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April 30 2015

Union Gaming Research Macau +853 2857 5825 1

Company Research

NagaCorp (3918 HK)

Analysts

Grant Govertsen

grantgovertsenuniongaminggroupcom

Felicity Chiang

felicitychianguniongaminggroupcom

Estimates and Valuation (US$)

2015 EPS (US cents) 688

2016 EPS (US cents) 797

2015 PE 104x

2016 PE 90x

2015 EBITDA ($m) 2114

2016 EBITDA ($m) 2551

2015 EVEBITDA 73x

2016 EVEBITDA 67x

Source Union Gaming ResearchMacau

Issue Data (HK$)

Last Price 556

52wk High (7302014) 739

52wk Low (3182015) 466

PE (Trailing 12m) 111x

Dividend Yield 57x

Price to Book Ratio 26x

Price to Sales Ratio 40x

EV Trail 12M EBITDA 70x

Shares Outstanding 2270

Market Cap 12621

Enterprise Value 11113

Source Capital IQ

For a description of important

disclosures please see Appendix 1

Still gaga for Naga after all

these years

Still among the best stories in gaming

Following our recent trip to Cambodia we are reiterating our Buy rating on shares

of NagaCorp on what we believe will be above-consensus results over the next

few years In our view shares of Naga have been unfairly penalized (down 35

from the March 2014 peak) as they have been lumped in with other Asian gaming

equities in the Macau downturn Unlike operators in Macau and certain other

regional Asian gaming jurisdictions we expect Naga to post continued strong and

stable growth across all of its primary gaming segments

High conviction in our above-consensus estimates

We are currently estimating EBITDA of USD211 million in 2015 and USD255 million

in 2016 These estimates are 4 and 9 higher than consensus and we have a high

degree of confidence that not only will Naga meet our expectations based on

ongoing operations but will likely well exceed them (by many tens of millions of

dollars) thanks to concession renewal fees for the two major slot vendor contracts

that are expiring later in 2015 and in early 2016 respectively Based on the most

recent comp the concession renewal fee in 2015 should be at least USD30 million

although we suspect it could be (notably) higher

Growth drivers as far as the eye can see

We have identified 27 growth drivers across NagaWorldrsquos three primary business

segments VIP mass tables and slotsETGs These drivers are discussed in detail

below in addition to the drivers of earnings growth that are the companyrsquos three

current greenfield development opportunities NagaCity Walk Naga2 andVladivostok The expansion projects in Phnom Penh are moving forward and we

toured the NagaCity Walk and Naga2 sites (see photos herein) The below-ground

heavy construction of NagaCity Walk is effectively complete while work continues

on the above-ground section This project is on track to open in early 2016 The

Naga2 casino is now above ground and work continues on the main podium We

believe the project is on pace to delivery to the company in 2017 with operations

commencin b late 2017

Buy Price Target $800

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April 30 2015

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Still gaga for Naga rare story of continued

solid growth in Asia raising PT to HKD8 and

reiterate Buy rating

Still among the best stories in gamingFollowing our recent trip to Cambodia we are reiterating our Buy rating on shares o

NagaCorp on what we believe will be above-consensus results over the next few

years In our view shares of Naga have been unfairly penalized (down 35 from the

March 2014 peak) as they have been lumped in with other Asian gaming equities in

the Macau downturn Unlike operators in Macau and certain other regional Asian

gaming jurisdictions we expect Naga to post continued strong and stable growth

across all of the primary gaming segments ndash including VIP ndash over the near medium

and long terms

High conviction in our above-consensus estimatesWe are currently estimating EBITDA of USD211 million in 2015 and USD255 million in

2016 These estimates are 4 and 9 higher than consensus and we have a high

degree of confidence that not only will Naga meet our expectations based on

ongoing operations but will likely well exceed them (by many tens of millions of

dollars) thanks to concession renewal fees for the two major slot vendor contracts

that are expiring later in 2015 and in early 2016 respectively Based on the most

recent comp the concession renewal fee in 2015 should be at least USD30 million

although we suspect it could be (notably) higher due to the prime physical location

of this concession which will be near the main entrance and the soon-to-openNagaCity Walk project

Growth drivers as far as the eye can seeWe have identified 27 growth drivers across NagaWorldrsquos three primary business

segments VIP mass tables and slotsETGs These drivers are discussed in detai

below in addition to the drivers of earnings growth that are the companyrsquos three

current greenfield development opportunities NagaCity Walk Naga2 and

Vladivostok The expansion projects in Phnom Penh are moving forward and we

toured the NagaCity Walk and Naga2 sites (see photos herein) The below-ground

heavy construction of NagaCity Walk is effectively complete while work continues on

the above-ground section This project is on track to open in early 2016 The Naga2casino is now above ground and work continues on the main podium We believe the

project is on pace to delivery to the company in 2017 with operations commencing

by late 2017 Finally we expect the company to formally break ground in Vladivostok

Russia in the very near term and would expect operations to commence on this

USD150 million project (Phase 1) by early 2018

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April 30 2015

Union Gaming Research Macau +853 2857 5825 3

VIPWe wish to address VIP first as it is not only the most exciting growth driver for Naga

but also because it runs counter to broader regional VIP trends In 1Q15 Naga

reported that VIP rolling chip volume increased by a staggering 79 yy to nearly

USD17 billion This was done primarily on the backs of the companyrsquos existing junket

network out of SE Asia plus some benefit from the Chinese-based Asian Nations

junket We are currently forecasting the following VIP metrics for Naga over the nex

two years

bull 2015 rolling chip volume +77 to USD109 billion

bull 2016 rolling chip volume +22 to USD133 billion

bull 2015 VIP gross profit of USD92 million (+34 on materially lower GP

margin owing to VIP incentive plan)

bull 2016 VIP gross profit of USD112 million (+21)

Figure 1 VIP rolling chip volume trends historical and forecast 1H10 to 2H17E

Source company data Union Gaming Research Macau

While the numbers above particularly for 2015 represent exceptional growth we

would still be biased to the upside given the following growth drivers

1 In early May Nagarsquos airline Bassaka Air will begin flying 2x weekly

between Macau and Phnom Penh We believe this will quickly increase

to 3x weekly It is this flight program that we believe the big Macau

junkets have been waiting on in order to begin sending players to Naga

2 Also in early May we believe Macaursquos largest junket Suncity will star

sending players to Naga Not only will this result in positive sentiment

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983125

983123 983108 983149 983145 983148 983148 983145 983151 983150 983155

983118983137983143983137 983154983151983148983148983145983150983143 983139983144983145983152 983158983151983148983157983149983141 983137983150983140 983161983161 983139983144983143

983122983151983148983148 983145983150983143 983139983144983145983152 983158983151983148983157983149983141 983129983129

7262019 NagaCorp research

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April 30 2015

4 +853 2857 5825 Union Gaming Research Macau

for shares but should be the biggest driver of near-term VIP rolling chip

growth at the property To put the Suncity opportunity in perspective

a At the current run-rate Macaursquos VIP segment GGR is on track to be

USD23 billion in 2015 which equates to USD808 billion in rollingchip volume Of this amount we estimate that Suncity is responsible

for 20 or approximately USD161 billion

b Should Suncity allocated only 2 of this volume to Naga ndash which we

think is becoming increasingly logical ndash this would result in USD32

billion incremental rolling chip volume to Naga

c Calendar dates notwithstanding this alone would account for all o

the 2015 rolling chip volume growth in our model

3 We believe that Naga is very close to finalizing contracts with two more

brand-name Macau VIP junkets which should come online in 2H15

4 Naga is at early stages of discussions with a few other MacauAsian

junkets which we estimate will be 2016 drivers of growth

5 The VIP downturn in Macau is a positive for Naga As junket earnings

have declined materially in Macau (with no visibility on a return to

growth) it is becoming increasingly incumbent upon junket operators

to seek jurisdictions whereby they can earn greater economics In the

case of Naga we believe junket operators will be able to capture a

revenue share in the neighborhood of 75 - a full 3000 basis points

higher than in Macau (typically ~45) In the meantime Naga has

quietly brought online significantly improved VIP spaces (with more tocome early next year) and amenities that compare favorably to any othe

market which gives us confidence that attracting enough quality

players will not be an issue Finally we note that generally speaking

while Naga is bringing high quality VIP players to the property their

average profile is typically off the radar screen of Beijing (ie not at risk

of anti-corruption)

6 In late 2015 Nagarsquos next VIP space will open including a rooftop poo

deck and at least 16 more VIP tables

7 In early 2016 NagaCity Walk will open which will have a three-fold

benefit

a The addition of a large amount of retail space (run by China Duty

Free) with such retail being a necessity in the context of an

increasing amount of China-originated business

b The conclusion of significant construction disruption to the main

porte-cochere of Naga

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April 30 2015

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c Along with the conclusion of construction disruption the re

opening of Nagarsquos own high-end retail shops in close proximity to

the main entrance

8 The opening of the Naga terminal at Phnom Penh International Airport

in 1Q16 which will highly complement the VIP experience at Naga

especially in the context of Bassaka Air regularly flying in high-value

customers

9 Further progress with respect to the companyrsquos direct VIP program

which we believe has been growing at double digit rates

7262019 NagaCorp research

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April 30 2015

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Mass market tablesIn 1Q15 Naga reported that mass market table games volume grew 12 yy to

USD130 million This is broadly consistent with trends seen in 2013 (+15) and 2014

(+16) even while the proportion of Vietnamese volume continues to decline as

more of these customers opt to go to the border casinos in Bavet We are currently

forecasting the following mass table metrics for Naga over the next two years

bull 2015 volume growth of 14

bull 2016 volume growth of 11

bull 2015 GGR growth of 12

bull 2016 GGR growth of 15 (on a slightly higher hold rate as explained

below)

Figure 2 Mass market table GGR trends historical and forecast 1H10 to 2H17E

Source company data Union Gaming Research Macau

As demonstrated in the above figure mass table GGR growth has been very stable

and predictable Based on the below drivers we expect the trends seen over the last

five years to continue apace We highlight the following growth drivers for mass

market tables

1 Beginning this June Naga for the first time ever will begin exchanging

cash for chips at the table rather than only at the cage Historically this

was done to combat counterfeiting but improved (and inexpensive) bil

validation technology will enable Naga to put bill validators at each

table This should result in the compound effect of not only increasing

wagering volume but should also result in a slightly higher hold rate

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1 983112 1 5 983109

2 983112 1 5 983109

1 983112 1 6 983109

2 983112 1 6 983109

1 983112 1 7 983109

2 983112 1 7 983109

983125 983123 983108 983149 983145 983148 983148 983145 983151 983150 983155

983118983137983143983137 983149983137983155983155 983149983137983154983147983141983156 983156983137983138983148983141 983111983111983122 983137983150983140 983161983161 983139983144983143

983117983137983155983155 983156983137983138983148983141 983111983111983122 983129983129

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2 Also in June of this year Naga will open a new valet parking garage

located in close proximity to Naga The lack of sufficient parking over the

years has likely impaired some amount of mass market volume

3 In July of this year we expect Bassaka Air to begin flying direct routes to

mainland China multiple times per week augmenting its Macau service

The mainland flights will be marketing in conjunction with China

International Travel Service and will promote tourism to Cambodia In

our view this should be a material driver of increased mass market

Chinese play

4 Naga has already put in place several general marketing initiatives to

attract increased regional play particularly from China and Malaysia

which already appear to be paying dividends We would look for these

trends to continue

5 Ongoing strength in general visitation to Cambodia In 2014 visitationto Cambodia grew by 7 while visitation from China grew by 21 to in

excess of 560000 Visitation to Cambodia beginning at Phnom Penh

International Airport grew 10 in 2014 to nearly 1 million

6 Similar to VIP the opening of NagaCity Walk will provide the company

with similar benefits and increased foot traffic

7 The locals expat story continues to improve with the combination o

wealth generation as well as significant Foreign Direct Investment

particularly from China and Korea

8 At the margin the recent opening of a bridge across the Mekong wilshave about 45 minutes off the travel time between Ho Chi Minh City

and Phnom Penh While the mass market contribution from Vietnamese

is becoming nominal this improved access is beneficial

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Slot machines ETGsIn 1Q15 Naga reported that slot machine ETG volume grew 6 yy to USD290

million While lower than in previous years (+10 in 2013 and +8 in 2014) we

believe growth has increased notably in the second quarter and should continue to

grow on the heels of numerous drivers We are currently forecasting the following slot

machines ETG metrics for Naga over the next two years

bull 2015 GGR growth of 12 to USD95 million (this represents only Nagarsquos

share of the slot GGR)

bull 2016 GGR growth of 11 to USD106 million

Figure 3 Slot ETG GGR trends historical and forecast 1H11 to 2H17E

Source company data Union Gaming Research Macau

Slot ETG GGR growth has also been quite stable although certain events like the

King fathers funeral and nationwide elections have impacted results from time-to-

time We highlight the following growth drivers for slot machines ETGs

1 In June of this year Naga will deploy a significant TITO (Ticket-In Ticket

Out aka ldquocashless gamingrdquo) rollout across the balance of its slots ETGs

Currently only about 600 of 1500 slots have TITO and bringing the

remaining 900 positions to TITO should result in increased time on

device which translates directly to increased GGR

2 At the end of 2015 the slot concession contract with Best Merit wil

expire This will likely result in the signing of a new slot concession (and

resulting one-time fee paid to Naga) Importantly and regardless of

whether the concessionaire remains with Best Merit or of it is a new

party we believe the nearly 300 machines will be replaced Today these

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983125 983123 983108 983149 983145 983148 983148 983145 983151 983150 983155

983118983137983143983137 983155983148983151983156 983109983124983111 983111983111983122 983137983150983140 983161983161 983139983144983143

983123983148983151983156 983109983124983111 983111983111983122 983129983129

7262019 NagaCorp research

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April 30 2015

Union Gaming Research Macau +853 2857 5825 9

are among the oldest games on the floor and are in need of replacement

Fresh games should result in increased win per unit

3 Noted above we believe Naga is likely to receive two large one-time fees

associated with new contracts to replace those expiring in 2015 with

Best Merit and 2016 with EGT representing nearly 300 and 650

machines respectively Based on the last comp this would imply

approximately USD30 million and USD60 million+ respectively

However based on current market dynamics we believe the numbers

could be higher Regardless the combined fees paid should reach at

least USD90 million+ resulting in headline earnings well beyond current

expectations not to mention incremental cash on hand (larger dividend

or incremental dry powder on the balance sheet)

The remaining drivers are similar to those listed above namely

4 The opening of the parking garage in June

5 The benefits of mass market play from Bassaka Air flights penetrating

into mainland China

6 General marketing initiatives into China and Malaysia

7 Ongoing strength in general visitation to Cambodia

8 The opening of NagaCity Walk

9 Growth in the locals expat story

10 Marginal lift owing to the new bridge across the Mekong

Considered as a whole these growth drivers give us a high degree of confidence in

our current above-consensus expectations over the next two years Importantly

these drivers are long-tailed and should provide for sustained growth into 2017 and

then into the opening of Naga2 the first full year of which will be in 2018

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Greenfield developments

Vladivostok

Outside of the solid growth expected at NagaWorld Naga currently has three

greenfield opportunities in their Vladivostok NagaCity Walk and Naga2 projects Weexpect the company to get break ground in Vladivostok next month with an

expected opening in early 2018 Much of the project will be built in a modular (prefab

format which should allow for a much quicker than normal build cycle We expect the

first phase be defined roughly as

bull USD150 million capex

bull 400 hotel rooms

bull ~70 mass and a TBD of VIP tables

bull 500 slots ETGs

bull Plus retail entertainment FampB and meeting space

Vladivostok is currently an untested market although the first casino should be

opening soon which should provide a solid baseline for the market In the meantime

we are confident that the Naga project can generate returns well into the double

digits and we are currently modeling USD60 million in EBITDA in year one (2018)

Given Vladivostokrsquos proximity to northeast China as well as being very much under-

penetrated in terms of casino gaming we believe our EBITDA estimate could be

conservative For the first time we are now including Vladivostok in our valuation of

Naga for which we are attributed HKD063 in present per share value

NagaCity Walk

The NagaCity Walk retail experience will eventually connect the existing NagaWorld

facility to Naga2 This project will be run by China Duty Free While not a gaming

component we believe the addition of high quality (and quantity of) retail will be a

key driver of incremental volume to the property ndash especially for higher end mass and

VIP customers At the same time the construction of NagaCity Walk has resulted in

notable construction disruption to the propertys primary porte-cochere as well as the

handful of retail outlets at the main entrance The opening of NagaCity Walk is

therefore important in returning the property to its previous traffic flow

While difficult to appreciate the scale of NagaCity Walk we are including two photosbelow It is important to keep in mind the 400 meter (1300 feet) subterranean length

of the project

7262019 NagaCorp research

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Union Gaming Research Macau +853 2857 5825 11

Figure 4 NagaCity Walk photo 1

Source Union Gaming Research Macau

Figure 5 NagaCity Walk photo 2

Source Union Gaming Research Macau

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April 30 2015

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Naga2

Naga2 in Phnom Penh is now moving vertically with significant work being done on

the podium The project remains on track for a late 2017 opening In our view this

continues to be a transformational milestone for the company as it will not only take

them out of the single-asset mold (along with Vladivostok) but that it will be the firsthigh-end purpose-built space for the company

We believe that Naga2 will serve to keep the VIP story growing especially given a

significant amount of in-suite VIP gaming salons On a combined basis we believe

that NagaWorld and Naga2 will generate approximately USD22 billion in rolling chip

volume by 2018 which put in perspective is about 3 of what Macau is currently run-

rating (and represents an even lower percentage relative to Macaus peak) In our

view Naga has and is putting in place the right infrastructure that should readily

support and attract this level of VIP gaming play This isnt to say that Naga2 is a VIP

only property To the contrary we have high expectations for mass market and slot

ETG GGR at the property

In its first full year of operations we believe Naga2 can generate approximately

USD550 million in GGR (NagaWorld generated in excess of USD400 million in 2014)

and EBITDA of USD216 million (NagaWorld generated USD176 million in 2014) We

are however modeling cannibalization at NagaWorld during this period

Figure 6 Naga2 construction progress

Source Union Gaming Research Macau

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April 30 2015

Union Gaming Research Macau +853 2857 5825 13

Looking at the out yearsClearly we are excited about the near medium and longer-term growth stories of

NagaCorp The company is in a position to demonstrate stable EBITDA growth ove

the next three years (including 2015) However it is the out years that are the most

transformational for the company The year 2018 is the biggest for Naga as it wil

become a three-asset operator with NagaWorld Naga2 and Vladivostok all being

operational

We are forecasting that NagaCorp can generate more than USD12 billion in revenue

in 2018 and nearly USD500 million in EBITDA (from our estimate of USD211 million in

2015) This level of cash flow along with a forecasted USD280 million in cash on its

unlevered balance sheet (after paying more than USD750 million in dividends from

2015-2018 and around USD250 million in expansion capex) should put NagaCorp in

the running for any number of other regional gaming opportunities including Japan

and or Korea should these opportunities present themselves

Figure 7 Nagas EBITDA outlook 2011 to 2018E

Note Historical EBITDA excludes one-time slot concession fees paid to the company in 2012 and 2013 and excludes potentia

one-time fees likely to be generated in 2015 and 2016 (and beyond)

Source Union Gaming Research Macau

112 128

157 176

211

255

305

484

0

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$200

$300

$400

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$600

2011 2012 2013 2014 2015983109 2016983109 2017983109 2018983109

983109

983106 983113 983124 983108 983105 ( 983125 983123 983108 983149 983145 983148 983148 983145 983151 983150 983155 )

983109983106983113983124983108983105 983129983129 983139983144983137983150983143983141

9831189831379831439831372 amp

983126983148983137983140983145983158983151983155983156983151983147

7262019 NagaCorp research

httpslidepdfcomreaderfullnagacorp-research 1417

April 30 2015

14 +853 2857 5825 Union Gaming Research Macau

EstimatesWe are largely maintaining our forward estimates for NagaCorp Our 2015 EBITDA

estimate is USD211 million (from USD212 million) Our 2016 EBITDA is USD255 million

(from USD251 million) Please see Figure 1 for detailed revenue EBITDA and EPS

estimates Note above our estimates are all above consensus

Figure 8 Estimates and consensus expectations

Source Union Gaming Research Macau Capital IQ

983107983137983152983145983156983137983148 983113983121 983107983151983149983152983137983150983161 983123983156983137983156983145983155983156983145983139983155 (983110983129983085983108983141983139)52983085983159983141983141983147 983144983145983143983144 $739 983105983150983150983157983137983148983145983162983141983140 983108983145983158983145983140983141983150983140983123983144983137983154983141 $032

52983085983159983141983141983147 983148983151983159 $466 983108983145983158983145983140983141983150983140 983129983145983141983148983140 57

983117983137983154983147983141983156 983139983137983152 ($983149983149) $12621 983113983150983155983145983140983141983154 983119983159983150983141983154983155983144983145983152 00

983123983144983137983154983141983155 983151983157983156983155983156983137983150983140983145983150983143 (983149983149) 22700 983113983150983155 983156983145 983156983157983156983145 983151983150 983119983159983150983141983154983155 983144983145 983152 246

983105983158983141983154983137983143983141 983140983137983145983148983161 983158983151983148983157983149983141 (983149983149) 245 983122983141983158983141983150983157983141 983143983154983151983159983156983144 (2983085983161983141983137983154) 199

983123983144983151983154983156 983145983150983156983141983154983141983155983156 (983149983149) 983150983137 983109983106983113983124983108983105 983143983154983151983159983156983144 (2983085983161983141983137983154) 983150983137

983123983144983151983154983156 983113983150983156983141983154983141983155983156 983137983155 983151983142 983142983148983151983137983156 983150983137 983109983120983123 983143983154983151983159983156983144 (2983085983161983141983137983154) 60

983105983150983150983157983137983148 983122983141983155983157983148983156983155 2014 2015983109 2016983109 2017983109 2018983109

983125983150983145983151983150 983122983141983158983141983150983157983141983155 ($983149983149) $404 $589 $680 $781 $1219

983120983154983141983158983145983151983157983155 983154983141983158983141983150983157983141 983141983155983156983145983149983137983156983141 983085 $564 $644 983085 983085

983107983144983137983150983143983141 983085 $26 $36 983085 983085

983107983137983152983145983156983137983148 983113983121 983154983141983158983141983150983157983141 983141983155983156983145983149983137983156983141 983085 $491 $581 $694 $1099

983125983150983145983151983150 983109983106983113983124983108983105 ($983149983149) $176 $211 $255 $305 $484

983120983154983141983158983145983151983157983155 983109983106983113983124983108983105 983141983155983156983145983149983137983156983141 983085 $212 $251 983085 983085

983107983144983137983150983143983141 983085 ($1) $4 983085 983085

983107983137983152983145983156983137983148 983113983121 983109983106983113983124983108983105 983141983155983156983145983149983137983156983141 983085 $203 $233 $267 $399

983125983150983145983151983150 983109983120983123 $0060 $0069 $0080 $0068 $0111

983120983154983141983158983145983151983157983155 983109983120983123 983141983155983156983145983149983137983156983141 983085 $0072 $0081 983085 983085

983107983144983137983150983143983141 983085 ($0003) ($0001) 983085 983085

983107983137983152983145983156983137983148 983113983121 983109983120983123 983141983155983156983145983149983137983156983141 983085 $0065 $0067 $0060 $0081

983126983137983148983157983137983156983145983151983150 983085 983109983120983123 983117983157983148983156983145983152983148983141 104983160 90983160 105983160 64983160

983126983137983148983157983137983156983145983151983150 983085 983109983126983109983106983113983124983108983105 983117983157983148983156983145983152983148983141 73983160 67983160 84983160 51983160

7262019 NagaCorp research

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April 30 2015

Union Gaming Research Macau +853 2857 5825 15

Price Target HKD800 (from HKD750)We value NagaCorp using an EVEBITDA approach on forward earnings in addition to

incremental present value associated with the companyrsquos Naga2 and Vladivostok

projects the first full year of operations for both will be 2018 Our 12 month price

target is HKD800 (+HKD050) and is based on an 85x multiple of our 2015 EBITDA

estimate (HKD400) in addition to the per share present value for Naga2 and

Vladivostok (HKD400) Our calculations assume a share count of approximately

3848mm which accounts for the dilution associated with the companyrsquos acquisition

of the USD369 million NagaCity Walk and Naga2 complex from CEO Tan Sri Dr Chen

in the form of share issuance convertible bond We note that the 85x multiple

represents a slightly lower multiple than we have previously ascribed (9x) which we

would attribute to broader multiple pullback in the gaming space However it stil

remains a discount to its peer group in Macau to which we generally ascribe a

multiple approximately 3 or 4 turns higher We feel an 85x multiple is justified fo

Naga as the company has consistently executed on its growth initiatives enabling the

company to growth faster than its peer group It is also in the home stretch of

shedding its image as a single-asset story with Naga2 now under construction in a

meaningful way and Vladivostok on the horizon Our price target along with an

expected dividend yield of 7 in 2015 represents 51 upside to todayrsquos closing price

RisksRisks to shares of NagaCorp include country risk (loss of exclusive license adjustmen

to the companyrsquos advantageous low monthly fixed obligation tax) development risk

including delays to Naga2 and the Vladivostok project incremental regiona

competition (especially from Vietnam should locals be allowed to gamble) volatility

associated with being a single-asset operator (for now) in the context of increasing

exposure to the VIP segment

7262019 NagaCorp research

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April 30 2015

16 +853 2857 5825 Union Gaming Research Macau

Appendix 1 Important DisclosuresAdditional information is available upon request

This report was prepared by Union Gaming Research Macau Limited Union Gaming Research Macau Limited is a wholly owned

subsidiary of Union Gaming Group LLC Union Gaming Group LLC also owns Union Gaming Advisors LLC a FINRA member firm

and Union Gaming Research LLC a Nevada Registered Investment Adviser Union Gaming Advisors LLC does not produce research

reports All questions or comments concerning this research report should be addressed to Union Gaming Research Macau at +853

2857 5825

Union Gaming Advisors LLC (Advisors) an affiliate of Union Gaming Research Macau Limited does not own any securities of any

company analyzed in this report (Subject Company) Advisors has received non-investment banking related compensation from

the subject company in the past twelve months Accordingly investors should be aware that the firm and its affiliates may have a

conflict of interest that could affect the objectivity of this report Advisors does expect and will seek compensation from any Subject

Company for investment banking services in the next three months Advisors has never been a market maker for a Subject Company

and does not expect to be a market maker for a Subject Company

All prices are those current at the end of the previous trading session unless otherwise indicated Prices are sourced from local

exchanges via Bloomberg and CapitalIQ Data is sourced from Union Gaming Research Union Gaming Research Macau Limited

and subject companies Union Gaming Research and Union Gaming Research Macau Limited are not responsible for errors in prices

provided by independent sources Data analyses and reports necessarily contain time-sensitive information and no subscriber o

client should rely on dated reports or conclusions

Investor clients and financial advisers should consider any report from Union Gaming as only a single factor in making any

investment decision

Ratings methodology

We use a traditional ratings construct (Buy Hold Sell) that is underscored by percentage upsidedownside form current trading

levels along with dividend yields for total return We exclude special dividends and only contemplate regular dividends in our tota

return forecasts These are absolute ratings not relative or forced ratings We define a Buy rating as a company whose shares exhibit

total return (appreciation and dividends) potential of at least +15 within the next twelve months and conversely a Sell rating as

a company whose shares exhibit downside potential of at least 15 within the next twelve months A Hold rating is reserved fo

companies whose shares exhibit total return potential between those parameters

Investor clients and financial advisers should consider any report from Union Gaming as only a single factor in making any

investment decision

7262019 NagaCorp research

httpslidepdfcomreaderfullnagacorp-research 1717

April 30 2015

Union Gaming Research Macau +853 2857 5825 17

Source Union Gaming Research LLC and Union Gaming Research Macau Limited Capital IQ

Distribution of Subject Companiesrsquo stock ratings

Source Union Gaming Research LLC and Union Gaming Research Macau Limited

Distribution of Subject Companies with affiliate banking relationships

Source Union Gaming Research LLC and Union Gaming Research Macau Limited

Copyright copy 2015 Union Gaming Research Macau Limited

Union Gaming Research Macau

Finance and IT Center of Macau (FIT)

Suite 8B

Nam Van Lake Quarteirao 5 Lote A

Macau

9 - 1 3 - 1 2

B u y

P T

=

$ 5

1 1 - 2 1 - 1 2

B u y

P T

=

$ 5 5

2 - 7 - 1 3

B u y

P T

=

$ 6 5

4 - 1 1 - 1 3

B u y

P T

=

$ 7

8 - 8 - 1 3

B u y

P T

= $ 7 5

1 0 - 7 - 1 3

B u y

P T

=

$ 8

2 - 5 - 1 5

B u y

P T

=

$ 7 5

4 - 3 0 - 1 5

B u y

P T

=

$ 8

$1

$2

$3

$4

$5

$6

$7

$8

$9

$10

$1

$2

$3

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$5

$6

$7

$8

$9

$10

9 1 3 1 2

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1 2 1 1 1 2

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2 2 0 1 3

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4 2 9 1 3

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6 1 3 1 3

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7 2 6 1 3

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9 1 0 1 3

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1 0 2 5 1 3

1 1 1 5 1 3

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1 2 3 1 1 3

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2 1 4 1 4

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1 1 6 1 4

1 1 2 7 1 4

1 2 1 8 1 4

1 1 3 1 5

2 3 1 5

2 2 6 1 5

3 1 9 1 5

4 1 4 1 5

NagaCorp (3918 HK)

Buy Hold Sell

81 19 0

Buy Hold Sell

100 0 0

7262019 NagaCorp research

httpslidepdfcomreaderfullnagacorp-research 217

April 30 2015

2 +853 2857 5825 Union Gaming Research Macau

Still gaga for Naga rare story of continued

solid growth in Asia raising PT to HKD8 and

reiterate Buy rating

Still among the best stories in gamingFollowing our recent trip to Cambodia we are reiterating our Buy rating on shares o

NagaCorp on what we believe will be above-consensus results over the next few

years In our view shares of Naga have been unfairly penalized (down 35 from the

March 2014 peak) as they have been lumped in with other Asian gaming equities in

the Macau downturn Unlike operators in Macau and certain other regional Asian

gaming jurisdictions we expect Naga to post continued strong and stable growth

across all of the primary gaming segments ndash including VIP ndash over the near medium

and long terms

High conviction in our above-consensus estimatesWe are currently estimating EBITDA of USD211 million in 2015 and USD255 million in

2016 These estimates are 4 and 9 higher than consensus and we have a high

degree of confidence that not only will Naga meet our expectations based on

ongoing operations but will likely well exceed them (by many tens of millions of

dollars) thanks to concession renewal fees for the two major slot vendor contracts

that are expiring later in 2015 and in early 2016 respectively Based on the most

recent comp the concession renewal fee in 2015 should be at least USD30 million

although we suspect it could be (notably) higher due to the prime physical location

of this concession which will be near the main entrance and the soon-to-openNagaCity Walk project

Growth drivers as far as the eye can seeWe have identified 27 growth drivers across NagaWorldrsquos three primary business

segments VIP mass tables and slotsETGs These drivers are discussed in detai

below in addition to the drivers of earnings growth that are the companyrsquos three

current greenfield development opportunities NagaCity Walk Naga2 and

Vladivostok The expansion projects in Phnom Penh are moving forward and we

toured the NagaCity Walk and Naga2 sites (see photos herein) The below-ground

heavy construction of NagaCity Walk is effectively complete while work continues on

the above-ground section This project is on track to open in early 2016 The Naga2casino is now above ground and work continues on the main podium We believe the

project is on pace to delivery to the company in 2017 with operations commencing

by late 2017 Finally we expect the company to formally break ground in Vladivostok

Russia in the very near term and would expect operations to commence on this

USD150 million project (Phase 1) by early 2018

7262019 NagaCorp research

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April 30 2015

Union Gaming Research Macau +853 2857 5825 3

VIPWe wish to address VIP first as it is not only the most exciting growth driver for Naga

but also because it runs counter to broader regional VIP trends In 1Q15 Naga

reported that VIP rolling chip volume increased by a staggering 79 yy to nearly

USD17 billion This was done primarily on the backs of the companyrsquos existing junket

network out of SE Asia plus some benefit from the Chinese-based Asian Nations

junket We are currently forecasting the following VIP metrics for Naga over the nex

two years

bull 2015 rolling chip volume +77 to USD109 billion

bull 2016 rolling chip volume +22 to USD133 billion

bull 2015 VIP gross profit of USD92 million (+34 on materially lower GP

margin owing to VIP incentive plan)

bull 2016 VIP gross profit of USD112 million (+21)

Figure 1 VIP rolling chip volume trends historical and forecast 1H10 to 2H17E

Source company data Union Gaming Research Macau

While the numbers above particularly for 2015 represent exceptional growth we

would still be biased to the upside given the following growth drivers

1 In early May Nagarsquos airline Bassaka Air will begin flying 2x weekly

between Macau and Phnom Penh We believe this will quickly increase

to 3x weekly It is this flight program that we believe the big Macau

junkets have been waiting on in order to begin sending players to Naga

2 Also in early May we believe Macaursquos largest junket Suncity will star

sending players to Naga Not only will this result in positive sentiment

0

10

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0

1000

2000

3000

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6000

7000

8000

9000

10000

1 983112 1 0

2 983112 1 0

1 983112 1 1

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1 983112 1 2

2 983112 1 2

1 983112 1 3

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1 983112 1 4

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1 983112 1 5 983109

2 983112 1 5 983109

1 983112 1 6 983109

2 983112 1 6 983109

1 983112 1 7 983109

2 983112 1 7 983109

983125

983123 983108 983149 983145 983148 983148 983145 983151 983150 983155

983118983137983143983137 983154983151983148983148983145983150983143 983139983144983145983152 983158983151983148983157983149983141 983137983150983140 983161983161 983139983144983143

983122983151983148983148 983145983150983143 983139983144983145983152 983158983151983148983157983149983141 983129983129

7262019 NagaCorp research

httpslidepdfcomreaderfullnagacorp-research 417

April 30 2015

4 +853 2857 5825 Union Gaming Research Macau

for shares but should be the biggest driver of near-term VIP rolling chip

growth at the property To put the Suncity opportunity in perspective

a At the current run-rate Macaursquos VIP segment GGR is on track to be

USD23 billion in 2015 which equates to USD808 billion in rollingchip volume Of this amount we estimate that Suncity is responsible

for 20 or approximately USD161 billion

b Should Suncity allocated only 2 of this volume to Naga ndash which we

think is becoming increasingly logical ndash this would result in USD32

billion incremental rolling chip volume to Naga

c Calendar dates notwithstanding this alone would account for all o

the 2015 rolling chip volume growth in our model

3 We believe that Naga is very close to finalizing contracts with two more

brand-name Macau VIP junkets which should come online in 2H15

4 Naga is at early stages of discussions with a few other MacauAsian

junkets which we estimate will be 2016 drivers of growth

5 The VIP downturn in Macau is a positive for Naga As junket earnings

have declined materially in Macau (with no visibility on a return to

growth) it is becoming increasingly incumbent upon junket operators

to seek jurisdictions whereby they can earn greater economics In the

case of Naga we believe junket operators will be able to capture a

revenue share in the neighborhood of 75 - a full 3000 basis points

higher than in Macau (typically ~45) In the meantime Naga has

quietly brought online significantly improved VIP spaces (with more tocome early next year) and amenities that compare favorably to any othe

market which gives us confidence that attracting enough quality

players will not be an issue Finally we note that generally speaking

while Naga is bringing high quality VIP players to the property their

average profile is typically off the radar screen of Beijing (ie not at risk

of anti-corruption)

6 In late 2015 Nagarsquos next VIP space will open including a rooftop poo

deck and at least 16 more VIP tables

7 In early 2016 NagaCity Walk will open which will have a three-fold

benefit

a The addition of a large amount of retail space (run by China Duty

Free) with such retail being a necessity in the context of an

increasing amount of China-originated business

b The conclusion of significant construction disruption to the main

porte-cochere of Naga

7262019 NagaCorp research

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April 30 2015

Union Gaming Research Macau +853 2857 5825 5

c Along with the conclusion of construction disruption the re

opening of Nagarsquos own high-end retail shops in close proximity to

the main entrance

8 The opening of the Naga terminal at Phnom Penh International Airport

in 1Q16 which will highly complement the VIP experience at Naga

especially in the context of Bassaka Air regularly flying in high-value

customers

9 Further progress with respect to the companyrsquos direct VIP program

which we believe has been growing at double digit rates

7262019 NagaCorp research

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April 30 2015

6 +853 2857 5825 Union Gaming Research Macau

Mass market tablesIn 1Q15 Naga reported that mass market table games volume grew 12 yy to

