statistics and

Census Service.


Census Service.

1H15 hotel occupancy rates declined considerably, indicating quantity of hotel rooms is no longer a bottleneck. For

all star rated hotels in Macau, occupancy rate fell from 87.0% in 2014 to 79.3% in 1Q15, and further to 77.8% in 2Q15.

Looking at just the hotels of the listed gaming operators, the average occupancy rate fell from 95.2% in 2014 to 92.6% in

1Q15, and fell further to 91.8% in 2Q15. The lower hotel occupancy rates in 1H15 were due to the decrease in the number of

overnight visitors and not due to more room supply, since from the end of 2014 to June 31 2015. Star rated hotel room supply

only increased by 1.6%.

Figure-5: Macau Star Hotels Occupancy Rates Figure-6: Macau Casino Hotels Occupancy Rates

84.2% 83.6%

87.0%

79.3%77.8%

60%

65%

70%

75%

80%

85%

90%

2012 2013 2014 1Q15 2Q15

Total 5-star hotels 4-star hotels3-star hotels 2-star hotels

96.8% 96.2% 96.5% 95.2%

92.6% 91.8%

75%

80%

85%

90%

95%

100%

1Q14 2Q14 3Q14 4Q14 1Q15 2Q15

Galaxy (00027 HK) Melco Crown (MPEL US)MGM China (02282 HK) Sands China (01928 HK)SJM (00880 HK) Wynn Macau (01128 HK)Avg.

Source: Government of Macao Special Administrative Region Statistics and Census Service.

Source: the Companies.

Table-7: Macau Star Hotel Rooms Growth (Sequential)

2011 2012 2013 2014 June 2015

5-star hotels 18.5% 17.1% 10.7% 0.0% -0.1%

4-star hotels -0.1% 28.4% 0.7% 0.0% 7.3%

3-star hotels 0.6% 0.0% -0.4% 4.2% 1.0%

2-star hotels 0.0% 5.0% -4.5% 0.0% 1.9%

Total 11.4% 17.0% 6.5% 0.7% 1.6%


Total GGR per visitor plunged 35.4% YoY for the first eight months of 2015. After 2014 experienced the first decline in

GGR per visitor since record-keeping began in 2008, the situation has only worsened so far this year. In 1H15, mass Market

GGR per visitor dropped 26.0% YoY, and VIP was even worse, down 39.8% YoY.

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Figure-7: Macau GGR per Visitor Figure-8: Macau GGR per Visitor, Growth (YoY)

7.0 7.5 8.1

6.7

5

2.6 3.3

4.2 4.4 4

9.6 10.8

12.3 11.2

8

0

2

4

6

8

10

12

14

2011 2012 2013 2014 1H15

VIP Mass Market Total

HK$ ('000)

28.9%

7.2% 8.3%

-17.1%

-39.8%

21.4%

29.7%25.5%

5.8%

-26.0%

26.8%13.2% 13.6%

-9.4%

-34.6%

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

2011 2012 2013 2014 1H15

VIP Mass Market Total



We expect GGR per visitor to continue to decline in 2H15 as Macau adds more non-gaming attractions to attract a

broader range of tourists and diversify Macau’s offerings to include more than just gaming. Besides casinos, the

opening this year of new developments from Galaxy Entertainment (00027 HK, “GEG”) and Melco Crown (MPEL US) will

include many non-gaming and family related attractions. Opened on May 27, GEG‟s “Galaxy Macau Phase II” and “Broadway”

will bring new non-gaming attractions making Galaxy Macau one of the most expansive water parks in Greater China. GEG‟s

Broadway has a 3,000-seat Broadway Theatre, a 10 screen 3D Cineplex and UA Galaxy Cinemas. Melco Crown‟s Studio City,

opening in mid 2015, will have a “Batman Dark Flight” virtual-reality ride, the Warner Bros. Family Entertainment Center,

Asia's highest Ferris wheel, a 30,000 sq. foot Family Entertainment Center for kids, the House of Magic, a 5,000-seat Studio

City Entertainment Center for live entertainment, a fully-operational TV broadcast studio, Pacha Nightclub, and an exotic

jungle river-themed water ride, among other things. As more visitors go to Macau for non-gaming entertainment, GGR per

visitor will continue to decline.

Macau’s total number of visitors from Jan.-Aug. 2015 decreased by 1.8% YoY to 20.7 million, worse than previous

expectations of 2015 full year increase of 5%. The decline comes after the Macau Government Tourist Office had

announced in January this year that it expected tourist arrivals to increase by 5% in 2015. The Tourist Office also got it wrong

(this time in the other direction) in January 2014 when they forecast visitor growth of less than 5%, but actual 2014 growth

turned out to be 7.5%.

The number of visitors from P.R. China from Jan.-Aug. 2015 decreased by 4.1%. The proportion of visitors to Macau from

mainland China in the first eight months of 2015 decreased by 2.8 ppt YoY to 65.8%. In recent years, improved travel

infrastructure, including high speed rail, has made it easier and more convenient for mainlanders from further away provinces

to travel to Macau. In 2014, more direct flights connecting Macau to mainland cities including Tianjin, Xian and Shijiazhuang

also helped support travel from far away provinces, and the number of Macau visitors from all regions of China surged, the

lowest being 8.8% growth in visitors from North China. This contrasts to 1H15, where the highest growth was just 2.5% YoY,

from Northwest China.

With the downturn in gaming and organic decline in visitors so far this year, the Macau government has eased up on

its previous position to restrict the number of mainland visitors. In February this year, Macau's Secretary for Social

Affairs and Culture, Alexis Tam Chon Weng ("Tam") indicated that due to overcrowding, the Macau government wanted to limit

to the number of mainland visitors. However, this has become a non-issue, at least for now, since so far this year the number

of mainland China visitors has decreased without any limits having been imposed. On Oct. 6, Macau Business Daily reported

that Tam clarified that Macau does not plan to reduce the number of tourists, but rather to have them arrive at different periods

of the year instead of creating huge influxes at peak times. The Macau government is planning for more resources and

products in order to attract more visitors and prolong their stay, and Macau should still have capacity to accept more tourists in

the current economic downturn. A recent survey by the Institute for Tourism Studies indicated that Macau has capacity for

around 31.5 million visitors, which would be more than the number of visitors in 2015 if extrapolating from the current run-rate.

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Individual visit scheme could be expanded. On Oct. 14, Dai Bin, president of the China Tourism Academy, said on the

sidelines of a forum that the central government would consider allowing more residents of cities across the mainland to visit

Hong Kong and Macau under the individual visit scheme. The number of mainland cities under the scheme currently stands at

49, whereas China has nearly 660 cities. The Individual Visit Scheme began on 28 July 2003 and allows travellers from

Mainland China to visit Hong Kong and Macau on an individual basis instead of only on business visas or in group tours.

Figure-9: Macau Visitors by Place of Origin, Growth (YoY) Figure-10: Macau Visitors by Place of Origin, % of Total

22.2%

4.6%

10.2%14.1%

4.4%1.6%

-6.6% -4.4%

-5.0%

0.3%

-6.0%

-11.8%

-6.6%

-4.7% 0.0%

12.2%

0.3%4.4%

7.5%

-3.9%

-20%

-10%

0%

10%

20%

30%

2011 2012 2013 2014 1H15

Mainland China Hong KongTaiwan, China Total

57.7% 60.2% 63.5% 67.4% 69.5%

27.1% 25.2% 23.1% 20.4% 21.5%4.3% 3.8% 3.4% 3.0% 3.2%10.9% 10.8% 10.0% 9.2% 5.7%

0%

20%

40%

60%

80%

100%

2011 2012 2013 2014 1H15

Mainland China Hong Kong Taiwan, China Other


Census Service.


Census Service.

Figure-11: PRC Visitors by Region, % of Total Figure-12: PRC Visitors by Region, Growth

66.9% 63.5% 63.3% 62.9% 63.8%

20.9% 20.9% 20.8% 20.5% 19.6%

5.0% 6.8% 6.6% 7.0% 6.6%4.1% 4.3% 4.5% 4.9% 5.1%

0%

20%

40%

60%

80%

100%

2011 2012 2013 2014 1H15

South Central China East ChinaNorth China Northeast ChinaSouthwest China Northwest China

1.3%

-4.6%

-8.8%

-1.9%

1.7%2.5%

-10%

0%

10%

20%

30%

2012 2013 2014 1H15

South Central China East ChinaNorth China Northeast ChinaSouthwest China Northwest China


Note*: South Central China includes Guangdong, Hunan, Hubei, Henan and, Guangxi;

East China includes Fujian, Zhejiang, Jiangsu, Shanghai, Jiangxi, Shandong and Anhui;

North China includes Beijing, Hebei, Shanxi, Inner Mongolia and Tianjin; Northeast China includes Liaoning, Heilongjiang and Jilin;

Southwest China includes Sichuan and Chongqing;

Northwest China includes Shaanxi.


Note*: South Central China includes Guangdong, Hunan, Hubei, Henan and, Guangxi;

East China includes Fujian, Zhejiang, Jiangsu, Shanghai, Jiangxi, Shandong and Anhui;

North China includes Beijing, Hebei, Shanxi, Inner Mongolia and Tianjin; Northeast China includes Liaoning, Heilongjiang and Jilin;

Southwest China includes Sichuan and Chongqing;


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Table-8: PRC Visitors by Province/Municipality and by Region, % of Total 2011 2012 2013 2014 1H15

Province/Region

Guangdong 56.2% 52.0% 51.0% 49.5% 50.6%

Fujian 6.4% 5.3% 4.9% 5.0% 4.7%

Hunan 3.7% 3.9% 4.1% 4.1% 4.3%

Zhejiang 3.9% 4.1% 4.0% 3.8% 3.4%

Hubei 2.8% 3.2% 3.4% 3.7% 3.6%

Jiangsu 3.0% 3.1% 3.2% 3.2% 2.9%

Shanghai 3.2% 3.3% 3.3% 3.0% 3.0%

Henan 1.9% 2.1% 2.3% 2.8% 2.5%

Guangxi 2.3% 2.4% 2.5% 2.8% 2.8%

Jiangxi 2.0% 2.2% 2.3% 2.5% 2.4%

Sichuan 2.0% 2.2% 2.4% 2.2% 2.3%

Beijing 2.2% 2.1% 2.2% 2.1% 2.0%

Hebei 1.1% 1.5% 1.5% 1.9% 1.8%

Liaoning 1.7% 1.7% 1.8% 1.9% 2.0%

Helongjiang 1.2% 1.4% 1.5% 1.7% 1.7%

Shandong 1.2% 1.4% 1.7% 1.7% 1.7%

Chongqing 1.2% 1.3% 1.4% 1.4% 1.4%

Anhui 1.2% 1.4% 1.4% 1.4% 1.4%

Shanxi 1.0% 1.4% 1.3% 1.4% 1.3%

Jilin 1.1% 1.2% 1.1% 1.3% 1.3%

Shaanxi 0.0% 1.0% 1.0% 1.1% 1.2%

Inner Mongolia 0.0% 0.8% 0.8% 0.8% 0.8%

Tianjin 0.7% 0.8% 0.8% 0.8% 0.7%

Region*

South Central China 66.9% 63.5% 63.3% 62.9% 63.8%

East China 20.9% 20.9% 20.8% 20.5% 19.6%

North China 5.0% 6.8% 6.6% 7.0% 6.6%

Northeast China 4.1% 4.3% 4.5% 4.9% 5.1%

Southwest China 3.2% 3.5% 3.7% 3.6% 3.7%

Northwest China 0.0% 1.0% 1.0% 1.1% 1.2%


Note*: South Central China includes Guangdong, Hunan, Hubei, Henan and, Guangxi; East China includes Fujian, Zhejiang, Jiangsu, Shanghai, Jiangxi, Shandong and Anhui;

North China includes Beijing, Hebei, Shanxi, Inner Mongolia and Tianjin;

Northeast China includes Liaoning, Heilongjiang and Jilin; Southwest China includes Sichuan and Chongqing;


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In 1H15, 47.9% of Macau’s visitor arrivals entered at the Gongbei Border crossing in Zhuhai. Of all Macau visitors,

54.1% arrived by land, 39.0% by ferry boat and only 6.9% by air. A number of infrastructure projects are slated to be

completed from 2015 to 2039 which will make for easier access to Macau. The expanded capacity for handling incoming

travelers will help shorten time at the borders and encourage more tourist arrivals.

Table-9: Macau Visitors by Entry Point

2011 2012 2013 2014

1H15

NUMBER OF VISITORS

Gongbei Border Gate 14,161 13,591 14,250 15,574

7,030

Other land 1,139 1,239 1,568 1,816

918

By land 15,300 14,830 15,817 17,390

7,948

Outer Harbour 7,125 7,042 7,072 7,363

3,585

Inner Harbour 474 541 503 473

145

Provisional Ferry Terminal in Taipa 3,422 3,902 3,982 4,244

1,997

By sea 11,021 11,485 11,558 12,081

5,727

Airport 1,656 1,739 1,907 2,027

1,008

Heliport (Outer Harbour) 26 29 43 28

6

By air 1,682 1,768 1,950 2,055

1,014

Total 28,002 28,082 29,325 31,526

14,689

GROWTH

Border Gate 17.8% -4.0% 4.9% 9.3%

-6.7%

Other land 7.1% 8.8% 26.5% 15.8%

1.4%

By land 16.9% -3.1% 6.7% 9.9%

-5.8%

Outer Harbour 10.3% -1.2% 0.4% 4.1%

-0.4%

Inner Harbour 35.2% 14.2% -7.0% -5.9%

-44.3%

Provisional Ferry Terminal in Taipa -0.3% 14.0% 2.1% 6.6%

0.8%

By sea 7.6% 4.2% 0.6% 4.5%

-2.0%

Airport 2.8% 5.0% 9.6% 6.3%

2.1%

Heliport (Outer Harbour) 14.7% 12.1% 49.9% -34.7%

-61.4%

By air 2.9% 5.1% 10.3% 5.4%

1.1%

Total 12.2% 0.3% 4.4% 7.5%

-3.9%

% OF TOTAL VISITORS

Border Gate 50.6% 48.4% 48.6% 49.4%

47.9%

Other land 4.1% 4.4% 5.3% 5.8%

6.2%

By land 54.6% 52.8% 53.9% 55.2%

54.1%

Outer Harbour 25.4% 25.1% 24.1% 23.4%

24.4%

Inner Harbour 1.7% 1.9% 1.7% 1.5%

1.0%

Provisional Ferry Terminal in Taipa 12.2% 13.9% 13.6% 13.5%

13.6%

By sea 39.4% 40.9% 39.4% 38.3%

39.0%

Airport 5.9% 6.2% 6.5% 6.4%

6.9%

Heliport (Outer Harbour) 0.1% 0.1% 0.1% 0.1%

0.0%

By air 6.0% 6.3% 6.6% 6.5%

6.9%


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Planned Infrastructure Improvements

The Macau Intercity Light Rail Transit is expected to partially open in

2017. When completed, the Macau Intercity Light Rail Transit (LRT) will run

through the Macau Peninsula, Taipa and Cotai and access major border

checkpoints such as the Gongbei Border crossing, the Outer Harbor Ferry

Terminal, the Lotus Bridge and the Macau International Airport. It will also

provide a convenient way to travel to all the major casino destinations both in

the Macau Penninsula and in Cotai. After a number of delays, the new start

date for only the phase one Cotai section of the LRT is now expected to be

September 2017, according to the Transportation Infrastructure Office. No

opening dates for the Macau Peninsula and Taipa section has been

announced, but it is unlikely to open until after 2018 or 2019.

We think the LRT is Macau's most important infrastructure

development since intercity travel is a major bottleneck. Macau's 21.3

million visitors from mainland China in 2014 surpassed Macau's

infrastructure capacity. Speaking at the Legislative Assembly in mid-April,

Macau‟s Secretary for Social Affairs and Culture, Alexis Tam Chon Weng,

said the city has the capacity to receive 21 million mainland visitors per year.

That number could increase once the city‟s transport infrastructure is

improved, including the Intercity Light Rail Transit. New and expanded border

crossings won‟t do much good in driving incremental visitation to Macau if

Macau‟s inter-city infrastructure is insufficient to handle more visitors.

Figure-13: Macau Intercity Light Rail

Transit System

Source: Macau Transportation Infrastructure Office.

The Pac On (or "Taipa") ferry terminal will have capacity of up to 15 million passengers per year, more than the total

12.1 million passengers who entered Macau by ferry at all harbors combined in 2014. The MOP3.2 billion (US$400.8

million) Pac On (also called "Taipa") Ferry Terminal is located near the airport on Taipa Island and will facilitate travel to the

nearby Cotai casino resorts. It will be able to handle about 40 ferries an hour, have capacity of up to 15 million passengers per

year (more than the total 12.1 million passengers who entered Macau by ferry at all harbors combined in 2014) and have 19

berths and a helipad, making it Macau‟s largest ferry terminal. A scaled down temporary ferry terminal, located just beside the

final Pac On ferry terminal‟s construction site, has serviced Taipa since 2007.

The Pac On (or "Taipa") ferry terminal is expected to open in mid 2016, but could likely be delayed, as has happened

continuously since construction began in 2005. On Sept. 8 this year, the director of the Macau Marine and Water Bureau,

Susana Wong Soi Man, confirmed that construction of the new ferry terminal should be completed by the end of 2015 and it

would then take around six months to have the facility operational. However, given the Macau government‟s track record of

infrastructure project delays, we won't be surprised if it is delayed again past 2016. Construction began in 2005 and was first

intended to be up and running by 2007, but had instead been delayed several times.

The HK-Zhuhai-Macau Bridge, which could be completed as early as 2017 or 2018, will facilitate travel from Zhuhai

and Hong Kong (Hong Kong accounted for 20.4% of all entries into Macau in 2014). According to Chinahighway.com, by

2035 the HK-Zhuhai-Macau Bridge will handle 50,00 to 60,000 vehicles per day, allowing for 230,000 to 250,000 people to

border-cross each day (84 million to 91 million per day). The under-construction Hong Kong-Zhuhai-Macau Bridge is a series

of bridges and tunnels that will connect the west side of Hong Kong to Macau and to the mainland Chinese city of Zhuhai. It

will shorten the distance from Hong Kong to Macau from 60 km to 30 km, and reduce the journey time to from ~3 hours

currently to 1/2 an hour, for an estimated charge of RMB100-150 each way. Construction began on 15 December 2009. After

a series of delays, it will most likely be further delayed until 2017 or even later, said Li Chunhong, the director general of

Guangdong‟s Development and Reform Commission, according to the South China Morning Post.

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The Zhuhai-Macau New Channel pedestrian border crossing, which could be ready as early as 2016, would have a

huge impact on easing congestion at the Gongbei border. The new 24 hour pedestrian border crossing, to be located in

IIha Verde， would have capacity of up to 200,000 crossings per day, rivaling the 350,000 daily capacity at the Gongbei Border

crossing. The New Channel was first announced in May 2012, and is to be located at the North-West end of Macau, just 800

meters from the Gongbei Border crossing at the North-East end of Macau. The New Channel crossing would be for

pedestrians only and not have facilities for vehicles. The completion date has not been determined but construction is

expected to begin this year. Obstacles to construction remain, including that currently there is a wholesale market at the

proposed location of the crossing which would have to be relocated.

Macau International Airport expected to increase capacity by 33% to 50% from 6 million to 8 or 9 million passengers

per year in 2018. The Macau International Airport Company (CAM) will launch construction on an expansion to the airport this

year, according to contruction-post.com. CAM had previously announced plans to increase airport capacity by extending the

passenger terminal. CAM expects the expansion to be completed in 2018, increasing airport capacity from 6 million

passengers per year currently to 9 or 10 million. However, the current capacity for planes hasn‟t been saturated; there were

only 2 million arrivals at the Macau Airport in 2014. The expansion is expected to allow for more airlines and flight routes. We

think the airport expansion is Macau‟s least important infrastructure project since 1) only 6.4% of visitors arrived via the airport

in 2014; and 2) only 2.0 million visitors arrived to Macau via the airport in 2014, meaning that current airport capacity of 6

million is more than sufficient.

Table-10: Macau Planned Infrastructure Projects

2014 Capacity Planned Capacity Completion

Date

Macau Intercity Light Rail Transit - Cotai Section 0 n.a. 2017 - 2018

Macau Intercity Light Rail Transit - Macau Peninsula Section 0 n.a. Not Scheduled

Pac On (Taipa) Ferry Terminal n.a. 15 million / Year Mid 2016

HK-Zhuhai-Macau Bridge 0 84 mn to 91 mn / year* 2017 / 2018

Zhuhai-Macau New Channel Pedestrian Border 0 200,000 / Day 2016

Macau International Airport 6 million / Year 8 to 9 mn / Year 2018 Source: Guotai Junan International.

Note: * By 2035, the HK-Zhuhai-Macau Bridge is expected to handle 50,00 to 60,000 vehicles per day, allowing for 230,000 to 250,000 person-border crossings

per day (84 million to 91 million per year).

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Gross Gaming Revenue

We think weak Gross Gaming Revenue in June through September indicates that new casinos are failing to stimulate

significant new gaming demand as was once hoped. After the May 27 grand opening of Galaxy Macau Phase II, Macau's

June GGR declined by 14.7% MoM to MOP17.4 billion, which was the lowest amount since November 2010. July GGR was

MOP18,615 million, down 34.5% YoY and up 7.3% MoM, which was the second lowest amount since January 2011. August

GGR was down 35.5% YoY to MOP18,623 million, marking the 15th consecutive month with a YoY decline, and MoM growth

was 0.0%, which is especially weak considering that 1) new demand had been expected from Galaxy Macau Phase II and

Broadway which both continue to ramp up to full operations as more stores and attractions open, and 2) August GGR usually

rises MoM due to seasonality and summer holidays; from 2008 through 2014, August GGR on average increased by 4.6%

MoM. This year's August MoM 0.0% change hasn't been so low since 2010. September GGR was even worse, down 33.0%

YoY and down 8.0% MoM to MOP17,133 million, marking the absolute lowest amount since Sept. 2010. We think the lousy

June through September GGR indicates that future casino openings, including Studio City, scheduled to open on Oct. 27,

2015, will also fail to stimulate significant new gaming demand.

Figure-14: Macau Total GGR and Growth (Monthly)

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

10,000

15,000

20,000

25,000

30,000

35,000

GGR (L) YoY (R) MoM (R)

MOP Mllion Historical High of MOP 38 B. on Feb. 2014

Source: Gaming Inspection and Coordination Bureau of Macao SAR.

Mass market GGR stabilized in 3Q15 with QoQ growth of 0.3%. Total GGR in 3Q15 was MOP52,788 million, down 34.4%

YoY and down 4.4% QoQ. VIP GGR for the quarter plunged by 38.0% YoY and fell by 8.2% QoQ to MOP 28,147 million,

marking the sixth consecutive quarter of QoQ declines. Mass market GGR fell 29.7% YoY but increased 0.3% QoQ to MOP

24,641 million. This was the first time since 1Q14 that mass GRR was positive, suggesting that the mass segment is

stabilizing.

Figure-15: Macau Total, VIP & Mass GGR Growth (YoY) Figure-16: Macau Total, VIP & Mass GGR Growth (QoQ)

-60%

-40%

-20%

0%

20%

40%

60%

80%

1Q15A 2Q15A 3Q15A 4Q15F 1Q16F 2Q16F 3Q16F 4Q15F

Mass (YoY) VIP (YoY) Total GGR (YoY)

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

1Q15A 2Q15A 3Q15A 4Q15F 1Q16F 2Q16F 3Q16F 4Q15F

Mass (QoQ) VIP (QoQ) Total GGR (QoQ)

Source: Gaming Inspection and Coordination Bureau of Macao SAR, Guotai

Junan International.

Source: Gaming Inspection and Coordination Bureau of Macao SA, Guotai

Junan International.

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We think that the mass segment has bottomed and will start to gradually improve. Although a number of negative

pressures persist, we think that the new casinos opening in 2016 will drive at least some incremental new demand. In addition,

on Oct. 2, Macau radio and television network Teledifusao de Macau, quoted Li Gang, the director of the Chinese

government‟s local liaison office, as saying that China will introduce policies this year to support Macau‟s economy and

gaming in particular (although no specifics were given). We expect Macau GGR growth to be more stable in 2016 as the

contribution from VIP is diminished and the market becomes mass market dominated.

We expect the VIP segment to continue to deteriorate going into the rest of 2015. Neptune Group (00070 HK), a Macau

junket, reported a net loss of HK$828 mn for FY15, compared to net profit of HK$155 mn in FY14. During 2HFY15, Neptune

suffered an impairment loss of trade receivables of HK$344.3 mn "as a result of steep turnaround of VIP gaming performance

from slowdown to a full year of depression". The Company said that "A Yuan devaluation, government clampdown on money

flows added concerns to this industry. Possibly if tighter junket regulations are adopted, we think further negative impact on

VIP gaming volumes would be inevitable, driven by the likely accelerating junket room closures." Moreover, we expect a

liquidity crunch in the VIP segment in the aftermath of a recent theft at major junket operator Dore. Macau police are

investigating complaints from parties including Dore on theft of HK$330 million (US$43 mn). The news is spooking junket fund

investors who are pulling out cash, which will lead to even less liquidity. Moreover, in response to the incident, Macau‟s casino

regulator is now studying new rules to disclose more information publicly, including a list of directors, shareholders, key

employees and collaborators.

We forecast 2016 Macau GGR growth of 5.7%. We expect VIP GGR to decline MoM in October due to the liquidity crunch,

but to stabilize in November and to show mild MoM growth of around 1% starting from December and into 2016. For the mass

segment, we expect positive MoM growth going forward, with MoM growth of about 4% in 2016. This translates into 2016

GGR Total, VIP and Mass growth of 5.7%, -12.4% and 27.5%, respectively.

Figure-14: Macau Total GGR and Growth (Monthly)

13.5% 18.6%

-2.6%

-37.7%

5.7%

30.0% 31.0%

13.7%

-28.7%

27.5%

7.5%13.1%

-10.9%

-43.6%

-12.4%

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

2012 2013 2014 2015F 2016F

Total GGR Growth (YoY)Mass Market GGR Growth (YoY)VIP Market GGR Growth (YoY)

Source: Gaming Inspection and Coordination Bureau of Macao SAR.

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COMPANY

History and Background

Melco International Development Limited (00200 HK) and Crown Resorts Limited (CWN AU) each own 34.29% of

Melco Crown Entertainment Limited (MPEL US, "Melco Crown" or the "Company")'s equity. The Company was initially

formed as a 50/50 joint venture between Melco International Development Limited (00200 HK) and Publishing and

Broadcasting Limited ("PBL"), an Australian listed corporation that is now known as Consolidated Media Holdings Limited as

their exclusive vehicle to carry on casino, gaming machine and casino hotel operations in Macau. The Company was originally

called Melco PBL Entertainment (Macau) Limited, and was founded in December 2004. On 12 December 2007, Crown

Resorts Limited (CWN AU), an Australian-listed corporation, acquired all the gaming businesses and investments of PBL,

including PBL‟s stake in the Company. In May 2008, the Company changed its name to Melco Crown Entertainment Limited.