USD130 million This is broadly consistent with trends seen in 2013 (+15) and 2014

(+16) even while the proportion of Vietnamese volume continues to decline as

more of these customers opt to go to the border casinos in Bavet We are currently

forecasting the following mass table metrics for Naga over the next two years

bull 2015 volume growth of 14

bull 2016 volume growth of 11

bull 2015 GGR growth of 12

bull 2016 GGR growth of 15 (on a slightly higher hold rate as explained

below)

Figure 2 Mass market table GGR trends historical and forecast 1H10 to 2H17E

Source company data Union Gaming Research Macau

As demonstrated in the above figure mass table GGR growth has been very stable

and predictable Based on the below drivers we expect the trends seen over the last

five years to continue apace We highlight the following growth drivers for mass

market tables

1 Beginning this June Naga for the first time ever will begin exchanging

cash for chips at the table rather than only at the cage Historically this

was done to combat counterfeiting but improved (and inexpensive) bil

validation technology will enable Naga to put bill validators at each

table This should result in the compound effect of not only increasing

wagering volume but should also result in a slightly higher hold rate

010

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20

30

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1 983112 1 0

2 983112 1 0

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1 983112 1 4

2 983112 1 4

1 983112 1 5 983109

2 983112 1 5 983109

1 983112 1 6 983109

2 983112 1 6 983109

1 983112 1 7 983109

2 983112 1 7 983109

983125 983123 983108 983149 983145 983148 983148 983145 983151 983150 983155

983118983137983143983137 983149983137983155983155 983149983137983154983147983141983156 983156983137983138983148983141 983111983111983122 983137983150983140 983161983161 983139983144983143

983117983137983155983155 983156983137983138983148983141 983111983111983122 983129983129

7262019 NagaCorp research

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April 30 2015

Union Gaming Research Macau +853 2857 5825 7

2 Also in June of this year Naga will open a new valet parking garage

located in close proximity to Naga The lack of sufficient parking over the

years has likely impaired some amount of mass market volume

3 In July of this year we expect Bassaka Air to begin flying direct routes to

mainland China multiple times per week augmenting its Macau service

The mainland flights will be marketing in conjunction with China

International Travel Service and will promote tourism to Cambodia In

our view this should be a material driver of increased mass market

Chinese play

4 Naga has already put in place several general marketing initiatives to

attract increased regional play particularly from China and Malaysia

which already appear to be paying dividends We would look for these

trends to continue

5 Ongoing strength in general visitation to Cambodia In 2014 visitationto Cambodia grew by 7 while visitation from China grew by 21 to in

excess of 560000 Visitation to Cambodia beginning at Phnom Penh

International Airport grew 10 in 2014 to nearly 1 million

6 Similar to VIP the opening of NagaCity Walk will provide the company

with similar benefits and increased foot traffic

7 The locals expat story continues to improve with the combination o

wealth generation as well as significant Foreign Direct Investment

particularly from China and Korea

8 At the margin the recent opening of a bridge across the Mekong wilshave about 45 minutes off the travel time between Ho Chi Minh City

and Phnom Penh While the mass market contribution from Vietnamese

is becoming nominal this improved access is beneficial

7262019 NagaCorp research

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April 30 2015

8 +853 2857 5825 Union Gaming Research Macau

Slot machines ETGsIn 1Q15 Naga reported that slot machine ETG volume grew 6 yy to USD290

million While lower than in previous years (+10 in 2013 and +8 in 2014) we

believe growth has increased notably in the second quarter and should continue to

grow on the heels of numerous drivers We are currently forecasting the following slot

machines ETG metrics for Naga over the next two years

bull 2015 GGR growth of 12 to USD95 million (this represents only Nagarsquos

share of the slot GGR)

bull 2016 GGR growth of 11 to USD106 million

Figure 3 Slot ETG GGR trends historical and forecast 1H11 to 2H17E

Source company data Union Gaming Research Macau

Slot ETG GGR growth has also been quite stable although certain events like the

King fathers funeral and nationwide elections have impacted results from time-to-

time We highlight the following growth drivers for slot machines ETGs

1 In June of this year Naga will deploy a significant TITO (Ticket-In Ticket

Out aka ldquocashless gamingrdquo) rollout across the balance of its slots ETGs

Currently only about 600 of 1500 slots have TITO and bringing the

remaining 900 positions to TITO should result in increased time on

device which translates directly to increased GGR

2 At the end of 2015 the slot concession contract with Best Merit wil

expire This will likely result in the signing of a new slot concession (and

resulting one-time fee paid to Naga) Importantly and regardless of

whether the concessionaire remains with Best Merit or of it is a new

party we believe the nearly 300 machines will be replaced Today these

0

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0

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1 983112 1 1

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1 983112 1 5 983109

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2 983112 1 7 983109

983125 983123 983108 983149 983145 983148 983148 983145 983151 983150 983155

983118983137983143983137 983155983148983151983156 983109983124983111 983111983111983122 983137983150983140 983161983161 983139983144983143

983123983148983151983156 983109983124983111 983111983111983122 983129983129

7262019 NagaCorp research

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April 30 2015

Union Gaming Research Macau +853 2857 5825 9

are among the oldest games on the floor and are in need of replacement

Fresh games should result in increased win per unit

3 Noted above we believe Naga is likely to receive two large one-time fees

associated with new contracts to replace those expiring in 2015 with

Best Merit and 2016 with EGT representing nearly 300 and 650

machines respectively Based on the last comp this would imply

approximately USD30 million and USD60 million+ respectively

However based on current market dynamics we believe the numbers

could be higher Regardless the combined fees paid should reach at

least USD90 million+ resulting in headline earnings well beyond current

expectations not to mention incremental cash on hand (larger dividend

or incremental dry powder on the balance sheet)

The remaining drivers are similar to those listed above namely

4 The opening of the parking garage in June

5 The benefits of mass market play from Bassaka Air flights penetrating

into mainland China

6 General marketing initiatives into China and Malaysia

7 Ongoing strength in general visitation to Cambodia

8 The opening of NagaCity Walk

9 Growth in the locals expat story

10 Marginal lift owing to the new bridge across the Mekong

Considered as a whole these growth drivers give us a high degree of confidence in

our current above-consensus expectations over the next two years Importantly

these drivers are long-tailed and should provide for sustained growth into 2017 and

then into the opening of Naga2 the first full year of which will be in 2018

7262019 NagaCorp research

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April 30 2015

10 +853 2857 5825 Union Gaming Research Macau

Greenfield developments

Vladivostok

Outside of the solid growth expected at NagaWorld Naga currently has three

greenfield opportunities in their Vladivostok NagaCity Walk and Naga2 projects Weexpect the company to get break ground in Vladivostok next month with an

expected opening in early 2018 Much of the project will be built in a modular (prefab

format which should allow for a much quicker than normal build cycle We expect the

first phase be defined roughly as

bull USD150 million capex

bull 400 hotel rooms

bull ~70 mass and a TBD of VIP tables

bull 500 slots ETGs

bull Plus retail entertainment FampB and meeting space

Vladivostok is currently an untested market although the first casino should be

opening soon which should provide a solid baseline for the market In the meantime

we are confident that the Naga project can generate returns well into the double

digits and we are currently modeling USD60 million in EBITDA in year one (2018)

Given Vladivostokrsquos proximity to northeast China as well as being very much under-

penetrated in terms of casino gaming we believe our EBITDA estimate could be

conservative For the first time we are now including Vladivostok in our valuation of

Naga for which we are attributed HKD063 in present per share value

NagaCity Walk

The NagaCity Walk retail experience will eventually connect the existing NagaWorld

facility to Naga2 This project will be run by China Duty Free While not a gaming

component we believe the addition of high quality (and quantity of) retail will be a

key driver of incremental volume to the property ndash especially for higher end mass and

VIP customers At the same time the construction of NagaCity Walk has resulted in

notable construction disruption to the propertys primary porte-cochere as well as the

handful of retail outlets at the main entrance The opening of NagaCity Walk is

therefore important in returning the property to its previous traffic flow

While difficult to appreciate the scale of NagaCity Walk we are including two photosbelow It is important to keep in mind the 400 meter (1300 feet) subterranean length

of the project

7262019 NagaCorp research

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April 30 2015

Union Gaming Research Macau +853 2857 5825 11

Figure 4 NagaCity Walk photo 1

Source Union Gaming Research Macau

Figure 5 NagaCity Walk photo 2

Source Union Gaming Research Macau

7262019 NagaCorp research

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April 30 2015

12 +853 2857 5825 Union Gaming Research Macau

Naga2

Naga2 in Phnom Penh is now moving vertically with significant work being done on

the podium The project remains on track for a late 2017 opening In our view this

continues to be a transformational milestone for the company as it will not only take

them out of the single-asset mold (along with Vladivostok) but that it will be the firsthigh-end purpose-built space for the company

We believe that Naga2 will serve to keep the VIP story growing especially given a

significant amount of in-suite VIP gaming salons On a combined basis we believe

that NagaWorld and Naga2 will generate approximately USD22 billion in rolling chip

volume by 2018 which put in perspective is about 3 of what Macau is currently run-

rating (and represents an even lower percentage relative to Macaus peak) In our

view Naga has and is putting in place the right infrastructure that should readily

support and attract this level of VIP gaming play This isnt to say that Naga2 is a VIP

only property To the contrary we have high expectations for mass market and slot

ETG GGR at the property

In its first full year of operations we believe Naga2 can generate approximately

USD550 million in GGR (NagaWorld generated in excess of USD400 million in 2014)

and EBITDA of USD216 million (NagaWorld generated USD176 million in 2014) We

are however modeling cannibalization at NagaWorld during this period

Figure 6 Naga2 construction progress

Source Union Gaming Research Macau

7262019 NagaCorp research

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April 30 2015

Union Gaming Research Macau +853 2857 5825 13

Looking at the out yearsClearly we are excited about the near medium and longer-term growth stories of

NagaCorp The company is in a position to demonstrate stable EBITDA growth ove

the next three years (including 2015) However it is the out years that are the most

transformational for the company The year 2018 is the biggest for Naga as it wil

become a three-asset operator with NagaWorld Naga2 and Vladivostok all being

operational

We are forecasting that NagaCorp can generate more than USD12 billion in revenue

in 2018 and nearly USD500 million in EBITDA (from our estimate of USD211 million in

2015) This level of cash flow along with a forecasted USD280 million in cash on its

unlevered balance sheet (after paying more than USD750 million in dividends from

2015-2018 and around USD250 million in expansion capex) should put NagaCorp in

the running for any number of other regional gaming opportunities including Japan

and or Korea should these opportunities present themselves

Figure 7 Nagas EBITDA outlook 2011 to 2018E

Note Historical EBITDA excludes one-time slot concession fees paid to the company in 2012 and 2013 and excludes potentia

one-time fees likely to be generated in 2015 and 2016 (and beyond)

Source Union Gaming Research Macau

112 128

157 176

211

255

305

484

0

10

20

30

40

50

60

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$0

$100

$200

$300

$400

$500

$600

2011 2012 2013 2014 2015983109 2016983109 2017983109 2018983109

983109

983106 983113 983124 983108 983105 ( 983125 983123 983108 983149 983145 983148 983148 983145 983151 983150 983155 )

983109983106983113983124983108983105 983129983129 983139983144983137983150983143983141

9831189831379831439831372 amp

983126983148983137983140983145983158983151983155983156983151983147

7262019 NagaCorp research

httpslidepdfcomreaderfullnagacorp-research 1417

April 30 2015

14 +853 2857 5825 Union Gaming Research Macau

EstimatesWe are largely maintaining our forward estimates for NagaCorp Our 2015 EBITDA

estimate is USD211 million (from USD212 million) Our 2016 EBITDA is USD255 million

(from USD251 million) Please see Figure 1 for detailed revenue EBITDA and EPS

estimates Note above our estimates are all above consensus

Figure 8 Estimates and consensus expectations

Source Union Gaming Research Macau Capital IQ

983107983137983152983145983156983137983148 983113983121 983107983151983149983152983137983150983161 983123983156983137983156983145983155983156983145983139983155 (983110983129983085983108983141983139)52983085983159983141983141983147 983144983145983143983144 $739 983105983150983150983157983137983148983145983162983141983140 983108983145983158983145983140983141983150983140983123983144983137983154983141 $032

52983085983159983141983141983147 983148983151983159 $466 983108983145983158983145983140983141983150983140 983129983145983141983148983140 57

983117983137983154983147983141983156 983139983137983152 ($983149983149) $12621 983113983150983155983145983140983141983154 983119983159983150983141983154983155983144983145983152 00

983123983144983137983154983141983155 983151983157983156983155983156983137983150983140983145983150983143 (983149983149) 22700 983113983150983155 983156983145 983156983157983156983145 983151983150 983119983159983150983141983154983155 983144983145 983152 246

983105983158983141983154983137983143983141 983140983137983145983148983161 983158983151983148983157983149983141 (983149983149) 245 983122983141983158983141983150983157983141 983143983154983151983159983156983144 (2983085983161983141983137983154) 199

983123983144983151983154983156 983145983150983156983141983154983141983155983156 (983149983149) 983150983137 983109983106983113983124983108983105 983143983154983151983159983156983144 (2983085983161983141983137983154) 983150983137

983123983144983151983154983156 983113983150983156983141983154983141983155983156 983137983155 983151983142 983142983148983151983137983156 983150983137 983109983120983123 983143983154983151983159983156983144 (2983085983161983141983137983154) 60

983105983150983150983157983137983148 983122983141983155983157983148983156983155 2014 2015983109 2016983109 2017983109 2018983109

983125983150983145983151983150 983122983141983158983141983150983157983141983155 ($983149983149) $404 $589 $680 $781 $1219

983120983154983141983158983145983151983157983155 983154983141983158983141983150983157983141 983141983155983156983145983149983137983156983141 983085 $564 $644 983085 983085

983107983144983137983150983143983141 983085 $26 $36 983085 983085

983107983137983152983145983156983137983148 983113983121 983154983141983158983141983150983157983141 983141983155983156983145983149983137983156983141 983085 $491 $581 $694 $1099

983125983150983145983151983150 983109983106983113983124983108983105 ($983149983149) $176 $211 $255 $305 $484

983120983154983141983158983145983151983157983155 983109983106983113983124983108983105 983141983155983156983145983149983137983156983141 983085 $212 $251 983085 983085

983107983144983137983150983143983141 983085 ($1) $4 983085 983085

983107983137983152983145983156983137983148 983113983121 983109983106983113983124983108983105 983141983155983156983145983149983137983156983141 983085 $203 $233 $267 $399

983125983150983145983151983150 983109983120983123 $0060 $0069 $0080 $0068 $0111

983120983154983141983158983145983151983157983155 983109983120983123 983141983155983156983145983149983137983156983141 983085 $0072 $0081 983085 983085

983107983144983137983150983143983141 983085 ($0003) ($0001) 983085 983085

983107983137983152983145983156983137983148 983113983121 983109983120983123 983141983155983156983145983149983137983156983141 983085 $0065 $0067 $0060 $0081

983126983137983148983157983137983156983145983151983150 983085 983109983120983123 983117983157983148983156983145983152983148983141 104983160 90983160 105983160 64983160

983126983137983148983157983137983156983145983151983150 983085 983109983126983109983106983113983124983108983105 983117983157983148983156983145983152983148983141 73983160 67983160 84983160 51983160

7262019 NagaCorp research

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April 30 2015

Union Gaming Research Macau +853 2857 5825 15

Price Target HKD800 (from HKD750)We value NagaCorp using an EVEBITDA approach on forward earnings in addition to

incremental present value associated with the companyrsquos Naga2 and Vladivostok

projects the first full year of operations for both will be 2018 Our 12 month price

target is HKD800 (+HKD050) and is based on an 85x multiple of our 2015 EBITDA

estimate (HKD400) in addition to the per share present value for Naga2 and

Vladivostok (HKD400) Our calculations assume a share count of approximately

3848mm which accounts for the dilution associated with the companyrsquos acquisition

of the USD369 million NagaCity Walk and Naga2 complex from CEO Tan Sri Dr Chen

in the form of share issuance convertible bond We note that the 85x multiple

represents a slightly lower multiple than we have previously ascribed (9x) which we

would attribute to broader multiple pullback in the gaming space However it stil

remains a discount to its peer group in Macau to which we generally ascribe a

multiple approximately 3 or 4 turns higher We feel an 85x multiple is justified fo

Naga as the company has consistently executed on its growth initiatives enabling the

company to growth faster than its peer group It is also in the home stretch of

shedding its image as a single-asset story with Naga2 now under construction in a

meaningful way and Vladivostok on the horizon Our price target along with an

expected dividend yield of 7 in 2015 represents 51 upside to todayrsquos closing price

RisksRisks to shares of NagaCorp include country risk (loss of exclusive license adjustmen

to the companyrsquos advantageous low monthly fixed obligation tax) development risk

including delays to Naga2 and the Vladivostok project incremental regiona

competition (especially from Vietnam should locals be allowed to gamble) volatility

associated with being a single-asset operator (for now) in the context of increasing

exposure to the VIP segment

7262019 NagaCorp research

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April 30 2015

16 +853 2857 5825 Union Gaming Research Macau

Appendix 1 Important DisclosuresAdditional information is available upon request

This report was prepared by Union Gaming Research Macau Limited Union Gaming Research Macau Limited is a wholly owned

subsidiary of Union Gaming Group LLC Union Gaming Group LLC also owns Union Gaming Advisors LLC a FINRA member firm

and Union Gaming Research LLC a Nevada Registered Investment Adviser Union Gaming Advisors LLC does not produce research

reports All questions or comments concerning this research report should be addressed to Union Gaming Research Macau at +853

2857 5825

Union Gaming Advisors LLC (Advisors) an affiliate of Union Gaming Research Macau Limited does not own any securities of any

company analyzed in this report (Subject Company) Advisors has received non-investment banking related compensation from

the subject company in the past twelve months Accordingly investors should be aware that the firm and its affiliates may have a

conflict of interest that could affect the objectivity of this report Advisors does expect and will seek compensation from any Subject

Company for investment banking services in the next three months Advisors has never been a market maker for a Subject Company

and does not expect to be a market maker for a Subject Company

All prices are those current at the end of the previous trading session unless otherwise indicated Prices are sourced from local

exchanges via Bloomberg and CapitalIQ Data is sourced from Union Gaming Research Union Gaming Research Macau Limited

and subject companies Union Gaming Research and Union Gaming Research Macau Limited are not responsible for errors in prices

provided by independent sources Data analyses and reports necessarily contain time-sensitive information and no subscriber o

client should rely on dated reports or conclusions

Investor clients and financial advisers should consider any report from Union Gaming as only a single factor in making any

investment decision

Ratings methodology

We use a traditional ratings construct (Buy Hold Sell) that is underscored by percentage upsidedownside form current trading

levels along with dividend yields for total return We exclude special dividends and only contemplate regular dividends in our tota

return forecasts These are absolute ratings not relative or forced ratings We define a Buy rating as a company whose shares exhibit

total return (appreciation and dividends) potential of at least +15 within the next twelve months and conversely a Sell rating as

a company whose shares exhibit downside potential of at least 15 within the next twelve months A Hold rating is reserved fo

companies whose shares exhibit total return potential between those parameters

Investor clients and financial advisers should consider any report from Union Gaming as only a single factor in making any

investment decision

7262019 NagaCorp research

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Union Gaming Research Macau +853 2857 5825 17

Source Union Gaming Research LLC and Union Gaming Research Macau Limited Capital IQ

Distribution of Subject Companiesrsquo stock ratings

Source Union Gaming Research LLC and Union Gaming Research Macau Limited

Distribution of Subject Companies with affiliate banking relationships

Source Union Gaming Research LLC and Union Gaming Research Macau Limited

Copyright copy 2015 Union Gaming Research Macau Limited

Union Gaming Research Macau

Finance and IT Center of Macau (FIT)

Suite 8B

Nam Van Lake Quarteirao 5 Lote A

Macau

9 - 1 3 - 1 2

B u y

P T

=

$ 5

1 1 - 2 1 - 1 2

B u y

P T

=

$ 5 5

2 - 7 - 1 3

B u y

P T

=

$ 6 5

4 - 1 1 - 1 3

B u y

P T

=

$ 7

8 - 8 - 1 3

B u y

P T

= $ 7 5

1 0 - 7 - 1 3

B u y

P T

=

$ 8

2 - 5 - 1 5

B u y

P T

=

$ 7 5

4 - 3 0 - 1 5

B u y

P T

=

$ 8

$1

$2

$3

$4

$5

$6

$7

$8

$9

$10

$1

$2

$3

$4

$5

$6

$7

$8

$9

$10

9 1 3 1 2

1 0 8 1 2

1 0 3 0 1 2

1 1 2 0 1 2

1 2 1 1 1 2

1 4 1 3

1 2 5 1 3

2 2 0 1 3

3 1 3 1 3

4 8 1 3

4 2 9 1 3

5 2 2 1 3

6 1 3 1 3

7 5 1 3

7 2 6 1 3

8 1 9 1 3

9 1 0 1 3

1 0 3 1 3

1 0 2 5 1 3

1 1 1 5 1 3

1 2 6 1 3

1 2 3 1 1 3

1 2 2 1 4

2 1 4 1 4

3 7 1 4

3 2 8 1 4

4 2 2 1 4

5 1 5 1 4

6 6 1 4

6 2 7 1 4

7 2 1 1 4

8 1 1 1 4

9 1 1 4

9 2 3 1 4

1 0 1 6 1 4

1 1 6 1 4

1 1 2 7 1 4

1 2 1 8 1 4

1 1 3 1 5

2 3 1 5

2 2 6 1 5

3 1 9 1 5

4 1 4 1 5

NagaCorp (3918 HK)

Buy Hold Sell

81 19 0

Buy Hold Sell

100 0 0

7262019 NagaCorp research

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April 30 2015

Union Gaming Research Macau +853 2857 5825 3

VIPWe wish to address VIP first as it is not only the most exciting growth driver for Naga

but also because it runs counter to broader regional VIP trends In 1Q15 Naga

reported that VIP rolling chip volume increased by a staggering 79 yy to nearly

USD17 billion This was done primarily on the backs of the companyrsquos existing junket

network out of SE Asia plus some benefit from the Chinese-based Asian Nations

junket We are currently forecasting the following VIP metrics for Naga over the nex

two years

bull 2015 rolling chip volume +77 to USD109 billion

bull 2016 rolling chip volume +22 to USD133 billion

bull 2015 VIP gross profit of USD92 million (+34 on materially lower GP

margin owing to VIP incentive plan)

bull 2016 VIP gross profit of USD112 million (+21)

Figure 1 VIP rolling chip volume trends historical and forecast 1H10 to 2H17E

Source company data Union Gaming Research Macau

While the numbers above particularly for 2015 represent exceptional growth we

would still be biased to the upside given the following growth drivers

1 In early May Nagarsquos airline Bassaka Air will begin flying 2x weekly

between Macau and Phnom Penh We believe this will quickly increase

to 3x weekly It is this flight program that we believe the big Macau

junkets have been waiting on in order to begin sending players to Naga

2 Also in early May we believe Macaursquos largest junket Suncity will star

sending players to Naga Not only will this result in positive sentiment

0

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2 983112 1 4

1 983112 1 5 983109

2 983112 1 5 983109

1 983112 1 6 983109

2 983112 1 6 983109

1 983112 1 7 983109

2 983112 1 7 983109

983125

983123 983108 983149 983145 983148 983148 983145 983151 983150 983155

983118983137983143983137 983154983151983148983148983145983150983143 983139983144983145983152 983158983151983148983157983149983141 983137983150983140 983161983161 983139983144983143

983122983151983148983148 983145983150983143 983139983144983145983152 983158983151983148983157983149983141 983129983129

7262019 NagaCorp research

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April 30 2015

4 +853 2857 5825 Union Gaming Research Macau

for shares but should be the biggest driver of near-term VIP rolling chip

growth at the property To put the Suncity opportunity in perspective

a At the current run-rate Macaursquos VIP segment GGR is on track to be

USD23 billion in 2015 which equates to USD808 billion in rollingchip volume Of this amount we estimate that Suncity is responsible

for 20 or approximately USD161 billion

b Should Suncity allocated only 2 of this volume to Naga ndash which we

think is becoming increasingly logical ndash this would result in USD32

billion incremental rolling chip volume to Naga

c Calendar dates notwithstanding this alone would account for all o

the 2015 rolling chip volume growth in our model

3 We believe that Naga is very close to finalizing contracts with two more

brand-name Macau VIP junkets which should come online in 2H15

4 Naga is at early stages of discussions with a few other MacauAsian

junkets which we estimate will be 2016 drivers of growth

5 The VIP downturn in Macau is a positive for Naga As junket earnings

have declined materially in Macau (with no visibility on a return to

growth) it is becoming increasingly incumbent upon junket operators

to seek jurisdictions whereby they can earn greater economics In the

case of Naga we believe junket operators will be able to capture a

revenue share in the neighborhood of 75 - a full 3000 basis points

higher than in Macau (typically ~45) In the meantime Naga has

quietly brought online significantly improved VIP spaces (with more tocome early next year) and amenities that compare favorably to any othe

market which gives us confidence that attracting enough quality

players will not be an issue Finally we note that generally speaking

while Naga is bringing high quality VIP players to the property their

average profile is typically off the radar screen of Beijing (ie not at risk

of anti-corruption)

6 In late 2015 Nagarsquos next VIP space will open including a rooftop poo

deck and at least 16 more VIP tables

7 In early 2016 NagaCity Walk will open which will have a three-fold

benefit

a The addition of a large amount of retail space (run by China Duty

Free) with such retail being a necessity in the context of an

increasing amount of China-originated business

b The conclusion of significant construction disruption to the main

porte-cochere of Naga

7262019 NagaCorp research

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April 30 2015

Union Gaming Research Macau +853 2857 5825 5

c Along with the conclusion of construction disruption the re

opening of Nagarsquos own high-end retail shops in close proximity to

the main entrance

8 The opening of the Naga terminal at Phnom Penh International Airport

in 1Q16 which will highly complement the VIP experience at Naga

especially in the context of Bassaka Air regularly flying in high-value

customers

9 Further progress with respect to the companyrsquos direct VIP program

which we believe has been growing at double digit rates

7262019 NagaCorp research

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April 30 2015

6 +853 2857 5825 Union Gaming Research Macau

Mass market tablesIn 1Q15 Naga reported that mass market table games volume grew 12 yy to

USD130 million This is broadly consistent with trends seen in 2013 (+15) and 2014

(+16) even while the proportion of Vietnamese volume continues to decline as

more of these customers opt to go to the border casinos in Bavet We are currently

forecasting the following mass table metrics for Naga over the next two years

bull 2015 volume growth of 14

bull 2016 volume growth of 11

bull 2015 GGR growth of 12

bull 2016 GGR growth of 15 (on a slightly higher hold rate as explained

below)

Figure 2 Mass market table GGR trends historical and forecast 1H10 to 2H17E

Source company data Union Gaming Research Macau

As demonstrated in the above figure mass table GGR growth has been very stable

and predictable Based on the below drivers we expect the trends seen over the last

five years to continue apace We highlight the following growth drivers for mass

market tables

1 Beginning this June Naga for the first time ever will begin exchanging

cash for chips at the table rather than only at the cage Historically this

was done to combat counterfeiting but improved (and inexpensive) bil

validation technology will enable Naga to put bill validators at each

table This should result in the compound effect of not only increasing

wagering volume but should also result in a slightly higher hold rate

010

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010

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1 983112 1 0

2 983112 1 0

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1 983112 1 3

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2 983112 1 4

1 983112 1 5 983109

2 983112 1 5 983109

1 983112 1 6 983109

2 983112 1 6 983109

1 983112 1 7 983109

2 983112 1 7 983109

983125 983123 983108 983149 983145 983148 983148 983145 983151 983150 983155

983118983137983143983137 983149983137983155983155 983149983137983154983147983141983156 983156983137983138983148983141 983111983111983122 983137983150983140 983161983161 983139983144983143

983117983137983155983155 983156983137983138983148983141 983111983111983122 983129983129

7262019 NagaCorp research

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April 30 2015

Union Gaming Research Macau +853 2857 5825 7

2 Also in June of this year Naga will open a new valet parking garage

located in close proximity to Naga The lack of sufficient parking over the

years has likely impaired some amount of mass market volume

3 In July of this year we expect Bassaka Air to begin flying direct routes to

mainland China multiple times per week augmenting its Macau service

The mainland flights will be marketing in conjunction with China

International Travel Service and will promote tourism to Cambodia In

our view this should be a material driver of increased mass market

Chinese play

4 Naga has already put in place several general marketing initiatives to

attract increased regional play particularly from China and Malaysia

which already appear to be paying dividends We would look for these

trends to continue

5 Ongoing strength in general visitation to Cambodia In 2014 visitationto Cambodia grew by 7 while visitation from China grew by 21 to in

excess of 560000 Visitation to Cambodia beginning at Phnom Penh

International Airport grew 10 in 2014 to nearly 1 million

6 Similar to VIP the opening of NagaCity Walk will provide the company

with similar benefits and increased foot traffic

7 The locals expat story continues to improve with the combination o

wealth generation as well as significant Foreign Direct Investment

particularly from China and Korea

8 At the margin the recent opening of a bridge across the Mekong wilshave about 45 minutes off the travel time between Ho Chi Minh City

and Phnom Penh While the mass market contribution from Vietnamese

is becoming nominal this improved access is beneficial

7262019 NagaCorp research

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April 30 2015

8 +853 2857 5825 Union Gaming Research Macau

Slot machines ETGsIn 1Q15 Naga reported that slot machine ETG volume grew 6 yy to USD290

million While lower than in previous years (+10 in 2013 and +8 in 2014) we

believe growth has increased notably in the second quarter and should continue to

grow on the heels of numerous drivers We are currently forecasting the following slot

machines ETG metrics for Naga over the next two years

bull 2015 GGR growth of 12 to USD95 million (this represents only Nagarsquos

share of the slot GGR)

bull 2016 GGR growth of 11 to USD106 million

Figure 3 Slot ETG GGR trends historical and forecast 1H11 to 2H17E

Source company data Union Gaming Research Macau

Slot ETG GGR growth has also been quite stable although certain events like the

King fathers funeral and nationwide elections have impacted results from time-to-

time We highlight the following growth drivers for slot machines ETGs

1 In June of this year Naga will deploy a significant TITO (Ticket-In Ticket

Out aka ldquocashless gamingrdquo) rollout across the balance of its slots ETGs

Currently only about 600 of 1500 slots have TITO and bringing the

remaining 900 positions to TITO should result in increased time on

device which translates directly to increased GGR

2 At the end of 2015 the slot concession contract with Best Merit wil

expire This will likely result in the signing of a new slot concession (and

resulting one-time fee paid to Naga) Importantly and regardless of

whether the concessionaire remains with Best Merit or of it is a new

party we believe the nearly 300 machines will be replaced Today these

0

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1 983112 1 5 983109

2 983112 1 5 983109

1 983112 1 6 983109

2 983112 1 6 983109

1 983112 1 7 983109

2 983112 1 7 983109

983125 983123 983108 983149 983145 983148 983148 983145 983151 983150 983155

983118983137983143983137 983155983148983151983156 983109983124983111 983111983111983122 983137983150983140 983161983161 983139983144983143

983123983148983151983156 983109983124983111 983111983111983122 983129983129

7262019 NagaCorp research

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April 30 2015

Union Gaming Research Macau +853 2857 5825 9

are among the oldest games on the floor and are in need of replacement

Fresh games should result in increased win per unit

3 Noted above we believe Naga is likely to receive two large one-time fees

associated with new contracts to replace those expiring in 2015 with

Best Merit and 2016 with EGT representing nearly 300 and 650

machines respectively Based on the last comp this would imply

approximately USD30 million and USD60 million+ respectively

However based on current market dynamics we believe the numbers

could be higher Regardless the combined fees paid should reach at

least USD90 million+ resulting in headline earnings well beyond current

expectations not to mention incremental cash on hand (larger dividend

or incremental dry powder on the balance sheet)

The remaining drivers are similar to those listed above namely

4 The opening of the parking garage in June

5 The benefits of mass market play from Bassaka Air flights penetrating

into mainland China

6 General marketing initiatives into China and Malaysia

7 Ongoing strength in general visitation to Cambodia

8 The opening of NagaCity Walk

9 Growth in the locals expat story

10 Marginal lift owing to the new bridge across the Mekong

Considered as a whole these growth drivers give us a high degree of confidence in

our current above-consensus expectations over the next two years Importantly

these drivers are long-tailed and should provide for sustained growth into 2017 and

then into the opening of Naga2 the first full year of which will be in 2018

7262019 NagaCorp research

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April 30 2015

10 +853 2857 5825 Union Gaming Research Macau

Greenfield developments

Vladivostok

Outside of the solid growth expected at NagaWorld Naga currently has three

greenfield opportunities in their Vladivostok NagaCity Walk and Naga2 projects Weexpect the company to get break ground in Vladivostok next month with an

expected opening in early 2018 Much of the project will be built in a modular (prefab

format which should allow for a much quicker than normal build cycle We expect the

first phase be defined roughly as

bull USD150 million capex

bull 400 hotel rooms

bull ~70 mass and a TBD of VIP tables

bull 500 slots ETGs

bull Plus retail entertainment FampB and meeting space

Vladivostok is currently an untested market although the first casino should be

opening soon which should provide a solid baseline for the market In the meantime

we are confident that the Naga project can generate returns well into the double

digits and we are currently modeling USD60 million in EBITDA in year one (2018)

Given Vladivostokrsquos proximity to northeast China as well as being very much under-

penetrated in terms of casino gaming we believe our EBITDA estimate could be

conservative For the first time we are now including Vladivostok in our valuation of

Naga for which we are attributed HKD063 in present per share value

NagaCity Walk

The NagaCity Walk retail experience will eventually connect the existing NagaWorld

facility to Naga2 This project will be run by China Duty Free While not a gaming

component we believe the addition of high quality (and quantity of) retail will be a

key driver of incremental volume to the property ndash especially for higher end mass and

VIP customers At the same time the construction of NagaCity Walk has resulted in

notable construction disruption to the propertys primary porte-cochere as well as the

handful of retail outlets at the main entrance The opening of NagaCity Walk is

therefore important in returning the property to its previous traffic flow

While difficult to appreciate the scale of NagaCity Walk we are including two photosbelow It is important to keep in mind the 400 meter (1300 feet) subterranean length

of the project

7262019 NagaCorp research

httpslidepdfcomreaderfullnagacorp-research 1117

April 30 2015

Union Gaming Research Macau +853 2857 5825 11

Figure 4 NagaCity Walk photo 1

Source Union Gaming Research Macau

Figure 5 NagaCity Walk photo 2

Source Union Gaming Research Macau

7262019 NagaCorp research

httpslidepdfcomreaderfullnagacorp-research 1217

April 30 2015

12 +853 2857 5825 Union Gaming Research Macau

Naga2

Naga2 in Phnom Penh is now moving vertically with significant work being done on

the podium The project remains on track for a late 2017 opening In our view this

continues to be a transformational milestone for the company as it will not only take

them out of the single-asset mold (along with Vladivostok) but that it will be the firsthigh-end purpose-built space for the company

We believe that Naga2 will serve to keep the VIP story growing especially given a

significant amount of in-suite VIP gaming salons On a combined basis we believe

that NagaWorld and Naga2 will generate approximately USD22 billion in rolling chip

volume by 2018 which put in perspective is about 3 of what Macau is currently run-

rating (and represents an even lower percentage relative to Macaus peak) In our

view Naga has and is putting in place the right infrastructure that should readily

support and attract this level of VIP gaming play This isnt to say that Naga2 is a VIP

only property To the contrary we have high expectations for mass market and slot

ETG GGR at the property

In its first full year of operations we believe Naga2 can generate approximately

USD550 million in GGR (NagaWorld generated in excess of USD400 million in 2014)

and EBITDA of USD216 million (NagaWorld generated USD176 million in 2014) We

are however modeling cannibalization at NagaWorld during this period

Figure 6 Naga2 construction progress

Source Union Gaming Research Macau

7262019 NagaCorp research

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April 30 2015

Union Gaming Research Macau +853 2857 5825 13

Looking at the out yearsClearly we are excited about the near medium and longer-term growth stories of

NagaCorp The company is in a position to demonstrate stable EBITDA growth ove

the next three years (including 2015) However it is the out years that are the most

transformational for the company The year 2018 is the biggest for Naga as it wil

become a three-asset operator with NagaWorld Naga2 and Vladivostok all being

operational

We are forecasting that NagaCorp can generate more than USD12 billion in revenue

in 2018 and nearly USD500 million in EBITDA (from our estimate of USD211 million in