Figure-8: Company Corporate Structure

96% 96% 96% 100%

90% 100%

68.58%

31.42%

100%

100%

100%

60%

100% 100%

34.29% 0.89% 30.53% 34.29%

Treasury Shares Melco Leisure and Entertainment

Group Limited (BVI)

Crown Asia Investment Pty. Ltd.

(Victoria) Public

The Company

(Cayman Islands)

MCE Finance Limited

(Cayman Islands)

MCE Holdings Limited

(Cayman Islands)

Studio City International Holdings Limited (BVI)

Studio City Finance Limited

(BVI)

Studio City Company Limited

(BVI)

Studio City Developments Limited

(Macau)

Melco Crown (Philippines) Resorts Corporation (Philippines)

Public

MCE Leisure (Philippines) Corporation (Philippines)

Melco Crown (Macau) Limited

(Macau)

10%

Managing Director

Melco Crown (COD) Hotels Limited

(Macau)

Melco Crown (COD) Developments Limited

(Macau)

Altira Hotel Limited

(Macau)

Altira Developments Limited (Macau)

Crown Resorts Limited

(CWN AU)

Melco International Development Limited

(00200 HK)


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Table-11: Company Milestones

Date Milestone

June 2004 Melco Intl. Dev. Ltd. (00200 HK) acquires 80% interest in Mocha Clubs.

July 2004 Melco Intl. Dev. Ltd. (00200 HK) acquires remaining 20% interest in Mocha Clubs from Dr. Stanley Ho.

Dec. 2004 Originally called Melco PBL Entertainment (Macau) Limited, the Company is founded as a 50/50 joint venture

between Melco Intl. Dev. Ltd. (00200 HK) and Crown Resorts Limited (CWN AU).

Dec. 2004 Crown Macau Hotel Casino (currently "Altira") construction begins.

March 2005 Mocha Slot Group Limited, the owner of the Mocha Clubs, becomes a subsidiary of the Company.

Dec. 2006 The Company completes its IPO listing on the NASDAQ.

April 2006 City of Dreams construction begins.

Sept. 2006 The Company obtains its Macau gaming license.

July 2007 Crown Macau Hotel Casino (currently "Altira") fully opens.

July 2007 The Company acquired a 60% interest in Studio City.

April 2009 Crown Macau Hotel Casino is rebranded as "Altira".

Dec. 2011 The Company completes its listing on the Hong Kong Exchange.

June 2009 City of Dreams opens.

Dec. 2012 The Company acquires a 68.6% interest in City of Dreams Manila.

Dec. 2014 City of Dreams Manila has its soft opening.

Feb. 2015 City of Dreams Manila has its Grand opening.

June 2015 Delisting of the Company's shares from the Hong Kong Exchange.

Planned

Oct. 27 2015 Opening of US$2.3 bn Studio City (Macau). Source: the Company, Guotai Junan International.

The Company listed on the NASDAQ on Dec. 19, 2006 and listed in Hong Kong on Dec. 7, 2011. Melco Crown

completed the initial public offering of its ADSs, each of which represents three ordinary shares, and listed its ADSs on the

NASDAQ on December 19, 2006. Melco Crown's ordinary shares were listed by way of introduction on the Main Board of the

Hong Kong Stock Exchange and began trading under the stock code “06883” on December 7, 2011.

Melco Crown (06883 HK) was voluntarily delist from the Hong Kong Stock Exchange on June 29, 2015 due to low

trading volume. Since the Hong Kong listing up through Dec. 31, 2014, 99.75% of the Company's dual listings' trading

volume had been done on the NASDAQ. Maintaining the listing on the HKSE would require additional and duplicative ongoing

regulatory compliance resulting in significant additional costs and administrative work, which is why the Company decided to

delist from the HKSE.

Co-Chairman and CEO Mr. Lawrence Yau Lung Ho is the son of Dr. Stanley Ho of SJM Holdings (000880 HK). Dr.

Stanley Ho was a director and the Chairman of the Company until he resigned from those positions in March 2006. His son,

Mr. Lawrence Yau Lung Ho, was appointed executive director in Dec. 2004 and has served as co-chairman and CEO since

Dec. 2004. As a member of the National Committee of the Chinese People‟s Political Consultative Conference, Mr. Lawrence

Ho also serves on numerous boards and committees of privately held companies in Hong Kong, Macau and mainland China.

Through the leadership and reputation of Mr. Lawrence Ho, the Company has a broad network of business relationships in

Macau, Hong Kong and elsewhere in Greater China. These relationships are important to the successful development and

operation of the Company. For example, Melco Crown‟s local relationships helped it to initially secure an interest in the Mocha

Clubs, the Crown Macau (currently "Altira") and the City of Dreams. In addition, Melco Crown‟s relationships have helped it to

identify and secure sites for the Mocha Club venues on attractive economic terms and helped expand the Mocha Clubs into

the largest non-casino based operations of gaming machines in Macau.

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The Company has 100% interest in subsidiary Melco Crown Macau, one of the six companies licensed to operate

casinos in Macau. The Company operates its gaming and non-gaming businesses in Macau through Melco Crown Macau.

The Company has a 60% interest in Studio City (Macau). On July 27, 2011, the Company acquired a 60% equity interest in

SCI, the developer of Studio City, a large-scale integrated entertainment, retail and gaming resort being developed in Macau

expected to open on October 27, 2015.

The Company has a 68.6% interest in City of Dreams Manila. On December 19, 2012, Melco Crown completed the

acquisition of a majority interest in the issued share capital of Melco Crown (Philippines) Resorts Corporation (MCP PSE)

("MCP"). In March 2013 the Company injected 100% equity interest of its subsidiary, MCE Leisure (Philippines) Corporation,

into MCP. MCE Leisure (Philippines) has been granted the exclusive right to manage, operate and control the Company's

Philippines integrated casino resort project, City of Dreams Manila, within Entertainment City in Manila.

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Company Business

In 2013 and 2014, 94.1% and 93.4% of Melco Crown's revenue came from casino gaming. The remainder of revenue

comes from hotel rooms, food and beverage, entertainment and retail.

Figure-9: Melco Crown Revenue Breakdown

93.4%

2.7%

1.7%

2.2%

90.4% 4.5%

2.8%

2.3%

Casino

Room

Food & Beverage

Entertainment & Retail

2014A

1H15A

Source: Guotai Junan International.

Melco Crown currently has two major casinos in Macau, City of Dreams and Altira Macau, as well as gaming machine

operations at its Mocha Clubs. The Company is a developer, owner and operator of casino gaming and entertainment

resorts primarily in Macau but more generally in Asia. Melco Crown currently owns and operate two Forbes 5-Star hotels in

Macau: Altira Macau and The Crown Towers hotel.

The Company has a 60.0% interest in Studio City, a cinematically-themed integrated entertainment, retail and gaming

resort, expected to open on October 27, 2015. Current and future operations are designed to cater to a broad spectrum of

gaming patrons, from high-stakes rolling chip gaming patrons to gaming patrons seeking a broader entertainment experience.

The Company has a 68.6% interest in City of Dreams Manila in the Philippines' Entertainment City. In the Philippines,

the Company's subsidiary MCE Leisure Philippines currently operates and manages City of Dreams Manila, a casino, hotel,

retail and entertainment integrated resort in the Entertainment City complex in Manila, which opened in December 2014.

Figure-10: Macau Taipa Casino Map (Company Casinos Outlined in Blue)

Source: www.macautripping.com/macau/macau.

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City of Dreams Macau

City of Dreams Macau, an integrated casino resort in Cotai, opened in June 2009 and currently has approximately

500 gaming tables and approximately 1,400 gaming machines. City of Dreams is a premium-focused property, targeting

high end customers and VIP rolling chip players. As of December 31, 2014, City of Dreams featured a casino area of

approximately 448,000 square feet with approximately 500 gaming tables and approximately 1,400 gaming machines. City of

dreams currently has three hotels. The Crown Towers hotel, a Forbes 5-Star hotel, and the Hard Rock Hotel each offers

approximately 300 guest rooms, and the Grand Hyatt Macau hotel offers approximately 800 guest rooms. City of Dreams

includes around 30 restaurants and bars, approximately 70 retail outlets, recreation and leisure facilities, including health and

fitness clubs, three swimming pools, spas and salons, and banquet and meeting facilities. The Club Cubic nightclub offers

approximately 26,200 square feet of live entertainment space. The Dancing Water Theater, a wet stage performance theater

with approximately 2,000 seats, features the internationally acclaimed and award winning The House of Dancing Water show,

which is the live entertainment centerpiece of the overall leisure and entertainment offering at City of Dreams. The retail

precinct at City of Dreams is being expanded and is anticipated to open in 1H16. Also, a fifth hotel tower is in an early stage of

development and the Company is currently reviewing its development plan and schedule.

City of Dreams has won numerous industry awards. In 2010 City of Dreams won the “Best Leisure Development in Asia

Pacific” award in the International Property Awards, which recognizes distinctive innovation and outstanding success in leisure

development, and in 2011 won the “Best Casino VIP Room” and “Best Casino Interior Design” awards in the International

Gaming Awards, which recognizes outstanding design in the casino sector. City of Dreams was also recognized for its

outstanding customer service and diverse range of unique world class entertainment experiences with the “Best Customer

Experience of the Year” award in the International Gaming Awards in 2012.

City of Dreams site is located on two adjacent land parcels in Cotai with a combined area of 113,325 square meters

(1.2 million square feet) under a 25-year land lease which is renewable for successive periods of up to ten years each.

The Macau government granted the land lease in August 2008.

Figure-11: City of Dreams Macau Figure-12: City of Dreams Macau, House of Dancing

Water

Source: www.hardrockhotelmacau.com Source: http://foodology.ca/

Altira Macau

The upscale Altira Macau, with its award winning hotel and approximately 120 gaming tables, first opened in 2007

and mainly targets the VIP market. Originally, the Crown Macau Hotel Casino opened in July 2007, and was renamed

"Altira" in April 2009. The casino had been filled with all tables and no slot or gaming machines, but then in 2Q15 56 slot

machines were added. Altira Macau has a casino area of approximately 173,000 square feet in a multi-floor layout comprised

primarily of designated gaming areas and private gaming rooms for VIP players. There is also a smaller general gaming area

for the mass market that offers various table limits.

http://www.hardrockhotelmacau.com/city-of-dreams.php

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The Altira Hotel, located within the 38-storey property, has approximately 230 guest rooms, including suites and

villas. A number of restaurants and dining facilities are available at Altira Macau, including a leading Italian restaurant Aurora,

several Chinese and international restaurants and several bars. Altira Hotel also offers a spa, gymnasium, outdoor garden

podium and sky terrace lounge. Altira Macau has been awarded the "Forbes 5-Star" rating in both Lodging and Spa categories

by the Forbes Travel Guide for the sixth year in February 2015. Altira Macau also won the “Best Luxury Hotel in Macau” award

in the TTG China Travel Awards 2010 and the “Best Business Hotel in Macau” award in the TTG China Travel Awards 2009.

Altira Macau is located on a plot of land in Taipa of 5,230 square meters (56,295 square feet) under a 25-year land

lease agreement which is renewable for successive periods of up to ten years each. The Macau government granted

the land on which Altira Macau is located in March 2006.

Figure-13: Altira Macau Figure-14: Altira Macau

Source: http://casinotraveltours.com/en/casino/46/altira-macau Source: http://diwyy.com/altira-macau-and-top-casinos-in-asia/

Mocha Clubs

The Company's eight Mocha Clubs have a total of 1,200 gaming machines in operation, which represents 8.5% of the

total machine installation in Macau. Mocha Clubs comprise the largest non-casino based operations of gaming machines in

Macau. They focus on general mass market players, including day-trip customers, outside the conventional casino setting.

Except for Mocha Altira located at Altira Macau, the Company operates its Mocha Clubs at leased or sub-leased premises or

under right-to-use agreements that expire at various dates through June 2022, which are renewable upon reaching an

agreement with the owners. The eight Mocha Clubs operate at premises with a total floor area of approximately 89,400

square feet.

The gaming facilities at Mocha Clubs include the latest technology for gaming machines and offer both single-player

machines and multi-player games. In addition to slot machines, each Mocha Club site offers electronic table games without

dealers. Games, including progressive jackpots, and multi-player games where players on linked machines play against the

house in electronic roulette, baccarat and sicbo, a traditional Chinese dice game.

Figure-15: Mocha Club Taipa Best Western Figure-16: Mocha Club

Source: http://a2zmacau.com/mocha-slot-club-taipa-hotel-macau/ Source: http://www.macaubusiness.com

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Table-12: Mocha Clubs

Mocha Club Opening Date Location Gaming Area (square feet)

Royal Sep-15 G/F and 1/F of Hotel Royal 8,450

Taipa Square Jan-05 G/F, 1/F and 2/F of Hotel Taipa Square 9,200

Sintra Nov-05 G/F and 1/F of Hotel Sintra 5,000

Mocha Altira Dec-08 Level 1 of Altira Macau 2,950

Macau Tower Sep-11 LG/F and G/F of Macau Tower 21,500

Golden Dragon Jan-12 G/F, 1/F, 2/F and 3/F of Hotel Golden Dragon 20,500

Inner Harbor Dec-13 No 286–312 Seaside New Street 12,800

Kuong Fat Jun-14 Macau, Rua de Pequim No. 174., Centro Comercial Kuong Fat Cave A 9,000

Total 89,400 Source: the Company.

City of Dreams Manila

City of Dreams Manila opened in December 2014 and as of December 31, 2014, had 1,508 slot machines, 158

electronic table games and 188 gaming tables in operation. City of Dreams Manila had its soft opening on December 14,

2014 and its Grand Opening on Feb. 2, 2015. The property is located on an approximately 6.2 hectare site at the gateway of

Entertainment City, Manila, close to Metro Manila‟s international airport and central business district. City of Dreams Manila is

the Company's first entry into an entertainment and gaming market outside of Macau and an incremental source of earnings

and cash flow outside of Macau. The property has approximately 14,026 square meters (approximately 150,727 square feet)

of aggregate gaming space and total gross floor area of approximately 300,100 square meters (approximately 3.2 million

square feet). The property is authorized by PAGCOR (Philippines Amusement and Gaming Corporation, the Philippines

regulatory body with jurisdiction over gaming activities) to operate up to 1,700 slot machines, 1,700 electronic table games

and 380 gaming tables.

City of Dreams Manila has three hotels comprising Crown Towers hotel, Nobu Hotel and Hyatt City of Dreams Manila,

with approximately 950 rooms in aggregate. City of Dreams Manila also features three separate entertainment venues:

DreamPlay, a family entertainment center (which is expected to open in 1H15); Centerplay, a live performance central lounge

within the casino; and night clubs Chaos and Pangaea Ultra-Lounge. City of Dreams Manila also features a retail boulevard.

Through its subsidiary, the Company is a co-licensee of City of Dreams Manila. The Company's subsidiary, MCE Leisure

Philippines, operates the casino business of City of Dreams Manila. Under the gaming license issued by PAGCOR, the

Company, along with three other parties (SM Investments Corporation, Belle Corporation and PremiumLeisure and

Amusement, Inc.) are co-licensees to establish and operate City of Dreams Manila. Under this structure, the Company must

make monthly payments as well as a percentage of EBITDA or revenue to PremiumLeisure and Amusement based on the

gaming operations performance. Melco Crown retains all revenues from non-gaming operations. In addition, the Company

must make payments to Belle Corporation for lease of the land and certain of the building structures for City of Dreams Manila

which is expected to expire on July 11, 2033

Figure-17: City of Dreams Manila Figure-18: City of Dreams Manila

Source: http://www.wheninmanila.com/ Source: http://www.philstar.com

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Studio City

Studio City is a large-scale cinematically-themed integrated entertainment, retail and gaming resort which is

expected to open in 3Q15. Studio City, upon completion, will include gaming facilities, five-star hotel offerings and various

entertainment, retail and food and beverage outlets to attract a diverse range of customers. Studio City is designed to capture

the increasingly important mass market segment, with its destination theme, unique and innovative interactive attractions,

including Asia‟s highest ferris wheel, a Warner Bros. themed family entertainment center, a fully-operational TV broadcast

studio, the world‟s first Batman film franchise digital ride, a 5,000-seat multi-purpose live performance arena and a live magic

venue, as well as approximately 1,600 hotel rooms, a vast array of food and beverage outlets and approximately 350,000

square feet of themed and innovative retail space.

Studio City is located in Cotai, directly adjacent to the Lotus Bridge immigration checkpoint, which should offer it

competitive advantage in the mass market segment. Studio City‟s site is on a plot of land of 130,789 square meters

(equivalent to approximately 1.4 million square feet) in Cotai, Macau.

Melco Crown estimates that total capex for the first phase of Studio City will be approximately US$2.3 billion. Studio

City has an approved gross construction area of 707,078 square meters (equivalent to approximately 7.6 million square feet).

Plans for an expansionary phase at Studio City are already under review by the Company.

Melco Crown has 60% interest in Studio City. On July 27, 2011, the Company through its subsidiary, MCE Cotai

Investments Limited, acquired a 60% equity interest in SCI, the developer, owner and operator of Studio City. The total

consideration was US$360 million. New Cotai Holdings, an entity incorporated in Delaware and controlled by funds managed

by Silver Point Capital, L.P. and Oaktree Capital Management, L.P., retains the remaining 40% interest in SCI. As of

December 31, 2014, a total of US$1,280 million has been funded for Studio City, with 60% (US$768 million) contributed by the

Company and 40% (US$512) million by New Cotai Holdings.

Figure-19: Studio City Figure-20: Studio City

Source: http://www.highstakesdb.com/ Source: http://macaudailytimes.com.mo/

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FINANCIAL ANALYSIS

Revenue

Gross revenue from Melco Crown's casino resorts consists of gross gaming revenue, hotel room revenue and other

revenue. Gross gaming revenue consists of VIP rolling chip table games win (calculated before discounts and commissions),

mass market table games win and gaming machine win. In addition, the Company also derives revenue from its hotel rooms,

food and beverage and entertainment.

The Company's total casino revenues derived from customers sourced through gaming promoters ("junkets") fell

from 49.8% in 2013 to 40.1% in 2014. VIP players sourced by gaming promoters do not earn direct gaming related rebates

from the Company, but the Company does pay a commission and provide other complimentary services to the gaming

promoters. Under standard arrangements used in Macau, the Company provides gaming promoters with exclusive or casual

access to one or more of its VIP gaming rooms and staff support. In return, gaming promoters source VIP gamers to generate

an expected minimum amount of rolling chip volume per month. As of December 31, 2013 and 2014, the Company had

agreements in place with 114 and 97 gaming promoters in Macau, respectively. We expect that the junkets will continue to

play a large role in Macau's VIP business. However, their importance diminishes as the proportion of GGR derived from mass

market increases and that of VIP decreases.

Net revenue is derived at after reducing gross revenues by discounts, commissions and promotional allowances.

Revenues are recognized net of sales incentives which are recorded as a reduction of revenue; consequently, the Company‟s

gross casino revenues are reduced by discounts, commissions and points earned in customer loyalty programs, such as the

player‟s club loyalty program. The retail value of rooms, food and beverage, entertainment, retail and other services furnished

to guests without charge is included in gross revenues and then deducted as promotional allowances.

City of Dreams Revenue

City of Dreams’ VIP market share fell from 8.7% in 2014 to 7.6% in 2Q15. Gross revenue ("rolling chip table games win")

for the property was US$300 million in 2Q15, down 30.6% QoQ, worse than the 16.2% market decline. Rolling chip volume

decreased by 17.8% QoQ to US$11.1 billion in 2Q15. The rolling chip win rate (calculated before discounts and commissions)

was 2.70%, at the bottom of the expected range of 2.7% to 3.0% and down from 3.20% in 1Q15. As a result, City of Dreams'

VIP market share fell from 9.2% in 1Q15 to 7.6% in 2Q15.

City of Dreams‟ mass market table games gross revenue ("win") was US$388 million in 2Q15, down 0.8% QoQ, worse than

the 6.7% mass market growth for Macau during the same period. Mass market table games drop was US$1.20 billion, flat

compared to 1Q15. However, the mass market table games hold percentage was 32.4%, down from 35.9% in 1Q15. Gaming

machine win was US$45.3 million, up 4.7%% QoQ. As a result, City of Dreams' mass market (tables and gaming

machines) share decreased from 14.0% in 1Q15 to 13.7% in 2Q15.

City of Dreams‟ total gross gaming revenue (GGR) was US$733.4 million in 2Q15, down 19.0% QoQ, worse than the overall

Macau GGR decline of 12.2%. City of Dreams' total GGR market share decreased from 11.2% in 1Q15 to 10.3% in 2Q15.

City of Dreams' non-casino gross revenues (including the retail value of promotional allowances) for 2Q15

decreased 4.3% QoQ to US$63.8 million. We estimate City of Dreams' gross hotel room revenue (including the retail value

of promotional allowances) for 2Q15 was US$24.5 million, down 3.8% QoQ. The decrease was due to flat occupancy rate

combined with lower average daily rate. City of Dreams‟ average daily rate, occupancy rate and REVPAR were US$198,

99.0% and US$196, respectively, in 2Q15, as compared to US$206, 99.0% and US$206, respectively, for 1Q15.

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City of Dreams' 2Q15 total net revenue was US$916.8 million, down 13.0% QoQ. Net revenue is derived at after

deducting discounts, commissions and promotional allowances paid to high-end patrons and junket operators. In 2014,

discounts and commissions were equivalent to 1.18% of City of Dream's VIP rolling chip volume. Promotional allowances is

the retail value of food, beverage and other services provided to guests without charge, and was equivalent to 56.7% of

non-gaming revenue in 2014.

We forecast City of Dreams' 2015-2017 total net revenue at US$2.618 billion, US$2.056 billion and US$2.044 billion,

reflecting growth of -32.0%, -21.5% and 0.6%, respectively. With Galaxy Entertainment (00027)'s Galaxy Macau Phase II

and Broadway opened on 27 May, and Melco Crown's Studio City expected to open in 3Q15, we expect revenue at City of

dreams to drop in 2015 and for it to lose market share to the newly opening casinos. For more detailed City of Dreams

revenue forecasts, please see the Appendix.

Figure-21: City of Dreams Total Gross Revenue

Breakdown

Figure-22: City of Dreams GGR Breakdown

94.6% 94.1% 92.4% 92.2% 92.2%

5.4% 5.9% 7.6% 7.8% 7.8%

0%

20%

40%

60%

80%

100%

2013A 2014A 2015F 2016F 2017F

Hotel, F&B and Other Gross Revenue


61.3%51.3%

43.6% 42.2% 42.2%

38.7%48.7%

56.4% 57.8% 57.8%

0%

20%

40%

60%

80%

100%

2013A 2014A 2015F 2016F 2017F

Mass Tables & Machines % of Total GGR

VIP % of Total GGR

Source: the Company, Guotai Junan International. Source: the Company, Guotai Junan International.

Figure-23: City of Dreams Total GGR Figure-24: City of Dreams Total Net Revenue

4,667 4,533

2,922

2,281 2,268

30.3%

-2.9%

-35.5%

-21.9%

-0.6%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

2013A 2014A 2015F 2016F 2017F

COD Total Gross Gaming Revenue YoY

US$ million

3,857 3,849 2,618 2,056 2,044

32.0%

-0.2%

-32.0%

-21.5%

-0.6%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

0

1,000

2,000

3,000

4,000

5,000

2013A 2014A 2015F 2016F 2017F

COD Total Net Revenue YoY

US$ million


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Altira Revenue

Altira's VIP market share increased from 3.5% in 2014 to 4.4% in 2Q15. Altira's VIP gross revenue ("rolling chip table

games win") was US$176 million in 2Q15, down just 5.1% QoQ, much better than the 16.2% market decline. Rolling chip

volume decreased by 12.2% QoQ to US$6.5 billion. The rolling chip win rate (calculated before discounts and commissions)

was 2.70%, at the bottom of the expected range of 2.7% to 3.0% but up from 2.50% in 1Q15. As a result, Altira's VIP market

share increased from 3.9% in 1Q15 to 4.4% in 2Q15.

Altira's mass market share is negligible, having increased slightly from 0.7% in 2014 to 0.9% in 2Q15. Altira's mass

market table games gross revenue ("win") was US$27 million in 2Q15, down 3.3% QoQ, compared to the 6.7% QoQ growth

for Macau. Mass market table games drop was US$167 million, an increase of 4.6% from 1Q15. However, table games hold

percentage was 15.9% in 2Q15, down from 17.2% in 1Q15. As a result, Altira's mass market share, including tables and slots,

was up slightly to 0.9% in 2Q15 compared to 0.8% in 1Q15.

Altira's total market share increased from 2.4% in 2014 to 2.8% in 2Q15. Altira gained market share in both the mass

segment and the VIP segment in 2Q15 compared to full year 2014. Total GGR was US$202 million in 2Q15, down just 4.7%

QoQ, much better than the overall Macau GGR decline of 12.2%. Altira's total market share also increased from 2.6% in 1Q15

to 2.8% in 2Q15.

Altira's non-casino gross revenues (including the retail value of promotional allowances) for 2Q15 decreased 3.5%

QoQ to US$8.2 million. We estimate that Altira's gross hotel room revenue (including the retail value of promotional

allowances) for 2Q15 was US$4.2 million, down 7.4% QoQ. The decrease was due to flat occupancy and lower average daily

rate. Altira's average daily rate, occupancy rate and REVPAR were US$208, 99% and US$206, respectively, for 2Q15, as

compared to US$228, 99% and US$225, respectively, for 1Q15. For 2Q15, we estimate Altira's other non-casino gross

revenues (including the retail value of promotional allowances) - which includes revenues from food and beverage,

entertainment, retail and other - increased 1.0% YoY to US$4.0 million.

Altira's total 2Q15 net revenue was US$143.9 million, down just 3.2% QoQ. Net revenue is derived at after deducting

discounts, commissions and promotional allowances paid to high-end patrons and junket operators. In 2014, discounts and

commissions were equivalent to 1.01% of Altira's VIP rolling chip volume.

We forecast Altira's 2015-2017 total net revenue at US$555.3 million, US$467.3 million and US$464.7 million,

reflecting growth of -25.4%, -15.8% and -0.6%, respectively. With Galaxy Entertainment (00027)'s Galaxy Macau Phase II

and Broadway opened on 27 May, and Melco Crown's Studio City expected to open in 3Q15, we expect revenue at Altira to

drop in 2015 and for it to lose market share to the newly opening casinos. For more detailed Altira revenue forecasts, please

see the Appendix.