2015) This level of cash flow along with a forecasted USD280 million in cash on its

unlevered balance sheet (after paying more than USD750 million in dividends from

2015-2018 and around USD250 million in expansion capex) should put NagaCorp in

the running for any number of other regional gaming opportunities including Japan

and or Korea should these opportunities present themselves

Figure 7 Nagas EBITDA outlook 2011 to 2018E

Note Historical EBITDA excludes one-time slot concession fees paid to the company in 2012 and 2013 and excludes potentia

one-time fees likely to be generated in 2015 and 2016 (and beyond)

Source Union Gaming Research Macau

112 128

157 176

211

255

305

484

0

10

20

30

40

50

60

70

$0

$100

$200

$300

$400

$500

$600

2011 2012 2013 2014 2015983109 2016983109 2017983109 2018983109

983109

983106 983113 983124 983108 983105 ( 983125 983123 983108 983149 983145 983148 983148 983145 983151 983150 983155 )

983109983106983113983124983108983105 983129983129 983139983144983137983150983143983141

9831189831379831439831372 amp

983126983148983137983140983145983158983151983155983156983151983147

7262019 NagaCorp research

httpslidepdfcomreaderfullnagacorp-research 1417

April 30 2015

14 +853 2857 5825 Union Gaming Research Macau

EstimatesWe are largely maintaining our forward estimates for NagaCorp Our 2015 EBITDA

estimate is USD211 million (from USD212 million) Our 2016 EBITDA is USD255 million

(from USD251 million) Please see Figure 1 for detailed revenue EBITDA and EPS

estimates Note above our estimates are all above consensus

Figure 8 Estimates and consensus expectations

Source Union Gaming Research Macau Capital IQ

983107983137983152983145983156983137983148 983113983121 983107983151983149983152983137983150983161 983123983156983137983156983145983155983156983145983139983155 (983110983129983085983108983141983139)52983085983159983141983141983147 983144983145983143983144 $739 983105983150983150983157983137983148983145983162983141983140 983108983145983158983145983140983141983150983140983123983144983137983154983141 $032

52983085983159983141983141983147 983148983151983159 $466 983108983145983158983145983140983141983150983140 983129983145983141983148983140 57

983117983137983154983147983141983156 983139983137983152 ($983149983149) $12621 983113983150983155983145983140983141983154 983119983159983150983141983154983155983144983145983152 00

983123983144983137983154983141983155 983151983157983156983155983156983137983150983140983145983150983143 (983149983149) 22700 983113983150983155 983156983145 983156983157983156983145 983151983150 983119983159983150983141983154983155 983144983145 983152 246

983105983158983141983154983137983143983141 983140983137983145983148983161 983158983151983148983157983149983141 (983149983149) 245 983122983141983158983141983150983157983141 983143983154983151983159983156983144 (2983085983161983141983137983154) 199

983123983144983151983154983156 983145983150983156983141983154983141983155983156 (983149983149) 983150983137 983109983106983113983124983108983105 983143983154983151983159983156983144 (2983085983161983141983137983154) 983150983137

983123983144983151983154983156 983113983150983156983141983154983141983155983156 983137983155 983151983142 983142983148983151983137983156 983150983137 983109983120983123 983143983154983151983159983156983144 (2983085983161983141983137983154) 60

983105983150983150983157983137983148 983122983141983155983157983148983156983155 2014 2015983109 2016983109 2017983109 2018983109

983125983150983145983151983150 983122983141983158983141983150983157983141983155 ($983149983149) $404 $589 $680 $781 $1219

983120983154983141983158983145983151983157983155 983154983141983158983141983150983157983141 983141983155983156983145983149983137983156983141 983085 $564 $644 983085 983085

983107983144983137983150983143983141 983085 $26 $36 983085 983085

983107983137983152983145983156983137983148 983113983121 983154983141983158983141983150983157983141 983141983155983156983145983149983137983156983141 983085 $491 $581 $694 $1099

983125983150983145983151983150 983109983106983113983124983108983105 ($983149983149) $176 $211 $255 $305 $484

983120983154983141983158983145983151983157983155 983109983106983113983124983108983105 983141983155983156983145983149983137983156983141 983085 $212 $251 983085 983085

983107983144983137983150983143983141 983085 ($1) $4 983085 983085

983107983137983152983145983156983137983148 983113983121 983109983106983113983124983108983105 983141983155983156983145983149983137983156983141 983085 $203 $233 $267 $399

983125983150983145983151983150 983109983120983123 $0060 $0069 $0080 $0068 $0111

983120983154983141983158983145983151983157983155 983109983120983123 983141983155983156983145983149983137983156983141 983085 $0072 $0081 983085 983085

983107983144983137983150983143983141 983085 ($0003) ($0001) 983085 983085

983107983137983152983145983156983137983148 983113983121 983109983120983123 983141983155983156983145983149983137983156983141 983085 $0065 $0067 $0060 $0081

983126983137983148983157983137983156983145983151983150 983085 983109983120983123 983117983157983148983156983145983152983148983141 104983160 90983160 105983160 64983160

983126983137983148983157983137983156983145983151983150 983085 983109983126983109983106983113983124983108983105 983117983157983148983156983145983152983148983141 73983160 67983160 84983160 51983160

7262019 NagaCorp research

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April 30 2015

Union Gaming Research Macau +853 2857 5825 15

Price Target HKD800 (from HKD750)We value NagaCorp using an EVEBITDA approach on forward earnings in addition to

incremental present value associated with the companyrsquos Naga2 and Vladivostok

projects the first full year of operations for both will be 2018 Our 12 month price

target is HKD800 (+HKD050) and is based on an 85x multiple of our 2015 EBITDA

estimate (HKD400) in addition to the per share present value for Naga2 and

Vladivostok (HKD400) Our calculations assume a share count of approximately

3848mm which accounts for the dilution associated with the companyrsquos acquisition

of the USD369 million NagaCity Walk and Naga2 complex from CEO Tan Sri Dr Chen

in the form of share issuance convertible bond We note that the 85x multiple

represents a slightly lower multiple than we have previously ascribed (9x) which we

would attribute to broader multiple pullback in the gaming space However it stil

remains a discount to its peer group in Macau to which we generally ascribe a

multiple approximately 3 or 4 turns higher We feel an 85x multiple is justified fo

Naga as the company has consistently executed on its growth initiatives enabling the

company to growth faster than its peer group It is also in the home stretch of

shedding its image as a single-asset story with Naga2 now under construction in a

meaningful way and Vladivostok on the horizon Our price target along with an

expected dividend yield of 7 in 2015 represents 51 upside to todayrsquos closing price

RisksRisks to shares of NagaCorp include country risk (loss of exclusive license adjustmen

to the companyrsquos advantageous low monthly fixed obligation tax) development risk

including delays to Naga2 and the Vladivostok project incremental regiona

competition (especially from Vietnam should locals be allowed to gamble) volatility

associated with being a single-asset operator (for now) in the context of increasing

exposure to the VIP segment

7262019 NagaCorp research

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April 30 2015

16 +853 2857 5825 Union Gaming Research Macau

Appendix 1 Important DisclosuresAdditional information is available upon request

This report was prepared by Union Gaming Research Macau Limited Union Gaming Research Macau Limited is a wholly owned

subsidiary of Union Gaming Group LLC Union Gaming Group LLC also owns Union Gaming Advisors LLC a FINRA member firm

and Union Gaming Research LLC a Nevada Registered Investment Adviser Union Gaming Advisors LLC does not produce research

reports All questions or comments concerning this research report should be addressed to Union Gaming Research Macau at +853

2857 5825

Union Gaming Advisors LLC (Advisors) an affiliate of Union Gaming Research Macau Limited does not own any securities of any

company analyzed in this report (Subject Company) Advisors has received non-investment banking related compensation from

the subject company in the past twelve months Accordingly investors should be aware that the firm and its affiliates may have a

conflict of interest that could affect the objectivity of this report Advisors does expect and will seek compensation from any Subject

Company for investment banking services in the next three months Advisors has never been a market maker for a Subject Company

and does not expect to be a market maker for a Subject Company

All prices are those current at the end of the previous trading session unless otherwise indicated Prices are sourced from local

exchanges via Bloomberg and CapitalIQ Data is sourced from Union Gaming Research Union Gaming Research Macau Limited

and subject companies Union Gaming Research and Union Gaming Research Macau Limited are not responsible for errors in prices

provided by independent sources Data analyses and reports necessarily contain time-sensitive information and no subscriber o

client should rely on dated reports or conclusions

Investor clients and financial advisers should consider any report from Union Gaming as only a single factor in making any

investment decision

Ratings methodology

We use a traditional ratings construct (Buy Hold Sell) that is underscored by percentage upsidedownside form current trading

levels along with dividend yields for total return We exclude special dividends and only contemplate regular dividends in our tota

return forecasts These are absolute ratings not relative or forced ratings We define a Buy rating as a company whose shares exhibit

total return (appreciation and dividends) potential of at least +15 within the next twelve months and conversely a Sell rating as

a company whose shares exhibit downside potential of at least 15 within the next twelve months A Hold rating is reserved fo

companies whose shares exhibit total return potential between those parameters

Investor clients and financial advisers should consider any report from Union Gaming as only a single factor in making any

investment decision

7262019 NagaCorp research

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April 30 2015

Union Gaming Research Macau +853 2857 5825 17

Source Union Gaming Research LLC and Union Gaming Research Macau Limited Capital IQ

Distribution of Subject Companiesrsquo stock ratings

Source Union Gaming Research LLC and Union Gaming Research Macau Limited

Distribution of Subject Companies with affiliate banking relationships

Source Union Gaming Research LLC and Union Gaming Research Macau Limited

Copyright copy 2015 Union Gaming Research Macau Limited

Union Gaming Research Macau

Finance and IT Center of Macau (FIT)

Suite 8B

Nam Van Lake Quarteirao 5 Lote A

Macau

9 - 1 3 - 1 2

B u y

P T

=

$ 5

1 1 - 2 1 - 1 2

B u y

P T

=

$ 5 5

2 - 7 - 1 3

B u y

P T

=

$ 6 5

4 - 1 1 - 1 3

B u y

P T

=

$ 7

8 - 8 - 1 3

B u y

P T

= $ 7 5

1 0 - 7 - 1 3

B u y

P T

=

$ 8

2 - 5 - 1 5

B u y

P T

=

$ 7 5

4 - 3 0 - 1 5

B u y

P T

=

$ 8

$1

$2

$3

$4

$5

$6

$7

$8

$9

$10

$1

$2

$3

$4

$5

$6

$7

$8

$9

$10

9 1 3 1 2

1 0 8 1 2

1 0 3 0 1 2

1 1 2 0 1 2

1 2 1 1 1 2

1 4 1 3

1 2 5 1 3

2 2 0 1 3

3 1 3 1 3

4 8 1 3

4 2 9 1 3

5 2 2 1 3

6 1 3 1 3

7 5 1 3

7 2 6 1 3

8 1 9 1 3

9 1 0 1 3

1 0 3 1 3

1 0 2 5 1 3

1 1 1 5 1 3

1 2 6 1 3

1 2 3 1 1 3

1 2 2 1 4

2 1 4 1 4

3 7 1 4

3 2 8 1 4

4 2 2 1 4

5 1 5 1 4

6 6 1 4

6 2 7 1 4

7 2 1 1 4

8 1 1 1 4

9 1 1 4

9 2 3 1 4

1 0 1 6 1 4

1 1 6 1 4

1 1 2 7 1 4

1 2 1 8 1 4

1 1 3 1 5

2 3 1 5

2 2 6 1 5

3 1 9 1 5

4 1 4 1 5

NagaCorp (3918 HK)

Buy Hold Sell

81 19 0

Buy Hold Sell

100 0 0

7262019 NagaCorp research

httpslidepdfcomreaderfullnagacorp-research 417

April 30 2015

4 +853 2857 5825 Union Gaming Research Macau

for shares but should be the biggest driver of near-term VIP rolling chip

growth at the property To put the Suncity opportunity in perspective

a At the current run-rate Macaursquos VIP segment GGR is on track to be

USD23 billion in 2015 which equates to USD808 billion in rollingchip volume Of this amount we estimate that Suncity is responsible

for 20 or approximately USD161 billion

b Should Suncity allocated only 2 of this volume to Naga ndash which we

think is becoming increasingly logical ndash this would result in USD32

billion incremental rolling chip volume to Naga

c Calendar dates notwithstanding this alone would account for all o

the 2015 rolling chip volume growth in our model

3 We believe that Naga is very close to finalizing contracts with two more

brand-name Macau VIP junkets which should come online in 2H15

4 Naga is at early stages of discussions with a few other MacauAsian

junkets which we estimate will be 2016 drivers of growth

5 The VIP downturn in Macau is a positive for Naga As junket earnings

have declined materially in Macau (with no visibility on a return to

growth) it is becoming increasingly incumbent upon junket operators

to seek jurisdictions whereby they can earn greater economics In the

case of Naga we believe junket operators will be able to capture a

revenue share in the neighborhood of 75 - a full 3000 basis points

higher than in Macau (typically ~45) In the meantime Naga has

quietly brought online significantly improved VIP spaces (with more tocome early next year) and amenities that compare favorably to any othe

market which gives us confidence that attracting enough quality

players will not be an issue Finally we note that generally speaking

while Naga is bringing high quality VIP players to the property their

average profile is typically off the radar screen of Beijing (ie not at risk

of anti-corruption)

6 In late 2015 Nagarsquos next VIP space will open including a rooftop poo

deck and at least 16 more VIP tables

7 In early 2016 NagaCity Walk will open which will have a three-fold

benefit

a The addition of a large amount of retail space (run by China Duty

Free) with such retail being a necessity in the context of an

increasing amount of China-originated business

b The conclusion of significant construction disruption to the main

porte-cochere of Naga

7262019 NagaCorp research

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April 30 2015

Union Gaming Research Macau +853 2857 5825 5

c Along with the conclusion of construction disruption the re

opening of Nagarsquos own high-end retail shops in close proximity to

the main entrance

8 The opening of the Naga terminal at Phnom Penh International Airport

in 1Q16 which will highly complement the VIP experience at Naga

especially in the context of Bassaka Air regularly flying in high-value

customers

9 Further progress with respect to the companyrsquos direct VIP program

which we believe has been growing at double digit rates

7262019 NagaCorp research

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April 30 2015

6 +853 2857 5825 Union Gaming Research Macau

Mass market tablesIn 1Q15 Naga reported that mass market table games volume grew 12 yy to

USD130 million This is broadly consistent with trends seen in 2013 (+15) and 2014

(+16) even while the proportion of Vietnamese volume continues to decline as

more of these customers opt to go to the border casinos in Bavet We are currently

forecasting the following mass table metrics for Naga over the next two years

bull 2015 volume growth of 14

bull 2016 volume growth of 11

bull 2015 GGR growth of 12

bull 2016 GGR growth of 15 (on a slightly higher hold rate as explained

below)

Figure 2 Mass market table GGR trends historical and forecast 1H10 to 2H17E

Source company data Union Gaming Research Macau

As demonstrated in the above figure mass table GGR growth has been very stable

and predictable Based on the below drivers we expect the trends seen over the last

five years to continue apace We highlight the following growth drivers for mass

market tables

1 Beginning this June Naga for the first time ever will begin exchanging

cash for chips at the table rather than only at the cage Historically this

was done to combat counterfeiting but improved (and inexpensive) bil

validation technology will enable Naga to put bill validators at each

table This should result in the compound effect of not only increasing

wagering volume but should also result in a slightly higher hold rate

010

20

30

40

50

60

70

80

010

20

30

40

50

60

70

80

1 983112 1 0

2 983112 1 0

1 983112 1 1

2 983112 1 1

1 983112 1 2

2 983112 1 2

1 983112 1 3

2 983112 1 3

1 983112 1 4

2 983112 1 4

1 983112 1 5 983109

2 983112 1 5 983109

1 983112 1 6 983109

2 983112 1 6 983109

1 983112 1 7 983109

2 983112 1 7 983109

983125 983123 983108 983149 983145 983148 983148 983145 983151 983150 983155

983118983137983143983137 983149983137983155983155 983149983137983154983147983141983156 983156983137983138983148983141 983111983111983122 983137983150983140 983161983161 983139983144983143

983117983137983155983155 983156983137983138983148983141 983111983111983122 983129983129

7262019 NagaCorp research

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April 30 2015

Union Gaming Research Macau +853 2857 5825 7

2 Also in June of this year Naga will open a new valet parking garage

located in close proximity to Naga The lack of sufficient parking over the

years has likely impaired some amount of mass market volume

3 In July of this year we expect Bassaka Air to begin flying direct routes to

mainland China multiple times per week augmenting its Macau service

The mainland flights will be marketing in conjunction with China

International Travel Service and will promote tourism to Cambodia In

our view this should be a material driver of increased mass market

Chinese play

4 Naga has already put in place several general marketing initiatives to

attract increased regional play particularly from China and Malaysia

which already appear to be paying dividends We would look for these

trends to continue

5 Ongoing strength in general visitation to Cambodia In 2014 visitationto Cambodia grew by 7 while visitation from China grew by 21 to in

excess of 560000 Visitation to Cambodia beginning at Phnom Penh

International Airport grew 10 in 2014 to nearly 1 million

6 Similar to VIP the opening of NagaCity Walk will provide the company

with similar benefits and increased foot traffic

7 The locals expat story continues to improve with the combination o

wealth generation as well as significant Foreign Direct Investment

particularly from China and Korea

8 At the margin the recent opening of a bridge across the Mekong wilshave about 45 minutes off the travel time between Ho Chi Minh City

and Phnom Penh While the mass market contribution from Vietnamese

is becoming nominal this improved access is beneficial

7262019 NagaCorp research

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April 30 2015

8 +853 2857 5825 Union Gaming Research Macau

Slot machines ETGsIn 1Q15 Naga reported that slot machine ETG volume grew 6 yy to USD290

million While lower than in previous years (+10 in 2013 and +8 in 2014) we

believe growth has increased notably in the second quarter and should continue to

grow on the heels of numerous drivers We are currently forecasting the following slot

machines ETG metrics for Naga over the next two years

bull 2015 GGR growth of 12 to USD95 million (this represents only Nagarsquos

share of the slot GGR)

bull 2016 GGR growth of 11 to USD106 million

Figure 3 Slot ETG GGR trends historical and forecast 1H11 to 2H17E

Source company data Union Gaming Research Macau

Slot ETG GGR growth has also been quite stable although certain events like the

King fathers funeral and nationwide elections have impacted results from time-to-

time We highlight the following growth drivers for slot machines ETGs

1 In June of this year Naga will deploy a significant TITO (Ticket-In Ticket

Out aka ldquocashless gamingrdquo) rollout across the balance of its slots ETGs

Currently only about 600 of 1500 slots have TITO and bringing the

remaining 900 positions to TITO should result in increased time on

device which translates directly to increased GGR

2 At the end of 2015 the slot concession contract with Best Merit wil

expire This will likely result in the signing of a new slot concession (and

resulting one-time fee paid to Naga) Importantly and regardless of

whether the concessionaire remains with Best Merit or of it is a new

party we believe the nearly 300 machines will be replaced Today these

0

10

20

30

40

50

60

70

80

90

100

0

10

20

30

40

50

60

70

80

90

100

1 983112 1 1

2 983112 1 1

1 983112 1 2

2 983112 1 2

1 983112 1 3

2 983112 1 3

1 983112 1 4

2 983112 1 4

1 983112 1 5 983109

2 983112 1 5 983109

1 983112 1 6 983109

2 983112 1 6 983109

1 983112 1 7 983109

2 983112 1 7 983109

983125 983123 983108 983149 983145 983148 983148 983145 983151 983150 983155

983118983137983143983137 983155983148983151983156 983109983124983111 983111983111983122 983137983150983140 983161983161 983139983144983143

983123983148983151983156 983109983124983111 983111983111983122 983129983129

7262019 NagaCorp research

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April 30 2015

Union Gaming Research Macau +853 2857 5825 9

are among the oldest games on the floor and are in need of replacement

Fresh games should result in increased win per unit

3 Noted above we believe Naga is likely to receive two large one-time fees

associated with new contracts to replace those expiring in 2015 with

Best Merit and 2016 with EGT representing nearly 300 and 650

machines respectively Based on the last comp this would imply

approximately USD30 million and USD60 million+ respectively

However based on current market dynamics we believe the numbers

could be higher Regardless the combined fees paid should reach at

least USD90 million+ resulting in headline earnings well beyond current

expectations not to mention incremental cash on hand (larger dividend

or incremental dry powder on the balance sheet)

The remaining drivers are similar to those listed above namely

4 The opening of the parking garage in June

5 The benefits of mass market play from Bassaka Air flights penetrating

into mainland China

6 General marketing initiatives into China and Malaysia

7 Ongoing strength in general visitation to Cambodia

8 The opening of NagaCity Walk

9 Growth in the locals expat story

10 Marginal lift owing to the new bridge across the Mekong

Considered as a whole these growth drivers give us a high degree of confidence in

our current above-consensus expectations over the next two years Importantly

these drivers are long-tailed and should provide for sustained growth into 2017 and

then into the opening of Naga2 the first full year of which will be in 2018

7262019 NagaCorp research

httpslidepdfcomreaderfullnagacorp-research 1017

April 30 2015

10 +853 2857 5825 Union Gaming Research Macau

Greenfield developments

Vladivostok

Outside of the solid growth expected at NagaWorld Naga currently has three

greenfield opportunities in their Vladivostok NagaCity Walk and Naga2 projects Weexpect the company to get break ground in Vladivostok next month with an

expected opening in early 2018 Much of the project will be built in a modular (prefab

format which should allow for a much quicker than normal build cycle We expect the

first phase be defined roughly as

bull USD150 million capex

bull 400 hotel rooms

bull ~70 mass and a TBD of VIP tables

bull 500 slots ETGs

bull Plus retail entertainment FampB and meeting space

Vladivostok is currently an untested market although the first casino should be

opening soon which should provide a solid baseline for the market In the meantime

we are confident that the Naga project can generate returns well into the double

digits and we are currently modeling USD60 million in EBITDA in year one (2018)

Given Vladivostokrsquos proximity to northeast China as well as being very much under-

penetrated in terms of casino gaming we believe our EBITDA estimate could be

conservative For the first time we are now including Vladivostok in our valuation of

Naga for which we are attributed HKD063 in present per share value

NagaCity Walk

The NagaCity Walk retail experience will eventually connect the existing NagaWorld

facility to Naga2 This project will be run by China Duty Free While not a gaming

component we believe the addition of high quality (and quantity of) retail will be a

key driver of incremental volume to the property ndash especially for higher end mass and

VIP customers At the same time the construction of NagaCity Walk has resulted in

notable construction disruption to the propertys primary porte-cochere as well as the

handful of retail outlets at the main entrance The opening of NagaCity Walk is

therefore important in returning the property to its previous traffic flow

While difficult to appreciate the scale of NagaCity Walk we are including two photosbelow It is important to keep in mind the 400 meter (1300 feet) subterranean length

of the project

7262019 NagaCorp research

httpslidepdfcomreaderfullnagacorp-research 1117

April 30 2015

Union Gaming Research Macau +853 2857 5825 11

Figure 4 NagaCity Walk photo 1

Source Union Gaming Research Macau

Figure 5 NagaCity Walk photo 2

Source Union Gaming Research Macau

7262019 NagaCorp research

httpslidepdfcomreaderfullnagacorp-research 1217

April 30 2015

12 +853 2857 5825 Union Gaming Research Macau

Naga2

Naga2 in Phnom Penh is now moving vertically with significant work being done on

the podium The project remains on track for a late 2017 opening In our view this

continues to be a transformational milestone for the company as it will not only take

them out of the single-asset mold (along with Vladivostok) but that it will be the firsthigh-end purpose-built space for the company

We believe that Naga2 will serve to keep the VIP story growing especially given a

significant amount of in-suite VIP gaming salons On a combined basis we believe

that NagaWorld and Naga2 will generate approximately USD22 billion in rolling chip

volume by 2018 which put in perspective is about 3 of what Macau is currently run-

rating (and represents an even lower percentage relative to Macaus peak) In our

view Naga has and is putting in place the right infrastructure that should readily

support and attract this level of VIP gaming play This isnt to say that Naga2 is a VIP

only property To the contrary we have high expectations for mass market and slot

ETG GGR at the property

In its first full year of operations we believe Naga2 can generate approximately

USD550 million in GGR (NagaWorld generated in excess of USD400 million in 2014)

and EBITDA of USD216 million (NagaWorld generated USD176 million in 2014) We

are however modeling cannibalization at NagaWorld during this period

Figure 6 Naga2 construction progress

Source Union Gaming Research Macau

7262019 NagaCorp research

httpslidepdfcomreaderfullnagacorp-research 1317

April 30 2015

Union Gaming Research Macau +853 2857 5825 13

Looking at the out yearsClearly we are excited about the near medium and longer-term growth stories of

NagaCorp The company is in a position to demonstrate stable EBITDA growth ove

the next three years (including 2015) However it is the out years that are the most

transformational for the company The year 2018 is the biggest for Naga as it wil

become a three-asset operator with NagaWorld Naga2 and Vladivostok all being

operational

We are forecasting that NagaCorp can generate more than USD12 billion in revenue

in 2018 and nearly USD500 million in EBITDA (from our estimate of USD211 million in

2015) This level of cash flow along with a forecasted USD280 million in cash on its

unlevered balance sheet (after paying more than USD750 million in dividends from

2015-2018 and around USD250 million in expansion capex) should put NagaCorp in

the running for any number of other regional gaming opportunities including Japan

and or Korea should these opportunities present themselves

Figure 7 Nagas EBITDA outlook 2011 to 2018E

Note Historical EBITDA excludes one-time slot concession fees paid to the company in 2012 and 2013 and excludes potentia

one-time fees likely to be generated in 2015 and 2016 (and beyond)

Source Union Gaming Research Macau

112 128

157 176

211

255

305

484

0

10

20

30

40

50

60

70

$0

$100

$200

$300

$400

$500

$600

2011 2012 2013 2014 2015983109 2016983109 2017983109 2018983109

983109

983106 983113 983124 983108 983105 ( 983125 983123 983108 983149 983145 983148 983148 983145 983151 983150 983155 )

983109983106983113983124983108983105 983129983129 983139983144983137983150983143983141

9831189831379831439831372 amp

983126983148983137983140983145983158983151983155983156983151983147

7262019 NagaCorp research

httpslidepdfcomreaderfullnagacorp-research 1417

April 30 2015

14 +853 2857 5825 Union Gaming Research Macau

EstimatesWe are largely maintaining our forward estimates for NagaCorp Our 2015 EBITDA

estimate is USD211 million (from USD212 million) Our 2016 EBITDA is USD255 million

(from USD251 million) Please see Figure 1 for detailed revenue EBITDA and EPS

estimates Note above our estimates are all above consensus

Figure 8 Estimates and consensus expectations

Source Union Gaming Research Macau Capital IQ

983107983137983152983145983156983137983148 983113983121 983107983151983149983152983137983150983161 983123983156983137983156983145983155983156983145983139983155 (983110983129983085983108983141983139)52983085983159983141983141983147 983144983145983143983144 $739 983105983150983150983157983137983148983145983162983141983140 983108983145983158983145983140983141983150983140983123983144983137983154983141 $032

52983085983159983141983141983147 983148983151983159 $466 983108983145983158983145983140983141983150983140 983129983145983141983148983140 57

983117983137983154983147983141983156 983139983137983152 ($983149983149) $12621 983113983150983155983145983140983141983154 983119983159983150983141983154983155983144983145983152 00

983123983144983137983154983141983155 983151983157983156983155983156983137983150983140983145983150983143 (983149983149) 22700 983113983150983155 983156983145 983156983157983156983145 983151983150 983119983159983150983141983154983155 983144983145 983152 246

983105983158983141983154983137983143983141 983140983137983145983148983161 983158983151983148983157983149983141 (983149983149) 245 983122983141983158983141983150983157983141 983143983154983151983159983156983144 (2983085983161983141983137983154) 199

983123983144983151983154983156 983145983150983156983141983154983141983155983156 (983149983149) 983150983137 983109983106983113983124983108983105 983143983154983151983159983156983144 (2983085983161983141983137983154) 983150983137

983123983144983151983154983156 983113983150983156983141983154983141983155983156 983137983155 983151983142 983142983148983151983137983156 983150983137 983109983120983123 983143983154983151983159983156983144 (2983085983161983141983137983154) 60

983105983150983150983157983137983148 983122983141983155983157983148983156983155 2014 2015983109 2016983109 2017983109 2018983109

983125983150983145983151983150 983122983141983158983141983150983157983141983155 ($983149983149) $404 $589 $680 $781 $1219

983120983154983141983158983145983151983157983155 983154983141983158983141983150983157983141 983141983155983156983145983149983137983156983141 983085 $564 $644 983085 983085

983107983144983137983150983143983141 983085 $26 $36 983085 983085

983107983137983152983145983156983137983148 983113983121 983154983141983158983141983150983157983141 983141983155983156983145983149983137983156983141 983085 $491 $581 $694 $1099

983125983150983145983151983150 983109983106983113983124983108983105 ($983149983149) $176 $211 $255 $305 $484

983120983154983141983158983145983151983157983155 983109983106983113983124983108983105 983141983155983156983145983149983137983156983141 983085 $212 $251 983085 983085

983107983144983137983150983143983141 983085 ($1) $4 983085 983085

983107983137983152983145983156983137983148 983113983121 983109983106983113983124983108983105 983141983155983156983145983149983137983156983141 983085 $203 $233 $267 $399

983125983150983145983151983150 983109983120983123 $0060 $0069 $0080 $0068 $0111

983120983154983141983158983145983151983157983155 983109983120983123 983141983155983156983145983149983137983156983141 983085 $0072 $0081 983085 983085

983107983144983137983150983143983141 983085 ($0003) ($0001) 983085 983085

983107983137983152983145983156983137983148 983113983121 983109983120983123 983141983155983156983145983149983137983156983141 983085 $0065 $0067 $0060 $0081

983126983137983148983157983137983156983145983151983150 983085 983109983120983123 983117983157983148983156983145983152983148983141 104983160 90983160 105983160 64983160

983126983137983148983157983137983156983145983151983150 983085 983109983126983109983106983113983124983108983105 983117983157983148983156983145983152983148983141 73983160 67983160 84983160 51983160

7262019 NagaCorp research

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April 30 2015

Union Gaming Research Macau +853 2857 5825 15

Price Target HKD800 (from HKD750)We value NagaCorp using an EVEBITDA approach on forward earnings in addition to

incremental present value associated with the companyrsquos Naga2 and Vladivostok

projects the first full year of operations for both will be 2018 Our 12 month price

target is HKD800 (+HKD050) and is based on an 85x multiple of our 2015 EBITDA

estimate (HKD400) in addition to the per share present value for Naga2 and

Vladivostok (HKD400) Our calculations assume a share count of approximately

3848mm which accounts for the dilution associated with the companyrsquos acquisition

of the USD369 million NagaCity Walk and Naga2 complex from CEO Tan Sri Dr Chen

in the form of share issuance convertible bond We note that the 85x multiple

represents a slightly lower multiple than we have previously ascribed (9x) which we

would attribute to broader multiple pullback in the gaming space However it stil

remains a discount to its peer group in Macau to which we generally ascribe a

multiple approximately 3 or 4 turns higher We feel an 85x multiple is justified fo

Naga as the company has consistently executed on its growth initiatives enabling the

company to growth faster than its peer group It is also in the home stretch of

shedding its image as a single-asset story with Naga2 now under construction in a

meaningful way and Vladivostok on the horizon Our price target along with an

expected dividend yield of 7 in 2015 represents 51 upside to todayrsquos closing price

RisksRisks to shares of NagaCorp include country risk (loss of exclusive license adjustmen

to the companyrsquos advantageous low monthly fixed obligation tax) development risk

including delays to Naga2 and the Vladivostok project incremental regiona

competition (especially from Vietnam should locals be allowed to gamble) volatility

associated with being a single-asset operator (for now) in the context of increasing

exposure to the VIP segment

7262019 NagaCorp research

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April 30 2015

16 +853 2857 5825 Union Gaming Research Macau

Appendix 1 Important DisclosuresAdditional information is available upon request

This report was prepared by Union Gaming Research Macau Limited Union Gaming Research Macau Limited is a wholly owned

subsidiary of Union Gaming Group LLC Union Gaming Group LLC also owns Union Gaming Advisors LLC a FINRA member firm

and Union Gaming Research LLC a Nevada Registered Investment Adviser Union Gaming Advisors LLC does not produce research

reports All questions or comments concerning this research report should be addressed to Union Gaming Research Macau at +853

2857 5825

Union Gaming Advisors LLC (Advisors) an affiliate of Union Gaming Research Macau Limited does not own any securities of any

company analyzed in this report (Subject Company) Advisors has received non-investment banking related compensation from

the subject company in the past twelve months Accordingly investors should be aware that the firm and its affiliates may have a

conflict of interest that could affect the objectivity of this report Advisors does expect and will seek compensation from any Subject

Company for investment banking services in the next three months Advisors has never been a market maker for a Subject Company

and does not expect to be a market maker for a Subject Company

All prices are those current at the end of the previous trading session unless otherwise indicated Prices are sourced from local

exchanges via Bloomberg and CapitalIQ Data is sourced from Union Gaming Research Union Gaming Research Macau Limited

and subject companies Union Gaming Research and Union Gaming Research Macau Limited are not responsible for errors in prices

provided by independent sources Data analyses and reports necessarily contain time-sensitive information and no subscriber o

client should rely on dated reports or conclusions

Investor clients and financial advisers should consider any report from Union Gaming as only a single factor in making any

investment decision

Ratings methodology

We use a traditional ratings construct (Buy Hold Sell) that is underscored by percentage upsidedownside form current trading

levels along with dividend yields for total return We exclude special dividends and only contemplate regular dividends in our tota

return forecasts These are absolute ratings not relative or forced ratings We define a Buy rating as a company whose shares exhibit

total return (appreciation and dividends) potential of at least +15 within the next twelve months and conversely a Sell rating as

a company whose shares exhibit downside potential of at least 15 within the next twelve months A Hold rating is reserved fo

companies whose shares exhibit total return potential between those parameters

Investor clients and financial advisers should consider any report from Union Gaming as only a single factor in making any

investment decision

7262019 NagaCorp research

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April 30 2015

Union Gaming Research Macau +853 2857 5825 17

Source Union Gaming Research LLC and Union Gaming Research Macau Limited Capital IQ

Distribution of Subject Companiesrsquo stock ratings

Source Union Gaming Research LLC and Union Gaming Research Macau Limited

Distribution of Subject Companies with affiliate banking relationships

Source Union Gaming Research LLC and Union Gaming Research Macau Limited

Copyright copy 2015 Union Gaming Research Macau Limited

Union Gaming Research Macau

Finance and IT Center of Macau (FIT)

Suite 8B

Nam Van Lake Quarteirao 5 Lote A

Macau

9 - 1 3 - 1 2

B u y

P T

=

$ 5

1 1 - 2 1 - 1 2

B u y

P T

=

$ 5 5

2 - 7 - 1 3

B u y

P T

=

$ 6 5

4 - 1 1 - 1 3

B u y

P T

=

$ 7

8 - 8 - 1 3

B u y

P T

= $ 7 5

1 0 - 7 - 1 3

B u y

P T

=

$ 8

2 - 5 - 1 5

B u y

P T

=

$ 7 5

4 - 3 0 - 1 5

B u y

P T

=

$ 8

$1

$2

$3

$4

$5

$6

$7

$8

$9

$10

$1

$2

$3

$4

$5

$6

$7

$8

$9

$10

9 1 3 1 2

1 0 8 1 2

1 0 3 0 1 2

1 1 2 0 1 2

1 2 1 1 1 2

1 4 1 3

1 2 5 1 3

2 2 0 1 3

3 1 3 1 3

4 8 1 3

4 2 9 1 3

5 2 2 1 3

6 1 3 1 3

7 5 1 3

7 2 6 1 3

8 1 9 1 3

9 1 0 1 3

1 0 3 1 3

1 0 2 5 1 3

1 1 1 5 1 3

1 2 6 1 3

1 2 3 1 1 3

1 2 2 1 4

2 1 4 1 4

3 7 1 4

3 2 8 1 4

4 2 2 1 4

5 1 5 1 4

6 6 1 4

6 2 7 1 4

7 2 1 1 4

8 1 1 1 4

9 1 1 4

9 2 3 1 4

1 0 1 6 1 4

1 1 6 1 4

1 1 2 7 1 4

1 2 1 8 1 4

1 1 3 1 5

2 3 1 5

2 2 6 1 5

3 1 9 1 5

4 1 4 1 5

NagaCorp (3918 HK)