Figure-25: Altira GGR Breakdown Figure-26: Altira VIP Vs. Mass GGR

97.5% 96.6% 96.2% 96.3% 96.3%

2.5% 3.4% 3.8% 3.7% 3.7%

0%

20%

40%

60%

80%

100%

2013A 2014A 2015F 2016F 2017F



92.3% 88.6% 87.1% 87.3% 87.3%

7.7% 11.4% 12.9% 12.7% 12.7%

0%

20%

40%

60%

80%

100%

2013A 2014A 2015F 2016F 2017F


VIP % of Total GGR


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Figure-27: Altira Total GGR Figure-28: Altira Total Net Revenue

1,441

1,047 778

645 642

5.0%

-27.3%-25.7%

-17.0%

-0.6%

-30%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

0

200

400

600

800

1,000

1,200

1,400

1,600

2013A 2014A 2015F 2016F 2017F

Total Gross Gaming Revenue YoY

US$ million

1,034

745555

467 465

6.9%

-28.0%-25.4%

-15.8%

-0.6%

-30%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

0

200

400

600

800

1,000

1,200

2013A 2014A 2015F 2016F 2017F

Property Net Revenue YoY

US$ million


Mocha Clubs

The number of gaming machines in operation at Mocha Clubs averaged approximately 1,200 in 2Q15, down from

approximately 1,400 in 1Q14. The reduction in gaming machines reported by Mocha Clubs was primarily due to the closure

of one club in mid-2014 and the transfer of the reporting of one club to Altira Macau in 2015, partially offset by the opening of a

new Mocha club in mid-2014. Average net win per gaming machine per day for 2Q15 was US$299, down 1.3% compared to

average net win per gaming machine per day of US$303 for full year 2014.

We forecast Mocha Clubs 2015-2017 total net revenue of US$124.5 million, US$99.8 million and US$99.0 million,

respectively, reflecting growth of -15.5%, -19.8% and -0.8%, respectively. We forecast Mocha Clubs' number of gaming

machines to remain flat at 1,200 machines. However, we forecast declines in average net win per gaming machine per day in

2015 due to loss of market share to Galaxy Entertainment (00027)'s Galaxy Macau Phase II and Broadway (opened 27 May),

and to Melco Crown's Studio City (expected to open on October 27).

Figure-29: Mocha Clubs Number of Slot Machines Figure-30: Mocha Clubs Total Net Revenue

1,3691,321

1,200 1,200 1,200-33.2%

-3.5%

-9.2%

0.0% 0.0%

-35%

-30%

-25%

-20%

-15%

-10%

-5%

0%

1,100

1,150

1,200

1,250

1,300

1,350

1,400

2013A 2014A 2015F 2016F 2017F

Number of Slot Machines YoY

148.7 147.4 124.5 99.8 99.0

3.8% -0.9%

-15.5%

-19.8%

-0.8%

-25%

-20%

-15%

-10%

-5%

0%

5%

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

160.0

2013A 2014A 2015F 2016F 2017F

Net Revenue YoY

US$ million



We forecast City of Dreams Manila 2015 and 2016 total net revenue of US$203.0 million and US$265.2 million,

respectively, equivalent to just 4.4% and 5.3% of the Company's total net revenue. City of Dreams Manila opened on

December 14, 2014 with its grand opening on February 2, 2015. For 1Q15, net revenue at City of Dreams Manila was

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US$52.7 million. In 2Q15, net revenue at City of Dreams Manila surged 42.3% QoQ to US$75.0 million. VIP rolling chip

volume increased 167.3% to US$495.8 million and the rolling chip win rate was 2.4% compared to -0.8% in the previous

quarter. Mass market table games drop was US$116.6 million, up 14.5% QoQ with hold percentage of 25.4%, almost

unchanged from 25.2% in 1Q15. Gaming machine handle increased 20.6% QoQ to US$28.3 million. Total non-gaming

revenue was US$28.6 million, up 41.6% QoQ.

Figure-31: City of Dreams Manila Total GGR Figure-32: City of Dreams Manila Total Net Revenue

275 371 450

34.7%

21.4%

0%

5%

10%

15%

20%

25%

30%

35%

40%

0

100

200

300

400

500

2013A 2014A 2015F 2016F 2017F


US$ million

8 203 265 311

30.6%

17.1%

0%

5%

10%

15%

20%

25%

30%

35%

0

50

100

150

200

250

300

350

2013A 2014A 2015F 2016F 2017F


US$ million


Studio City

Studio City has capacity for 500 gaming tables but think the Macau government will allow it only around 200 tables.

Besides new tables, the Company can also move tables from its other casinos to Studio City. Since the Company has an only

60% stake in Studio City but 100% stake in its other casinos, it may not make economic sense to reallocate tables from its

other casinos to Studio City. The number of new tables must be approved by the Macau government. On January 12,

co-chairman and CEO Lawrence Ho said at a press event that he had “no idea” how many gaming tables the Macau

government would grant. For reference, Galaxy Macau Phase II opened on May 27, 2015 with capacity for 500 tables but was

granted just 150 tables by the Macau government; however, Galaxy recently announced that it is now in talks with the Macau

government negotiating for more tables, and we think it and Studio City could be granted a total of around 200 tables each.

We forecast Studio City 2015 to 2017 total net revenue of US$368.5 million, US$1,507 million and US$1,485 million,

respectively. Revenue contribution will be small in 2015 since Studio City does not open until October 27. With many more

non-gaming attractions, we expect Studio City's non-gaming revenue to make a greater contribution to total revenue. We also

expect that a higher proportion of gaming revenue will come from the mass segment.

Figure-33: Studio City GGR Breakdown Figure-34: Studio City VIP Vs. Mass GGR

80.9% 81.6% 82.3%

19.1% 18.4% 17.7%

0%

20%

40%

60%

80%

100%

2013A 2014A 2015F 2016F 2017F



35.5% 35.5% 35.5%

64.5% 64.5% 64.5%

0%

20%

40%

60%

80%

100%

2013A 2014A 2015F 2016F 2017F


VIP % of Total GGR

Source: Guotai Junan International. Source: Guotai Junan International.

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Figure-35: Studio City Total GGR Figure-36: Studio City Total Net Revenue

340

1,405 1,397

313.1%

-0.6%

-50%

0%

50%

100%

150%

200%

250%

300%

350%

0

200

400

600

800

1,000

1,200

1,400

1,600

2013A 2014A 2015F 2016F 2017F


US$ million

2369

1,507 1,485

308.9%

-1.5%

-50%

0%

50%

100%

150%

200%

250%

300%

350%

0

200

400

600

800

1,000

1,200

1,400

1,600

2013A 2014A 2015F 2016F 2017F


US$ million

Source: Guotai Junan International. Source: the Company, Guotai Junan International.

Total Net Revenue

Melco Crown's total 2Q15 net revenue was US$916.8 million, a YoY/QoQ decrease of 23.6%/13.0%, compared to

Macau total 2Q15 GGR YoY/QoQ declines of 37.4%/12.2%. The decline was primarily attributable to lower Company-wide

rolling chip revenues primarily driven by deteriorating demand from Chinese players as well as restrictive policies including

changes to travel and visa policies.

With the opening of Studio City on October 27, 2015, we expect the Company's 2015 net revenue to decline by just

4.3%, much better than our expectation for Macau's 2015 GGR to decline by 34.1%. We forecast 2015 net revenue of

US$4,594 million. In 2016, with Studio City contributing for the entire year, we forecast net revenue to jump by 9.8% to

US$5.042 million. We forecast revenue growth falling back to just 1.1% in 2017 as SJM Holdings opens its Lisboa Palace that

year.

Figure-37: Melco Crown Total Revenue & Growth Figure-38: Melco Crown Revenue Contribution by

Property

5,087

4,802

4,594 5,042 5,095

24.7%

-5.6% -4.3%

9.8%

1.1%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

4,300

4,400

4,500

4,600

4,700

4,800

4,900

5,000

5,100

5,200

2013A 2014A 2015F 2016F 2017F

Total Net Revenue Growth

US$ million

0.2%

0.0%

81.0%

15.7%

3.1%

5.2%

9.5%

67.7%

14.4%

3.2%


Studio City

City of Dreams

Altira Macau

Mocha Clubs

2014A

2015F


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Operating Expenses

We expect 2015-2017 casino expense to net revenue ratio to be stable at 67.6%. For 2013 and 2014, casino expense

was equivalent to 69.9% and 69.8% of casino revenue and 67.9% and 67.6% of total net revenue, respectively. Casino

expenses consist of commissions, payroll, other operating costs, promotional allowances to customers and the Macau 35%

gaming tax on gaming revenues as well as other levies of 4%, which in 2013 and 2104 were equivalent to 39.6% and 39.7%

of GGR and equivalent to 71.8% and 70.1% of total casino expenses, respectively.

We forecast room, F&B, entertainment, retail and other combined expense ratio of 3.3%, 3.0% and 2.7% for 2015-2017,

respectively. These expenses combined were equivalent to 2.1% and 2.0% of 2013 and 2014 net revenue, respectively. We

expect this ratio to increase in 2015 on higher promotional allowances to customers in order to promote the Company's new

properties, and to gradually fall back to a more normalized level in 2016 and 2017.

We forecast 2015-2017 G&A expense ratio of 7.0%, 6.9% and 6.5%, respectively. G&A expense was equivalent to 5.0%

and 6.5% of 2013 and 2014 total net revenue, respectively. General and administrative expenses consists of payroll expenses,

share-based compensation, rental expenses, marketing and advertising expenses, as well as professional fees to support

continuing and expanding operations. We expect this ratio to increase in 2015 as the Company promotes its new properties,

and to gradually fall back to a more normalized level in 2016 and 2017.

We forecast pre-opening, development, property charges and other expense combined expense ratio of 3.2%, 0.8%

and 0.5% for 2015-2017, respectively. These expenses combined were equivalent to 1.0% and 2.2% of 2013 and 2014 total

net revenue, respectively. Pre-opening costs have been primarily from City of Dreams Manila and Studio City since December

2012 and July 2011, respectively. The Company also incurs pre-opening costs on other one-off activities related to the

marketing of new operations. We expect pre-opening costs to drop significantly after Studio City opens in 3Q15, since after

such time the only projects under development will be the expansion of the retail precinct at City of Dreams (anticipated to

open 1H16) and the development of a fifth hotel tower at City of Dreams. Development costs are incurred mostly in relation to

pursuit of new business opportunities. Property charges and others include property remodeling and rebranding costs.

We forecast 2015-2017 D&A to net revenue ratio of 8.8%, 10.3% and 10.3%, respectively. D&A expense was equivalent

to 7.5% and 7.7% of 2013 and 2014 total net revenue, respectively. Amortization of the Company's gaming subconcession

continued to be recognized on a straight-line basis at an annual rate of US$57.2 million for 2013 and 2014, and is expected to

continue as such going forward. Amortization of land use rights remained stable at US$64.3 million and US$64.5 million for

2013 and, respectively. With City of Dreams Manila opened in Feb 2015 and Studio City opening in 3Q15, we expect

depreciation expense to increase significantly in 2015 and again in 2016.

We forecast 2015-2017 payments to the "Philippine Parties" equivalent to 0.5%, 0.6% and 0.7% of net revenue,

respectively. The Company, along with three other parties (SM Investments Corporation, Belle Corporation and

PremiumLeisure and Amusement, Inc.) are co-licensees to establish and operate City of Dreams Manila. The Company must

make monthly payments to PremiumLeisure and Amusement (the "Philippines Parties") based on the gaming operations

performance. In addition, the Company is required to remit specified percentages gaming EBITDA or revenues to the

Philippines Parties. City of Dreams Manila had its soft opening in Dec. 2014, and the Company made its first payment to the

Philippines Parties in the amount of US$870,000, which is equivalent to 11.5% of the property's 2014 revenue. We forecast

payment to the Philippines Parties to equal 11.5% of City of Dreams Manila's total net revenue for each year 2015-1017.

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Figure-39: Melco Crown Operating Expense Ratios (1) Figure-40: Melco Crown Operating Expense Ratios (2)

0%

2%

4%

6%

8%

10%

12%

2013A 2014A 2015F 2016F 2017F

G&AD&APre-opening, Development, Property Charges & OtherRoom, F&B, Entertainment, Retail & OtherPayments to the Philippine Parties

67.9% 67.6% 67.6% 67.6% 67.6%

83.5% 85.7%93.1% 91.6% 90.7%

0%

20%

40%

60%

80%

100%

2013A 2014A 2015F 2016F 2017F

Casino Expense Total Operating Expenses


Non Operating Expenses

We expect the Company to take on more debt and hence incur higher interest expense in 2015 to cover 2015 capex of

US$1.274 billion, mostly for Studio City. However, we expect total debt, and hence interest expense, to decrease in 2016

and further in 2017 as operating cash flows can be used to pay down debt.

We expect the effective tax rate to be 2.4% for 2015-2017. Melco Crown has been exempted from Macau Complementary

Tax on profits generated by gaming operations for five years commencing from 2007 to 2011 and will continue to benefit from

this exemption for another five years from 2012 to 2016. However, certain subsidiaries of the Company incorporated or

conducting businesses in Hong Kong, Macau, the Philippines and other jurisdictions are subject to Hong Kong profits tax,

Macau complementary tax as well as income tax in the Philippines and other jurisdictions. The Company's effective tax rate

increased from 0.6% in 2014 to 2.4% in 1Q15; (income before tax was negative in 2Q15).