Buy Hold Sell

81 19 0

Buy Hold Sell

100 0 0

7262019 NagaCorp research

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April 30 2015

Union Gaming Research Macau +853 2857 5825 5

c Along with the conclusion of construction disruption the re

opening of Nagarsquos own high-end retail shops in close proximity to

the main entrance

8 The opening of the Naga terminal at Phnom Penh International Airport

in 1Q16 which will highly complement the VIP experience at Naga

especially in the context of Bassaka Air regularly flying in high-value

customers

9 Further progress with respect to the companyrsquos direct VIP program

which we believe has been growing at double digit rates

7262019 NagaCorp research

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April 30 2015

6 +853 2857 5825 Union Gaming Research Macau

Mass market tablesIn 1Q15 Naga reported that mass market table games volume grew 12 yy to

USD130 million This is broadly consistent with trends seen in 2013 (+15) and 2014

(+16) even while the proportion of Vietnamese volume continues to decline as

more of these customers opt to go to the border casinos in Bavet We are currently

forecasting the following mass table metrics for Naga over the next two years

bull 2015 volume growth of 14

bull 2016 volume growth of 11

bull 2015 GGR growth of 12

bull 2016 GGR growth of 15 (on a slightly higher hold rate as explained

below)

Figure 2 Mass market table GGR trends historical and forecast 1H10 to 2H17E

Source company data Union Gaming Research Macau

As demonstrated in the above figure mass table GGR growth has been very stable

and predictable Based on the below drivers we expect the trends seen over the last

five years to continue apace We highlight the following growth drivers for mass

market tables

1 Beginning this June Naga for the first time ever will begin exchanging

cash for chips at the table rather than only at the cage Historically this

was done to combat counterfeiting but improved (and inexpensive) bil

validation technology will enable Naga to put bill validators at each

table This should result in the compound effect of not only increasing

wagering volume but should also result in a slightly higher hold rate

010

20

30

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50

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80

010

20

30

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1 983112 1 0

2 983112 1 0

1 983112 1 1

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1 983112 1 2

2 983112 1 2

1 983112 1 3

2 983112 1 3

1 983112 1 4

2 983112 1 4

1 983112 1 5 983109

2 983112 1 5 983109

1 983112 1 6 983109

2 983112 1 6 983109

1 983112 1 7 983109

2 983112 1 7 983109

983125 983123 983108 983149 983145 983148 983148 983145 983151 983150 983155

983118983137983143983137 983149983137983155983155 983149983137983154983147983141983156 983156983137983138983148983141 983111983111983122 983137983150983140 983161983161 983139983144983143

983117983137983155983155 983156983137983138983148983141 983111983111983122 983129983129

7262019 NagaCorp research

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April 30 2015

Union Gaming Research Macau +853 2857 5825 7

2 Also in June of this year Naga will open a new valet parking garage

located in close proximity to Naga The lack of sufficient parking over the

years has likely impaired some amount of mass market volume

3 In July of this year we expect Bassaka Air to begin flying direct routes to

mainland China multiple times per week augmenting its Macau service

The mainland flights will be marketing in conjunction with China

International Travel Service and will promote tourism to Cambodia In

our view this should be a material driver of increased mass market

Chinese play

4 Naga has already put in place several general marketing initiatives to

attract increased regional play particularly from China and Malaysia

which already appear to be paying dividends We would look for these

trends to continue

5 Ongoing strength in general visitation to Cambodia In 2014 visitationto Cambodia grew by 7 while visitation from China grew by 21 to in

excess of 560000 Visitation to Cambodia beginning at Phnom Penh

International Airport grew 10 in 2014 to nearly 1 million

6 Similar to VIP the opening of NagaCity Walk will provide the company

with similar benefits and increased foot traffic

7 The locals expat story continues to improve with the combination o

wealth generation as well as significant Foreign Direct Investment

particularly from China and Korea

8 At the margin the recent opening of a bridge across the Mekong wilshave about 45 minutes off the travel time between Ho Chi Minh City

and Phnom Penh While the mass market contribution from Vietnamese

is becoming nominal this improved access is beneficial

7262019 NagaCorp research

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April 30 2015

8 +853 2857 5825 Union Gaming Research Macau

Slot machines ETGsIn 1Q15 Naga reported that slot machine ETG volume grew 6 yy to USD290

million While lower than in previous years (+10 in 2013 and +8 in 2014) we

believe growth has increased notably in the second quarter and should continue to

grow on the heels of numerous drivers We are currently forecasting the following slot

machines ETG metrics for Naga over the next two years

bull 2015 GGR growth of 12 to USD95 million (this represents only Nagarsquos

share of the slot GGR)

bull 2016 GGR growth of 11 to USD106 million

Figure 3 Slot ETG GGR trends historical and forecast 1H11 to 2H17E

Source company data Union Gaming Research Macau

Slot ETG GGR growth has also been quite stable although certain events like the

King fathers funeral and nationwide elections have impacted results from time-to-

time We highlight the following growth drivers for slot machines ETGs

1 In June of this year Naga will deploy a significant TITO (Ticket-In Ticket

Out aka ldquocashless gamingrdquo) rollout across the balance of its slots ETGs

Currently only about 600 of 1500 slots have TITO and bringing the

remaining 900 positions to TITO should result in increased time on

device which translates directly to increased GGR

2 At the end of 2015 the slot concession contract with Best Merit wil

expire This will likely result in the signing of a new slot concession (and

resulting one-time fee paid to Naga) Importantly and regardless of

whether the concessionaire remains with Best Merit or of it is a new

party we believe the nearly 300 machines will be replaced Today these

0

10

20

30

40

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60

70

80

90

100

0

10

20

30

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1 983112 1 1

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2 983112 1 2

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1 983112 1 4

2 983112 1 4

1 983112 1 5 983109

2 983112 1 5 983109

1 983112 1 6 983109

2 983112 1 6 983109

1 983112 1 7 983109

2 983112 1 7 983109

983125 983123 983108 983149 983145 983148 983148 983145 983151 983150 983155

983118983137983143983137 983155983148983151983156 983109983124983111 983111983111983122 983137983150983140 983161983161 983139983144983143

983123983148983151983156 983109983124983111 983111983111983122 983129983129

7262019 NagaCorp research

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April 30 2015

Union Gaming Research Macau +853 2857 5825 9

are among the oldest games on the floor and are in need of replacement

Fresh games should result in increased win per unit

3 Noted above we believe Naga is likely to receive two large one-time fees

associated with new contracts to replace those expiring in 2015 with

Best Merit and 2016 with EGT representing nearly 300 and 650

machines respectively Based on the last comp this would imply

approximately USD30 million and USD60 million+ respectively

However based on current market dynamics we believe the numbers

could be higher Regardless the combined fees paid should reach at

least USD90 million+ resulting in headline earnings well beyond current

expectations not to mention incremental cash on hand (larger dividend

or incremental dry powder on the balance sheet)

The remaining drivers are similar to those listed above namely

4 The opening of the parking garage in June

5 The benefits of mass market play from Bassaka Air flights penetrating

into mainland China

6 General marketing initiatives into China and Malaysia

7 Ongoing strength in general visitation to Cambodia

8 The opening of NagaCity Walk

9 Growth in the locals expat story

10 Marginal lift owing to the new bridge across the Mekong

Considered as a whole these growth drivers give us a high degree of confidence in

our current above-consensus expectations over the next two years Importantly

these drivers are long-tailed and should provide for sustained growth into 2017 and

then into the opening of Naga2 the first full year of which will be in 2018

7262019 NagaCorp research

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April 30 2015

10 +853 2857 5825 Union Gaming Research Macau

Greenfield developments

Vladivostok

Outside of the solid growth expected at NagaWorld Naga currently has three

greenfield opportunities in their Vladivostok NagaCity Walk and Naga2 projects Weexpect the company to get break ground in Vladivostok next month with an

expected opening in early 2018 Much of the project will be built in a modular (prefab

format which should allow for a much quicker than normal build cycle We expect the

first phase be defined roughly as

bull USD150 million capex

bull 400 hotel rooms

bull ~70 mass and a TBD of VIP tables

bull 500 slots ETGs

bull Plus retail entertainment FampB and meeting space

Vladivostok is currently an untested market although the first casino should be

opening soon which should provide a solid baseline for the market In the meantime

we are confident that the Naga project can generate returns well into the double

digits and we are currently modeling USD60 million in EBITDA in year one (2018)

Given Vladivostokrsquos proximity to northeast China as well as being very much under-

penetrated in terms of casino gaming we believe our EBITDA estimate could be

conservative For the first time we are now including Vladivostok in our valuation of

Naga for which we are attributed HKD063 in present per share value

NagaCity Walk

The NagaCity Walk retail experience will eventually connect the existing NagaWorld

facility to Naga2 This project will be run by China Duty Free While not a gaming

component we believe the addition of high quality (and quantity of) retail will be a

key driver of incremental volume to the property ndash especially for higher end mass and

VIP customers At the same time the construction of NagaCity Walk has resulted in

notable construction disruption to the propertys primary porte-cochere as well as the

handful of retail outlets at the main entrance The opening of NagaCity Walk is

therefore important in returning the property to its previous traffic flow

While difficult to appreciate the scale of NagaCity Walk we are including two photosbelow It is important to keep in mind the 400 meter (1300 feet) subterranean length

of the project

7262019 NagaCorp research

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April 30 2015

Union Gaming Research Macau +853 2857 5825 11

Figure 4 NagaCity Walk photo 1

Source Union Gaming Research Macau

Figure 5 NagaCity Walk photo 2

Source Union Gaming Research Macau

7262019 NagaCorp research

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April 30 2015

12 +853 2857 5825 Union Gaming Research Macau

Naga2

Naga2 in Phnom Penh is now moving vertically with significant work being done on

the podium The project remains on track for a late 2017 opening In our view this

continues to be a transformational milestone for the company as it will not only take

them out of the single-asset mold (along with Vladivostok) but that it will be the firsthigh-end purpose-built space for the company

We believe that Naga2 will serve to keep the VIP story growing especially given a

significant amount of in-suite VIP gaming salons On a combined basis we believe

that NagaWorld and Naga2 will generate approximately USD22 billion in rolling chip

volume by 2018 which put in perspective is about 3 of what Macau is currently run-

rating (and represents an even lower percentage relative to Macaus peak) In our

view Naga has and is putting in place the right infrastructure that should readily

support and attract this level of VIP gaming play This isnt to say that Naga2 is a VIP

only property To the contrary we have high expectations for mass market and slot

ETG GGR at the property

In its first full year of operations we believe Naga2 can generate approximately

USD550 million in GGR (NagaWorld generated in excess of USD400 million in 2014)

and EBITDA of USD216 million (NagaWorld generated USD176 million in 2014) We

are however modeling cannibalization at NagaWorld during this period

Figure 6 Naga2 construction progress

Source Union Gaming Research Macau

7262019 NagaCorp research

httpslidepdfcomreaderfullnagacorp-research 1317

April 30 2015

Union Gaming Research Macau +853 2857 5825 13

Looking at the out yearsClearly we are excited about the near medium and longer-term growth stories of

NagaCorp The company is in a position to demonstrate stable EBITDA growth ove

the next three years (including 2015) However it is the out years that are the most

transformational for the company The year 2018 is the biggest for Naga as it wil

become a three-asset operator with NagaWorld Naga2 and Vladivostok all being

operational

We are forecasting that NagaCorp can generate more than USD12 billion in revenue

in 2018 and nearly USD500 million in EBITDA (from our estimate of USD211 million in

2015) This level of cash flow along with a forecasted USD280 million in cash on its

unlevered balance sheet (after paying more than USD750 million in dividends from

2015-2018 and around USD250 million in expansion capex) should put NagaCorp in

the running for any number of other regional gaming opportunities including Japan

and or Korea should these opportunities present themselves

Figure 7 Nagas EBITDA outlook 2011 to 2018E

Note Historical EBITDA excludes one-time slot concession fees paid to the company in 2012 and 2013 and excludes potentia

one-time fees likely to be generated in 2015 and 2016 (and beyond)

Source Union Gaming Research Macau

112 128

157 176

211

255

305

484

0

10

20

30

40

50

60

70

$0

$100

$200

$300

$400

$500

$600

2011 2012 2013 2014 2015983109 2016983109 2017983109 2018983109

983109

983106 983113 983124 983108 983105 ( 983125 983123 983108 983149 983145 983148 983148 983145 983151 983150 983155 )

983109983106983113983124983108983105 983129983129 983139983144983137983150983143983141

9831189831379831439831372 amp

983126983148983137983140983145983158983151983155983156983151983147

7262019 NagaCorp research

httpslidepdfcomreaderfullnagacorp-research 1417

April 30 2015

14 +853 2857 5825 Union Gaming Research Macau

EstimatesWe are largely maintaining our forward estimates for NagaCorp Our 2015 EBITDA

estimate is USD211 million (from USD212 million) Our 2016 EBITDA is USD255 million

(from USD251 million) Please see Figure 1 for detailed revenue EBITDA and EPS

estimates Note above our estimates are all above consensus

Figure 8 Estimates and consensus expectations

Source Union Gaming Research Macau Capital IQ

983107983137983152983145983156983137983148 983113983121 983107983151983149983152983137983150983161 983123983156983137983156983145983155983156983145983139983155 (983110983129983085983108983141983139)52983085983159983141983141983147 983144983145983143983144 $739 983105983150983150983157983137983148983145983162983141983140 983108983145983158983145983140983141983150983140983123983144983137983154983141 $032

52983085983159983141983141983147 983148983151983159 $466 983108983145983158983145983140983141983150983140 983129983145983141983148983140 57

983117983137983154983147983141983156 983139983137983152 ($983149983149) $12621 983113983150983155983145983140983141983154 983119983159983150983141983154983155983144983145983152 00

983123983144983137983154983141983155 983151983157983156983155983156983137983150983140983145983150983143 (983149983149) 22700 983113983150983155 983156983145 983156983157983156983145 983151983150 983119983159983150983141983154983155 983144983145 983152 246

983105983158983141983154983137983143983141 983140983137983145983148983161 983158983151983148983157983149983141 (983149983149) 245 983122983141983158983141983150983157983141 983143983154983151983159983156983144 (2983085983161983141983137983154) 199

983123983144983151983154983156 983145983150983156983141983154983141983155983156 (983149983149) 983150983137 983109983106983113983124983108983105 983143983154983151983159983156983144 (2983085983161983141983137983154) 983150983137

983123983144983151983154983156 983113983150983156983141983154983141983155983156 983137983155 983151983142 983142983148983151983137983156 983150983137 983109983120983123 983143983154983151983159983156983144 (2983085983161983141983137983154) 60

983105983150983150983157983137983148 983122983141983155983157983148983156983155 2014 2015983109 2016983109 2017983109 2018983109

983125983150983145983151983150 983122983141983158983141983150983157983141983155 ($983149983149) $404 $589 $680 $781 $1219

983120983154983141983158983145983151983157983155 983154983141983158983141983150983157983141 983141983155983156983145983149983137983156983141 983085 $564 $644 983085 983085

983107983144983137983150983143983141 983085 $26 $36 983085 983085

983107983137983152983145983156983137983148 983113983121 983154983141983158983141983150983157983141 983141983155983156983145983149983137983156983141 983085 $491 $581 $694 $1099

983125983150983145983151983150 983109983106983113983124983108983105 ($983149983149) $176 $211 $255 $305 $484

983120983154983141983158983145983151983157983155 983109983106983113983124983108983105 983141983155983156983145983149983137983156983141 983085 $212 $251 983085 983085

983107983144983137983150983143983141 983085 ($1) $4 983085 983085

983107983137983152983145983156983137983148 983113983121 983109983106983113983124983108983105 983141983155983156983145983149983137983156983141 983085 $203 $233 $267 $399

983125983150983145983151983150 983109983120983123 $0060 $0069 $0080 $0068 $0111

983120983154983141983158983145983151983157983155 983109983120983123 983141983155983156983145983149983137983156983141 983085 $0072 $0081 983085 983085

983107983144983137983150983143983141 983085 ($0003) ($0001) 983085 983085

983107983137983152983145983156983137983148 983113983121 983109983120983123 983141983155983156983145983149983137983156983141 983085 $0065 $0067 $0060 $0081

983126983137983148983157983137983156983145983151983150 983085 983109983120983123 983117983157983148983156983145983152983148983141 104983160 90983160 105983160 64983160

983126983137983148983157983137983156983145983151983150 983085 983109983126983109983106983113983124983108983105 983117983157983148983156983145983152983148983141 73983160 67983160 84983160 51983160

7262019 NagaCorp research

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April 30 2015

Union Gaming Research Macau +853 2857 5825 15

Price Target HKD800 (from HKD750)We value NagaCorp using an EVEBITDA approach on forward earnings in addition to

incremental present value associated with the companyrsquos Naga2 and Vladivostok

projects the first full year of operations for both will be 2018 Our 12 month price

target is HKD800 (+HKD050) and is based on an 85x multiple of our 2015 EBITDA

estimate (HKD400) in addition to the per share present value for Naga2 and

Vladivostok (HKD400) Our calculations assume a share count of approximately

3848mm which accounts for the dilution associated with the companyrsquos acquisition

of the USD369 million NagaCity Walk and Naga2 complex from CEO Tan Sri Dr Chen

in the form of share issuance convertible bond We note that the 85x multiple

represents a slightly lower multiple than we have previously ascribed (9x) which we

would attribute to broader multiple pullback in the gaming space However it stil

remains a discount to its peer group in Macau to which we generally ascribe a

multiple approximately 3 or 4 turns higher We feel an 85x multiple is justified fo

Naga as the company has consistently executed on its growth initiatives enabling the

company to growth faster than its peer group It is also in the home stretch of

shedding its image as a single-asset story with Naga2 now under construction in a

meaningful way and Vladivostok on the horizon Our price target along with an

expected dividend yield of 7 in 2015 represents 51 upside to todayrsquos closing price

RisksRisks to shares of NagaCorp include country risk (loss of exclusive license adjustmen

to the companyrsquos advantageous low monthly fixed obligation tax) development risk

including delays to Naga2 and the Vladivostok project incremental regiona

competition (especially from Vietnam should locals be allowed to gamble) volatility

associated with being a single-asset operator (for now) in the context of increasing

exposure to the VIP segment

7262019 NagaCorp research

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16 +853 2857 5825 Union Gaming Research Macau

Appendix 1 Important DisclosuresAdditional information is available upon request

This report was prepared by Union Gaming Research Macau Limited Union Gaming Research Macau Limited is a wholly owned

subsidiary of Union Gaming Group LLC Union Gaming Group LLC also owns Union Gaming Advisors LLC a FINRA member firm

and Union Gaming Research LLC a Nevada Registered Investment Adviser Union Gaming Advisors LLC does not produce research

reports All questions or comments concerning this research report should be addressed to Union Gaming Research Macau at +853

2857 5825

Union Gaming Advisors LLC (Advisors) an affiliate of Union Gaming Research Macau Limited does not own any securities of any

company analyzed in this report (Subject Company) Advisors has received non-investment banking related compensation from

the subject company in the past twelve months Accordingly investors should be aware that the firm and its affiliates may have a

conflict of interest that could affect the objectivity of this report Advisors does expect and will seek compensation from any Subject

Company for investment banking services in the next three months Advisors has never been a market maker for a Subject Company

and does not expect to be a market maker for a Subject Company

All prices are those current at the end of the previous trading session unless otherwise indicated Prices are sourced from local

exchanges via Bloomberg and CapitalIQ Data is sourced from Union Gaming Research Union Gaming Research Macau Limited

and subject companies Union Gaming Research and Union Gaming Research Macau Limited are not responsible for errors in prices

provided by independent sources Data analyses and reports necessarily contain time-sensitive information and no subscriber o

client should rely on dated reports or conclusions

Investor clients and financial advisers should consider any report from Union Gaming as only a single factor in making any

investment decision

Ratings methodology

We use a traditional ratings construct (Buy Hold Sell) that is underscored by percentage upsidedownside form current trading

levels along with dividend yields for total return We exclude special dividends and only contemplate regular dividends in our tota

return forecasts These are absolute ratings not relative or forced ratings We define a Buy rating as a company whose shares exhibit

total return (appreciation and dividends) potential of at least +15 within the next twelve months and conversely a Sell rating as

a company whose shares exhibit downside potential of at least 15 within the next twelve months A Hold rating is reserved fo

companies whose shares exhibit total return potential between those parameters

Investor clients and financial advisers should consider any report from Union Gaming as only a single factor in making any

investment decision

7262019 NagaCorp research

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April 30 2015

Union Gaming Research Macau +853 2857 5825 17

Source Union Gaming Research LLC and Union Gaming Research Macau Limited Capital IQ

Distribution of Subject Companiesrsquo stock ratings

Source Union Gaming Research LLC and Union Gaming Research Macau Limited

Distribution of Subject Companies with affiliate banking relationships

Source Union Gaming Research LLC and Union Gaming Research Macau Limited

Copyright copy 2015 Union Gaming Research Macau Limited

Union Gaming Research Macau

Finance and IT Center of Macau (FIT)

Suite 8B

Nam Van Lake Quarteirao 5 Lote A

Macau

9 - 1 3 - 1 2

B u y

P T

=

$ 5

1 1 - 2 1 - 1 2

B u y

P T

=

$ 5 5

2 - 7 - 1 3

B u y

P T

=

$ 6 5

4 - 1 1 - 1 3

B u y

P T

=

$ 7

8 - 8 - 1 3

B u y

P T

= $ 7 5

1 0 - 7 - 1 3

B u y

P T

=

$ 8

2 - 5 - 1 5

B u y

P T

=

$ 7 5

4 - 3 0 - 1 5

B u y

P T

=

$ 8

$1

$2

$3

$4

$5

$6

$7

$8

$9

$10

$1

$2

$3

$4

$5

$6

$7

$8

$9

$10

9 1 3 1 2

1 0 8 1 2

1 0 3 0 1 2

1 1 2 0 1 2

1 2 1 1 1 2

1 4 1 3

1 2 5 1 3

2 2 0 1 3

3 1 3 1 3

4 8 1 3

4 2 9 1 3

5 2 2 1 3

6 1 3 1 3

7 5 1 3

7 2 6 1 3

8 1 9 1 3

9 1 0 1 3

1 0 3 1 3

1 0 2 5 1 3

1 1 1 5 1 3

1 2 6 1 3

1 2 3 1 1 3

1 2 2 1 4

2 1 4 1 4

3 7 1 4

3 2 8 1 4

4 2 2 1 4

5 1 5 1 4

6 6 1 4

6 2 7 1 4

7 2 1 1 4

8 1 1 1 4

9 1 1 4

9 2 3 1 4

1 0 1 6 1 4

1 1 6 1 4

1 1 2 7 1 4

1 2 1 8 1 4

1 1 3 1 5

2 3 1 5

2 2 6 1 5

3 1 9 1 5

4 1 4 1 5

NagaCorp (3918 HK)

Buy Hold Sell

81 19 0

Buy Hold Sell

100 0 0

7262019 NagaCorp research

httpslidepdfcomreaderfullnagacorp-research 617

April 30 2015

6 +853 2857 5825 Union Gaming Research Macau

Mass market tablesIn 1Q15 Naga reported that mass market table games volume grew 12 yy to

USD130 million This is broadly consistent with trends seen in 2013 (+15) and 2014

(+16) even while the proportion of Vietnamese volume continues to decline as

more of these customers opt to go to the border casinos in Bavet We are currently

forecasting the following mass table metrics for Naga over the next two years

bull 2015 volume growth of 14

bull 2016 volume growth of 11

bull 2015 GGR growth of 12

bull 2016 GGR growth of 15 (on a slightly higher hold rate as explained

below)

Figure 2 Mass market table GGR trends historical and forecast 1H10 to 2H17E

Source company data Union Gaming Research Macau

As demonstrated in the above figure mass table GGR growth has been very stable

and predictable Based on the below drivers we expect the trends seen over the last

five years to continue apace We highlight the following growth drivers for mass

market tables

1 Beginning this June Naga for the first time ever will begin exchanging

cash for chips at the table rather than only at the cage Historically this

was done to combat counterfeiting but improved (and inexpensive) bil

validation technology will enable Naga to put bill validators at each

table This should result in the compound effect of not only increasing

wagering volume but should also result in a slightly higher hold rate

010

20

30

40

50

60

70

80

010

20

30

40

50

60

70

80

1 983112 1 0

2 983112 1 0

1 983112 1 1

2 983112 1 1

1 983112 1 2

2 983112 1 2

1 983112 1 3

2 983112 1 3

1 983112 1 4

2 983112 1 4

1 983112 1 5 983109

2 983112 1 5 983109

1 983112 1 6 983109

2 983112 1 6 983109

1 983112 1 7 983109

2 983112 1 7 983109

983125 983123 983108 983149 983145 983148 983148 983145 983151 983150 983155

983118983137983143983137 983149983137983155983155 983149983137983154983147983141983156 983156983137983138983148983141 983111983111983122 983137983150983140 983161983161 983139983144983143

983117983137983155983155 983156983137983138983148983141 983111983111983122 983129983129

7262019 NagaCorp research

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April 30 2015

Union Gaming Research Macau +853 2857 5825 7

2 Also in June of this year Naga will open a new valet parking garage

located in close proximity to Naga The lack of sufficient parking over the

years has likely impaired some amount of mass market volume

3 In July of this year we expect Bassaka Air to begin flying direct routes to

mainland China multiple times per week augmenting its Macau service

The mainland flights will be marketing in conjunction with China

International Travel Service and will promote tourism to Cambodia In

our view this should be a material driver of increased mass market

Chinese play

4 Naga has already put in place several general marketing initiatives to

attract increased regional play particularly from China and Malaysia

which already appear to be paying dividends We would look for these

trends to continue

5 Ongoing strength in general visitation to Cambodia In 2014 visitationto Cambodia grew by 7 while visitation from China grew by 21 to in

excess of 560000 Visitation to Cambodia beginning at Phnom Penh

International Airport grew 10 in 2014 to nearly 1 million

6 Similar to VIP the opening of NagaCity Walk will provide the company

with similar benefits and increased foot traffic

7 The locals expat story continues to improve with the combination o

wealth generation as well as significant Foreign Direct Investment

particularly from China and Korea

8 At the margin the recent opening of a bridge across the Mekong wilshave about 45 minutes off the travel time between Ho Chi Minh City

and Phnom Penh While the mass market contribution from Vietnamese

is becoming nominal this improved access is beneficial

7262019 NagaCorp research

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April 30 2015

8 +853 2857 5825 Union Gaming Research Macau

Slot machines ETGsIn 1Q15 Naga reported that slot machine ETG volume grew 6 yy to USD290

million While lower than in previous years (+10 in 2013 and +8 in 2014) we

believe growth has increased notably in the second quarter and should continue to

grow on the heels of numerous drivers We are currently forecasting the following slot

machines ETG metrics for Naga over the next two years

bull 2015 GGR growth of 12 to USD95 million (this represents only Nagarsquos

share of the slot GGR)

bull 2016 GGR growth of 11 to USD106 million

Figure 3 Slot ETG GGR trends historical and forecast 1H11 to 2H17E

Source company data Union Gaming Research Macau

Slot ETG GGR growth has also been quite stable although certain events like the

King fathers funeral and nationwide elections have impacted results from time-to-

time We highlight the following growth drivers for slot machines ETGs

1 In June of this year Naga will deploy a significant TITO (Ticket-In Ticket

Out aka ldquocashless gamingrdquo) rollout across the balance of its slots ETGs

Currently only about 600 of 1500 slots have TITO and bringing the

remaining 900 positions to TITO should result in increased time on

device which translates directly to increased GGR

2 At the end of 2015 the slot concession contract with Best Merit wil

expire This will likely result in the signing of a new slot concession (and

resulting one-time fee paid to Naga) Importantly and regardless of

whether the concessionaire remains with Best Merit or of it is a new

party we believe the nearly 300 machines will be replaced Today these

0

10

20

30

40

50

60

70

80

90

100

0

10

20

30

40

50

60

70

80

90

100

1 983112 1 1

2 983112 1 1

1 983112 1 2

2 983112 1 2

1 983112 1 3

2 983112 1 3

1 983112 1 4

2 983112 1 4

1 983112 1 5 983109

2 983112 1 5 983109

1 983112 1 6 983109

2 983112 1 6 983109

1 983112 1 7 983109

2 983112 1 7 983109

983125 983123 983108 983149 983145 983148 983148 983145 983151 983150 983155

983118983137983143983137 983155983148983151983156 983109983124983111 983111983111983122 983137983150983140 983161983161 983139983144983143

983123983148983151983156 983109983124983111 983111983111983122 983129983129

7262019 NagaCorp research

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April 30 2015

Union Gaming Research Macau +853 2857 5825 9

are among the oldest games on the floor and are in need of replacement

Fresh games should result in increased win per unit

3 Noted above we believe Naga is likely to receive two large one-time fees

associated with new contracts to replace those expiring in 2015 with

Best Merit and 2016 with EGT representing nearly 300 and 650

machines respectively Based on the last comp this would imply

approximately USD30 million and USD60 million+ respectively

However based on current market dynamics we believe the numbers

could be higher Regardless the combined fees paid should reach at

least USD90 million+ resulting in headline earnings well beyond current

expectations not to mention incremental cash on hand (larger dividend

or incremental dry powder on the balance sheet)

The remaining drivers are similar to those listed above namely

4 The opening of the parking garage in June

5 The benefits of mass market play from Bassaka Air flights penetrating

into mainland China

6 General marketing initiatives into China and Malaysia

7 Ongoing strength in general visitation to Cambodia

8 The opening of NagaCity Walk

9 Growth in the locals expat story

10 Marginal lift owing to the new bridge across the Mekong

Considered as a whole these growth drivers give us a high degree of confidence in

our current above-consensus expectations over the next two years Importantly

these drivers are long-tailed and should provide for sustained growth into 2017 and

then into the opening of Naga2 the first full year of which will be in 2018

7262019 NagaCorp research

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April 30 2015

10 +853 2857 5825 Union Gaming Research Macau

Greenfield developments

Vladivostok

Outside of the solid growth expected at NagaWorld Naga currently has three

greenfield opportunities in their Vladivostok NagaCity Walk and Naga2 projects Weexpect the company to get break ground in Vladivostok next month with an

expected opening in early 2018 Much of the project will be built in a modular (prefab

format which should allow for a much quicker than normal build cycle We expect the

first phase be defined roughly as

bull USD150 million capex

bull 400 hotel rooms

bull ~70 mass and a TBD of VIP tables

bull 500 slots ETGs

bull Plus retail entertainment FampB and meeting space

Vladivostok is currently an untested market although the first casino should be

opening soon which should provide a solid baseline for the market In the meantime

we are confident that the Naga project can generate returns well into the double

digits and we are currently modeling USD60 million in EBITDA in year one (2018)

Given Vladivostokrsquos proximity to northeast China as well as being very much under-

penetrated in terms of casino gaming we believe our EBITDA estimate could be

conservative For the first time we are now including Vladivostok in our valuation of

Naga for which we are attributed HKD063 in present per share value

NagaCity Walk

The NagaCity Walk retail experience will eventually connect the existing NagaWorld

facility to Naga2 This project will be run by China Duty Free While not a gaming

component we believe the addition of high quality (and quantity of) retail will be a

key driver of incremental volume to the property ndash especially for higher end mass and

VIP customers At the same time the construction of NagaCity Walk has resulted in

notable construction disruption to the propertys primary porte-cochere as well as the

handful of retail outlets at the main entrance The opening of NagaCity Walk is

therefore important in returning the property to its previous traffic flow

While difficult to appreciate the scale of NagaCity Walk we are including two photosbelow It is important to keep in mind the 400 meter (1300 feet) subterranean length

of the project

7262019 NagaCorp research

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April 30 2015

Union Gaming Research Macau +853 2857 5825 11

Figure 4 NagaCity Walk photo 1

Source Union Gaming Research Macau

Figure 5 NagaCity Walk photo 2

Source Union Gaming Research Macau

7262019 NagaCorp research

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April 30 2015

12 +853 2857 5825 Union Gaming Research Macau

Naga2

Naga2 in Phnom Penh is now moving vertically with significant work being done on

the podium The project remains on track for a late 2017 opening In our view this

continues to be a transformational milestone for the company as it will not only take

them out of the single-asset mold (along with Vladivostok) but that it will be the firsthigh-end purpose-built space for the company

We believe that Naga2 will serve to keep the VIP story growing especially given a

significant amount of in-suite VIP gaming salons On a combined basis we believe

that NagaWorld and Naga2 will generate approximately USD22 billion in rolling chip

volume by 2018 which put in perspective is about 3 of what Macau is currently run-

rating (and represents an even lower percentage relative to Macaus peak) In our

view Naga has and is putting in place the right infrastructure that should readily

support and attract this level of VIP gaming play This isnt to say that Naga2 is a VIP

only property To the contrary we have high expectations for mass market and slot

ETG GGR at the property

In its first full year of operations we believe Naga2 can generate approximately

USD550 million in GGR (NagaWorld generated in excess of USD400 million in 2014)

and EBITDA of USD216 million (NagaWorld generated USD176 million in 2014) We

are however modeling cannibalization at NagaWorld during this period

Figure 6 Naga2 construction progress

Source Union Gaming Research Macau

7262019 NagaCorp research

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April 30 2015

Union Gaming Research Macau +853 2857 5825 13

Looking at the out yearsClearly we are excited about the near medium and longer-term growth stories of

NagaCorp The company is in a position to demonstrate stable EBITDA growth ove

the next three years (including 2015) However it is the out years that are the most

transformational for the company The year 2018 is the biggest for Naga as it wil

become a three-asset operator with NagaWorld Naga2 and Vladivostok all being

operational

We are forecasting that NagaCorp can generate more than USD12 billion in revenue

in 2018 and nearly USD500 million in EBITDA (from our estimate of USD211 million in

2015) This level of cash flow along with a forecasted USD280 million in cash on its

unlevered balance sheet (after paying more than USD750 million in dividends from

2015-2018 and around USD250 million in expansion capex) should put NagaCorp in

the running for any number of other regional gaming opportunities including Japan

and or Korea should these opportunities present themselves

Figure 7 Nagas EBITDA outlook 2011 to 2018E

Note Historical EBITDA excludes one-time slot concession fees paid to the company in 2012 and 2013 and excludes potentia

one-time fees likely to be generated in 2015 and 2016 (and beyond)

Source Union Gaming Research Macau

112 128

157 176

211

255

305

484

0

10

20

30

40

50

60

70

$0

$100

$200

$300

$400

$500

$600

2011 2012 2013 2014 2015983109 2016983109 2017983109 2018983109

983109

983106 983113 983124 983108 983105 ( 983125 983123 983108 983149 983145 983148 983148 983145 983151 983150 983155 )

983109983106983113983124983108983105 983129983129 983139983144983137983150983143983141

9831189831379831439831372 amp

983126983148983137983140983145983158983151983155983156983151983147

7262019 NagaCorp research

httpslidepdfcomreaderfullnagacorp-research 1417

April 30 2015

14 +853 2857 5825 Union Gaming Research Macau

EstimatesWe are largely maintaining our forward estimates for NagaCorp Our 2015 EBITDA

estimate is USD211 million (from USD212 million) Our 2016 EBITDA is USD255 million

(from USD251 million) Please see Figure 1 for detailed revenue EBITDA and EPS

estimates Note above our estimates are all above consensus

Figure 8 Estimates and consensus expectations

Source Union Gaming Research Macau Capital IQ

983107983137983152983145983156983137983148 983113983121 983107983151983149983152983137983150983161 983123983156983137983156983145983155983156983145983139983155 (983110983129983085983108983141983139)52983085983159983141983141983147 983144983145983143983144 $739 983105983150983150983157983137983148983145983162983141983140 983108983145983158983145983140983141983150983140983123983144983137983154983141 $032

52983085983159983141983141983147 983148983151983159 $466 983108983145983158983145983140983141983150983140 983129983145983141983148983140 57

983117983137983154983147983141983156 983139983137983152 ($983149983149) $12621 983113983150983155983145983140983141983154 983119983159983150983141983154983155983144983145983152 00

983123983144983137983154983141983155 983151983157983156983155983156983137983150983140983145983150983143 (983149983149) 22700 983113983150983155 983156983145 983156983157983156983145 983151983150 983119983159983150983141983154983155 983144983145 983152 246

983105983158983141983154983137983143983141 983140983137983145983148983161 983158983151983148983157983149983141 (983149983149) 245 983122983141983158983141983150983157983141 983143983154983151983159983156983144 (2983085983161983141983137983154) 199