Figure-41: Melco Crown Net Finance Expense to Net

Revenue Ratio

Figure-42: Melco Crown Effective Tax Rate

2.9%

2.2%

1.9%

1.8%

1.7%

0%

1%

2%

3%

2013A 2014A 2015F 2016F 2017F

Net Finance Expense to Net Revenue Ratio*

0.4%0.6%

2.4% 2.4% 2.4%

0%

1%

2%

3%

2013A 2014A 2015F 2016F 2017F

Effective Tax Rate


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Operating Income, EBITDA & Net Profit

We forecast 2015-2017 operating income of US$315.4 million, US$425.7 million and US$475.9 million, representing

growth of -54.0%, 35.0% and 11.8%, respectively. For 2015 we expect low revenue growth combined with higher operating

expenses, including higher depreciation expense. As a result, we forecast operating income margin dropping from 14.3% in

2014 to 6.9% in 2015. Although we expect depreciation expense to continue to climb in 2016, the revenue base will be much

higher with Studio City contributing for the full year, and so we expect operating income margin to increase to 8.4%.

The Company's adjusted property EBITDA margin decreased from 26.8% in 2014 to 24.0% in 1Q15 and declined

further to 22.4% in 2Q15. Adjusted EBITDA is total earnings before interest, taxes, depreciation, amortization, pre-opening

costs, development costs, property charges and others, share-based compensation, payments to the Philippine Parties, land

rent to Belle Corporation, gain on disposal of assets held for sale, Corporate and Others expenses and other non-operating

income and expenses. Adjusted property EBITDA is calculated the same way as adjusted EBITDA but also adds back

corporate and others expenses, which was US$119.0 million in 2014, equivalent to 9.3% of adjusted property EBITDA.

Corporate expenses relate to a license agreement the Company has with Crown Limited for the exclusive and

non-transferable license to use the Crown brand in Macau.

We forecast 2015-2017 adjusted property EBITDA of US$1,027 million, US$1,185 million and US$1,248 million,

representing growth of -20.1%, 15.4% and 5.4%, respectively. We expect the Company's EBITDA margin to be under

pressure in 2015 largely due to higher G&A as the Company spends on marketing and advertising for its new properties.

However, the opening of Studio City in October will help somewhat to partially offset the EBITDA decline.

Figure-43: Melco Crown Operating Income Figure-44: Melco Crown Adjusted Property EBITDA

840 685

315

426 476

65.6%

-18.4%

-54.0%

35.0%

11.8%

-60%

-40%

-20%

0%

20%

40%

60%

80%

-

200

400

600

800

1,000

2013A 2014A 2015F 2016F 2017F

Operating Income Growth

US$ million

1,379 1,285 1,027 1,185 1,248

38.6%

-6.8%

-20.1%

15.4%

5.4%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

-

200

400

600

800

1,000

1,200

1,400

1,600

2013A 2014A 2015F 2016F 2017F

Adjusted Property EBITDA GrowthUS$ million


We forecast 2015-2017 net income of US$257.0 million, US$266.5 million and US$277.3 million, representing growth

of -57.7%, 3.7% and 4.1%, respectively. 2014 net income benefitted from add back of net loss attributable to non-controlling

interests of US$80.9 million in 2014, which was primarily due to the share of the Studio City expenses of US$40.0 million and

Melco Crown Philippines expenses of US$40.9 million. With City of Dreams Manila opened in December last year and Studio

City scheduled to open on October 27, 2015, we forecast a somewhat smaller 2015 non-controlling interests net loss

(US$75.0 million) to be added back to the Company's net income. For 2016, we forecast 55.7% growth in net income before

non-controlling interests. However, with City of Dreams Manila and Studio City contributing profit for the whole year, we

forecast non-controlling interests turning from net loss in 2015 to net gain of US$17.0 million in 2016.

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Figure-45: Melco Crown Profit Margins Melco Crown Figure-46: Net Income

16.5%14.3%

6.9%8.4% 9.3%

27.1% 26.8%

22.4%23.5% 24.5%

12.5% 12.7%

5.6% 5.3% 5.4%0%

5%

10%

15%

20%

25%

30%

2013A 2014A 2015F 2016F 2017F

Operating Income Margin

Adjusted Property EBITDA Margin

Net Income Margin

637 608 257 267 277

52.8%

-4.6%

-57.7%

3.7% 4.1%

-80%

-60%

-40%

-20%

0%

20%

40%

60%

-

100

200

300

400

500

600

700

2013A 2014A 2015F 2016F 2017F

Net Income GrowthUS$ million


Dividends

We forecast dividend payout ratio falling from 57.2% in 2014 to 40.0% in 2015. During 2013 and 2012, the Company did

not declare or pay any cash dividends on ordinary shares. Under the Company's latest Dividend Policy, adopted on Feb. 25,

2014, subject to the Company‟s cash balance and future commitments at the time of declaration of dividend, the Company

intends to provide shareholders with quarterly dividends in an aggregate amount per year of approximately 30% of the

Company‟s annual net income. In addition, the New Dividend Policy also allows the Company to declare special dividends.

The Company paid its first dividends in 2014 and had a total payout ratio of 57.2% for 2014. With higher capex needs, we

forecast dividend payout ratio retreating to 40.0% in 2015.

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RISKS

Melco International Development Limited (00200 HK) and Crown Resorts Limited (CWN AU) together own 68.6% of

the Company's outstanding shares, and their interests in the Company may be different than that of other

shareholders. If they act together, they would have the power to elect board directors, including six of ten directors who are

designated nominees of Melco and Crown, appoint and change management, affect legal and capital structure and operations

and approve any other material transactions, which may conflict with the interests of minority shareholders.

Since Macau casinos must employ Macau residents as dealers and supervisors, a limited labor supply and increased

competition could cause labor costs to increase. The pool of experienced gaming and other skilled and unskilled

personnel in Macau and the Philippines is limited. Moreover, competition to recruit and retain qualified gaming and other

personnel is expected to continue, as well as demand for qualified personnel. Macau casinos are not allowed under Macau

government policy to hire non-Macau resident dealers and supervisors.

Melco Crown Macau’s exemption from complementary tax on income from gaming operations will expire in 2016, and

the Company may not be able to extend it. Companies in Macau are subject to complementary tax of up to 12% of taxable

income. The Macau government granted to Melco Crown Macau a corporate tax holiday on gaming income in Macau for five

years from 2007 to 2011 and the exemption was extended for five years from 2012 through 2016. However, there is no assure

that the corporate tax holiday benefits will be extended beyond 2016.

City of Dreams Manila is located in the Philippines, which has in the past experienced severe political and social

instability, including acts of political violence. Any future political or social instability in the Philippines could adversely

affect the business operations and financial conditions of City of Dreams Manila.

City of Dreams Manila depends substantially on revenues from foreign visitors and revenue may be affected by

events that deter foreigners from travel to Manila. Foreigner visitation could decline if there are concerns about personal

safety, civil disturbances, terrorist attacks or major catastrophes including typhoons, volcanic eruptions and earthquakes.

Inadequate transportation infrastructure in the Philippines or Macau.. City of Dreams Manila is located within

Entertainment City, Manila, an area in the city of Manila which is currently under development. Other than Solaire, there are

currently no other integrated tourism resorts which have begun operations in Entertainment City, Manila. It is unlikely that

Manila‟s existing transportation infrastructure is capable of handling the increased number of tourist arrivals and the frequency

of bus, plane and ferry services to Macau will need to increase and Moreover, new infrastructure, including new highways and

expressways, is needed to ease traffic congestion in Manila.

The integrated casino resort and gaming industry in the Philippines is immature and has a short history.

Entertainment City, Manila and the Philippines, in general, are still unproven as viable gaming destinations to domestic and

international visitors. City of Dreams Manila‟s ability to generate revenue depends to a substantial degree on the continued

development of the Philippines as a tourist and gaming destination, which in turn depends on several factors, including the

Philippine government‟s successfully promotion the Philippines as an attractive tourist destination.

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VALUATION

The Macau gaming sector last closed at forward adjusted property EV/EBITDA of 10.4x, which is a 23.0% discount to

its historical average level of 13.6x. The current sector valuation is well below its five year high of 18.4x, reached in January

2014, but also not as bad as the 7.4x low in July, 2012. The sector last closed with valuation at an 8.8% discount to U.S.

casino operators, compared to the historical average premium of 17.1%. We think a Macau sector valuation discount is

warranted given the large expected decrease in Macau's GGR this year as well a slow-recovery outlook going into 2016.

MPEL's ADS price has surged 36.3% from its 52 week low of US$12.80 reached just weeks ago on Sept. 29. Based on

Bloomberg consensus forecasts, Melco Crown last closed at 12.9x forward adjusted property EV/EBITDA, which is a 5.2%

discount to its own historical average but a 23.8% premium to the Macau peers, much more than its historical average

premium of 0.5% relative to Macau peers.

With target price of US$19.10, we recommend to "Accumulate" Melco Crown on price dips. We expect weak Macau

GGR results for the remainder of this year due to tight liquidity in the VIP segment, which we expect will in turn drive share and

ADS prices lower, creating a better entry point for MPEL US. However, we expect the Macau gaming market to begin to

recover going into 2016, pushing valuations up, especially for Melco Crown, whose new Studio City targets the higher margin

mass segment. Our target price is equivalent to 14.4x 2015 / 12.4x 2016 / 11.7x 2017 EV/adjusted EBITDA and is equivalent

to 41.2x 2015 / 40.1x 2016 / 39.0x 2017 PE. Our target price is a 16.8% discount to our DCF derived NAV per ADS of

HK$22.96 and reflects 9.5% upside potential.

Table-13: Gaming Sector Peers Comparison

Company Stock Crncy Price M-Cap PE

Adjusted EV/EBITDA ROE PB

Code

HKD mil Hist Avg Current

Hist Avg Current 15F 15F

Fwd Fwd 15F 16F 17F

Fwd Fwd 15F 16F 17F (%)

Macau Operators

Galaxy Entertain 27 HK HKD 26.700 113,693 20.0 21.6 21.6 19.3 18.2

13.5 7.4 12.9 11.1 10.2 19.1 3.5

Melco Crown-Adr MPEL US USD 17.440 73,604 24.5 39.5 41.0 33.3 28.2

13.6 12.9 13.3 9.5 8.5 4.8 2.2

Mgm China 2282 HK HKD 11.380 43,244 16.1 13.8 13.8 18.1 13.4

13.9 12.7 12.7 15.0 9.7 42.7 2.9

Sands China Ltd 1928 HK HKD 28.600 230,779 19.4 19.4 19.5 19.7 17.4

14.2 11.3 14.8 15.0 13.0 24.8 5.0

Sjm Holdings Ltd 880 HK HKD 6.480 36,656 13.4 10.7 10.7 12.7 18.9

8.5 4.8 5.1 7.3 10.1 14.3 1.5

Wynn Macau Ltd 1128 HK HKD 11.000 57,151 19.9 21.1 21.1 21.9 16.2

13.9 11.6 16.3 13.8 10.6 40.3 10.4

Simple Average 18.9 21.0 21.3 20.8 18.7 12.9 10.1 12.5 12.0 10.3 24.3 4.2

Weighted Average 19.6 21.7 21.9 21.0 18.6 13.6 10.4 13.6 12.8 11.1 23.3 4.5

USA Operators

Boyd Gaming Corp BYD US USD 18.080 15,545 59.6 26.7 31.9 23.1 20.1

8.9 9.0 9.0 8.4 7.8 14.1 4.1

Caesars Entertai CZR US USD 8.000 8,990 5.9 6.1 0.2 10.0 3.2

10.6 4.4 9.0 7.9 2.7 9.9 0.5

Isle Of Capri ISLE US USD 18.260 5,758 38.5 14.1 140.5 14.5 12.9

7.2 7.5 8.2 7.4 6.8 24.2 31.5

Las Vegas Sands LVS US USD 47.540 293,809 19.0 19.1 18.7 18.5 17.2

12.1 11.8 12.1 12.0 11.0 26.0 4.9

Mgm Resorts Inte MGM US USD 21.000 91,644 60.0 46.9 37.4 36.2 22.1

11.4 12.0 12.5 12.3 9.8 5.7 2.2

Penn Natl Gaming PENN US USD 17.840 11,086 37.6 21.2 29.7 19.7 20.8

6.8 7.4 9.1 7.2 6.3 9.5 2.8

Simple Average 36.8 22.4 43.0 20.3 16.1 9.5 8.7 10.0 9.2 7.4 14.9 7.7


Other - Listed

Genting Singapor GENS SP SGD 0.780 52,233 22.7 17.7 26.0 20.0 18.1

10.6 9.1 9.1 7.8 7.0 4.1 1.0

Genting Malaysia GENM MK MYR 4.390 45,826 16.1 20.9 18.9 16.8 14.6

10.0 9.5 10.0 8.7 7.4 7.9 1.5

Bloomberry Res BLOOM PM PHP 6.500 12,016 33.2 n.a. n.a. 22.5 19.2

15.7 11.6 11.6 8.1 6.6 (4.5) 2.8

Echo Entert Grp EGP AU AUD 4.970 23,070 17.8 18.7 24.2 17.8 16.5

7.9 8.8 9.2 8.4 7.9 5.7 1.4

Belle Corp BEL PM PHP 3.380 5,968 28.3 13.2 13.2 10.4 8.7

21.7 10.2 10.2 7.7 5.3 11.7 1.4

Simple Average 23.6 17.6 20.6 17.5 15.4 13.2 9.8 10.0 8.1 6.8 5.0 1.6


Source: Bloomberg, Guotai Junan International.