983123983144983151983154983156 983145983150983156983141983154983141983155983156 (983149983149) 983150983137 983109983106983113983124983108983105 983143983154983151983159983156983144 (2983085983161983141983137983154) 983150983137

983123983144983151983154983156 983113983150983156983141983154983141983155983156 983137983155 983151983142 983142983148983151983137983156 983150983137 983109983120983123 983143983154983151983159983156983144 (2983085983161983141983137983154) 60

983105983150983150983157983137983148 983122983141983155983157983148983156983155 2014 2015983109 2016983109 2017983109 2018983109

983125983150983145983151983150 983122983141983158983141983150983157983141983155 ($983149983149) $404 $589 $680 $781 $1219

983120983154983141983158983145983151983157983155 983154983141983158983141983150983157983141 983141983155983156983145983149983137983156983141 983085 $564 $644 983085 983085

983107983144983137983150983143983141 983085 $26 $36 983085 983085

983107983137983152983145983156983137983148 983113983121 983154983141983158983141983150983157983141 983141983155983156983145983149983137983156983141 983085 $491 $581 $694 $1099

983125983150983145983151983150 983109983106983113983124983108983105 ($983149983149) $176 $211 $255 $305 $484

983120983154983141983158983145983151983157983155 983109983106983113983124983108983105 983141983155983156983145983149983137983156983141 983085 $212 $251 983085 983085

983107983144983137983150983143983141 983085 ($1) $4 983085 983085

983107983137983152983145983156983137983148 983113983121 983109983106983113983124983108983105 983141983155983156983145983149983137983156983141 983085 $203 $233 $267 $399

983125983150983145983151983150 983109983120983123 $0060 $0069 $0080 $0068 $0111

983120983154983141983158983145983151983157983155 983109983120983123 983141983155983156983145983149983137983156983141 983085 $0072 $0081 983085 983085

983107983144983137983150983143983141 983085 ($0003) ($0001) 983085 983085

983107983137983152983145983156983137983148 983113983121 983109983120983123 983141983155983156983145983149983137983156983141 983085 $0065 $0067 $0060 $0081

983126983137983148983157983137983156983145983151983150 983085 983109983120983123 983117983157983148983156983145983152983148983141 104983160 90983160 105983160 64983160

983126983137983148983157983137983156983145983151983150 983085 983109983126983109983106983113983124983108983105 983117983157983148983156983145983152983148983141 73983160 67983160 84983160 51983160

7262019 NagaCorp research

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April 30 2015

Union Gaming Research Macau +853 2857 5825 15

Price Target HKD800 (from HKD750)We value NagaCorp using an EVEBITDA approach on forward earnings in addition to

incremental present value associated with the companyrsquos Naga2 and Vladivostok

projects the first full year of operations for both will be 2018 Our 12 month price

target is HKD800 (+HKD050) and is based on an 85x multiple of our 2015 EBITDA

estimate (HKD400) in addition to the per share present value for Naga2 and

Vladivostok (HKD400) Our calculations assume a share count of approximately

3848mm which accounts for the dilution associated with the companyrsquos acquisition

of the USD369 million NagaCity Walk and Naga2 complex from CEO Tan Sri Dr Chen

in the form of share issuance convertible bond We note that the 85x multiple

represents a slightly lower multiple than we have previously ascribed (9x) which we

would attribute to broader multiple pullback in the gaming space However it stil

remains a discount to its peer group in Macau to which we generally ascribe a

multiple approximately 3 or 4 turns higher We feel an 85x multiple is justified fo

Naga as the company has consistently executed on its growth initiatives enabling the

company to growth faster than its peer group It is also in the home stretch of

shedding its image as a single-asset story with Naga2 now under construction in a

meaningful way and Vladivostok on the horizon Our price target along with an

expected dividend yield of 7 in 2015 represents 51 upside to todayrsquos closing price

RisksRisks to shares of NagaCorp include country risk (loss of exclusive license adjustmen

to the companyrsquos advantageous low monthly fixed obligation tax) development risk

including delays to Naga2 and the Vladivostok project incremental regiona

competition (especially from Vietnam should locals be allowed to gamble) volatility

associated with being a single-asset operator (for now) in the context of increasing

exposure to the VIP segment

7262019 NagaCorp research

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April 30 2015

16 +853 2857 5825 Union Gaming Research Macau

Appendix 1 Important DisclosuresAdditional information is available upon request

This report was prepared by Union Gaming Research Macau Limited Union Gaming Research Macau Limited is a wholly owned

subsidiary of Union Gaming Group LLC Union Gaming Group LLC also owns Union Gaming Advisors LLC a FINRA member firm

and Union Gaming Research LLC a Nevada Registered Investment Adviser Union Gaming Advisors LLC does not produce research

reports All questions or comments concerning this research report should be addressed to Union Gaming Research Macau at +853

2857 5825

Union Gaming Advisors LLC (Advisors) an affiliate of Union Gaming Research Macau Limited does not own any securities of any

company analyzed in this report (Subject Company) Advisors has received non-investment banking related compensation from

the subject company in the past twelve months Accordingly investors should be aware that the firm and its affiliates may have a

conflict of interest that could affect the objectivity of this report Advisors does expect and will seek compensation from any Subject

Company for investment banking services in the next three months Advisors has never been a market maker for a Subject Company

and does not expect to be a market maker for a Subject Company

All prices are those current at the end of the previous trading session unless otherwise indicated Prices are sourced from local

exchanges via Bloomberg and CapitalIQ Data is sourced from Union Gaming Research Union Gaming Research Macau Limited

and subject companies Union Gaming Research and Union Gaming Research Macau Limited are not responsible for errors in prices

provided by independent sources Data analyses and reports necessarily contain time-sensitive information and no subscriber o

client should rely on dated reports or conclusions

Investor clients and financial advisers should consider any report from Union Gaming as only a single factor in making any

investment decision

Ratings methodology

We use a traditional ratings construct (Buy Hold Sell) that is underscored by percentage upsidedownside form current trading

levels along with dividend yields for total return We exclude special dividends and only contemplate regular dividends in our tota

return forecasts These are absolute ratings not relative or forced ratings We define a Buy rating as a company whose shares exhibit

total return (appreciation and dividends) potential of at least +15 within the next twelve months and conversely a Sell rating as

a company whose shares exhibit downside potential of at least 15 within the next twelve months A Hold rating is reserved fo

companies whose shares exhibit total return potential between those parameters

Investor clients and financial advisers should consider any report from Union Gaming as only a single factor in making any

investment decision

7262019 NagaCorp research

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April 30 2015

Union Gaming Research Macau +853 2857 5825 17

Source Union Gaming Research LLC and Union Gaming Research Macau Limited Capital IQ

Distribution of Subject Companiesrsquo stock ratings

Source Union Gaming Research LLC and Union Gaming Research Macau Limited

Distribution of Subject Companies with affiliate banking relationships

Source Union Gaming Research LLC and Union Gaming Research Macau Limited

Copyright copy 2015 Union Gaming Research Macau Limited

Union Gaming Research Macau

Finance and IT Center of Macau (FIT)

Suite 8B

Nam Van Lake Quarteirao 5 Lote A

Macau

9 - 1 3 - 1 2

B u y

P T

=

$ 5

1 1 - 2 1 - 1 2

B u y

P T

=

$ 5 5

2 - 7 - 1 3

B u y

P T

=

$ 6 5

4 - 1 1 - 1 3

B u y

P T

=

$ 7

8 - 8 - 1 3

B u y

P T

= $ 7 5

1 0 - 7 - 1 3

B u y

P T

=

$ 8

2 - 5 - 1 5

B u y

P T

=

$ 7 5

4 - 3 0 - 1 5

B u y

P T

=

$ 8

$1

$2

$3

$4

$5

$6

$7

$8

$9

$10

$1

$2

$3

$4

$5

$6

$7

$8

$9

$10

9 1 3 1 2

1 0 8 1 2

1 0 3 0 1 2

1 1 2 0 1 2

1 2 1 1 1 2

1 4 1 3

1 2 5 1 3

2 2 0 1 3

3 1 3 1 3

4 8 1 3

4 2 9 1 3

5 2 2 1 3

6 1 3 1 3

7 5 1 3

7 2 6 1 3

8 1 9 1 3

9 1 0 1 3

1 0 3 1 3

1 0 2 5 1 3

1 1 1 5 1 3

1 2 6 1 3

1 2 3 1 1 3

1 2 2 1 4

2 1 4 1 4

3 7 1 4

3 2 8 1 4

4 2 2 1 4

5 1 5 1 4

6 6 1 4

6 2 7 1 4

7 2 1 1 4

8 1 1 1 4

9 1 1 4

9 2 3 1 4

1 0 1 6 1 4

1 1 6 1 4

1 1 2 7 1 4

1 2 1 8 1 4

1 1 3 1 5

2 3 1 5

2 2 6 1 5

3 1 9 1 5

4 1 4 1 5

NagaCorp (3918 HK)

Buy Hold Sell

81 19 0

Buy Hold Sell

100 0 0

7262019 NagaCorp research

httpslidepdfcomreaderfullnagacorp-research 717

April 30 2015

Union Gaming Research Macau +853 2857 5825 7

2 Also in June of this year Naga will open a new valet parking garage

located in close proximity to Naga The lack of sufficient parking over the

years has likely impaired some amount of mass market volume

3 In July of this year we expect Bassaka Air to begin flying direct routes to

mainland China multiple times per week augmenting its Macau service

The mainland flights will be marketing in conjunction with China

International Travel Service and will promote tourism to Cambodia In

our view this should be a material driver of increased mass market

Chinese play

4 Naga has already put in place several general marketing initiatives to

attract increased regional play particularly from China and Malaysia

which already appear to be paying dividends We would look for these

trends to continue

5 Ongoing strength in general visitation to Cambodia In 2014 visitationto Cambodia grew by 7 while visitation from China grew by 21 to in

excess of 560000 Visitation to Cambodia beginning at Phnom Penh

International Airport grew 10 in 2014 to nearly 1 million

6 Similar to VIP the opening of NagaCity Walk will provide the company

with similar benefits and increased foot traffic

7 The locals expat story continues to improve with the combination o

wealth generation as well as significant Foreign Direct Investment

particularly from China and Korea

8 At the margin the recent opening of a bridge across the Mekong wilshave about 45 minutes off the travel time between Ho Chi Minh City

and Phnom Penh While the mass market contribution from Vietnamese

is becoming nominal this improved access is beneficial

7262019 NagaCorp research

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April 30 2015

8 +853 2857 5825 Union Gaming Research Macau

Slot machines ETGsIn 1Q15 Naga reported that slot machine ETG volume grew 6 yy to USD290

million While lower than in previous years (+10 in 2013 and +8 in 2014) we

believe growth has increased notably in the second quarter and should continue to

grow on the heels of numerous drivers We are currently forecasting the following slot

machines ETG metrics for Naga over the next two years

bull 2015 GGR growth of 12 to USD95 million (this represents only Nagarsquos

share of the slot GGR)

bull 2016 GGR growth of 11 to USD106 million

Figure 3 Slot ETG GGR trends historical and forecast 1H11 to 2H17E

Source company data Union Gaming Research Macau

Slot ETG GGR growth has also been quite stable although certain events like the

King fathers funeral and nationwide elections have impacted results from time-to-

time We highlight the following growth drivers for slot machines ETGs

1 In June of this year Naga will deploy a significant TITO (Ticket-In Ticket

Out aka ldquocashless gamingrdquo) rollout across the balance of its slots ETGs

Currently only about 600 of 1500 slots have TITO and bringing the

remaining 900 positions to TITO should result in increased time on

device which translates directly to increased GGR

2 At the end of 2015 the slot concession contract with Best Merit wil

expire This will likely result in the signing of a new slot concession (and

resulting one-time fee paid to Naga) Importantly and regardless of

whether the concessionaire remains with Best Merit or of it is a new

party we believe the nearly 300 machines will be replaced Today these

0

10

20

30

40

50

60

70

80

90

100

0

10

20

30

40

50

60

70

80

90

100

1 983112 1 1

2 983112 1 1

1 983112 1 2

2 983112 1 2

1 983112 1 3

2 983112 1 3

1 983112 1 4

2 983112 1 4

1 983112 1 5 983109

2 983112 1 5 983109

1 983112 1 6 983109

2 983112 1 6 983109

1 983112 1 7 983109

2 983112 1 7 983109

983125 983123 983108 983149 983145 983148 983148 983145 983151 983150 983155

983118983137983143983137 983155983148983151983156 983109983124983111 983111983111983122 983137983150983140 983161983161 983139983144983143

983123983148983151983156 983109983124983111 983111983111983122 983129983129

7262019 NagaCorp research

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April 30 2015

Union Gaming Research Macau +853 2857 5825 9

are among the oldest games on the floor and are in need of replacement

Fresh games should result in increased win per unit

3 Noted above we believe Naga is likely to receive two large one-time fees

associated with new contracts to replace those expiring in 2015 with

Best Merit and 2016 with EGT representing nearly 300 and 650

machines respectively Based on the last comp this would imply

approximately USD30 million and USD60 million+ respectively

However based on current market dynamics we believe the numbers

could be higher Regardless the combined fees paid should reach at

least USD90 million+ resulting in headline earnings well beyond current

expectations not to mention incremental cash on hand (larger dividend

or incremental dry powder on the balance sheet)

The remaining drivers are similar to those listed above namely

4 The opening of the parking garage in June

5 The benefits of mass market play from Bassaka Air flights penetrating

into mainland China

6 General marketing initiatives into China and Malaysia

7 Ongoing strength in general visitation to Cambodia

8 The opening of NagaCity Walk

9 Growth in the locals expat story

10 Marginal lift owing to the new bridge across the Mekong

Considered as a whole these growth drivers give us a high degree of confidence in

our current above-consensus expectations over the next two years Importantly

these drivers are long-tailed and should provide for sustained growth into 2017 and

then into the opening of Naga2 the first full year of which will be in 2018

7262019 NagaCorp research

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April 30 2015

10 +853 2857 5825 Union Gaming Research Macau

Greenfield developments

Vladivostok

Outside of the solid growth expected at NagaWorld Naga currently has three

greenfield opportunities in their Vladivostok NagaCity Walk and Naga2 projects Weexpect the company to get break ground in Vladivostok next month with an

expected opening in early 2018 Much of the project will be built in a modular (prefab

format which should allow for a much quicker than normal build cycle We expect the

first phase be defined roughly as

bull USD150 million capex

bull 400 hotel rooms

bull ~70 mass and a TBD of VIP tables

bull 500 slots ETGs

bull Plus retail entertainment FampB and meeting space

Vladivostok is currently an untested market although the first casino should be

opening soon which should provide a solid baseline for the market In the meantime

we are confident that the Naga project can generate returns well into the double

digits and we are currently modeling USD60 million in EBITDA in year one (2018)

Given Vladivostokrsquos proximity to northeast China as well as being very much under-

penetrated in terms of casino gaming we believe our EBITDA estimate could be

conservative For the first time we are now including Vladivostok in our valuation of

Naga for which we are attributed HKD063 in present per share value

NagaCity Walk

The NagaCity Walk retail experience will eventually connect the existing NagaWorld

facility to Naga2 This project will be run by China Duty Free While not a gaming

component we believe the addition of high quality (and quantity of) retail will be a

key driver of incremental volume to the property ndash especially for higher end mass and

VIP customers At the same time the construction of NagaCity Walk has resulted in

notable construction disruption to the propertys primary porte-cochere as well as the

handful of retail outlets at the main entrance The opening of NagaCity Walk is

therefore important in returning the property to its previous traffic flow

While difficult to appreciate the scale of NagaCity Walk we are including two photosbelow It is important to keep in mind the 400 meter (1300 feet) subterranean length

of the project

7262019 NagaCorp research

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April 30 2015

Union Gaming Research Macau +853 2857 5825 11

Figure 4 NagaCity Walk photo 1

Source Union Gaming Research Macau

Figure 5 NagaCity Walk photo 2

Source Union Gaming Research Macau

7262019 NagaCorp research

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April 30 2015

12 +853 2857 5825 Union Gaming Research Macau

Naga2

Naga2 in Phnom Penh is now moving vertically with significant work being done on

the podium The project remains on track for a late 2017 opening In our view this

continues to be a transformational milestone for the company as it will not only take

them out of the single-asset mold (along with Vladivostok) but that it will be the firsthigh-end purpose-built space for the company

We believe that Naga2 will serve to keep the VIP story growing especially given a

significant amount of in-suite VIP gaming salons On a combined basis we believe

that NagaWorld and Naga2 will generate approximately USD22 billion in rolling chip

volume by 2018 which put in perspective is about 3 of what Macau is currently run-

rating (and represents an even lower percentage relative to Macaus peak) In our

view Naga has and is putting in place the right infrastructure that should readily

support and attract this level of VIP gaming play This isnt to say that Naga2 is a VIP

only property To the contrary we have high expectations for mass market and slot

ETG GGR at the property

In its first full year of operations we believe Naga2 can generate approximately

USD550 million in GGR (NagaWorld generated in excess of USD400 million in 2014)

and EBITDA of USD216 million (NagaWorld generated USD176 million in 2014) We

are however modeling cannibalization at NagaWorld during this period

Figure 6 Naga2 construction progress

Source Union Gaming Research Macau

7262019 NagaCorp research

httpslidepdfcomreaderfullnagacorp-research 1317

April 30 2015

Union Gaming Research Macau +853 2857 5825 13

Looking at the out yearsClearly we are excited about the near medium and longer-term growth stories of

NagaCorp The company is in a position to demonstrate stable EBITDA growth ove

the next three years (including 2015) However it is the out years that are the most

transformational for the company The year 2018 is the biggest for Naga as it wil

become a three-asset operator with NagaWorld Naga2 and Vladivostok all being

operational

We are forecasting that NagaCorp can generate more than USD12 billion in revenue

in 2018 and nearly USD500 million in EBITDA (from our estimate of USD211 million in

2015) This level of cash flow along with a forecasted USD280 million in cash on its

unlevered balance sheet (after paying more than USD750 million in dividends from

2015-2018 and around USD250 million in expansion capex) should put NagaCorp in

the running for any number of other regional gaming opportunities including Japan

and or Korea should these opportunities present themselves

Figure 7 Nagas EBITDA outlook 2011 to 2018E

Note Historical EBITDA excludes one-time slot concession fees paid to the company in 2012 and 2013 and excludes potentia

one-time fees likely to be generated in 2015 and 2016 (and beyond)

Source Union Gaming Research Macau

112 128

157 176

211

255

305

484

0

10

20

30

40

50

60

70

$0

$100

$200

$300

$400

$500

$600

2011 2012 2013 2014 2015983109 2016983109 2017983109 2018983109

983109

983106 983113 983124 983108 983105 ( 983125 983123 983108 983149 983145 983148 983148 983145 983151 983150 983155 )

983109983106983113983124983108983105 983129983129 983139983144983137983150983143983141

9831189831379831439831372 amp

983126983148983137983140983145983158983151983155983156983151983147

7262019 NagaCorp research

httpslidepdfcomreaderfullnagacorp-research 1417

April 30 2015

14 +853 2857 5825 Union Gaming Research Macau

EstimatesWe are largely maintaining our forward estimates for NagaCorp Our 2015 EBITDA

estimate is USD211 million (from USD212 million) Our 2016 EBITDA is USD255 million

(from USD251 million) Please see Figure 1 for detailed revenue EBITDA and EPS

estimates Note above our estimates are all above consensus

Figure 8 Estimates and consensus expectations

Source Union Gaming Research Macau Capital IQ

983107983137983152983145983156983137983148 983113983121 983107983151983149983152983137983150983161 983123983156983137983156983145983155983156983145983139983155 (983110983129983085983108983141983139)52983085983159983141983141983147 983144983145983143983144 $739 983105983150983150983157983137983148983145983162983141983140 983108983145983158983145983140983141983150983140983123983144983137983154983141 $032

52983085983159983141983141983147 983148983151983159 $466 983108983145983158983145983140983141983150983140 983129983145983141983148983140 57

983117983137983154983147983141983156 983139983137983152 ($983149983149) $12621 983113983150983155983145983140983141983154 983119983159983150983141983154983155983144983145983152 00

983123983144983137983154983141983155 983151983157983156983155983156983137983150983140983145983150983143 (983149983149) 22700 983113983150983155 983156983145 983156983157983156983145 983151983150 983119983159983150983141983154983155 983144983145 983152 246

983105983158983141983154983137983143983141 983140983137983145983148983161 983158983151983148983157983149983141 (983149983149) 245 983122983141983158983141983150983157983141 983143983154983151983159983156983144 (2983085983161983141983137983154) 199

983123983144983151983154983156 983145983150983156983141983154983141983155983156 (983149983149) 983150983137 983109983106983113983124983108983105 983143983154983151983159983156983144 (2983085983161983141983137983154) 983150983137

983123983144983151983154983156 983113983150983156983141983154983141983155983156 983137983155 983151983142 983142983148983151983137983156 983150983137 983109983120983123 983143983154983151983159983156983144 (2983085983161983141983137983154) 60

983105983150983150983157983137983148 983122983141983155983157983148983156983155 2014 2015983109 2016983109 2017983109 2018983109

983125983150983145983151983150 983122983141983158983141983150983157983141983155 ($983149983149) $404 $589 $680 $781 $1219

983120983154983141983158983145983151983157983155 983154983141983158983141983150983157983141 983141983155983156983145983149983137983156983141 983085 $564 $644 983085 983085

983107983144983137983150983143983141 983085 $26 $36 983085 983085

983107983137983152983145983156983137983148 983113983121 983154983141983158983141983150983157983141 983141983155983156983145983149983137983156983141 983085 $491 $581 $694 $1099

983125983150983145983151983150 983109983106983113983124983108983105 ($983149983149) $176 $211 $255 $305 $484

983120983154983141983158983145983151983157983155 983109983106983113983124983108983105 983141983155983156983145983149983137983156983141 983085 $212 $251 983085 983085

983107983144983137983150983143983141 983085 ($1) $4 983085 983085

983107983137983152983145983156983137983148 983113983121 983109983106983113983124983108983105 983141983155983156983145983149983137983156983141 983085 $203 $233 $267 $399

983125983150983145983151983150 983109983120983123 $0060 $0069 $0080 $0068 $0111

983120983154983141983158983145983151983157983155 983109983120983123 983141983155983156983145983149983137983156983141 983085 $0072 $0081 983085 983085

983107983144983137983150983143983141 983085 ($0003) ($0001) 983085 983085

983107983137983152983145983156983137983148 983113983121 983109983120983123 983141983155983156983145983149983137983156983141 983085 $0065 $0067 $0060 $0081

983126983137983148983157983137983156983145983151983150 983085 983109983120983123 983117983157983148983156983145983152983148983141 104983160 90983160 105983160 64983160

983126983137983148983157983137983156983145983151983150 983085 983109983126983109983106983113983124983108983105 983117983157983148983156983145983152983148983141 73983160 67983160 84983160 51983160

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April 30 2015

Union Gaming Research Macau +853 2857 5825 15

Price Target HKD800 (from HKD750)We value NagaCorp using an EVEBITDA approach on forward earnings in addition to

incremental present value associated with the companyrsquos Naga2 and Vladivostok

projects the first full year of operations for both will be 2018 Our 12 month price

target is HKD800 (+HKD050) and is based on an 85x multiple of our 2015 EBITDA

estimate (HKD400) in addition to the per share present value for Naga2 and

Vladivostok (HKD400) Our calculations assume a share count of approximately

3848mm which accounts for the dilution associated with the companyrsquos acquisition

of the USD369 million NagaCity Walk and Naga2 complex from CEO Tan Sri Dr Chen

in the form of share issuance convertible bond We note that the 85x multiple

represents a slightly lower multiple than we have previously ascribed (9x) which we

would attribute to broader multiple pullback in the gaming space However it stil

remains a discount to its peer group in Macau to which we generally ascribe a

multiple approximately 3 or 4 turns higher We feel an 85x multiple is justified fo

Naga as the company has consistently executed on its growth initiatives enabling the

company to growth faster than its peer group It is also in the home stretch of

shedding its image as a single-asset story with Naga2 now under construction in a

meaningful way and Vladivostok on the horizon Our price target along with an

expected dividend yield of 7 in 2015 represents 51 upside to todayrsquos closing price

RisksRisks to shares of NagaCorp include country risk (loss of exclusive license adjustmen

to the companyrsquos advantageous low monthly fixed obligation tax) development risk

including delays to Naga2 and the Vladivostok project incremental regiona

competition (especially from Vietnam should locals be allowed to gamble) volatility

associated with being a single-asset operator (for now) in the context of increasing

exposure to the VIP segment

7262019 NagaCorp research

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April 30 2015

16 +853 2857 5825 Union Gaming Research Macau

Appendix 1 Important DisclosuresAdditional information is available upon request

This report was prepared by Union Gaming Research Macau Limited Union Gaming Research Macau Limited is a wholly owned

subsidiary of Union Gaming Group LLC Union Gaming Group LLC also owns Union Gaming Advisors LLC a FINRA member firm

and Union Gaming Research LLC a Nevada Registered Investment Adviser Union Gaming Advisors LLC does not produce research

reports All questions or comments concerning this research report should be addressed to Union Gaming Research Macau at +853

2857 5825

Union Gaming Advisors LLC (Advisors) an affiliate of Union Gaming Research Macau Limited does not own any securities of any

company analyzed in this report (Subject Company) Advisors has received non-investment banking related compensation from

the subject company in the past twelve months Accordingly investors should be aware that the firm and its affiliates may have a

conflict of interest that could affect the objectivity of this report Advisors does expect and will seek compensation from any Subject

Company for investment banking services in the next three months Advisors has never been a market maker for a Subject Company

and does not expect to be a market maker for a Subject Company

All prices are those current at the end of the previous trading session unless otherwise indicated Prices are sourced from local

exchanges via Bloomberg and CapitalIQ Data is sourced from Union Gaming Research Union Gaming Research Macau Limited

and subject companies Union Gaming Research and Union Gaming Research Macau Limited are not responsible for errors in prices

provided by independent sources Data analyses and reports necessarily contain time-sensitive information and no subscriber o

client should rely on dated reports or conclusions

Investor clients and financial advisers should consider any report from Union Gaming as only a single factor in making any

investment decision

Ratings methodology

We use a traditional ratings construct (Buy Hold Sell) that is underscored by percentage upsidedownside form current trading

levels along with dividend yields for total return We exclude special dividends and only contemplate regular dividends in our tota

return forecasts These are absolute ratings not relative or forced ratings We define a Buy rating as a company whose shares exhibit

total return (appreciation and dividends) potential of at least +15 within the next twelve months and conversely a Sell rating as

a company whose shares exhibit downside potential of at least 15 within the next twelve months A Hold rating is reserved fo

companies whose shares exhibit total return potential between those parameters

Investor clients and financial advisers should consider any report from Union Gaming as only a single factor in making any

investment decision

7262019 NagaCorp research

httpslidepdfcomreaderfullnagacorp-research 1717

April 30 2015

Union Gaming Research Macau +853 2857 5825 17

Source Union Gaming Research LLC and Union Gaming Research Macau Limited Capital IQ

Distribution of Subject Companiesrsquo stock ratings

Source Union Gaming Research LLC and Union Gaming Research Macau Limited

Distribution of Subject Companies with affiliate banking relationships

Source Union Gaming Research LLC and Union Gaming Research Macau Limited

Copyright copy 2015 Union Gaming Research Macau Limited

Union Gaming Research Macau

Finance and IT Center of Macau (FIT)

Suite 8B

Nam Van Lake Quarteirao 5 Lote A

Macau

9 - 1 3 - 1 2

B u y

P T

=

$ 5

1 1 - 2 1 - 1 2

B u y

P T

=

$ 5 5

2 - 7 - 1 3

B u y

P T

=

$ 6 5

4 - 1 1 - 1 3

B u y

P T

=

$ 7

8 - 8 - 1 3

B u y

P T

= $ 7 5

1 0 - 7 - 1 3

B u y

P T

=

$ 8

2 - 5 - 1 5

B u y

P T

=

$ 7 5

4 - 3 0 - 1 5

B u y

P T

=

$ 8

$1

$2

$3

$4

$5

$6

$7

$8

$9

$10

$1

$2

$3

$4

$5

$6

$7

$8

$9

$10

9 1 3 1 2

1 0 8 1 2

1 0 3 0 1 2

1 1 2 0 1 2

1 2 1 1 1 2

1 4 1 3

1 2 5 1 3

2 2 0 1 3

3 1 3 1 3

4 8 1 3

4 2 9 1 3

5 2 2 1 3

6 1 3 1 3

7 5 1 3

7 2 6 1 3

8 1 9 1 3

9 1 0 1 3

1 0 3 1 3

1 0 2 5 1 3

1 1 1 5 1 3

1 2 6 1 3

1 2 3 1 1 3

1 2 2 1 4

2 1 4 1 4

3 7 1 4

3 2 8 1 4

4 2 2 1 4

5 1 5 1 4

6 6 1 4

6 2 7 1 4

7 2 1 1 4

8 1 1 1 4

9 1 1 4

9 2 3 1 4

1 0 1 6 1 4

1 1 6 1 4

1 1 2 7 1 4

1 2 1 8 1 4

1 1 3 1 5

2 3 1 5

2 2 6 1 5

3 1 9 1 5

4 1 4 1 5

NagaCorp (3918 HK)

Buy Hold Sell

81 19 0

Buy Hold Sell

100 0 0

7262019 NagaCorp research

httpslidepdfcomreaderfullnagacorp-research 817

April 30 2015

8 +853 2857 5825 Union Gaming Research Macau

Slot machines ETGsIn 1Q15 Naga reported that slot machine ETG volume grew 6 yy to USD290

million While lower than in previous years (+10 in 2013 and +8 in 2014) we

believe growth has increased notably in the second quarter and should continue to

grow on the heels of numerous drivers We are currently forecasting the following slot

machines ETG metrics for Naga over the next two years

bull 2015 GGR growth of 12 to USD95 million (this represents only Nagarsquos

share of the slot GGR)

bull 2016 GGR growth of 11 to USD106 million

Figure 3 Slot ETG GGR trends historical and forecast 1H11 to 2H17E

Source company data Union Gaming Research Macau

Slot ETG GGR growth has also been quite stable although certain events like the

King fathers funeral and nationwide elections have impacted results from time-to-

time We highlight the following growth drivers for slot machines ETGs

1 In June of this year Naga will deploy a significant TITO (Ticket-In Ticket

Out aka ldquocashless gamingrdquo) rollout across the balance of its slots ETGs

Currently only about 600 of 1500 slots have TITO and bringing the

remaining 900 positions to TITO should result in increased time on

device which translates directly to increased GGR

2 At the end of 2015 the slot concession contract with Best Merit wil

expire This will likely result in the signing of a new slot concession (and

resulting one-time fee paid to Naga) Importantly and regardless of

whether the concessionaire remains with Best Merit or of it is a new

party we believe the nearly 300 machines will be replaced Today these

0

10

20

30

40

50

60

70

80

90

100

0

10

20

30

40

50

60

70

80

90

100

1 983112 1 1

2 983112 1 1

1 983112 1 2

2 983112 1 2

1 983112 1 3

2 983112 1 3

1 983112 1 4

2 983112 1 4

1 983112 1 5 983109

2 983112 1 5 983109

1 983112 1 6 983109

2 983112 1 6 983109

1 983112 1 7 983109

2 983112 1 7 983109

983125 983123 983108 983149 983145 983148 983148 983145 983151 983150 983155

983118983137983143983137 983155983148983151983156 983109983124983111 983111983111983122 983137983150983140 983161983161 983139983144983143

983123983148983151983156 983109983124983111 983111983111983122 983129983129

7262019 NagaCorp research

httpslidepdfcomreaderfullnagacorp-research 917

April 30 2015

Union Gaming Research Macau +853 2857 5825 9

are among the oldest games on the floor and are in need of replacement

Fresh games should result in increased win per unit

3 Noted above we believe Naga is likely to receive two large one-time fees

associated with new contracts to replace those expiring in 2015 with

Best Merit and 2016 with EGT representing nearly 300 and 650

machines respectively Based on the last comp this would imply

approximately USD30 million and USD60 million+ respectively

However based on current market dynamics we believe the numbers

could be higher Regardless the combined fees paid should reach at

least USD90 million+ resulting in headline earnings well beyond current

expectations not to mention incremental cash on hand (larger dividend

or incremental dry powder on the balance sheet)

The remaining drivers are similar to those listed above namely

4 The opening of the parking garage in June

5 The benefits of mass market play from Bassaka Air flights penetrating

into mainland China

6 General marketing initiatives into China and Malaysia

7 Ongoing strength in general visitation to Cambodia

8 The opening of NagaCity Walk

9 Growth in the locals expat story

10 Marginal lift owing to the new bridge across the Mekong

Considered as a whole these growth drivers give us a high degree of confidence in

our current above-consensus expectations over the next two years Importantly

these drivers are long-tailed and should provide for sustained growth into 2017 and

then into the opening of Naga2 the first full year of which will be in 2018

7262019 NagaCorp research

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April 30 2015

10 +853 2857 5825 Union Gaming Research Macau

Greenfield developments

Vladivostok

Outside of the solid growth expected at NagaWorld Naga currently has three

greenfield opportunities in their Vladivostok NagaCity Walk and Naga2 projects Weexpect the company to get break ground in Vladivostok next month with an

expected opening in early 2018 Much of the project will be built in a modular (prefab

format which should allow for a much quicker than normal build cycle We expect the

first phase be defined roughly as

bull USD150 million capex

bull 400 hotel rooms

bull ~70 mass and a TBD of VIP tables

bull 500 slots ETGs

bull Plus retail entertainment FampB and meeting space

Vladivostok is currently an untested market although the first casino should be

opening soon which should provide a solid baseline for the market In the meantime

we are confident that the Naga project can generate returns well into the double

digits and we are currently modeling USD60 million in EBITDA in year one (2018)

Given Vladivostokrsquos proximity to northeast China as well as being very much under-

penetrated in terms of casino gaming we believe our EBITDA estimate could be

conservative For the first time we are now including Vladivostok in our valuation of

Naga for which we are attributed HKD063 in present per share value

NagaCity Walk

The NagaCity Walk retail experience will eventually connect the existing NagaWorld

facility to Naga2 This project will be run by China Duty Free While not a gaming

component we believe the addition of high quality (and quantity of) retail will be a

key driver of incremental volume to the property ndash especially for higher end mass and

VIP customers At the same time the construction of NagaCity Walk has resulted in

notable construction disruption to the propertys primary porte-cochere as well as the

handful of retail outlets at the main entrance The opening of NagaCity Walk is

therefore important in returning the property to its previous traffic flow

While difficult to appreciate the scale of NagaCity Walk we are including two photosbelow It is important to keep in mind the 400 meter (1300 feet) subterranean length

of the project

7262019 NagaCorp research

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April 30 2015

Union Gaming Research Macau +853 2857 5825 11

Figure 4 NagaCity Walk photo 1

Source Union Gaming Research Macau

Figure 5 NagaCity Walk photo 2

Source Union Gaming Research Macau

7262019 NagaCorp research

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April 30 2015

12 +853 2857 5825 Union Gaming Research Macau

Naga2

Naga2 in Phnom Penh is now moving vertically with significant work being done on

the podium The project remains on track for a late 2017 opening In our view this

continues to be a transformational milestone for the company as it will not only take

them out of the single-asset mold (along with Vladivostok) but that it will be the firsthigh-end purpose-built space for the company

We believe that Naga2 will serve to keep the VIP story growing especially given a

significant amount of in-suite VIP gaming salons On a combined basis we believe

that NagaWorld and Naga2 will generate approximately USD22 billion in rolling chip

volume by 2018 which put in perspective is about 3 of what Macau is currently run-

rating (and represents an even lower percentage relative to Macaus peak) In our

view Naga has and is putting in place the right infrastructure that should readily

support and attract this level of VIP gaming play This isnt to say that Naga2 is a VIP

only property To the contrary we have high expectations for mass market and slot

ETG GGR at the property

In its first full year of operations we believe Naga2 can generate approximately

USD550 million in GGR (NagaWorld generated in excess of USD400 million in 2014)

and EBITDA of USD216 million (NagaWorld generated USD176 million in 2014) We

are however modeling cannibalization at NagaWorld during this period

Figure 6 Naga2 construction progress

Source Union Gaming Research Macau

7262019 NagaCorp research

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April 30 2015

Union Gaming Research Macau +853 2857 5825 13

Looking at the out yearsClearly we are excited about the near medium and longer-term growth stories of

NagaCorp The company is in a position to demonstrate stable EBITDA growth ove

the next three years (including 2015) However it is the out years that are the most

transformational for the company The year 2018 is the biggest for Naga as it wil

become a three-asset operator with NagaWorld Naga2 and Vladivostok all being

operational

We are forecasting that NagaCorp can generate more than USD12 billion in revenue

in 2018 and nearly USD500 million in EBITDA (from our estimate of USD211 million in