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Table-14: DCF Valuation

Risk Free Rate 1.80% Sum of PV FCFF (US$ mn) 5,247

Market Return 13.87% + PV Terminal Value (US$ mn) 9,260

Market Risk Premium 12.07% Enterprise Value (US$ mn) 14,507

Adj. Beta 1.3 - Net Debt/(cash) (US$ mn) 2,001

Equity Discount Rate 17.17% Equity Value (US$ mn) 12,506

ADS Outstanding (mn) 544.6

After Tax Cost of Debt 2.4% NAV per ADS (US$) 22.96

D/(D+E) 47.5%

E/(D+E) 52.5%

WACC 10.1%

Long term growth rate 3.0%

Source: Bloomberg, the Company, Guotai Junan International.

Figure-47: Melco Crown's Forward PE (Next 4 Quarters) Figure-48: Melco Crown's Forward Adjusted EV/EBITDA

(Next 4 Quarters)

6

16

26

36

46

BEst P/E Ratio (Next 4 Quarters) Mean

+1 ST. DEV. -1 ST. DEV.

6

8

10

12

14

16

18

20

BEst EV / BEst EBITDA (Next 4 Quarters)

Mean

+1 ST. DEV.

-1 ST. DEV.

Source: Bloomberg, Guotai Junan International. Source: Bloomberg, Guotai Junan International.

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FINANCIAL STATEMENTS AND RATIOS

Income Statement

Year end Dec. (US$ m) 2013A 2014A 2015F 2016F 2017F

Casino Gross Revenue 6,257 5,727 4,439 4,803 4,856 Non-Gaming Gross Revenue 304 320 460 668 669

Total Gross Revenue 6,561 6,047 4,900 5,471 5,526

Discounts and Commissions (1,309) (1,063) (45) (50) (51)

Promotional Allowances (165) (182) (261) (379) (379)

Total Revenue (net) 5,087 4,802 4,594 5,042 5,095

YoY 24.7% (5.6%) (4.3%) 9.8% 1.1%

Casino Expenses (3,453) (3,246) (3,105) (3,408) (3,445)

Rooms Expenses (13) (13) (22) (19) (14) Food & Beverage Expenses (29) (24) (57) (58) (53)

Entertainment, Retail & Other Expenses (64) (62) (71) (73) (68)

General and Administrative (256) (312) (322) (348) (331)

Payments to the Philippine Parties 0 (1) (23) (31) (36)

Pre-Opening Expenses (17) (94) (120) (3) (3) Development Expenses (26) (11) (24) (26) (11)

Depreciation and Amortization (383) (368) (526) (642) (649)

Property Charges and Other Expenses (7) 13 (8) (9) (9)

Operating Income 840 685 315 426 476

YoY 65.6% (18.4%) (54.0%) 35.0% 11.8%

Interest Income 8 20 16 14 13

Interest & Other Finance Expense (214) (171) (149) (150) (145)

Other (53) (4) 4 1 1

Income before Income Tax 580 530 186 290 346

Income Tax (Credit) Expense (2) (3) (4) (7) (8) Non-controlling Interest Net Loss 59 81 75 (17) (60)

Net Income (Loss) 637 608 257 267 277

YoY 52.8% (4.6%) (57.7%) 3.7% 4.1%

Basic Earnings per ADS (US$) 1.159 1.108 0.463 0.476 0.490 YoY 52.3% (4.4%) (58.2%) 2.7% 3.0%

Diluted Earnings per ADS (US$) 1.149 1.099 0.460 0.472 0.486

YoY 52.2% (4.4%) (58.2%) 2.7% 3.0%

EBITDA 1,288 1,167 913 1,060 1,122 YoY 39.9% (9.4%) (21.7%) 16.0% 5.9% Source: the Company, Guotai Junan International. Ratios

2013A 2014A 2015F 2016F 2017F

Margins

Operating Margin 16.5% 14.3% 6.9% 8.4% 9.3% Net Profit Margin 12.5% 12.7% 5.6% 5.3% 5.4%

Adj. EBITDA Margin 25.3% 24.3% 19.9% 21.0% 22.0%

Return Ratios

ROA 7.6% 6.3% 2.4% 2.5% 2.6% ROE 14.7% 12.2% 5.1% 5.3% 5.5%

Return on Capital Invested 17.7% 6.1% 3.2% 3.8% 4.5%

Liquidity & Leverage

Leverage (i.e., Gearing) 129.9% 168.7% 181.0% 173.0% 161.0%

Net Gearing 1.6% 42.1% 79.3% 78.6% 65.7%

Interest Coverage Ratio 579.2% 453.6% 239.1% 312.0% 362.1%

Current Ratio 254.3% 266.0% 222.1% 195.1% 195.4% Source: the Company, Guotai Junan International.

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Balance Sheet

As at Dec. 31 (US$ m) 2013A 2014A 2015F 2016F 2017F

Cash & Cash Equivalents 1,382 1,598 1,367 1,270 1,185

Bank Deposits with 3+ Month Maturity 627 111 298 122 134

Restricted Cash 770 1,447 900 990 1,089

Accounts & Notes Receivable 288 254 243 266 269

Inventories 18 23 22 24 25

Other ST Assets 63 71 0 0 0

Total Current Assets 3,148 3,503 2,830 2,672 2,701

Property, Plant & Equip, Net 3,309 4,696 5,437 5,560 5,527

Other LT Assets 2,356 2,233 2,522 2,471 2,234

Total Noncurrent Assets 5,665 6,930 7,959 8,031 7,761

Total Assets 8,814 10,433 10,789 10,704 10,463

Payables & Accruals 945 1,027 982 1,078 1,089

ST Debt 290 286 288 287 288

Other ST Liabilities 3 4 4 5 6

Total Current Liabilities 1,238 1,317 1,274 1,370 1,383

LT Debt 2,524 3,918 4,278 4,078 3,778

Other LT Liabilities 127 156 186 215 244

Total Non-current Liabilities 2,651 4,074 4,464 4,293 4,022

Total Liabilities 3,889 5,391 5,738 5,663 5,405

Total Equity 4,925 5,042 5,051 5,041 5,058

Minority Interest 678 756 710 768 828

Total Shareholders' Equity 4,247 4,286 4,340 4,273 4,230

Book Value per ADS 7.723 7.804 7.825 7.627 7.476 Source: the Company, Guotai Junan International. Cash Flow Statement

Year end Dec. (US$ m) 2013A 2014A 2015F 2016F 2017F

Net Income 637 608 257 267 277

Depreciation & Amortization 384 368 404 520 527

Non-Cash Items 98 25 89 98 108

Chg in Working Capital 33 (107) (32) 71 9

Cash from Operating Activities 1,152 895 718 956 921

Capex (912) (1,637) (1,109) (610) (460)

Other Investing (297) 32 (42) (63) (95)

Cash from Investing Activities (1,209) (1,605) (1,151) (673) (554)

Dividends Paid 0 (343) (103) (160) (166)

Cash From (Repayment) Debt (668) 1,370 362 (201) (300)

Issuance (Buyback) of Equity 4 (179) (143) (115) (92)

Other Financing Activities 399 79 87 96 105

Cash from Financing Activities (265) 927 202 (380) (453)

Effect of Foreign Exchanges (5) (0) 0 0 0

Net Changes in Cash (327) 216 (230) (97) (85)

Cash at Beg of Year 1,709 1,382 1,598 1,367 1,270

Cash at End of Year 1,382 1,598 1,367 1,270 1,185 Source: the Company, Guotai Junan International.

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APPENDIX

Property Revenue Models Table-1: City of Dreams - Revenue Model (Annually)

US$ Million 2013A 2014A 2015F 2016F 2017F

VIP

Rolling Chip Volume 97,000 82,100 43,581 33,761 33,568

YoY 19.3% (15.4%) (46.9%) (22.5%) (0.6%)

Rolling Chip Table Win % 3.0% 2.8% 2.9% 2.9% 2.9%

VIP Rolling Chip Win 2,862 2,323 1,273 962 957

YoY 20.5% (18.8%) (45.2%) (24.4%) (0.6%)

Mass Tables

Drop 4,660 5,290 4,448 3,646 3,625

Mass Table Hold % 34.6% 37.5% 33.3% 32.4% 32.4%

Mass Tables Win 1,612 1,984 1,483 1,181 1,175

YoY 54.3% 23.0% (25.2%) (20.3%) (0.6%)

Slots

Avg. Number of Slot Machines 1,469 1,331 1,128 1,082 1,082

Slots Win / Unit / Day (US$) 361 464 405 348 347

Slot Machine Handle 4,770 5,904 4,268 3,396 3,377

Slot Win % 4.1% 3.8% 3.9% 4.1% 4.1%

Slots Win 194 225 166 138 137

YoY 19.2% 16.5% (26.4%) (17.0%) (0.6%)

Total Gross Gaming Revenue 4,667 4,533 2,922 2,281 2,268

YoY 30.3% (2.9%) (35.5%) (21.9%) (0.6%)

Hotels

Avg. Number of Hotel Rooms in Operation 1,372 1,372 1,372 1,372 1,372

Average Occupancy 97% 99% 94% 89% 105%

Average Daily Rate (US$) 189 197 194 166 142

RevPAR(US$) 183 195 183 148 148

Hotel Room Revenue 92 98 92 74 74

YoY 6.7% 6.6% (6.0%) (18.9%) (0.6%)

Other Revenue 176 186 148 120 119

YoY 0.0% 5.8% (20.4%) (19.1%) (0.6%)

Non-Gaming Revenue 267 284 240 194 193

YoY 10.2% 6.1% (15.5%) (19.0%) (0.6%)

Commissions and Discounts (1,078) (967) (543) (420) (417)

% of Rolling Chip Volume 1.1% 1.2% 1.2% 1.2% 1.2%

Property Net Revenue 3,857 3,849 2,618 2,056 2,044

YoY 32.0% (0.2%) (32.0%) (21.5%) (0.6%)


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Table-2: Altira - Revenue Model (Annually)

US$ Million 2013A 2014A 2015F 2016F 2017F

VIP

Rolling Chip Volume 44,900 33,600 25,015 19,770 19,657

YoY 2.0% (25.2%) (25.6%) (21.0%) (0.6%)

Rolling Chip Table Win % 3.0% 2.8% 2.7% 2.9% 2.9%

VIP Rolling Chip Win 1,329 927 677 563 560

YoY 4.5% (30.2%) (27.0%) (16.8%) (0.6%)

Mass Tables

Drop 724 757 611 507 504

Mass Table Hold % 15.4% 15.8% 16.2% 15.9% 15.9%

Mass Win 111 120 99 81 80

YoY 11.0% 7.2% (17.0%) (18.8%) (0.6%)

Total Gross Gaming Revenue 1,441 1,047 778 645 642

YoY 5.0% (27.3%) (25.7%) (17.0%) (0.6%)

Hotel

Avg. Number of Hotel Rooms in Operation 225 225 225 225 225

Average Occupancy 99% 99% 94% 89% 105%

Average Daily Rate (US$) 230 232 207 174 149

RevPAR (US$) 227 229 195 156 155

Hotel Room Revenue 18.7 18.8 16.0 12.9 12.8

YoY 4.8% 0.9% (15.0%) (19.8%) (0.6%)

Other Revenue 18.4 18.0 14.7 12.1 12.0

YoY 17.5% (2.5%) (18.1%) (17.8%) (0.6%)

Non-Gaming Revenue 37.1 36.8 30.7 24.9 24.8

YoY 10.7% (0.8%) (16.5%) (18.8%) (0.6%)

Commissions and Discounts (444) (339) (253) (203) (202)

% of Rolling Chip Volume (1.0%) (1.0%) (1.0%) (1.0%) (1.0%)

Property Net Revenue 1,034 745 555 467 465

YoY 6.9% (28.0%) (25.4%) (15.8%) (0.6%)


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Table-3: City of Dreams - Revenue Model (Quarterly)

US$ Million 1Q14A 2Q14A 3Q14A 4Q14A 1Q15A 2Q15A 3Q15F 4Q15F

VIP

Rolling Chip Volume 24,600 22,100 17,300 18,000 13,500 11,100 9,990 8,991

YoY 3.4% (10.9%) (24.1%) (29.7%) (45.1%) (49.8%) (42.3%) (50.1%)

QoQ (3.9%) (10.2%) (21.7%) 4.0% (25.0%) (17.8%) (10.0%) (10.0%)

Rolling Chip Table Win % 3.0% 2.7% 2.7% 2.8% 3.2% 2.7% 2.9% 2.9%

VIP Rolling Chip Win 738 597 467 504 432 300 285 256

YoY 14.8% (22.4%) (31.7%) (34.4%) (41.5%) (49.8%) (39.0%) (49.2%)

QoQ (3.9%) (19.1%) (21.7%) 7.9% (14.3%) (30.6%) (5.0%) (10.0%)

Mass Tables

Drop 1,299 1,331 1,340 1,315 1,199 1,199 1,079 971

Mass Table Hold % 37.5% 37.4% 38.9% 36.4% 35.9% 32.4% 32.4% 32.4%

Mass Tables Win 487 498 521 479 430 388 350 315

YoY 44.4% 36.7% 23.5% (2.3%) (11.6%) (22.0%) (33.0%) (34.3%)

QoQ (0.6%) 2.2% 4.8% (8.2%) (10.1%) (9.8%) (10.0%) (10.0%)

Slots

Avg. Number of Slot Machines 1,183 1,373 1,417 1,350 1,265 1,082 1,082 1,082

Slots Win / Unit / Day (US$) 536 457 449 427 380 460 410 369

Slot Machine Handle 1,490 1,511 1,552 1,351 1,242 1,117 1,005 905

Slot Win % 3.8% 3.8% 3.8% 3.9% 3.5% 4.1% 4.1% 4.1%

Slots Win 57 57 59 53 43 45 41 37

YoY 25.3% 20.8% 22.0% 0.6% (24.2%) (20.7%) (30.4%) (30.8%)