2015) This level of cash flow along with a forecasted USD280 million in cash on its

unlevered balance sheet (after paying more than USD750 million in dividends from

2015-2018 and around USD250 million in expansion capex) should put NagaCorp in

the running for any number of other regional gaming opportunities including Japan

and or Korea should these opportunities present themselves

Figure 7 Nagas EBITDA outlook 2011 to 2018E

Note Historical EBITDA excludes one-time slot concession fees paid to the company in 2012 and 2013 and excludes potentia

one-time fees likely to be generated in 2015 and 2016 (and beyond)

Source Union Gaming Research Macau

112 128

157 176

211

255

305

484

0

10

20

30

40

50

60

70

$0

$100

$200

$300

$400

$500

$600

2011 2012 2013 2014 2015983109 2016983109 2017983109 2018983109

983109

983106 983113 983124 983108 983105 ( 983125 983123 983108 983149 983145 983148 983148 983145 983151 983150 983155 )

983109983106983113983124983108983105 983129983129 983139983144983137983150983143983141

9831189831379831439831372 amp

983126983148983137983140983145983158983151983155983156983151983147

7262019 NagaCorp research

httpslidepdfcomreaderfullnagacorp-research 1417

April 30 2015

14 +853 2857 5825 Union Gaming Research Macau

EstimatesWe are largely maintaining our forward estimates for NagaCorp Our 2015 EBITDA

estimate is USD211 million (from USD212 million) Our 2016 EBITDA is USD255 million

(from USD251 million) Please see Figure 1 for detailed revenue EBITDA and EPS

estimates Note above our estimates are all above consensus

Figure 8 Estimates and consensus expectations

Source Union Gaming Research Macau Capital IQ

983107983137983152983145983156983137983148 983113983121 983107983151983149983152983137983150983161 983123983156983137983156983145983155983156983145983139983155 (983110983129983085983108983141983139)52983085983159983141983141983147 983144983145983143983144 $739 983105983150983150983157983137983148983145983162983141983140 983108983145983158983145983140983141983150983140983123983144983137983154983141 $032

52983085983159983141983141983147 983148983151983159 $466 983108983145983158983145983140983141983150983140 983129983145983141983148983140 57

983117983137983154983147983141983156 983139983137983152 ($983149983149) $12621 983113983150983155983145983140983141983154 983119983159983150983141983154983155983144983145983152 00

983123983144983137983154983141983155 983151983157983156983155983156983137983150983140983145983150983143 (983149983149) 22700 983113983150983155 983156983145 983156983157983156983145 983151983150 983119983159983150983141983154983155 983144983145 983152 246

983105983158983141983154983137983143983141 983140983137983145983148983161 983158983151983148983157983149983141 (983149983149) 245 983122983141983158983141983150983157983141 983143983154983151983159983156983144 (2983085983161983141983137983154) 199

983123983144983151983154983156 983145983150983156983141983154983141983155983156 (983149983149) 983150983137 983109983106983113983124983108983105 983143983154983151983159983156983144 (2983085983161983141983137983154) 983150983137

983123983144983151983154983156 983113983150983156983141983154983141983155983156 983137983155 983151983142 983142983148983151983137983156 983150983137 983109983120983123 983143983154983151983159983156983144 (2983085983161983141983137983154) 60

983105983150983150983157983137983148 983122983141983155983157983148983156983155 2014 2015983109 2016983109 2017983109 2018983109

983125983150983145983151983150 983122983141983158983141983150983157983141983155 ($983149983149) $404 $589 $680 $781 $1219

983120983154983141983158983145983151983157983155 983154983141983158983141983150983157983141 983141983155983156983145983149983137983156983141 983085 $564 $644 983085 983085

983107983144983137983150983143983141 983085 $26 $36 983085 983085

983107983137983152983145983156983137983148 983113983121 983154983141983158983141983150983157983141 983141983155983156983145983149983137983156983141 983085 $491 $581 $694 $1099

983125983150983145983151983150 983109983106983113983124983108983105 ($983149983149) $176 $211 $255 $305 $484

983120983154983141983158983145983151983157983155 983109983106983113983124983108983105 983141983155983156983145983149983137983156983141 983085 $212 $251 983085 983085

983107983144983137983150983143983141 983085 ($1) $4 983085 983085

983107983137983152983145983156983137983148 983113983121 983109983106983113983124983108983105 983141983155983156983145983149983137983156983141 983085 $203 $233 $267 $399

983125983150983145983151983150 983109983120983123 $0060 $0069 $0080 $0068 $0111

983120983154983141983158983145983151983157983155 983109983120983123 983141983155983156983145983149983137983156983141 983085 $0072 $0081 983085 983085

983107983144983137983150983143983141 983085 ($0003) ($0001) 983085 983085

983107983137983152983145983156983137983148 983113983121 983109983120983123 983141983155983156983145983149983137983156983141 983085 $0065 $0067 $0060 $0081

983126983137983148983157983137983156983145983151983150 983085 983109983120983123 983117983157983148983156983145983152983148983141 104983160 90983160 105983160 64983160

983126983137983148983157983137983156983145983151983150 983085 983109983126983109983106983113983124983108983105 983117983157983148983156983145983152983148983141 73983160 67983160 84983160 51983160

7262019 NagaCorp research

httpslidepdfcomreaderfullnagacorp-research 1517

April 30 2015

Union Gaming Research Macau +853 2857 5825 15

Price Target HKD800 (from HKD750)We value NagaCorp using an EVEBITDA approach on forward earnings in addition to

incremental present value associated with the companyrsquos Naga2 and Vladivostok

projects the first full year of operations for both will be 2018 Our 12 month price

target is HKD800 (+HKD050) and is based on an 85x multiple of our 2015 EBITDA

estimate (HKD400) in addition to the per share present value for Naga2 and

Vladivostok (HKD400) Our calculations assume a share count of approximately

3848mm which accounts for the dilution associated with the companyrsquos acquisition

of the USD369 million NagaCity Walk and Naga2 complex from CEO Tan Sri Dr Chen

in the form of share issuance convertible bond We note that the 85x multiple

represents a slightly lower multiple than we have previously ascribed (9x) which we

would attribute to broader multiple pullback in the gaming space However it stil

remains a discount to its peer group in Macau to which we generally ascribe a

multiple approximately 3 or 4 turns higher We feel an 85x multiple is justified fo

Naga as the company has consistently executed on its growth initiatives enabling the

company to growth faster than its peer group It is also in the home stretch of

shedding its image as a single-asset story with Naga2 now under construction in a

meaningful way and Vladivostok on the horizon Our price target along with an

expected dividend yield of 7 in 2015 represents 51 upside to todayrsquos closing price

RisksRisks to shares of NagaCorp include country risk (loss of exclusive license adjustmen

to the companyrsquos advantageous low monthly fixed obligation tax) development risk

including delays to Naga2 and the Vladivostok project incremental regiona

competition (especially from Vietnam should locals be allowed to gamble) volatility

associated with being a single-asset operator (for now) in the context of increasing

exposure to the VIP segment

7262019 NagaCorp research

httpslidepdfcomreaderfullnagacorp-research 1617

April 30 2015

16 +853 2857 5825 Union Gaming Research Macau

Appendix 1 Important DisclosuresAdditional information is available upon request

This report was prepared by Union Gaming Research Macau Limited Union Gaming Research Macau Limited is a wholly owned

subsidiary of Union Gaming Group LLC Union Gaming Group LLC also owns Union Gaming Advisors LLC a FINRA member firm

and Union Gaming Research LLC a Nevada Registered Investment Adviser Union Gaming Advisors LLC does not produce research

reports All questions or comments concerning this research report should be addressed to Union Gaming Research Macau at +853

2857 5825

Union Gaming Advisors LLC (Advisors) an affiliate of Union Gaming Research Macau Limited does not own any securities of any

company analyzed in this report (Subject Company) Advisors has received non-investment banking related compensation from

the subject company in the past twelve months Accordingly investors should be aware that the firm and its affiliates may have a

conflict of interest that could affect the objectivity of this report Advisors does expect and will seek compensation from any Subject

Company for investment banking services in the next three months Advisors has never been a market maker for a Subject Company

and does not expect to be a market maker for a Subject Company

All prices are those current at the end of the previous trading session unless otherwise indicated Prices are sourced from local

exchanges via Bloomberg and CapitalIQ Data is sourced from Union Gaming Research Union Gaming Research Macau Limited

and subject companies Union Gaming Research and Union Gaming Research Macau Limited are not responsible for errors in prices

provided by independent sources Data analyses and reports necessarily contain time-sensitive information and no subscriber o

client should rely on dated reports or conclusions

Investor clients and financial advisers should consider any report from Union Gaming as only a single factor in making any

investment decision

Ratings methodology

We use a traditional ratings construct (Buy Hold Sell) that is underscored by percentage upsidedownside form current trading

levels along with dividend yields for total return We exclude special dividends and only contemplate regular dividends in our tota

return forecasts These are absolute ratings not relative or forced ratings We define a Buy rating as a company whose shares exhibit

total return (appreciation and dividends) potential of at least +15 within the next twelve months and conversely a Sell rating as

a company whose shares exhibit downside potential of at least 15 within the next twelve months A Hold rating is reserved fo

companies whose shares exhibit total return potential between those parameters

Investor clients and financial advisers should consider any report from Union Gaming as only a single factor in making any

investment decision

7262019 NagaCorp research

httpslidepdfcomreaderfullnagacorp-research 1717

April 30 2015

Union Gaming Research Macau +853 2857 5825 17

Source Union Gaming Research LLC and Union Gaming Research Macau Limited Capital IQ

Distribution of Subject Companiesrsquo stock ratings

Source Union Gaming Research LLC and Union Gaming Research Macau Limited

Distribution of Subject Companies with affiliate banking relationships

Source Union Gaming Research LLC and Union Gaming Research Macau Limited

Copyright copy 2015 Union Gaming Research Macau Limited

Union Gaming Research Macau

Finance and IT Center of Macau (FIT)

Suite 8B

Nam Van Lake Quarteirao 5 Lote A

Macau

9 - 1 3 - 1 2

B u y

P T

=

$ 5

1 1 - 2 1 - 1 2

B u y

P T

=

$ 5 5

2 - 7 - 1 3

B u y

P T

=

$ 6 5

4 - 1 1 - 1 3

B u y

P T

=

$ 7

8 - 8 - 1 3

B u y

P T

= $ 7 5

1 0 - 7 - 1 3

B u y

P T

=

$ 8

2 - 5 - 1 5

B u y

P T

=

$ 7 5

4 - 3 0 - 1 5

B u y

P T

=

$ 8

$1

$2

$3

$4

$5

$6

$7

$8

$9

$10

$1

$2

$3

$4

$5

$6

$7

$8

$9

$10

9 1 3 1 2

1 0 8 1 2

1 0 3 0 1 2

1 1 2 0 1 2

1 2 1 1 1 2

1 4 1 3

1 2 5 1 3

2 2 0 1 3

3 1 3 1 3

4 8 1 3

4 2 9 1 3

5 2 2 1 3

6 1 3 1 3

7 5 1 3

7 2 6 1 3

8 1 9 1 3

9 1 0 1 3

1 0 3 1 3

1 0 2 5 1 3

1 1 1 5 1 3

1 2 6 1 3

1 2 3 1 1 3

1 2 2 1 4

2 1 4 1 4

3 7 1 4

3 2 8 1 4

4 2 2 1 4

5 1 5 1 4

6 6 1 4

6 2 7 1 4

7 2 1 1 4

8 1 1 1 4

9 1 1 4

9 2 3 1 4

1 0 1 6 1 4

1 1 6 1 4

1 1 2 7 1 4

1 2 1 8 1 4

1 1 3 1 5

2 3 1 5

2 2 6 1 5

3 1 9 1 5

4 1 4 1 5

NagaCorp (3918 HK)

Buy Hold Sell

81 19 0

Buy Hold Sell

100 0 0

7262019 NagaCorp research

httpslidepdfcomreaderfullnagacorp-research 917

April 30 2015

Union Gaming Research Macau +853 2857 5825 9

are among the oldest games on the floor and are in need of replacement

Fresh games should result in increased win per unit

3 Noted above we believe Naga is likely to receive two large one-time fees

associated with new contracts to replace those expiring in 2015 with

Best Merit and 2016 with EGT representing nearly 300 and 650

machines respectively Based on the last comp this would imply

approximately USD30 million and USD60 million+ respectively

However based on current market dynamics we believe the numbers

could be higher Regardless the combined fees paid should reach at

least USD90 million+ resulting in headline earnings well beyond current

expectations not to mention incremental cash on hand (larger dividend

or incremental dry powder on the balance sheet)

The remaining drivers are similar to those listed above namely

4 The opening of the parking garage in June

5 The benefits of mass market play from Bassaka Air flights penetrating

into mainland China

6 General marketing initiatives into China and Malaysia

7 Ongoing strength in general visitation to Cambodia

8 The opening of NagaCity Walk

9 Growth in the locals expat story

10 Marginal lift owing to the new bridge across the Mekong

Considered as a whole these growth drivers give us a high degree of confidence in

our current above-consensus expectations over the next two years Importantly

these drivers are long-tailed and should provide for sustained growth into 2017 and

then into the opening of Naga2 the first full year of which will be in 2018

7262019 NagaCorp research

httpslidepdfcomreaderfullnagacorp-research 1017

April 30 2015

10 +853 2857 5825 Union Gaming Research Macau

Greenfield developments

Vladivostok

Outside of the solid growth expected at NagaWorld Naga currently has three

greenfield opportunities in their Vladivostok NagaCity Walk and Naga2 projects Weexpect the company to get break ground in Vladivostok next month with an

expected opening in early 2018 Much of the project will be built in a modular (prefab

format which should allow for a much quicker than normal build cycle We expect the

first phase be defined roughly as

bull USD150 million capex

bull 400 hotel rooms

bull ~70 mass and a TBD of VIP tables

bull 500 slots ETGs

bull Plus retail entertainment FampB and meeting space

Vladivostok is currently an untested market although the first casino should be

opening soon which should provide a solid baseline for the market In the meantime

we are confident that the Naga project can generate returns well into the double

digits and we are currently modeling USD60 million in EBITDA in year one (2018)

Given Vladivostokrsquos proximity to northeast China as well as being very much under-

penetrated in terms of casino gaming we believe our EBITDA estimate could be

conservative For the first time we are now including Vladivostok in our valuation of

Naga for which we are attributed HKD063 in present per share value

NagaCity Walk

The NagaCity Walk retail experience will eventually connect the existing NagaWorld

facility to Naga2 This project will be run by China Duty Free While not a gaming

component we believe the addition of high quality (and quantity of) retail will be a

key driver of incremental volume to the property ndash especially for higher end mass and

VIP customers At the same time the construction of NagaCity Walk has resulted in

notable construction disruption to the propertys primary porte-cochere as well as the

handful of retail outlets at the main entrance The opening of NagaCity Walk is

therefore important in returning the property to its previous traffic flow

While difficult to appreciate the scale of NagaCity Walk we are including two photosbelow It is important to keep in mind the 400 meter (1300 feet) subterranean length

of the project

7262019 NagaCorp research

httpslidepdfcomreaderfullnagacorp-research 1117

April 30 2015

Union Gaming Research Macau +853 2857 5825 11

Figure 4 NagaCity Walk photo 1

Source Union Gaming Research Macau

Figure 5 NagaCity Walk photo 2

Source Union Gaming Research Macau

7262019 NagaCorp research

httpslidepdfcomreaderfullnagacorp-research 1217

April 30 2015

12 +853 2857 5825 Union Gaming Research Macau

Naga2

Naga2 in Phnom Penh is now moving vertically with significant work being done on

the podium The project remains on track for a late 2017 opening In our view this

continues to be a transformational milestone for the company as it will not only take

them out of the single-asset mold (along with Vladivostok) but that it will be the firsthigh-end purpose-built space for the company

We believe that Naga2 will serve to keep the VIP story growing especially given a

significant amount of in-suite VIP gaming salons On a combined basis we believe

that NagaWorld and Naga2 will generate approximately USD22 billion in rolling chip

volume by 2018 which put in perspective is about 3 of what Macau is currently run-

rating (and represents an even lower percentage relative to Macaus peak) In our

view Naga has and is putting in place the right infrastructure that should readily

support and attract this level of VIP gaming play This isnt to say that Naga2 is a VIP

only property To the contrary we have high expectations for mass market and slot

ETG GGR at the property

In its first full year of operations we believe Naga2 can generate approximately

USD550 million in GGR (NagaWorld generated in excess of USD400 million in 2014)

and EBITDA of USD216 million (NagaWorld generated USD176 million in 2014) We

are however modeling cannibalization at NagaWorld during this period

Figure 6 Naga2 construction progress

Source Union Gaming Research Macau

7262019 NagaCorp research

httpslidepdfcomreaderfullnagacorp-research 1317

April 30 2015

Union Gaming Research Macau +853 2857 5825 13

Looking at the out yearsClearly we are excited about the near medium and longer-term growth stories of

NagaCorp The company is in a position to demonstrate stable EBITDA growth ove

the next three years (including 2015) However it is the out years that are the most

transformational for the company The year 2018 is the biggest for Naga as it wil

become a three-asset operator with NagaWorld Naga2 and Vladivostok all being

operational

We are forecasting that NagaCorp can generate more than USD12 billion in revenue

in 2018 and nearly USD500 million in EBITDA (from our estimate of USD211 million in

2015) This level of cash flow along with a forecasted USD280 million in cash on its

unlevered balance sheet (after paying more than USD750 million in dividends from

2015-2018 and around USD250 million in expansion capex) should put NagaCorp in

the running for any number of other regional gaming opportunities including Japan

and or Korea should these opportunities present themselves

Figure 7 Nagas EBITDA outlook 2011 to 2018E

Note Historical EBITDA excludes one-time slot concession fees paid to the company in 2012 and 2013 and excludes potentia

one-time fees likely to be generated in 2015 and 2016 (and beyond)

Source Union Gaming Research Macau

112 128

157 176

211

255

305

484

0

10

20

30

40

50

60

70

$0

$100

$200

$300

$400

$500

$600

2011 2012 2013 2014 2015983109 2016983109 2017983109 2018983109

983109

983106 983113 983124 983108 983105 ( 983125 983123 983108 983149 983145 983148 983148 983145 983151 983150 983155 )

983109983106983113983124983108983105 983129983129 983139983144983137983150983143983141

9831189831379831439831372 amp

983126983148983137983140983145983158983151983155983156983151983147

7262019 NagaCorp research

httpslidepdfcomreaderfullnagacorp-research 1417

April 30 2015

14 +853 2857 5825 Union Gaming Research Macau

EstimatesWe are largely maintaining our forward estimates for NagaCorp Our 2015 EBITDA

estimate is USD211 million (from USD212 million) Our 2016 EBITDA is USD255 million

(from USD251 million) Please see Figure 1 for detailed revenue EBITDA and EPS

estimates Note above our estimates are all above consensus

Figure 8 Estimates and consensus expectations

Source Union Gaming Research Macau Capital IQ

983107983137983152983145983156983137983148 983113983121 983107983151983149983152983137983150983161 983123983156983137983156983145983155983156983145983139983155 (983110983129983085983108983141983139)52983085983159983141983141983147 983144983145983143983144 $739 983105983150983150983157983137983148983145983162983141983140 983108983145983158983145983140983141983150983140983123983144983137983154983141 $032

52983085983159983141983141983147 983148983151983159 $466 983108983145983158983145983140983141983150983140 983129983145983141983148983140 57

983117983137983154983147983141983156 983139983137983152 ($983149983149) $12621 983113983150983155983145983140983141983154 983119983159983150983141983154983155983144983145983152 00

983123983144983137983154983141983155 983151983157983156983155983156983137983150983140983145983150983143 (983149983149) 22700 983113983150983155 983156983145 983156983157983156983145 983151983150 983119983159983150983141983154983155 983144983145 983152 246

983105983158983141983154983137983143983141 983140983137983145983148983161 983158983151983148983157983149983141 (983149983149) 245 983122983141983158983141983150983157983141 983143983154983151983159983156983144 (2983085983161983141983137983154) 199

983123983144983151983154983156 983145983150983156983141983154983141983155983156 (983149983149) 983150983137 983109983106983113983124983108983105 983143983154983151983159983156983144 (2983085983161983141983137983154) 983150983137

983123983144983151983154983156 983113983150983156983141983154983141983155983156 983137983155 983151983142 983142983148983151983137983156 983150983137 983109983120983123 983143983154983151983159983156983144 (2983085983161983141983137983154) 60

983105983150983150983157983137983148 983122983141983155983157983148983156983155 2014 2015983109 2016983109 2017983109 2018983109

983125983150983145983151983150 983122983141983158983141983150983157983141983155 ($983149983149) $404 $589 $680 $781 $1219

983120983154983141983158983145983151983157983155 983154983141983158983141983150983157983141 983141983155983156983145983149983137983156983141 983085 $564 $644 983085 983085

983107983144983137983150983143983141 983085 $26 $36 983085 983085

983107983137983152983145983156983137983148 983113983121 983154983141983158983141983150983157983141 983141983155983156983145983149983137983156983141 983085 $491 $581 $694 $1099

983125983150983145983151983150 983109983106983113983124983108983105 ($983149983149) $176 $211 $255 $305 $484

983120983154983141983158983145983151983157983155 983109983106983113983124983108983105 983141983155983156983145983149983137983156983141 983085 $212 $251 983085 983085

983107983144983137983150983143983141 983085 ($1) $4 983085 983085

983107983137983152983145983156983137983148 983113983121 983109983106983113983124983108983105 983141983155983156983145983149983137983156983141 983085 $203 $233 $267 $399

983125983150983145983151983150 983109983120983123 $0060 $0069 $0080 $0068 $0111

983120983154983141983158983145983151983157983155 983109983120983123 983141983155983156983145983149983137983156983141 983085 $0072 $0081 983085 983085

983107983144983137983150983143983141 983085 ($0003) ($0001) 983085 983085

983107983137983152983145983156983137983148 983113983121 983109983120983123 983141983155983156983145983149983137983156983141 983085 $0065 $0067 $0060 $0081

983126983137983148983157983137983156983145983151983150 983085 983109983120983123 983117983157983148983156983145983152983148983141 104983160 90983160 105983160 64983160

983126983137983148983157983137983156983145983151983150 983085 983109983126983109983106983113983124983108983105 983117983157983148983156983145983152983148983141 73983160 67983160 84983160 51983160

7262019 NagaCorp research

httpslidepdfcomreaderfullnagacorp-research 1517

April 30 2015

Union Gaming Research Macau +853 2857 5825 15

Price Target HKD800 (from HKD750)We value NagaCorp using an EVEBITDA approach on forward earnings in addition to

incremental present value associated with the companyrsquos Naga2 and Vladivostok

projects the first full year of operations for both will be 2018 Our 12 month price

target is HKD800 (+HKD050) and is based on an 85x multiple of our 2015 EBITDA

estimate (HKD400) in addition to the per share present value for Naga2 and

Vladivostok (HKD400) Our calculations assume a share count of approximately

3848mm which accounts for the dilution associated with the companyrsquos acquisition

of the USD369 million NagaCity Walk and Naga2 complex from CEO Tan Sri Dr Chen

in the form of share issuance convertible bond We note that the 85x multiple

represents a slightly lower multiple than we have previously ascribed (9x) which we

would attribute to broader multiple pullback in the gaming space However it stil

remains a discount to its peer group in Macau to which we generally ascribe a

multiple approximately 3 or 4 turns higher We feel an 85x multiple is justified fo

Naga as the company has consistently executed on its growth initiatives enabling the

company to growth faster than its peer group It is also in the home stretch of

shedding its image as a single-asset story with Naga2 now under construction in a

meaningful way and Vladivostok on the horizon Our price target along with an

expected dividend yield of 7 in 2015 represents 51 upside to todayrsquos closing price

RisksRisks to shares of NagaCorp include country risk (loss of exclusive license adjustmen

to the companyrsquos advantageous low monthly fixed obligation tax) development risk

including delays to Naga2 and the Vladivostok project incremental regiona

competition (especially from Vietnam should locals be allowed to gamble) volatility

associated with being a single-asset operator (for now) in the context of increasing

exposure to the VIP segment

7262019 NagaCorp research

httpslidepdfcomreaderfullnagacorp-research 1617

April 30 2015

16 +853 2857 5825 Union Gaming Research Macau

Appendix 1 Important DisclosuresAdditional information is available upon request

This report was prepared by Union Gaming Research Macau Limited Union Gaming Research Macau Limited is a wholly owned

subsidiary of Union Gaming Group LLC Union Gaming Group LLC also owns Union Gaming Advisors LLC a FINRA member firm

and Union Gaming Research LLC a Nevada Registered Investment Adviser Union Gaming Advisors LLC does not produce research

reports All questions or comments concerning this research report should be addressed to Union Gaming Research Macau at +853

2857 5825

Union Gaming Advisors LLC (Advisors) an affiliate of Union Gaming Research Macau Limited does not own any securities of any

company analyzed in this report (Subject Company) Advisors has received non-investment banking related compensation from

the subject company in the past twelve months Accordingly investors should be aware that the firm and its affiliates may have a

conflict of interest that could affect the objectivity of this report Advisors does expect and will seek compensation from any Subject

Company for investment banking services in the next three months Advisors has never been a market maker for a Subject Company

and does not expect to be a market maker for a Subject Company

All prices are those current at the end of the previous trading session unless otherwise indicated Prices are sourced from local

exchanges via Bloomberg and CapitalIQ Data is sourced from Union Gaming Research Union Gaming Research Macau Limited

and subject companies Union Gaming Research and Union Gaming Research Macau Limited are not responsible for errors in prices

provided by independent sources Data analyses and reports necessarily contain time-sensitive information and no subscriber o

client should rely on dated reports or conclusions

Investor clients and financial advisers should consider any report from Union Gaming as only a single factor in making any

investment decision

Ratings methodology

We use a traditional ratings construct (Buy Hold Sell) that is underscored by percentage upsidedownside form current trading

levels along with dividend yields for total return We exclude special dividends and only contemplate regular dividends in our tota

return forecasts These are absolute ratings not relative or forced ratings We define a Buy rating as a company whose shares exhibit

total return (appreciation and dividends) potential of at least +15 within the next twelve months and conversely a Sell rating as

a company whose shares exhibit downside potential of at least 15 within the next twelve months A Hold rating is reserved fo

companies whose shares exhibit total return potential between those parameters

Investor clients and financial advisers should consider any report from Union Gaming as only a single factor in making any

investment decision

7262019 NagaCorp research

httpslidepdfcomreaderfullnagacorp-research 1717

April 30 2015

Union Gaming Research Macau +853 2857 5825 17

Source Union Gaming Research LLC and Union Gaming Research Macau Limited Capital IQ

Distribution of Subject Companiesrsquo stock ratings

Source Union Gaming Research LLC and Union Gaming Research Macau Limited

Distribution of Subject Companies with affiliate banking relationships

Source Union Gaming Research LLC and Union Gaming Research Macau Limited

Copyright copy 2015 Union Gaming Research Macau Limited

Union Gaming Research Macau

Finance and IT Center of Macau (FIT)

Suite 8B

Nam Van Lake Quarteirao 5 Lote A

Macau

9 - 1 3 - 1 2

B u y

P T

=

$ 5

1 1 - 2 1 - 1 2

B u y

P T

=

$ 5 5

2 - 7 - 1 3

B u y

P T

=

$ 6 5

4 - 1 1 - 1 3

B u y

P T

=

$ 7

8 - 8 - 1 3

B u y

P T

= $ 7 5

1 0 - 7 - 1 3

B u y

P T

=

$ 8

2 - 5 - 1 5

B u y

P T

=

$ 7 5

4 - 3 0 - 1 5

B u y

P T

=

$ 8

$1

$2

$3

$4

$5

$6

$7

$8

$9

$10

$1

$2

$3

$4

$5

$6

$7

$8

$9

$10

9 1 3 1 2

1 0 8 1 2

1 0 3 0 1 2

1 1 2 0 1 2

1 2 1 1 1 2

1 4 1 3

1 2 5 1 3

2 2 0 1 3

3 1 3 1 3

4 8 1 3

4 2 9 1 3

5 2 2 1 3

6 1 3 1 3

7 5 1 3

7 2 6 1 3

8 1 9 1 3

9 1 0 1 3

1 0 3 1 3

1 0 2 5 1 3

1 1 1 5 1 3

1 2 6 1 3

1 2 3 1 1 3

1 2 2 1 4

2 1 4 1 4

3 7 1 4

3 2 8 1 4

4 2 2 1 4

5 1 5 1 4

6 6 1 4

6 2 7 1 4

7 2 1 1 4

8 1 1 1 4

9 1 1 4

9 2 3 1 4

1 0 1 6 1 4

1 1 6 1 4

1 1 2 7 1 4

1 2 1 8 1 4

1 1 3 1 5

2 3 1 5

2 2 6 1 5

3 1 9 1 5

4 1 4 1 5

NagaCorp (3918 HK)

Buy Hold Sell

81 19 0

Buy Hold Sell

100 0 0

7262019 NagaCorp research

httpslidepdfcomreaderfullnagacorp-research 1017

April 30 2015

10 +853 2857 5825 Union Gaming Research Macau

Greenfield developments

Vladivostok

Outside of the solid growth expected at NagaWorld Naga currently has three

greenfield opportunities in their Vladivostok NagaCity Walk and Naga2 projects Weexpect the company to get break ground in Vladivostok next month with an

expected opening in early 2018 Much of the project will be built in a modular (prefab

format which should allow for a much quicker than normal build cycle We expect the

first phase be defined roughly as

bull USD150 million capex

bull 400 hotel rooms

bull ~70 mass and a TBD of VIP tables

bull 500 slots ETGs

bull Plus retail entertainment FampB and meeting space

Vladivostok is currently an untested market although the first casino should be

opening soon which should provide a solid baseline for the market In the meantime

we are confident that the Naga project can generate returns well into the double

digits and we are currently modeling USD60 million in EBITDA in year one (2018)

Given Vladivostokrsquos proximity to northeast China as well as being very much under-

penetrated in terms of casino gaming we believe our EBITDA estimate could be

conservative For the first time we are now including Vladivostok in our valuation of

Naga for which we are attributed HKD063 in present per share value

NagaCity Walk

The NagaCity Walk retail experience will eventually connect the existing NagaWorld

facility to Naga2 This project will be run by China Duty Free While not a gaming

component we believe the addition of high quality (and quantity of) retail will be a

key driver of incremental volume to the property ndash especially for higher end mass and

VIP customers At the same time the construction of NagaCity Walk has resulted in

notable construction disruption to the propertys primary porte-cochere as well as the

handful of retail outlets at the main entrance The opening of NagaCity Walk is

therefore important in returning the property to its previous traffic flow

While difficult to appreciate the scale of NagaCity Walk we are including two photosbelow It is important to keep in mind the 400 meter (1300 feet) subterranean length

of the project

7262019 NagaCorp research

httpslidepdfcomreaderfullnagacorp-research 1117

April 30 2015

Union Gaming Research Macau +853 2857 5825 11

Figure 4 NagaCity Walk photo 1

Source Union Gaming Research Macau

Figure 5 NagaCity Walk photo 2

Source Union Gaming Research Macau

7262019 NagaCorp research

httpslidepdfcomreaderfullnagacorp-research 1217

April 30 2015

12 +853 2857 5825 Union Gaming Research Macau

Naga2

Naga2 in Phnom Penh is now moving vertically with significant work being done on

the podium The project remains on track for a late 2017 opening In our view this

continues to be a transformational milestone for the company as it will not only take

them out of the single-asset mold (along with Vladivostok) but that it will be the firsthigh-end purpose-built space for the company

We believe that Naga2 will serve to keep the VIP story growing especially given a

significant amount of in-suite VIP gaming salons On a combined basis we believe

that NagaWorld and Naga2 will generate approximately USD22 billion in rolling chip

volume by 2018 which put in perspective is about 3 of what Macau is currently run-

rating (and represents an even lower percentage relative to Macaus peak) In our

view Naga has and is putting in place the right infrastructure that should readily

support and attract this level of VIP gaming play This isnt to say that Naga2 is a VIP

only property To the contrary we have high expectations for mass market and slot

ETG GGR at the property

In its first full year of operations we believe Naga2 can generate approximately

USD550 million in GGR (NagaWorld generated in excess of USD400 million in 2014)

and EBITDA of USD216 million (NagaWorld generated USD176 million in 2014) We

are however modeling cannibalization at NagaWorld during this period

Figure 6 Naga2 construction progress

Source Union Gaming Research Macau

7262019 NagaCorp research

httpslidepdfcomreaderfullnagacorp-research 1317

April 30 2015

Union Gaming Research Macau +853 2857 5825 13

Looking at the out yearsClearly we are excited about the near medium and longer-term growth stories of

NagaCorp The company is in a position to demonstrate stable EBITDA growth ove

the next three years (including 2015) However it is the out years that are the most

transformational for the company The year 2018 is the biggest for Naga as it wil

become a three-asset operator with NagaWorld Naga2 and Vladivostok all being

operational

We are forecasting that NagaCorp can generate more than USD12 billion in revenue

in 2018 and nearly USD500 million in EBITDA (from our estimate of USD211 million in

2015) This level of cash flow along with a forecasted USD280 million in cash on its

unlevered balance sheet (after paying more than USD750 million in dividends from

2015-2018 and around USD250 million in expansion capex) should put NagaCorp in

the running for any number of other regional gaming opportunities including Japan

and or Korea should these opportunities present themselves

Figure 7 Nagas EBITDA outlook 2011 to 2018E

Note Historical EBITDA excludes one-time slot concession fees paid to the company in 2012 and 2013 and excludes potentia

one-time fees likely to be generated in 2015 and 2016 (and beyond)

Source Union Gaming Research Macau

112 128

157 176

211

255

305

484

0

10

20

30

40

50

60

70

$0

$100

$200

$300

$400

$500

$600

2011 2012 2013 2014 2015983109 2016983109 2017983109 2018983109

983109

983106 983113 983124 983108 983105 ( 983125 983123 983108 983149 983145 983148 983148 983145 983151 983150 983155 )

983109983106983113983124983108983105 983129983129 983139983144983137983150983143983141

9831189831379831439831372 amp

983126983148983137983140983145983158983151983155983156983151983147

7262019 NagaCorp research

httpslidepdfcomreaderfullnagacorp-research 1417

April 30 2015

14 +853 2857 5825 Union Gaming Research Macau

EstimatesWe are largely maintaining our forward estimates for NagaCorp Our 2015 EBITDA

estimate is USD211 million (from USD212 million) Our 2016 EBITDA is USD255 million

(from USD251 million) Please see Figure 1 for detailed revenue EBITDA and EPS

estimates Note above our estimates are all above consensus

Figure 8 Estimates and consensus expectations

Source Union Gaming Research Macau Capital IQ

983107983137983152983145983156983137983148 983113983121 983107983151983149983152983137983150983161 983123983156983137983156983145983155983156983145983139983155 (983110983129983085983108983141983139)52983085983159983141983141983147 983144983145983143983144 $739 983105983150983150983157983137983148983145983162983141983140 983108983145983158983145983140983141983150983140983123983144983137983154983141 $032

52983085983159983141983141983147 983148983151983159 $466 983108983145983158983145983140983141983150983140 983129983145983141983148983140 57

983117983137983154983147983141983156 983139983137983152 ($983149983149) $12621 983113983150983155983145983140983141983154 983119983159983150983141983154983155983144983145983152 00

983123983144983137983154983141983155 983151983157983156983155983156983137983150983140983145983150983143 (983149983149) 22700 983113983150983155 983156983145 983156983157983156983145 983151983150 983119983159983150983141983154983155 983144983145 983152 246

983105983158983141983154983137983143983141 983140983137983145983148983161 983158983151983148983157983149983141 (983149983149) 245 983122983141983158983141983150983157983141 983143983154983151983159983156983144 (2983085983161983141983137983154) 199

983123983144983151983154983156 983145983150983156983141983154983141983155983156 (983149983149) 983150983137 983109983106983113983124983108983105 983143983154983151983159983156983144 (2983085983161983141983137983154) 983150983137

983123983144983151983154983156 983113983150983156983141983154983141983155983156 983137983155 983151983142 983142983148983151983137983156 983150983137 983109983120983123 983143983154983151983159983156983144 (2983085983161983141983137983154) 60

983105983150983150983157983137983148 983122983141983155983157983148983156983155 2014 2015983109 2016983109 2017983109 2018983109