QoQ 8.2% 0.1% 2.5% (9.4%) (18.4%) 4.7% (10.0%) (10.0%)

Total Gross Gaming Revenue 1,282 1,152 1,047 1,036 906 733 675 608

YoY 25.0% (2.4%) (9.3%) (21.0%) (29.4%) (36.3%) (35.5%) (41.3%)

QoQ (2.2%) (10.2%) (9.1%) (1.1%) (12.6%) (19.0%) (8.0%) (10.0%)

Hotels

Avg. Number of Hotel Rooms in Operation 1,372 1,372 1,372 1,372 1,372 1,372 1,372 1,372

Average Occupancy 98% 99% 100% 100% 99% 99% 92% 86%

Average Daily Rate (US$) 197 196 194 200 206 198 190 183

RevPAR (US$) 193 194 193 200 206 196 174 157

Hotel Room Revenue 23.8 24.2 24.4 25.2 25.4 24.5 22.0 19.8

YoY 6.0% 6.6% 7.2% 5.3% 6.7% 1.0% (9.6%) (21.5%)

QoQ (0.6%) 1.6% 0.6% 3.6% 0.8% (3.8%) (10.0%) (10.0%)

Other Revenue 46.8 43.0 49.8 46.3 41.3 39.3 35.4 31.9

YoY 14.6% 8.9% 3.4% (1.4%) (11.8%) (8.5%) (29.0%) (31.1%)

QoQ (0.3%) (8.1%) 16.0% (7.2%) (10.8%) (4.7%) (10.0%) (10.0%)

Non-Gaming Revenue 70.6 67.2 74.2 71.5 66.7 63.8 57.4 51.7

YoY 11.5% 8.0% 4.7% 0.8% (5.5%) (5.1%) (22.6%) (27.7%)

QoQ (0.4%) (4.8%) 10.4% (3.6%) (6.7%) (4.3%) (10.0%) (10.0%)

Commissions and Discounts (279) (251) (210) (212) (167) (143) (123) (111)

% of Rolling Chip Volume 1.1% 1.1% 1.2% 1.2% 1.2% 1.3% 1.2% 1.2%

Property Net Revenue 1,074 968 912 896 806 654 610 548

YoY 28.5% 0.1% (4.9%) (18.3%) (25.0%) (32.4%) (33.1%) (38.8%)

QoQ (2.0%) (9.9%) (5.8%) (1.8%) (10.0%) (18.8%) (6.8%) (10.1%)


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Table-4: Altira - Revenue Model (Quarterly)

US$ Million 1Q14A 2Q14A 3Q14A 4Q14A 1Q15A 2Q15A 3Q15F 4Q15F

VIP

Rolling Chip Volume 10,100 8,300 7,200 8,100 7,400 6,500 5,850 5,265

YoY (14.4%) (29.7%) (33.3%) (23.6%) (26.7%) (21.7%) (18.8%) (35.0%)

QoQ (4.7%) (17.8%) (13.3%) 12.5% (8.6%) (12.2%) (10.0%) (10.0%)

Rolling Chip Table Win % 2.9% 2.7% 2.7% 2.6% 2.5% 2.7% 2.9% 2.9%

VIP Rolling Chip Win 293 224 194 211 185 176 167 150

YoY (14.4%) (36.7%) (37.9%) (33.8%) (36.8%) (21.7%) (14.2%) (28.8%)

QoQ (7.9%) (23.5%) (13.3%) 8.3% (12.2%) (5.1%) (5.0%) (10.0%)

Mass Tables

Drop 204 197 181 175 159 167 150 135

Mass Table Hold % 13.3% 15.9% 16.2% 18.4% 17.2% 15.9% 15.9% 15.9%

Mass Win 27 31 29 32 27 27 24 21

YoY 9.6% 17.3% 8.4% (3.9%) 1.1% (15.3%) (18.8%) (33.2%)

QoQ (19.0%) 15.4% (6.1%) 9.4% (14.8%) (3.3%) (10.0%) (10.0%)

Slots

Avg. Number of Slot Machines 0 0 0 0 0 56 56 56

Slots Win / Unit / Day (US$) n.a. n.a. n.a. n.a. n.a. 89 79 71

Slot Machine Handle n.a. n.a. n.a. n.a. n.a. 8 7 6

Slot Win % n.a. n.a. n.a. n.a. n.a. 5.9% 5.9% 5.9%

Slots Win 0 0 0 0 0 0 0 0

YoY n.a. n.a. n.a. n.a. n.a. n.a. 0.0% 0.0%

QoQ n.a. n.a. n.a. n.a. n.a. n.a. (10.0%) (10.0%)

Total Gross Gaming Revenue 320 255 224 243 212 202 191 172

YoY n.a. n.a. n.a. n.a. n.a. n.a. (14.7%) (29.2%)

QoQ n.a. n.a. n.a. n.a. n.a. n.a. (5.7%) (10.0%)

Hotel

Avg. Number of Hotel Rooms in Operation 225 225 225 225 225 225 225 225

Average Occupancy 99% 99% 99% 99% 99% 99% 92% 86%

Average Daily Rate (US$) 236 232 224 235 228 208 200 192

RevPAR (US$) 233 229 222 233 225 206 183 165

Hotel Room Revenue 4.7 4.7 4.6 4.8 4.6 4.2 3.8 3.4

YoY 1.7% 1.3% 0.9% 0.0% (3.4%) (10.0%) (17.4%) (29.2%)

QoQ (2.2%) (0.6%) (2.0%) 5.0% (5.5%) (7.4%) (10.0%) (10.0%)

Other Revenue 4.7 4.4 4.4 4.5 3.9 4.0 3.6 3.2

YoY 7.3% (3.5%) (5.2%) (8.2%) (15.8%) (9.7%) (18.6%) (27.9%)

QoQ (4.0%) (5.8%) (0.1%) 1.6% (11.9%) 1.0% (10.0%) (10.0%)

Non-Gaming Revenue 9.4 9.1 9.0 9.3 8.5 8.2 7.4 6.6

YoY 4.4% (1.1%) (2.2%) (4.1%) (9.6%) (9.9%) (18.0%) (28.6%)

QoQ (3.1%) (3.2%) (1.1%) 3.3% (8.6%) (3.5%) (10.0%) (10.0%)

Commissions and Discounts (100) (83) (72) (79) (72) (67) (60) (54)

% of Rolling Chip Volume 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0%

Property Net Revenue 230 182 160 173 149 144 138 124

YoY (13.3%) (34.9%) (33.8%) (30.1%) (35.3%) (20.8%) (13.8%) (28.1%)

QoQ (7.2%) (21.0%) (11.7%) 7.9% (14.1%) (3.2%) (3.9%) (10.0%)


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Macau Gaming Operators Comparison Table-1: Macau Gaming Operators Adjusted Property EBITDA Margins

2011 2012 2013 2014 1Q15 2Q15

Galaxy Ent. (00027 HK) 14.3% 17.9% 19.6% 18.9% 16.8% n.a.

Melco Crown (MPEL US) 23.0% 24.4% 27.1% 26.8% 23.8% 21.0%

MGM China (02282 HK) 23.4% 24.2% 24.5% 25.9% 23.6% 23.7%

SJM (00880 HK) 8.8% 9.2% 9.3% 9.4% 8.6% 7.7%

Sands China (01928 HK) 32.0% 30.1% 32.3% 34.5% 29.8% 31.5%

Wynn Macau (01128 HK) 31.6% 31.8% 32.8% 33.1% 30.1% 28.1%

M-Cap Wt. Avg. 17.3% 18.3% 19.4% 19.5% 17.5% 13.2%

Source: the Companies, Bloomberg.

Table-2: Gross Gaming Revenue Market Share

2011 2012 2013 2014 1Q15 2Q15

Galaxy Ent. (00027 HK) 17.3% 20.4% 20.1% 24.5% 25.7% 30.1%


MGM China (02282 HK) 11.3% 10.6% 11.1% 10.6% 11.0% 9.5%

SJM (00880 HK) 28.1% 26.2% 24.6% 23.8% 23.7% 20.4%

Sands China (01928 HK) 12.3% 15.9% 17.2% 17.0% 13.9% 16.2%

Wynn Macau (01128 HK) 15.0% 12.9% 12.6% 11.7% 11.2% 11.5%

VIP 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Galaxy Ent. (00027 HK) 7.8% 13.0% 14.1% 13.8% 14.9% 8.5%


MGM China (02282 HK) 8.0% 7.6% 7.0% 8.0% 7.8% 8.8%

SJM (00880 HK) 37.1% 32.3% 26.9% 24.9% 23.6% 25.2%

Sands China (01928 HK) 25.4% 26.4% 31.2% 31.9% 30.6% 35.0%

Wynn Macau (01128 HK) 10.7% 8.8% 7.6% 7.7% 8.5% 7.5%

Mass Market (Tables) 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Galaxy Ent. (00027 HK) 7.7% 10.9% 11.8% 12.3% 12.3% 14.9%


MGM China (02282 HK) 13.9% 15.7% 15.5% 14.2% 14.5% 14.6%

SJM (00880 HK) 26.4% 30.3% 34.1% 37.7% 37.2% 35.4%

Sands China (01928 HK) 12.7% 11.2% 9.6% 9.3% 11.0% 9.4%

Wynn Macau (01128 HK) 18.8% 14.3% 13.1% 14.3% 13.1% 13.6%

Slots 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Galaxy Ent. (00027 HK) 17.0% 20.6% 20.3% 22.4% 23.2% 28.3%


MGM China (02282 HK) 9.0% 8.4% 8.4% 8.3% 8.4% 8.1%

SJM (00880 HK) 33.9% 30.9% 28.6% 26.3% 25.0% 21.8%

Sands China (01928 HK) 14.9% 17.6% 20.4% 21.7% 20.6% 21.4%

Wynn Macau (01128 HK) 12.5% 10.5% 9.7% 9.2% 9.0% 8.1%

Gross Gaming Revenue 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%


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Table-3: Share of Gaming Tables

2011 2012 2013 2014 1Q15 2Q15

Galaxy Ent. (00027 HK) 15.1% 13.7% 16.1% 15.9% 16.0% 18.2%


MGM China (02282 HK) 8.1% 7.7% 7.3% 7.4% 7.4% 7.2%

SJM (00880 HK) 33.8% 32.6% 30.9% 30.9% 30.5% 29.8%

Sands China (01928 HK) 21.8% 25.5% 26.3% 26.8% 26.9% 26.0%

Wynn Macau (01128 HK) 9.3% 9.0% 8.5% 8.1% 8.2% 8.1%

Macau Gaming 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%


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Company Rating Definition

The Benchmark: NASDAQ Composite Index

Time Horizon: 6 to 18 months

Rating Definition

Buy Relative Performance >15%; or the fundamental outlook of the company or sector is favorable.

Accumulate Relative Performance is 5% to 15%; or the fundamental outlook of the company or sector is favorable.

Neutral Relative Performance is -5% to 5%; or the fundamental outlook of the company or sector is neutral.

Reduce Relative Performance is -5% to -15%; or the fundamental outlook of the company or sector is unfavorable.

Sell Relative Performance <-15%; or the fundamental outlook of the company or sector is unfavorable.

Sector Rating Definition

The Benchmark: NASDAQ Composite Index

Time Horizon: 6 to 18 months

Rating Definition

Outperform Relative Performance >5%; or the fundamental outlook of the sector is favorable.

Neutral Relative Performance is -5% to 5%; or the fundamental outlook of the sector is neutral.

Underperform Relative Performance <-5%;

or the fundamental outlook of the sector is unfavorable.

DISCLOSURE OF INTERESTS

(1) The Analysts and their associates do not serve as an officer of the issuer mentioned in this Research Report. (2) The Analysts and their associates do not have any financial interests in relation to the issuer mentioned in this Research Report.

(3) Except for SMI Holdings Group Limited (00198), China Fire Safety Enterprise Group Limited (00445), Guangshen Railway Company Limited-H shares (00525), China All Access (Holdings) Limited (00633), Guotai Junan International Holdings Limited (01788) and Binhai Investment Company Limited (02886), Guotai Junan and its group companies do not hold equal to or more than 1% of the market

capitalization of the issuer mentioned in this Research Report. (4) Guotai Junan and its group companies have not had investment banking relationships with the issuer mentioned in this Research Report

within the preceding 12 months.

DISCLAIMER

This Research Report does not constitute an invitation or offer to acquire, purchase or subscribe for securities by Guotai Junan Securities (Hong Kong) Limited ("Guotai Junan"). Guotai Junan and its group companies may do business that relates to companies covered in

research reports, including investment banking, investment services and etc. (for example, the placing agent, lead manager, sponsor, underwriter or invest proprietarily).

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

Though best effort has been made to ensure the accuracy of the information and data contained in this Research Report, Guotai Junan does not guarantee the accuracy and completeness of the information and data herein. This Research Report may contain some forward-looking

estimates and forecasts derived from the assumptions of the future political and economic conditions with inherently unpredic table and mutable situation, so uncertainty may contain. Investors should understand and comprehend the investment objectives and its related risks, and where necessary consult their own financial advisers prior to any investment decision.

This Research Report is not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation or which would

subject Guotai Junan and its group companies to any registration or licensing requirement within such jurisdiction. © 2015 Guotai Junan Securities (Hong Kong) Limited. All Rights Reserved.

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