983125983150983145983151983150 983122983141983158983141983150983157983141983155 ($983149983149) $404 $589 $680 $781 $1219

983120983154983141983158983145983151983157983155 983154983141983158983141983150983157983141 983141983155983156983145983149983137983156983141 983085 $564 $644 983085 983085

983107983144983137983150983143983141 983085 $26 $36 983085 983085

983107983137983152983145983156983137983148 983113983121 983154983141983158983141983150983157983141 983141983155983156983145983149983137983156983141 983085 $491 $581 $694 $1099

983125983150983145983151983150 983109983106983113983124983108983105 ($983149983149) $176 $211 $255 $305 $484

983120983154983141983158983145983151983157983155 983109983106983113983124983108983105 983141983155983156983145983149983137983156983141 983085 $212 $251 983085 983085

983107983144983137983150983143983141 983085 ($1) $4 983085 983085

983107983137983152983145983156983137983148 983113983121 983109983106983113983124983108983105 983141983155983156983145983149983137983156983141 983085 $203 $233 $267 $399

983125983150983145983151983150 983109983120983123 $0060 $0069 $0080 $0068 $0111

983120983154983141983158983145983151983157983155 983109983120983123 983141983155983156983145983149983137983156983141 983085 $0072 $0081 983085 983085

983107983144983137983150983143983141 983085 ($0003) ($0001) 983085 983085

983107983137983152983145983156983137983148 983113983121 983109983120983123 983141983155983156983145983149983137983156983141 983085 $0065 $0067 $0060 $0081

983126983137983148983157983137983156983145983151983150 983085 983109983120983123 983117983157983148983156983145983152983148983141 104983160 90983160 105983160 64983160

983126983137983148983157983137983156983145983151983150 983085 983109983126983109983106983113983124983108983105 983117983157983148983156983145983152983148983141 73983160 67983160 84983160 51983160

7262019 NagaCorp research

httpslidepdfcomreaderfullnagacorp-research 1517

April 30 2015

Union Gaming Research Macau +853 2857 5825 15

Price Target HKD800 (from HKD750)We value NagaCorp using an EVEBITDA approach on forward earnings in addition to

incremental present value associated with the companyrsquos Naga2 and Vladivostok

projects the first full year of operations for both will be 2018 Our 12 month price

target is HKD800 (+HKD050) and is based on an 85x multiple of our 2015 EBITDA

estimate (HKD400) in addition to the per share present value for Naga2 and

Vladivostok (HKD400) Our calculations assume a share count of approximately

3848mm which accounts for the dilution associated with the companyrsquos acquisition

of the USD369 million NagaCity Walk and Naga2 complex from CEO Tan Sri Dr Chen

in the form of share issuance convertible bond We note that the 85x multiple

represents a slightly lower multiple than we have previously ascribed (9x) which we

would attribute to broader multiple pullback in the gaming space However it stil

remains a discount to its peer group in Macau to which we generally ascribe a

multiple approximately 3 or 4 turns higher We feel an 85x multiple is justified fo

Naga as the company has consistently executed on its growth initiatives enabling the

company to growth faster than its peer group It is also in the home stretch of

shedding its image as a single-asset story with Naga2 now under construction in a

meaningful way and Vladivostok on the horizon Our price target along with an

expected dividend yield of 7 in 2015 represents 51 upside to todayrsquos closing price

RisksRisks to shares of NagaCorp include country risk (loss of exclusive license adjustmen

to the companyrsquos advantageous low monthly fixed obligation tax) development risk

including delays to Naga2 and the Vladivostok project incremental regiona

competition (especially from Vietnam should locals be allowed to gamble) volatility

associated with being a single-asset operator (for now) in the context of increasing

exposure to the VIP segment

7262019 NagaCorp research

httpslidepdfcomreaderfullnagacorp-research 1617

April 30 2015

16 +853 2857 5825 Union Gaming Research Macau

Appendix 1 Important DisclosuresAdditional information is available upon request

This report was prepared by Union Gaming Research Macau Limited Union Gaming Research Macau Limited is a wholly owned

subsidiary of Union Gaming Group LLC Union Gaming Group LLC also owns Union Gaming Advisors LLC a FINRA member firm

and Union Gaming Research LLC a Nevada Registered Investment Adviser Union Gaming Advisors LLC does not produce research

reports All questions or comments concerning this research report should be addressed to Union Gaming Research Macau at +853

2857 5825

Union Gaming Advisors LLC (Advisors) an affiliate of Union Gaming Research Macau Limited does not own any securities of any

company analyzed in this report (Subject Company) Advisors has received non-investment banking related compensation from

the subject company in the past twelve months Accordingly investors should be aware that the firm and its affiliates may have a

conflict of interest that could affect the objectivity of this report Advisors does expect and will seek compensation from any Subject

Company for investment banking services in the next three months Advisors has never been a market maker for a Subject Company

and does not expect to be a market maker for a Subject Company

All prices are those current at the end of the previous trading session unless otherwise indicated Prices are sourced from local

exchanges via Bloomberg and CapitalIQ Data is sourced from Union Gaming Research Union Gaming Research Macau Limited

and subject companies Union Gaming Research and Union Gaming Research Macau Limited are not responsible for errors in prices

provided by independent sources Data analyses and reports necessarily contain time-sensitive information and no subscriber o

client should rely on dated reports or conclusions

Investor clients and financial advisers should consider any report from Union Gaming as only a single factor in making any

investment decision

Ratings methodology

We use a traditional ratings construct (Buy Hold Sell) that is underscored by percentage upsidedownside form current trading

levels along with dividend yields for total return We exclude special dividends and only contemplate regular dividends in our tota

return forecasts These are absolute ratings not relative or forced ratings We define a Buy rating as a company whose shares exhibit

total return (appreciation and dividends) potential of at least +15 within the next twelve months and conversely a Sell rating as

a company whose shares exhibit downside potential of at least 15 within the next twelve months A Hold rating is reserved fo

companies whose shares exhibit total return potential between those parameters

Investor clients and financial advisers should consider any report from Union Gaming as only a single factor in making any

investment decision

7262019 NagaCorp research

httpslidepdfcomreaderfullnagacorp-research 1717

April 30 2015

Union Gaming Research Macau +853 2857 5825 17

Source Union Gaming Research LLC and Union Gaming Research Macau Limited Capital IQ

Distribution of Subject Companiesrsquo stock ratings

Source Union Gaming Research LLC and Union Gaming Research Macau Limited

Distribution of Subject Companies with affiliate banking relationships

Source Union Gaming Research LLC and Union Gaming Research Macau Limited

Copyright copy 2015 Union Gaming Research Macau Limited

Union Gaming Research Macau

Finance and IT Center of Macau (FIT)

Suite 8B

Nam Van Lake Quarteirao 5 Lote A

Macau

9 - 1 3 - 1 2

B u y

P T

=

$ 5

1 1 - 2 1 - 1 2

B u y

P T

=

$ 5 5

2 - 7 - 1 3

B u y

P T

=

$ 6 5

4 - 1 1 - 1 3

B u y

P T

=

$ 7

8 - 8 - 1 3

B u y

P T

= $ 7 5

1 0 - 7 - 1 3

B u y

P T

=

$ 8

2 - 5 - 1 5

B u y

P T

=

$ 7 5

4 - 3 0 - 1 5

B u y

P T

=

$ 8

$1

$2

$3

$4

$5

$6

$7

$8

$9

$10

$1

$2

$3

$4

$5

$6

$7

$8

$9

$10

9 1 3 1 2

1 0 8 1 2

1 0 3 0 1 2

1 1 2 0 1 2

1 2 1 1 1 2

1 4 1 3

1 2 5 1 3

2 2 0 1 3

3 1 3 1 3

4 8 1 3

4 2 9 1 3

5 2 2 1 3

6 1 3 1 3

7 5 1 3

7 2 6 1 3

8 1 9 1 3

9 1 0 1 3

1 0 3 1 3

1 0 2 5 1 3

1 1 1 5 1 3

1 2 6 1 3

1 2 3 1 1 3

1 2 2 1 4

2 1 4 1 4

3 7 1 4

3 2 8 1 4

4 2 2 1 4

5 1 5 1 4

6 6 1 4

6 2 7 1 4

7 2 1 1 4

8 1 1 1 4

9 1 1 4

9 2 3 1 4

1 0 1 6 1 4

1 1 6 1 4

1 1 2 7 1 4

1 2 1 8 1 4

1 1 3 1 5

2 3 1 5

2 2 6 1 5

3 1 9 1 5

4 1 4 1 5

NagaCorp (3918 HK)

Buy Hold Sell

81 19 0

Buy Hold Sell

100 0 0

7262019 NagaCorp research

httpslidepdfcomreaderfullnagacorp-research 1117

April 30 2015

Union Gaming Research Macau +853 2857 5825 11

Figure 4 NagaCity Walk photo 1

Source Union Gaming Research Macau

Figure 5 NagaCity Walk photo 2

Source Union Gaming Research Macau

7262019 NagaCorp research

httpslidepdfcomreaderfullnagacorp-research 1217

April 30 2015

12 +853 2857 5825 Union Gaming Research Macau

Naga2

Naga2 in Phnom Penh is now moving vertically with significant work being done on

the podium The project remains on track for a late 2017 opening In our view this

continues to be a transformational milestone for the company as it will not only take

them out of the single-asset mold (along with Vladivostok) but that it will be the firsthigh-end purpose-built space for the company

We believe that Naga2 will serve to keep the VIP story growing especially given a

significant amount of in-suite VIP gaming salons On a combined basis we believe

that NagaWorld and Naga2 will generate approximately USD22 billion in rolling chip

volume by 2018 which put in perspective is about 3 of what Macau is currently run-

rating (and represents an even lower percentage relative to Macaus peak) In our

view Naga has and is putting in place the right infrastructure that should readily

support and attract this level of VIP gaming play This isnt to say that Naga2 is a VIP

only property To the contrary we have high expectations for mass market and slot

ETG GGR at the property

In its first full year of operations we believe Naga2 can generate approximately

USD550 million in GGR (NagaWorld generated in excess of USD400 million in 2014)

and EBITDA of USD216 million (NagaWorld generated USD176 million in 2014) We

are however modeling cannibalization at NagaWorld during this period

Figure 6 Naga2 construction progress

Source Union Gaming Research Macau

7262019 NagaCorp research

httpslidepdfcomreaderfullnagacorp-research 1317

April 30 2015

Union Gaming Research Macau +853 2857 5825 13

Looking at the out yearsClearly we are excited about the near medium and longer-term growth stories of

NagaCorp The company is in a position to demonstrate stable EBITDA growth ove

the next three years (including 2015) However it is the out years that are the most

transformational for the company The year 2018 is the biggest for Naga as it wil

become a three-asset operator with NagaWorld Naga2 and Vladivostok all being

operational

We are forecasting that NagaCorp can generate more than USD12 billion in revenue

in 2018 and nearly USD500 million in EBITDA (from our estimate of USD211 million in

2015) This level of cash flow along with a forecasted USD280 million in cash on its

unlevered balance sheet (after paying more than USD750 million in dividends from

2015-2018 and around USD250 million in expansion capex) should put NagaCorp in

the running for any number of other regional gaming opportunities including Japan

and or Korea should these opportunities present themselves

Figure 7 Nagas EBITDA outlook 2011 to 2018E

Note Historical EBITDA excludes one-time slot concession fees paid to the company in 2012 and 2013 and excludes potentia

one-time fees likely to be generated in 2015 and 2016 (and beyond)

Source Union Gaming Research Macau

112 128

157 176

211

255

305

484

0

10

20

30

40

50

60

70

$0

$100

$200

$300

$400

$500

$600

2011 2012 2013 2014 2015983109 2016983109 2017983109 2018983109

983109

983106 983113 983124 983108 983105 ( 983125 983123 983108 983149 983145 983148 983148 983145 983151 983150 983155 )

983109983106983113983124983108983105 983129983129 983139983144983137983150983143983141

9831189831379831439831372 amp

983126983148983137983140983145983158983151983155983156983151983147

7262019 NagaCorp research

httpslidepdfcomreaderfullnagacorp-research 1417

April 30 2015

14 +853 2857 5825 Union Gaming Research Macau

EstimatesWe are largely maintaining our forward estimates for NagaCorp Our 2015 EBITDA

estimate is USD211 million (from USD212 million) Our 2016 EBITDA is USD255 million

(from USD251 million) Please see Figure 1 for detailed revenue EBITDA and EPS

estimates Note above our estimates are all above consensus

Figure 8 Estimates and consensus expectations

Source Union Gaming Research Macau Capital IQ

983107983137983152983145983156983137983148 983113983121 983107983151983149983152983137983150983161 983123983156983137983156983145983155983156983145983139983155 (983110983129983085983108983141983139)52983085983159983141983141983147 983144983145983143983144 $739 983105983150983150983157983137983148983145983162983141983140 983108983145983158983145983140983141983150983140983123983144983137983154983141 $032

52983085983159983141983141983147 983148983151983159 $466 983108983145983158983145983140983141983150983140 983129983145983141983148983140 57

983117983137983154983147983141983156 983139983137983152 ($983149983149) $12621 983113983150983155983145983140983141983154 983119983159983150983141983154983155983144983145983152 00

983123983144983137983154983141983155 983151983157983156983155983156983137983150983140983145983150983143 (983149983149) 22700 983113983150983155 983156983145 983156983157983156983145 983151983150 983119983159983150983141983154983155 983144983145 983152 246

983105983158983141983154983137983143983141 983140983137983145983148983161 983158983151983148983157983149983141 (983149983149) 245 983122983141983158983141983150983157983141 983143983154983151983159983156983144 (2983085983161983141983137983154) 199

983123983144983151983154983156 983145983150983156983141983154983141983155983156 (983149983149) 983150983137 983109983106983113983124983108983105 983143983154983151983159983156983144 (2983085983161983141983137983154) 983150983137

983123983144983151983154983156 983113983150983156983141983154983141983155983156 983137983155 983151983142 983142983148983151983137983156 983150983137 983109983120983123 983143983154983151983159983156983144 (2983085983161983141983137983154) 60

983105983150983150983157983137983148 983122983141983155983157983148983156983155 2014 2015983109 2016983109 2017983109 2018983109

983125983150983145983151983150 983122983141983158983141983150983157983141983155 ($983149983149) $404 $589 $680 $781 $1219

983120983154983141983158983145983151983157983155 983154983141983158983141983150983157983141 983141983155983156983145983149983137983156983141 983085 $564 $644 983085 983085

983107983144983137983150983143983141 983085 $26 $36 983085 983085

983107983137983152983145983156983137983148 983113983121 983154983141983158983141983150983157983141 983141983155983156983145983149983137983156983141 983085 $491 $581 $694 $1099

983125983150983145983151983150 983109983106983113983124983108983105 ($983149983149) $176 $211 $255 $305 $484

983120983154983141983158983145983151983157983155 983109983106983113983124983108983105 983141983155983156983145983149983137983156983141 983085 $212 $251 983085 983085

983107983144983137983150983143983141 983085 ($1) $4 983085 983085

983107983137983152983145983156983137983148 983113983121 983109983106983113983124983108983105 983141983155983156983145983149983137983156983141 983085 $203 $233 $267 $399

983125983150983145983151983150 983109983120983123 $0060 $0069 $0080 $0068 $0111

983120983154983141983158983145983151983157983155 983109983120983123 983141983155983156983145983149983137983156983141 983085 $0072 $0081 983085 983085

983107983144983137983150983143983141 983085 ($0003) ($0001) 983085 983085

983107983137983152983145983156983137983148 983113983121 983109983120983123 983141983155983156983145983149983137983156983141 983085 $0065 $0067 $0060 $0081

983126983137983148983157983137983156983145983151983150 983085 983109983120983123 983117983157983148983156983145983152983148983141 104983160 90983160 105983160 64983160

983126983137983148983157983137983156983145983151983150 983085 983109983126983109983106983113983124983108983105 983117983157983148983156983145983152983148983141 73983160 67983160 84983160 51983160

7262019 NagaCorp research

httpslidepdfcomreaderfullnagacorp-research 1517

April 30 2015

Union Gaming Research Macau +853 2857 5825 15

Price Target HKD800 (from HKD750)We value NagaCorp using an EVEBITDA approach on forward earnings in addition to

incremental present value associated with the companyrsquos Naga2 and Vladivostok

projects the first full year of operations for both will be 2018 Our 12 month price

target is HKD800 (+HKD050) and is based on an 85x multiple of our 2015 EBITDA

estimate (HKD400) in addition to the per share present value for Naga2 and

Vladivostok (HKD400) Our calculations assume a share count of approximately

3848mm which accounts for the dilution associated with the companyrsquos acquisition

of the USD369 million NagaCity Walk and Naga2 complex from CEO Tan Sri Dr Chen

in the form of share issuance convertible bond We note that the 85x multiple

represents a slightly lower multiple than we have previously ascribed (9x) which we

would attribute to broader multiple pullback in the gaming space However it stil

remains a discount to its peer group in Macau to which we generally ascribe a

multiple approximately 3 or 4 turns higher We feel an 85x multiple is justified fo

Naga as the company has consistently executed on its growth initiatives enabling the

company to growth faster than its peer group It is also in the home stretch of

shedding its image as a single-asset story with Naga2 now under construction in a

meaningful way and Vladivostok on the horizon Our price target along with an

expected dividend yield of 7 in 2015 represents 51 upside to todayrsquos closing price

RisksRisks to shares of NagaCorp include country risk (loss of exclusive license adjustmen

to the companyrsquos advantageous low monthly fixed obligation tax) development risk

including delays to Naga2 and the Vladivostok project incremental regiona

competition (especially from Vietnam should locals be allowed to gamble) volatility

associated with being a single-asset operator (for now) in the context of increasing

exposure to the VIP segment

7262019 NagaCorp research

httpslidepdfcomreaderfullnagacorp-research 1617

April 30 2015

16 +853 2857 5825 Union Gaming Research Macau

Appendix 1 Important DisclosuresAdditional information is available upon request

This report was prepared by Union Gaming Research Macau Limited Union Gaming Research Macau Limited is a wholly owned

subsidiary of Union Gaming Group LLC Union Gaming Group LLC also owns Union Gaming Advisors LLC a FINRA member firm

and Union Gaming Research LLC a Nevada Registered Investment Adviser Union Gaming Advisors LLC does not produce research

reports All questions or comments concerning this research report should be addressed to Union Gaming Research Macau at +853

2857 5825

Union Gaming Advisors LLC (Advisors) an affiliate of Union Gaming Research Macau Limited does not own any securities of any

company analyzed in this report (Subject Company) Advisors has received non-investment banking related compensation from

the subject company in the past twelve months Accordingly investors should be aware that the firm and its affiliates may have a

conflict of interest that could affect the objectivity of this report Advisors does expect and will seek compensation from any Subject

Company for investment banking services in the next three months Advisors has never been a market maker for a Subject Company

and does not expect to be a market maker for a Subject Company

All prices are those current at the end of the previous trading session unless otherwise indicated Prices are sourced from local

exchanges via Bloomberg and CapitalIQ Data is sourced from Union Gaming Research Union Gaming Research Macau Limited

and subject companies Union Gaming Research and Union Gaming Research Macau Limited are not responsible for errors in prices

provided by independent sources Data analyses and reports necessarily contain time-sensitive information and no subscriber o

client should rely on dated reports or conclusions

Investor clients and financial advisers should consider any report from Union Gaming as only a single factor in making any

investment decision

Ratings methodology

We use a traditional ratings construct (Buy Hold Sell) that is underscored by percentage upsidedownside form current trading

levels along with dividend yields for total return We exclude special dividends and only contemplate regular dividends in our tota

return forecasts These are absolute ratings not relative or forced ratings We define a Buy rating as a company whose shares exhibit

total return (appreciation and dividends) potential of at least +15 within the next twelve months and conversely a Sell rating as

a company whose shares exhibit downside potential of at least 15 within the next twelve months A Hold rating is reserved fo

companies whose shares exhibit total return potential between those parameters

Investor clients and financial advisers should consider any report from Union Gaming as only a single factor in making any

investment decision

7262019 NagaCorp research

httpslidepdfcomreaderfullnagacorp-research 1717

April 30 2015

Union Gaming Research Macau +853 2857 5825 17

Source Union Gaming Research LLC and Union Gaming Research Macau Limited Capital IQ

Distribution of Subject Companiesrsquo stock ratings

Source Union Gaming Research LLC and Union Gaming Research Macau Limited

Distribution of Subject Companies with affiliate banking relationships

Source Union Gaming Research LLC and Union Gaming Research Macau Limited

Copyright copy 2015 Union Gaming Research Macau Limited

Union Gaming Research Macau

Finance and IT Center of Macau (FIT)

Suite 8B

Nam Van Lake Quarteirao 5 Lote A

Macau

9 - 1 3 - 1 2

B u y

P T

=

$ 5

1 1 - 2 1 - 1 2

B u y

P T

=

$ 5 5

2 - 7 - 1 3

B u y

P T

=

$ 6 5

4 - 1 1 - 1 3

B u y

P T

=

$ 7

8 - 8 - 1 3

B u y

P T

= $ 7 5

1 0 - 7 - 1 3

B u y

P T

=

$ 8

2 - 5 - 1 5

B u y

P T

=

$ 7 5

4 - 3 0 - 1 5

B u y

P T

=

$ 8

$1

$2

$3

$4

$5

$6

$7

$8

$9

$10

$1

$2

$3

$4

$5

$6

$7

$8

$9

$10

9 1 3 1 2

1 0 8 1 2

1 0 3 0 1 2

1 1 2 0 1 2

1 2 1 1 1 2

1 4 1 3

1 2 5 1 3

2 2 0 1 3

3 1 3 1 3

4 8 1 3

4 2 9 1 3

5 2 2 1 3

6 1 3 1 3

7 5 1 3

7 2 6 1 3

8 1 9 1 3

9 1 0 1 3

1 0 3 1 3

1 0 2 5 1 3

1 1 1 5 1 3

1 2 6 1 3

1 2 3 1 1 3

1 2 2 1 4

2 1 4 1 4

3 7 1 4

3 2 8 1 4

4 2 2 1 4

5 1 5 1 4

6 6 1 4

6 2 7 1 4

7 2 1 1 4

8 1 1 1 4

9 1 1 4

9 2 3 1 4

1 0 1 6 1 4

1 1 6 1 4

1 1 2 7 1 4

1 2 1 8 1 4

1 1 3 1 5

2 3 1 5

2 2 6 1 5

3 1 9 1 5

4 1 4 1 5

NagaCorp (3918 HK)

Buy Hold Sell

81 19 0

Buy Hold Sell

100 0 0

7262019 NagaCorp research

httpslidepdfcomreaderfullnagacorp-research 1217

April 30 2015

12 +853 2857 5825 Union Gaming Research Macau

Naga2

Naga2 in Phnom Penh is now moving vertically with significant work being done on

the podium The project remains on track for a late 2017 opening In our view this

continues to be a transformational milestone for the company as it will not only take

them out of the single-asset mold (along with Vladivostok) but that it will be the firsthigh-end purpose-built space for the company

We believe that Naga2 will serve to keep the VIP story growing especially given a

significant amount of in-suite VIP gaming salons On a combined basis we believe

that NagaWorld and Naga2 will generate approximately USD22 billion in rolling chip

volume by 2018 which put in perspective is about 3 of what Macau is currently run-

rating (and represents an even lower percentage relative to Macaus peak) In our

view Naga has and is putting in place the right infrastructure that should readily

support and attract this level of VIP gaming play This isnt to say that Naga2 is a VIP

only property To the contrary we have high expectations for mass market and slot

ETG GGR at the property

In its first full year of operations we believe Naga2 can generate approximately

USD550 million in GGR (NagaWorld generated in excess of USD400 million in 2014)

and EBITDA of USD216 million (NagaWorld generated USD176 million in 2014) We

are however modeling cannibalization at NagaWorld during this period

Figure 6 Naga2 construction progress

Source Union Gaming Research Macau

7262019 NagaCorp research

httpslidepdfcomreaderfullnagacorp-research 1317

April 30 2015

Union Gaming Research Macau +853 2857 5825 13

Looking at the out yearsClearly we are excited about the near medium and longer-term growth stories of

NagaCorp The company is in a position to demonstrate stable EBITDA growth ove

the next three years (including 2015) However it is the out years that are the most

transformational for the company The year 2018 is the biggest for Naga as it wil

become a three-asset operator with NagaWorld Naga2 and Vladivostok all being

operational

We are forecasting that NagaCorp can generate more than USD12 billion in revenue

in 2018 and nearly USD500 million in EBITDA (from our estimate of USD211 million in

2015) This level of cash flow along with a forecasted USD280 million in cash on its

unlevered balance sheet (after paying more than USD750 million in dividends from

2015-2018 and around USD250 million in expansion capex) should put NagaCorp in

the running for any number of other regional gaming opportunities including Japan

and or Korea should these opportunities present themselves

Figure 7 Nagas EBITDA outlook 2011 to 2018E

Note Historical EBITDA excludes one-time slot concession fees paid to the company in 2012 and 2013 and excludes potentia

one-time fees likely to be generated in 2015 and 2016 (and beyond)

Source Union Gaming Research Macau

112 128

157 176

211

255

305

484

0

10

20

30

40

50

60

70

$0

$100

$200

$300

$400

$500

$600

2011 2012 2013 2014 2015983109 2016983109 2017983109 2018983109

983109

983106 983113 983124 983108 983105 ( 983125 983123 983108 983149 983145 983148 983148 983145 983151 983150 983155 )

983109983106983113983124983108983105 983129983129 983139983144983137983150983143983141

9831189831379831439831372 amp

983126983148983137983140983145983158983151983155983156983151983147

7262019 NagaCorp research

httpslidepdfcomreaderfullnagacorp-research 1417

April 30 2015

14 +853 2857 5825 Union Gaming Research Macau

EstimatesWe are largely maintaining our forward estimates for NagaCorp Our 2015 EBITDA

estimate is USD211 million (from USD212 million) Our 2016 EBITDA is USD255 million

(from USD251 million) Please see Figure 1 for detailed revenue EBITDA and EPS

estimates Note above our estimates are all above consensus

Figure 8 Estimates and consensus expectations

Source Union Gaming Research Macau Capital IQ

983107983137983152983145983156983137983148 983113983121 983107983151983149983152983137983150983161 983123983156983137983156983145983155983156983145983139983155 (983110983129983085983108983141983139)52983085983159983141983141983147 983144983145983143983144 $739 983105983150983150983157983137983148983145983162983141983140 983108983145983158983145983140983141983150983140983123983144983137983154983141 $032

52983085983159983141983141983147 983148983151983159 $466 983108983145983158983145983140983141983150983140 983129983145983141983148983140 57

983117983137983154983147983141983156 983139983137983152 ($983149983149) $12621 983113983150983155983145983140983141983154 983119983159983150983141983154983155983144983145983152 00

983123983144983137983154983141983155 983151983157983156983155983156983137983150983140983145983150983143 (983149983149) 22700 983113983150983155 983156983145 983156983157983156983145 983151983150 983119983159983150983141983154983155 983144983145 983152 246

983105983158983141983154983137983143983141 983140983137983145983148983161 983158983151983148983157983149983141 (983149983149) 245 983122983141983158983141983150983157983141 983143983154983151983159983156983144 (2983085983161983141983137983154) 199

983123983144983151983154983156 983145983150983156983141983154983141983155983156 (983149983149) 983150983137 983109983106983113983124983108983105 983143983154983151983159983156983144 (2983085983161983141983137983154) 983150983137

983123983144983151983154983156 983113983150983156983141983154983141983155983156 983137983155 983151983142 983142983148983151983137983156 983150983137 983109983120983123 983143983154983151983159983156983144 (2983085983161983141983137983154) 60

983105983150983150983157983137983148 983122983141983155983157983148983156983155 2014 2015983109 2016983109 2017983109 2018983109

983125983150983145983151983150 983122983141983158983141983150983157983141983155 ($983149983149) $404 $589 $680 $781 $1219

983120983154983141983158983145983151983157983155 983154983141983158983141983150983157983141 983141983155983156983145983149983137983156983141 983085 $564 $644 983085 983085

983107983144983137983150983143983141 983085 $26 $36 983085 983085

983107983137983152983145983156983137983148 983113983121 983154983141983158983141983150983157983141 983141983155983156983145983149983137983156983141 983085 $491 $581 $694 $1099

983125983150983145983151983150 983109983106983113983124983108983105 ($983149983149) $176 $211 $255 $305 $484

983120983154983141983158983145983151983157983155 983109983106983113983124983108983105 983141983155983156983145983149983137983156983141 983085 $212 $251 983085 983085

983107983144983137983150983143983141 983085 ($1) $4 983085 983085

983107983137983152983145983156983137983148 983113983121 983109983106983113983124983108983105 983141983155983156983145983149983137983156983141 983085 $203 $233 $267 $399

983125983150983145983151983150 983109983120983123 $0060 $0069 $0080 $0068 $0111

983120983154983141983158983145983151983157983155 983109983120983123 983141983155983156983145983149983137983156983141 983085 $0072 $0081 983085 983085

983107983144983137983150983143983141 983085 ($0003) ($0001) 983085 983085

983107983137983152983145983156983137983148 983113983121 983109983120983123 983141983155983156983145983149983137983156983141 983085 $0065 $0067 $0060 $0081

983126983137983148983157983137983156983145983151983150 983085 983109983120983123 983117983157983148983156983145983152983148983141 104983160 90983160 105983160 64983160

983126983137983148983157983137983156983145983151983150 983085 983109983126983109983106983113983124983108983105 983117983157983148983156983145983152983148983141 73983160 67983160 84983160 51983160

7262019 NagaCorp research

httpslidepdfcomreaderfullnagacorp-research 1517

April 30 2015

Union Gaming Research Macau +853 2857 5825 15

Price Target HKD800 (from HKD750)We value NagaCorp using an EVEBITDA approach on forward earnings in addition to

incremental present value associated with the companyrsquos Naga2 and Vladivostok

projects the first full year of operations for both will be 2018 Our 12 month price

target is HKD800 (+HKD050) and is based on an 85x multiple of our 2015 EBITDA

estimate (HKD400) in addition to the per share present value for Naga2 and

Vladivostok (HKD400) Our calculations assume a share count of approximately

3848mm which accounts for the dilution associated with the companyrsquos acquisition

of the USD369 million NagaCity Walk and Naga2 complex from CEO Tan Sri Dr Chen

in the form of share issuance convertible bond We note that the 85x multiple

represents a slightly lower multiple than we have previously ascribed (9x) which we

would attribute to broader multiple pullback in the gaming space However it stil

remains a discount to its peer group in Macau to which we generally ascribe a

multiple approximately 3 or 4 turns higher We feel an 85x multiple is justified fo

Naga as the company has consistently executed on its growth initiatives enabling the

company to growth faster than its peer group It is also in the home stretch of

shedding its image as a single-asset story with Naga2 now under construction in a

meaningful way and Vladivostok on the horizon Our price target along with an

expected dividend yield of 7 in 2015 represents 51 upside to todayrsquos closing price

RisksRisks to shares of NagaCorp include country risk (loss of exclusive license adjustmen

to the companyrsquos advantageous low monthly fixed obligation tax) development risk

including delays to Naga2 and the Vladivostok project incremental regiona

competition (especially from Vietnam should locals be allowed to gamble) volatility

associated with being a single-asset operator (for now) in the context of increasing

exposure to the VIP segment

7262019 NagaCorp research

httpslidepdfcomreaderfullnagacorp-research 1617

April 30 2015

16 +853 2857 5825 Union Gaming Research Macau

Appendix 1 Important DisclosuresAdditional information is available upon request

This report was prepared by Union Gaming Research Macau Limited Union Gaming Research Macau Limited is a wholly owned

subsidiary of Union Gaming Group LLC Union Gaming Group LLC also owns Union Gaming Advisors LLC a FINRA member firm

and Union Gaming Research LLC a Nevada Registered Investment Adviser Union Gaming Advisors LLC does not produce research

reports All questions or comments concerning this research report should be addressed to Union Gaming Research Macau at +853

2857 5825

Union Gaming Advisors LLC (Advisors) an affiliate of Union Gaming Research Macau Limited does not own any securities of any

company analyzed in this report (Subject Company) Advisors has received non-investment banking related compensation from

the subject company in the past twelve months Accordingly investors should be aware that the firm and its affiliates may have a

conflict of interest that could affect the objectivity of this report Advisors does expect and will seek compensation from any Subject

Company for investment banking services in the next three months Advisors has never been a market maker for a Subject Company

and does not expect to be a market maker for a Subject Company

All prices are those current at the end of the previous trading session unless otherwise indicated Prices are sourced from local

exchanges via Bloomberg and CapitalIQ Data is sourced from Union Gaming Research Union Gaming Research Macau Limited

and subject companies Union Gaming Research and Union Gaming Research Macau Limited are not responsible for errors in prices

provided by independent sources Data analyses and reports necessarily contain time-sensitive information and no subscriber o

client should rely on dated reports or conclusions

Investor clients and financial advisers should consider any report from Union Gaming as only a single factor in making any

investment decision

Ratings methodology

We use a traditional ratings construct (Buy Hold Sell) that is underscored by percentage upsidedownside form current trading

levels along with dividend yields for total return We exclude special dividends and only contemplate regular dividends in our tota

return forecasts These are absolute ratings not relative or forced ratings We define a Buy rating as a company whose shares exhibit

total return (appreciation and dividends) potential of at least +15 within the next twelve months and conversely a Sell rating as

a company whose shares exhibit downside potential of at least 15 within the next twelve months A Hold rating is reserved fo

companies whose shares exhibit total return potential between those parameters

Investor clients and financial advisers should consider any report from Union Gaming as only a single factor in making any

investment decision

7262019 NagaCorp research

httpslidepdfcomreaderfullnagacorp-research 1717

April 30 2015

Union Gaming Research Macau +853 2857 5825 17

Source Union Gaming Research LLC and Union Gaming Research Macau Limited Capital IQ

Distribution of Subject Companiesrsquo stock ratings

Source Union Gaming Research LLC and Union Gaming Research Macau Limited

Distribution of Subject Companies with affiliate banking relationships

Source Union Gaming Research LLC and Union Gaming Research Macau Limited

Copyright copy 2015 Union Gaming Research Macau Limited

Union Gaming Research Macau

Finance and IT Center of Macau (FIT)

Suite 8B

Nam Van Lake Quarteirao 5 Lote A

Macau

9 - 1 3 - 1 2

B u y

P T

=

$ 5

1 1 - 2 1 - 1 2

B u y

P T

=

$ 5 5

2 - 7 - 1 3

B u y

P T

=

$ 6 5

4 - 1 1 - 1 3

B u y

P T

=

$ 7

8 - 8 - 1 3

B u y

P T

= $ 7 5

1 0 - 7 - 1 3

B u y

P T

=

$ 8

2 - 5 - 1 5

B u y

P T

=

$ 7 5

4 - 3 0 - 1 5

B u y

P T

=

$ 8

$1

$2

$3

$4

$5

$6

$7

$8

$9

$10

$1

$2

$3

$4

$5

$6

$7

$8

$9

$10

9 1 3 1 2

1 0 8 1 2

1 0 3 0 1 2

1 1 2 0 1 2

1 2 1 1 1 2

1 4 1 3

1 2 5 1 3

2 2 0 1 3

3 1 3 1 3

4 8 1 3

4 2 9 1 3

5 2 2 1 3

6 1 3 1 3

7 5 1 3

7 2 6 1 3

8 1 9 1 3

9 1 0 1 3

1 0 3 1 3

1 0 2 5 1 3

1 1 1 5 1 3

1 2 6 1 3

1 2 3 1 1 3

1 2 2 1 4

2 1 4 1 4

3 7 1 4

3 2 8 1 4

4 2 2 1 4

5 1 5 1 4

6 6 1 4

6 2 7 1 4

7 2 1 1 4

8 1 1 1 4

9 1 1 4

9 2 3 1 4

1 0 1 6 1 4

1 1 6 1 4

1 1 2 7 1 4

1 2 1 8 1 4

1 1 3 1 5

2 3 1 5

2 2 6 1 5

3 1 9 1 5

4 1 4 1 5

NagaCorp (3918 HK)

Buy Hold Sell

81 19 0

Buy Hold Sell

100 0 0

7262019 NagaCorp research

httpslidepdfcomreaderfullnagacorp-research 1317

April 30 2015

Union Gaming Research Macau +853 2857 5825 13

Looking at the out yearsClearly we are excited about the near medium and longer-term growth stories of

NagaCorp The company is in a position to demonstrate stable EBITDA growth ove

the next three years (including 2015) However it is the out years that are the most

transformational for the company The year 2018 is the biggest for Naga as it wil

become a three-asset operator with NagaWorld Naga2 and Vladivostok all being

operational

We are forecasting that NagaCorp can generate more than USD12 billion in revenue

in 2018 and nearly USD500 million in EBITDA (from our estimate of USD211 million in

2015) This level of cash flow along with a forecasted USD280 million in cash on its

unlevered balance sheet (after paying more than USD750 million in dividends from

2015-2018 and around USD250 million in expansion capex) should put NagaCorp in

the running for any number of other regional gaming opportunities including Japan

and or Korea should these opportunities present themselves

Figure 7 Nagas EBITDA outlook 2011 to 2018E

Note Historical EBITDA excludes one-time slot concession fees paid to the company in 2012 and 2013 and excludes potentia

one-time fees likely to be generated in 2015 and 2016 (and beyond)

Source Union Gaming Research Macau

112 128

157 176

211

255

305

484

0

10

20

30

40

50

60

70

$0

$100

$200

$300

$400

$500

$600

2011 2012 2013 2014 2015983109 2016983109 2017983109 2018983109

983109

983106 983113 983124 983108 983105 ( 983125 983123 983108 983149 983145 983148 983148 983145 983151 983150 983155 )

983109983106983113983124983108983105 983129983129 983139983144983137983150983143983141

9831189831379831439831372 amp

983126983148983137983140983145983158983151983155983156983151983147

7262019 NagaCorp research

httpslidepdfcomreaderfullnagacorp-research 1417

April 30 2015

14 +853 2857 5825 Union Gaming Research Macau

EstimatesWe are largely maintaining our forward estimates for NagaCorp Our 2015 EBITDA

estimate is USD211 million (from USD212 million) Our 2016 EBITDA is USD255 million

(from USD251 million) Please see Figure 1 for detailed revenue EBITDA and EPS

estimates Note above our estimates are all above consensus

Figure 8 Estimates and consensus expectations

Source Union Gaming Research Macau Capital IQ

983107983137983152983145983156983137983148 983113983121 983107983151983149983152983137983150983161 983123983156983137983156983145983155983156983145983139983155 (983110983129983085983108983141983139)52983085983159983141983141983147 983144983145983143983144 $739 983105983150983150983157983137983148983145983162983141983140 983108983145983158983145983140983141983150983140983123983144983137983154983141 $032

52983085983159983141983141983147 983148983151983159 $466 983108983145983158983145983140983141983150983140 983129983145983141983148983140 57

983117983137983154983147983141983156 983139983137983152 ($983149983149) $12621 983113983150983155983145983140983141983154 983119983159983150983141983154983155983144983145983152 00

983123983144983137983154983141983155 983151983157983156983155983156983137983150983140983145983150983143 (983149983149) 22700 983113983150983155 983156983145 983156983157983156983145 983151983150 983119983159983150983141983154983155 983144983145 983152 246

983105983158983141983154983137983143983141 983140983137983145983148983161 983158983151983148983157983149983141 (983149983149) 245 983122983141983158983141983150983157983141 983143983154983151983159983156983144 (2983085983161983141983137983154) 199

983123983144983151983154983156 983145983150983156983141983154983141983155983156 (983149983149) 983150983137 983109983106983113983124983108983105 983143983154983151983159983156983144 (2983085983161983141983137983154) 983150983137

983123983144983151983154983156 983113983150983156983141983154983141983155983156 983137983155 983151983142 983142983148983151983137983156 983150983137 983109983120983123 983143983154983151983159983156983144 (2983085983161983141983137983154) 60

983105983150983150983157983137983148 983122983141983155983157983148983156983155 2014 2015983109 2016983109 2017983109 2018983109

983125983150983145983151983150 983122983141983158983141983150983157983141983155 ($983149983149) $404 $589 $680 $781 $1219

983120983154983141983158983145983151983157983155 983154983141983158983141983150983157983141 983141983155983156983145983149983137983156983141 983085 $564 $644 983085 983085

983107983144983137983150983143983141 983085 $26 $36 983085 983085

983107983137983152983145983156983137983148 983113983121 983154983141983158983141983150983157983141 983141983155983156983145983149983137983156983141 983085 $491 $581 $694 $1099

983125983150983145983151983150 983109983106983113983124983108983105 ($983149983149) $176 $211 $255 $305 $484

983120983154983141983158983145983151983157983155 983109983106983113983124983108983105 983141983155983156983145983149983137983156983141 983085 $212 $251 983085 983085

983107983144983137983150983143983141 983085 ($1) $4 983085 983085

983107983137983152983145983156983137983148 983113983121 983109983106983113983124983108983105 983141983155983156983145983149983137983156983141 983085 $203 $233 $267 $399

983125983150983145983151983150 983109983120983123 $0060 $0069 $0080 $0068 $0111

983120983154983141983158983145983151983157983155 983109983120983123 983141983155983156983145983149983137983156983141 983085 $0072 $0081 983085 983085

983107983144983137983150983143983141 983085 ($0003) ($0001) 983085 983085

983107983137983152983145983156983137983148 983113983121 983109983120983123 983141983155983156983145983149983137983156983141 983085 $0065 $0067 $0060 $0081

983126983137983148983157983137983156983145983151983150 983085 983109983120983123 983117983157983148983156983145983152983148983141 104983160 90983160 105983160 64983160

983126983137983148983157983137983156983145983151983150 983085 983109983126983109983106983113983124983108983105 983117983157983148983156983145983152983148983141 73983160 67983160 84983160 51983160

7262019 NagaCorp research

httpslidepdfcomreaderfullnagacorp-research 1517

April 30 2015

Union Gaming Research Macau +853 2857 5825 15

Price Target HKD800 (from HKD750)We value NagaCorp using an EVEBITDA approach on forward earnings in addition to

incremental present value associated with the companyrsquos Naga2 and Vladivostok

projects the first full year of operations for both will be 2018 Our 12 month price

target is HKD800 (+HKD050) and is based on an 85x multiple of our 2015 EBITDA

estimate (HKD400) in addition to the per share present value for Naga2 and

Vladivostok (HKD400) Our calculations assume a share count of approximately

3848mm which accounts for the dilution associated with the companyrsquos acquisition

of the USD369 million NagaCity Walk and Naga2 complex from CEO Tan Sri Dr Chen

in the form of share issuance convertible bond We note that the 85x multiple

represents a slightly lower multiple than we have previously ascribed (9x) which we

would attribute to broader multiple pullback in the gaming space However it stil

remains a discount to its peer group in Macau to which we generally ascribe a

multiple approximately 3 or 4 turns higher We feel an 85x multiple is justified fo

Naga as the company has consistently executed on its growth initiatives enabling the

company to growth faster than its peer group It is also in the home stretch of

shedding its image as a single-asset story with Naga2 now under construction in a

meaningful way and Vladivostok on the horizon Our price target along with an

expected dividend yield of 7 in 2015 represents 51 upside to todayrsquos closing price

RisksRisks to shares of NagaCorp include country risk (loss of exclusive license adjustmen

to the companyrsquos advantageous low monthly fixed obligation tax) development risk

including delays to Naga2 and the Vladivostok project incremental regiona

competition (especially from Vietnam should locals be allowed to gamble) volatility

associated with being a single-asset operator (for now) in the context of increasing

exposure to the VIP segment

7262019 NagaCorp research

httpslidepdfcomreaderfullnagacorp-research 1617

April 30 2015

16 +853 2857 5825 Union Gaming Research Macau

Appendix 1 Important DisclosuresAdditional information is available upon request

This report was prepared by Union Gaming Research Macau Limited Union Gaming Research Macau Limited is a wholly owned

subsidiary of Union Gaming Group LLC Union Gaming Group LLC also owns Union Gaming Advisors LLC a FINRA member firm

and Union Gaming Research LLC a Nevada Registered Investment Adviser Union Gaming Advisors LLC does not produce research

reports All questions or comments concerning this research report should be addressed to Union Gaming Research Macau at +853

2857 5825

Union Gaming Advisors LLC (Advisors) an affiliate of Union Gaming Research Macau Limited does not own any securities of any

company analyzed in this report (Subject Company) Advisors has received non-investment banking related compensation from

the subject company in the past twelve months Accordingly investors should be aware that the firm and its affiliates may have a

conflict of interest that could affect the objectivity of this report Advisors does expect and will seek compensation from any Subject

Company for investment banking services in the next three months Advisors has never been a market maker for a Subject Company

and does not expect to be a market maker for a Subject Company

All prices are those current at the end of the previous trading session unless otherwise indicated Prices are sourced from local

exchanges via Bloomberg and CapitalIQ Data is sourced from Union Gaming Research Union Gaming Research Macau Limited

and subject companies Union Gaming Research and Union Gaming Research Macau Limited are not responsible for errors in prices

provided by independent sources Data analyses and reports necessarily contain time-sensitive information and no subscriber o

client should rely on dated reports or conclusions

Investor clients and financial advisers should consider any report from Union Gaming as only a single factor in making any

investment decision

Ratings methodology

We use a traditional ratings construct (Buy Hold Sell) that is underscored by percentage upsidedownside form current trading

levels along with dividend yields for total return We exclude special dividends and only contemplate regular dividends in our tota

return forecasts These are absolute ratings not relative or forced ratings We define a Buy rating as a company whose shares exhibit

total return (appreciation and dividends) potential of at least +15 within the next twelve months and conversely a Sell rating as

a company whose shares exhibit downside potential of at least 15 within the next twelve months A Hold rating is reserved fo

companies whose shares exhibit total return potential between those parameters

Investor clients and financial advisers should consider any report from Union Gaming as only a single factor in making any

investment decision

7262019 NagaCorp research

httpslidepdfcomreaderfullnagacorp-research 1717

April 30 2015

Union Gaming Research Macau +853 2857 5825 17

Source Union Gaming Research LLC and Union Gaming Research Macau Limited Capital IQ

Distribution of Subject Companiesrsquo stock ratings

Source Union Gaming Research LLC and Union Gaming Research Macau Limited

Distribution of Subject Companies with affiliate banking relationships

Source Union Gaming Research LLC and Union Gaming Research Macau Limited

Copyright copy 2015 Union Gaming Research Macau Limited

Union Gaming Research Macau

Finance and IT Center of Macau (FIT)

Suite 8B

Nam Van Lake Quarteirao 5 Lote A

Macau

9 - 1 3 - 1 2

B u y

P T

=

$ 5

1 1 - 2 1 - 1 2

B u y

P T

=

$ 5 5

2 - 7 - 1 3

B u y

P T

=

$ 6 5

4 - 1 1 - 1 3

B u y

P T

=

$ 7

8 - 8 - 1 3

B u y

P T

= $ 7 5

1 0 - 7 - 1 3

B u y

P T

=

$ 8

2 - 5 - 1 5

B u y

P T

=

$ 7 5

4 - 3 0 - 1 5

B u y

P T

=

$ 8

$1

$2

$3

$4

$5

$6

$7

$8

$9

$10

$1

$2

$3

$4

$5

$6

$7

$8

$9

$10

9 1 3 1 2

1 0 8 1 2

1 0 3 0 1 2

1 1 2 0 1 2

1 2 1 1 1 2

1 4 1 3

1 2 5 1 3

2 2 0 1 3

3 1 3 1 3

4 8 1 3

4 2 9 1 3

5 2 2 1 3

6 1 3 1 3

7 5 1 3

7 2 6 1 3

8 1 9 1 3

9 1 0 1 3

1 0 3 1 3

1 0 2 5 1 3

1 1 1 5 1 3

1 2 6 1 3

1 2 3 1 1 3

1 2 2 1 4

2 1 4 1 4

3 7 1 4

3 2 8 1 4

4 2 2 1 4

5 1 5 1 4

6 6 1 4

6 2 7 1 4

7 2 1 1 4

8 1 1 1 4

9 1 1 4

9 2 3 1 4

1 0 1 6 1 4

1 1 6 1 4

1 1 2 7 1 4

1 2 1 8 1 4

1 1 3 1 5

2 3 1 5

2 2 6 1 5

3 1 9 1 5

4 1 4 1 5

NagaCorp (3918 HK)

Buy Hold Sell

81 19 0

Buy Hold Sell

100 0 0

7262019 NagaCorp research

httpslidepdfcomreaderfullnagacorp-research 1417

April 30 2015

14 +853 2857 5825 Union Gaming Research Macau

EstimatesWe are largely maintaining our forward estimates for NagaCorp Our 2015 EBITDA

estimate is USD211 million (from USD212 million) Our 2016 EBITDA is USD255 million

(from USD251 million) Please see Figure 1 for detailed revenue EBITDA and EPS

estimates Note above our estimates are all above consensus

Figure 8 Estimates and consensus expectations

Source Union Gaming Research Macau Capital IQ

983107983137983152983145983156983137983148 983113983121 983107983151983149983152983137983150983161 983123983156983137983156983145983155983156983145983139983155 (983110983129983085983108983141983139)52983085983159983141983141983147 983144983145983143983144 $739 983105983150983150983157983137983148983145983162983141983140 983108983145983158983145983140983141983150983140983123983144983137983154983141 $032

52983085983159983141983141983147 983148983151983159 $466 983108983145983158983145983140983141983150983140 983129983145983141983148983140 57

983117983137983154983147983141983156 983139983137983152 ($983149983149) $12621 983113983150983155983145983140983141983154 983119983159983150983141983154983155983144983145983152 00

983123983144983137983154983141983155 983151983157983156983155983156983137983150983140983145983150983143 (983149983149) 22700 983113983150983155 983156983145 983156983157983156983145 983151983150 983119983159983150983141983154983155 983144983145 983152 246

983105983158983141983154983137983143983141 983140983137983145983148983161 983158983151983148983157983149983141 (983149983149) 245 983122983141983158983141983150983157983141 983143983154983151983159983156983144 (2983085983161983141983137983154) 199

983123983144983151983154983156 983145983150983156983141983154983141983155983156 (983149983149) 983150983137 983109983106983113983124983108983105 983143983154983151983159983156983144 (2983085983161983141983137983154) 983150983137

983123983144983151983154983156 983113983150983156983141983154983141983155983156 983137983155 983151983142 983142983148983151983137983156 983150983137 983109983120983123 983143983154983151983159983156983144 (2983085983161983141983137983154) 60

983105983150983150983157983137983148 983122983141983155983157983148983156983155 2014 2015983109 2016983109 2017983109 2018983109

983125983150983145983151983150 983122983141983158983141983150983157983141983155 ($983149983149) $404 $589 $680 $781 $1219

983120983154983141983158983145983151983157983155 983154983141983158983141983150983157983141 983141983155983156983145983149983137983156983141 983085 $564 $644 983085 983085

983107983144983137983150983143983141 983085 $26 $36 983085 983085

983107983137983152983145983156983137983148 983113983121 983154983141983158983141983150983157983141 983141983155983156983145983149983137983156983141 983085 $491 $581 $694 $1099

983125983150983145983151983150 983109983106983113983124983108983105 ($983149983149) $176 $211 $255 $305 $484

983120983154983141983158983145983151983157983155 983109983106983113983124983108983105 983141983155983156983145983149983137983156983141 983085 $212 $251 983085 983085

983107983144983137983150983143983141 983085 ($1) $4 983085 983085

983107983137983152983145983156983137983148 983113983121 983109983106983113983124983108983105 983141983155983156983145983149983137983156983141 983085 $203 $233 $267 $399

983125983150983145983151983150 983109983120983123 $0060 $0069 $0080 $0068 $0111

983120983154983141983158983145983151983157983155 983109983120983123 983141983155983156983145983149983137983156983141 983085 $0072 $0081 983085 983085

983107983144983137983150983143983141 983085 ($0003) ($0001) 983085 983085

983107983137983152983145983156983137983148 983113983121 983109983120983123 983141983155983156983145983149983137983156983141 983085 $0065 $0067 $0060 $0081

983126983137983148983157983137983156983145983151983150 983085 983109983120983123 983117983157983148983156983145983152983148983141 104983160 90983160 105983160 64983160

983126983137983148983157983137983156983145983151983150 983085 983109983126983109983106983113983124983108983105 983117983157983148983156983145983152983148983141 73983160 67983160 84983160 51983160

7262019 NagaCorp research

httpslidepdfcomreaderfullnagacorp-research 1517

April 30 2015

Union Gaming Research Macau +853 2857 5825 15

Price Target HKD800 (from HKD750)We value NagaCorp using an EVEBITDA approach on forward earnings in addition to

incremental present value associated with the companyrsquos Naga2 and Vladivostok

projects the first full year of operations for both will be 2018 Our 12 month price

target is HKD800 (+HKD050) and is based on an 85x multiple of our 2015 EBITDA

estimate (HKD400) in addition to the per share present value for Naga2 and

Vladivostok (HKD400) Our calculations assume a share count of approximately

3848mm which accounts for the dilution associated with the companyrsquos acquisition

of the USD369 million NagaCity Walk and Naga2 complex from CEO Tan Sri Dr Chen

in the form of share issuance convertible bond We note that the 85x multiple

represents a slightly lower multiple than we have previously ascribed (9x) which we

would attribute to broader multiple pullback in the gaming space However it stil

remains a discount to its peer group in Macau to which we generally ascribe a

multiple approximately 3 or 4 turns higher We feel an 85x multiple is justified fo

Naga as the company has consistently executed on its growth initiatives enabling the

company to growth faster than its peer group It is also in the home stretch of

shedding its image as a single-asset story with Naga2 now under construction in a

meaningful way and Vladivostok on the horizon Our price target along with an

expected dividend yield of 7 in 2015 represents 51 upside to todayrsquos closing price

RisksRisks to shares of NagaCorp include country risk (loss of exclusive license adjustmen

to the companyrsquos advantageous low monthly fixed obligation tax) development risk

including delays to Naga2 and the Vladivostok project incremental regiona

competition (especially from Vietnam should locals be allowed to gamble) volatility

associated with being a single-asset operator (for now) in the context of increasing

exposure to the VIP segment

7262019 NagaCorp research

httpslidepdfcomreaderfullnagacorp-research 1617

April 30 2015

16 +853 2857 5825 Union Gaming Research Macau

Appendix 1 Important DisclosuresAdditional information is available upon request

This report was prepared by Union Gaming Research Macau Limited Union Gaming Research Macau Limited is a wholly owned

subsidiary of Union Gaming Group LLC Union Gaming Group LLC also owns Union Gaming Advisors LLC a FINRA member firm

and Union Gaming Research LLC a Nevada Registered Investment Adviser Union Gaming Advisors LLC does not produce research

reports All questions or comments concerning this research report should be addressed to Union Gaming Research Macau at +853

2857 5825

Union Gaming Advisors LLC (Advisors) an affiliate of Union Gaming Research Macau Limited does not own any securities of any

company analyzed in this report (Subject Company) Advisors has received non-investment banking related compensation from

the subject company in the past twelve months Accordingly investors should be aware that the firm and its affiliates may have a

conflict of interest that could affect the objectivity of this report Advisors does expect and will seek compensation from any Subject

Company for investment banking services in the next three months Advisors has never been a market maker for a Subject Company

and does not expect to be a market maker for a Subject Company

All prices are those current at the end of the previous trading session unless otherwise indicated Prices are sourced from local

exchanges via Bloomberg and CapitalIQ Data is sourced from Union Gaming Research Union Gaming Research Macau Limited

and subject companies Union Gaming Research and Union Gaming Research Macau Limited are not responsible for errors in prices

provided by independent sources Data analyses and reports necessarily contain time-sensitive information and no subscriber o

client should rely on dated reports or conclusions

Investor clients and financial advisers should consider any report from Union Gaming as only a single factor in making any

investment decision

Ratings methodology

We use a traditional ratings construct (Buy Hold Sell) that is underscored by percentage upsidedownside form current trading

levels along with dividend yields for total return We exclude special dividends and only contemplate regular dividends in our tota

return forecasts These are absolute ratings not relative or forced ratings We define a Buy rating as a company whose shares exhibit

total return (appreciation and dividends) potential of at least +15 within the next twelve months and conversely a Sell rating as

a company whose shares exhibit downside potential of at least 15 within the next twelve months A Hold rating is reserved fo

companies whose shares exhibit total return potential between those parameters

Investor clients and financial advisers should consider any report from Union Gaming as only a single factor in making any

investment decision

7262019 NagaCorp research

httpslidepdfcomreaderfullnagacorp-research 1717

April 30 2015

Union Gaming Research Macau +853 2857 5825 17

Source Union Gaming Research LLC and Union Gaming Research Macau Limited Capital IQ

Distribution of Subject Companiesrsquo stock ratings

Source Union Gaming Research LLC and Union Gaming Research Macau Limited

Distribution of Subject Companies with affiliate banking relationships

Source Union Gaming Research LLC and Union Gaming Research Macau Limited

Copyright copy 2015 Union Gaming Research Macau Limited

Union Gaming Research Macau

Finance and IT Center of Macau (FIT)

Suite 8B

Nam Van Lake Quarteirao 5 Lote A

Macau

9 - 1 3 - 1 2

B u y

P T

=

$ 5

1 1 - 2 1 - 1 2

B u y

P T

=

$ 5 5

2 - 7 - 1 3

B u y

P T

=

$ 6 5

4 - 1 1 - 1 3

B u y

P T

=

$ 7

8 - 8 - 1 3

B u y

P T

= $ 7 5

1 0 - 7 - 1 3

B u y

P T

=

$ 8

2 - 5 - 1 5

B u y

P T

=

$ 7 5

4 - 3 0 - 1 5

B u y

P T

=

$ 8

$1

$2

$3

$4

$5

$6

$7

$8

$9

$10

$1

$2

$3

$4

$5

$6

$7

$8

$9

$10

9 1 3 1 2

1 0 8 1 2

1 0 3 0 1 2

1 1 2 0 1 2

1 2 1 1 1 2

1 4 1 3

1 2 5 1 3

2 2 0 1 3

3 1 3 1 3

4 8 1 3

4 2 9 1 3

5 2 2 1 3

6 1 3 1 3

7 5 1 3

7 2 6 1 3

8 1 9 1 3

9 1 0 1 3

1 0 3 1 3

1 0 2 5 1 3

1 1 1 5 1 3

1 2 6 1 3

1 2 3 1 1 3

1 2 2 1 4

2 1 4 1 4

3 7 1 4

3 2 8 1 4

4 2 2 1 4

5 1 5 1 4

6 6 1 4

6 2 7 1 4

7 2 1 1 4

8 1 1 1 4

9 1 1 4

9 2 3 1 4

1 0 1 6 1 4

1 1 6 1 4

1 1 2 7 1 4

1 2 1 8 1 4

1 1 3 1 5

2 3 1 5

2 2 6 1 5

3 1 9 1 5

4 1 4 1 5

NagaCorp (3918 HK)

Buy Hold Sell

81 19 0

Buy Hold Sell

100 0 0

7262019 NagaCorp research

httpslidepdfcomreaderfullnagacorp-research 1517

April 30 2015

Union Gaming Research Macau +853 2857 5825 15

Price Target HKD800 (from HKD750)We value NagaCorp using an EVEBITDA approach on forward earnings in addition to

incremental present value associated with the companyrsquos Naga2 and Vladivostok

projects the first full year of operations for both will be 2018 Our 12 month price

target is HKD800 (+HKD050) and is based on an 85x multiple of our 2015 EBITDA

estimate (HKD400) in addition to the per share present value for Naga2 and

Vladivostok (HKD400) Our calculations assume a share count of approximately

3848mm which accounts for the dilution associated with the companyrsquos acquisition

of the USD369 million NagaCity Walk and Naga2 complex from CEO Tan Sri Dr Chen

in the form of share issuance convertible bond We note that the 85x multiple

represents a slightly lower multiple than we have previously ascribed (9x) which we

would attribute to broader multiple pullback in the gaming space However it stil

remains a discount to its peer group in Macau to which we generally ascribe a

multiple approximately 3 or 4 turns higher We feel an 85x multiple is justified fo

Naga as the company has consistently executed on its growth initiatives enabling the

company to growth faster than its peer group It is also in the home stretch of

shedding its image as a single-asset story with Naga2 now under construction in a

meaningful way and Vladivostok on the horizon Our price target along with an

expected dividend yield of 7 in 2015 represents 51 upside to todayrsquos closing price

RisksRisks to shares of NagaCorp include country risk (loss of exclusive license adjustmen

to the companyrsquos advantageous low monthly fixed obligation tax) development risk

including delays to Naga2 and the Vladivostok project incremental regiona

competition (especially from Vietnam should locals be allowed to gamble) volatility

associated with being a single-asset operator (for now) in the context of increasing

exposure to the VIP segment

7262019 NagaCorp research

httpslidepdfcomreaderfullnagacorp-research 1617

April 30 2015

16 +853 2857 5825 Union Gaming Research Macau

Appendix 1 Important DisclosuresAdditional information is available upon request

This report was prepared by Union Gaming Research Macau Limited Union Gaming Research Macau Limited is a wholly owned

subsidiary of Union Gaming Group LLC Union Gaming Group LLC also owns Union Gaming Advisors LLC a FINRA member firm

and Union Gaming Research LLC a Nevada Registered Investment Adviser Union Gaming Advisors LLC does not produce research

reports All questions or comments concerning this research report should be addressed to Union Gaming Research Macau at +853

2857 5825

Union Gaming Advisors LLC (Advisors) an affiliate of Union Gaming Research Macau Limited does not own any securities of any

company analyzed in this report (Subject Company) Advisors has received non-investment banking related compensation from

the subject company in the past twelve months Accordingly investors should be aware that the firm and its affiliates may have a

conflict of interest that could affect the objectivity of this report Advisors does expect and will seek compensation from any Subject

Company for investment banking services in the next three months Advisors has never been a market maker for a Subject Company

and does not expect to be a market maker for a Subject Company

All prices are those current at the end of the previous trading session unless otherwise indicated Prices are sourced from local

exchanges via Bloomberg and CapitalIQ Data is sourced from Union Gaming Research Union Gaming Research Macau Limited

and subject companies Union Gaming Research and Union Gaming Research Macau Limited are not responsible for errors in prices

provided by independent sources Data analyses and reports necessarily contain time-sensitive information and no subscriber o

client should rely on dated reports or conclusions

Investor clients and financial advisers should consider any report from Union Gaming as only a single factor in making any

investment decision

Ratings methodology

We use a traditional ratings construct (Buy Hold Sell) that is underscored by percentage upsidedownside form current trading

levels along with dividend yields for total return We exclude special dividends and only contemplate regular dividends in our tota

return forecasts These are absolute ratings not relative or forced ratings We define a Buy rating as a company whose shares exhibit

total return (appreciation and dividends) potential of at least +15 within the next twelve months and conversely a Sell rating as

a company whose shares exhibit downside potential of at least 15 within the next twelve months A Hold rating is reserved fo

companies whose shares exhibit total return potential between those parameters

Investor clients and financial advisers should consider any report from Union Gaming as only a single factor in making any

investment decision

7262019 NagaCorp research

httpslidepdfcomreaderfullnagacorp-research 1717

April 30 2015

Union Gaming Research Macau +853 2857 5825 17

Source Union Gaming Research LLC and Union Gaming Research Macau Limited Capital IQ

Distribution of Subject Companiesrsquo stock ratings

Source Union Gaming Research LLC and Union Gaming Research Macau Limited

Distribution of Subject Companies with affiliate banking relationships

Source Union Gaming Research LLC and Union Gaming Research Macau Limited

Copyright copy 2015 Union Gaming Research Macau Limited

Union Gaming Research Macau

Finance and IT Center of Macau (FIT)

Suite 8B

Nam Van Lake Quarteirao 5 Lote A

Macau

9 - 1 3 - 1 2

B u y

P T

=

$ 5

1 1 - 2 1 - 1 2

B u y

P T

=

$ 5 5

2 - 7 - 1 3

B u y

P T

=

$ 6 5

4 - 1 1 - 1 3

B u y

P T

=

$ 7

8 - 8 - 1 3

B u y

P T

= $ 7 5

1 0 - 7 - 1 3

B u y

P T

=

$ 8

2 - 5 - 1 5

B u y

P T

=

$ 7 5

4 - 3 0 - 1 5

B u y

P T

=

$ 8

$1

$2

$3

$4

$5

$6

$7

$8

$9

$10

$1

$2

$3

$4

$5

$6

$7

$8

$9

$10

9 1 3 1 2

1 0 8 1 2

1 0 3 0 1 2

1 1 2 0 1 2

1 2 1 1 1 2

1 4 1 3

1 2 5 1 3

2 2 0 1 3

3 1 3 1 3

4 8 1 3

4 2 9 1 3

5 2 2 1 3

6 1 3 1 3

7 5 1 3

7 2 6 1 3

8 1 9 1 3

9 1 0 1 3

1 0 3 1 3

1 0 2 5 1 3

1 1 1 5 1 3

1 2 6 1 3

1 2 3 1 1 3

1 2 2 1 4

2 1 4 1 4

3 7 1 4

3 2 8 1 4

4 2 2 1 4

5 1 5 1 4

6 6 1 4

6 2 7 1 4

7 2 1 1 4

8 1 1 1 4

9 1 1 4

9 2 3 1 4

1 0 1 6 1 4

1 1 6 1 4

1 1 2 7 1 4

1 2 1 8 1 4

1 1 3 1 5

2 3 1 5

2 2 6 1 5

3 1 9 1 5

4 1 4 1 5

NagaCorp (3918 HK)

Buy Hold Sell

81 19 0

Buy Hold Sell

100 0 0

7262019 NagaCorp research

httpslidepdfcomreaderfullnagacorp-research 1617

April 30 2015

16 +853 2857 5825 Union Gaming Research Macau

Appendix 1 Important DisclosuresAdditional information is available upon request

This report was prepared by Union Gaming Research Macau Limited Union Gaming Research Macau Limited is a wholly owned

subsidiary of Union Gaming Group LLC Union Gaming Group LLC also owns Union Gaming Advisors LLC a FINRA member firm

and Union Gaming Research LLC a Nevada Registered Investment Adviser Union Gaming Advisors LLC does not produce research

reports All questions or comments concerning this research report should be addressed to Union Gaming Research Macau at +853

2857 5825

Union Gaming Advisors LLC (Advisors) an affiliate of Union Gaming Research Macau Limited does not own any securities of any

company analyzed in this report (Subject Company) Advisors has received non-investment banking related compensation from

the subject company in the past twelve months Accordingly investors should be aware that the firm and its affiliates may have a

conflict of interest that could affect the objectivity of this report Advisors does expect and will seek compensation from any Subject

Company for investment banking services in the next three months Advisors has never been a market maker for a Subject Company

and does not expect to be a market maker for a Subject Company

All prices are those current at the end of the previous trading session unless otherwise indicated Prices are sourced from local

exchanges via Bloomberg and CapitalIQ Data is sourced from Union Gaming Research Union Gaming Research Macau Limited

and subject companies Union Gaming Research and Union Gaming Research Macau Limited are not responsible for errors in prices

provided by independent sources Data analyses and reports necessarily contain time-sensitive information and no subscriber o

client should rely on dated reports or conclusions

Investor clients and financial advisers should consider any report from Union Gaming as only a single factor in making any

investment decision

Ratings methodology

We use a traditional ratings construct (Buy Hold Sell) that is underscored by percentage upsidedownside form current trading

levels along with dividend yields for total return We exclude special dividends and only contemplate regular dividends in our tota

return forecasts These are absolute ratings not relative or forced ratings We define a Buy rating as a company whose shares exhibit

total return (appreciation and dividends) potential of at least +15 within the next twelve months and conversely a Sell rating as

a company whose shares exhibit downside potential of at least 15 within the next twelve months A Hold rating is reserved fo

companies whose shares exhibit total return potential between those parameters

Investor clients and financial advisers should consider any report from Union Gaming as only a single factor in making any

investment decision

7262019 NagaCorp research

httpslidepdfcomreaderfullnagacorp-research 1717

April 30 2015

Union Gaming Research Macau +853 2857 5825 17

Source Union Gaming Research LLC and Union Gaming Research Macau Limited Capital IQ

Distribution of Subject Companiesrsquo stock ratings

Source Union Gaming Research LLC and Union Gaming Research Macau Limited

Distribution of Subject Companies with affiliate banking relationships

Source Union Gaming Research LLC and Union Gaming Research Macau Limited

Copyright copy 2015 Union Gaming Research Macau Limited

Union Gaming Research Macau

Finance and IT Center of Macau (FIT)

Suite 8B

Nam Van Lake Quarteirao 5 Lote A

Macau

9 - 1 3 - 1 2

B u y

P T

=

$ 5

1 1 - 2 1 - 1 2

B u y

P T

=

$ 5 5

2 - 7 - 1 3

B u y

P T

=

$ 6 5

4 - 1 1 - 1 3

B u y

P T

=

$ 7

8 - 8 - 1 3

B u y

P T

= $ 7 5

1 0 - 7 - 1 3

B u y

P T

=

$ 8

2 - 5 - 1 5

B u y

P T

=

$ 7 5

4 - 3 0 - 1 5

B u y

P T

=

$ 8

$1

$2

$3

$4

$5

$6

$7

$8

$9

$10

$1

$2

$3

$4

$5

$6

$7

$8

$9

$10

9 1 3 1 2

1 0 8 1 2

1 0 3 0 1 2

1 1 2 0 1 2

1 2 1 1 1 2

1 4 1 3

1 2 5 1 3

2 2 0 1 3

3 1 3 1 3

4 8 1 3

4 2 9 1 3

5 2 2 1 3

6 1 3 1 3

7 5 1 3

7 2 6 1 3

8 1 9 1 3

9 1 0 1 3

1 0 3 1 3

1 0 2 5 1 3

1 1 1 5 1 3

1 2 6 1 3

1 2 3 1 1 3

1 2 2 1 4

2 1 4 1 4

3 7 1 4

3 2 8 1 4

4 2 2 1 4

5 1 5 1 4

6 6 1 4

6 2 7 1 4

7 2 1 1 4

8 1 1 1 4

9 1 1 4

9 2 3 1 4

1 0 1 6 1 4

1 1 6 1 4

1 1 2 7 1 4

1 2 1 8 1 4

1 1 3 1 5

2 3 1 5

2 2 6 1 5

3 1 9 1 5

4 1 4 1 5

NagaCorp (3918 HK)

Buy Hold Sell

81 19 0

Buy Hold Sell

100 0 0

7262019 NagaCorp research

httpslidepdfcomreaderfullnagacorp-research 1717

April 30 2015

Union Gaming Research Macau +853 2857 5825 17

Source Union Gaming Research LLC and Union Gaming Research Macau Limited Capital IQ

Distribution of Subject Companiesrsquo stock ratings

Source Union Gaming Research LLC and Union Gaming Research Macau Limited

Distribution of Subject Companies with affiliate banking relationships

Source Union Gaming Research LLC and Union Gaming Research Macau Limited

Copyright copy 2015 Union Gaming Research Macau Limited

Union Gaming Research Macau

Finance and IT Center of Macau (FIT)

Suite 8B

Nam Van Lake Quarteirao 5 Lote A

Macau

9 - 1 3 - 1 2

B u y

P T

=

$ 5

1 1 - 2 1 - 1 2

B u y

P T

=

$ 5 5

2 - 7 - 1 3

B u y

P T

=

$ 6 5

4 - 1 1 - 1 3

B u y

P T

=

$ 7

8 - 8 - 1 3

B u y

P T

= $ 7 5

1 0 - 7 - 1 3

B u y

P T

=

$ 8

2 - 5 - 1 5

B u y

P T

=

$ 7 5

4 - 3 0 - 1 5

B u y

P T

=

$ 8

$1

$2

$3

$4

$5

$6

$7

$8

$9

$10

$1

$2

$3

$4

$5

$6

$7

$8

$9

$10

9 1 3 1 2

1 0 8 1 2

1 0 3 0 1 2

1 1 2 0 1 2

1 2 1 1 1 2

1 4 1 3

1 2 5 1 3

2 2 0 1 3

3 1 3 1 3

4 8 1 3

4 2 9 1 3

5 2 2 1 3

6 1 3 1 3

7 5 1 3

7 2 6 1 3

8 1 9 1 3

9 1 0 1 3

1 0 3 1 3

1 0 2 5 1 3

1 1 1 5 1 3

1 2 6 1 3

1 2 3 1 1 3

1 2 2 1 4

2 1 4 1 4

3 7 1 4

3 2 8 1 4

4 2 2 1 4

5 1 5 1 4

6 6 1 4

6 2 7 1 4

7 2 1 1 4

8 1 1 1 4

9 1 1 4

9 2 3 1 4

1 0 1 6 1 4

1 1 6 1 4

1 1 2 7 1 4

1 2 1 8 1 4

1 1 3 1 5

2 3 1 5

2 2 6 1 5

3 1 9 1 5

4 1 4 1 5

NagaCorp (3918 HK)

Buy Hold Sell

81 19 0

Buy Hold Sell

100 0 0