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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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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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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
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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
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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 0
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1 983112 1 3
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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
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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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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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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
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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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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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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
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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
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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
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P T
=
$ 5 5
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P T
=
$ 6 5
4 - 1 1 - 1 3
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P T
=
$ 7
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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
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P T
=
$ 8
$1
$2
$3
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$5
$6
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$8
$9
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$1
$2
$3
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$5
$6
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$8
$9
$10
9 1 3 1 2
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2 2 0 1 3
3 1 3 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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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
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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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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1000
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7000
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1 983112 1 5 983109
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1 983112 1 6 983109
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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
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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
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1 983112 1 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 983149983137983155983155 983149983137983154983147983141983156 983156983137983138983148983141 983111983111983122 983137983150983140 983161983161 983139983144983143
983117983137983155983155 983156983137983138983148983141 983111983111983122 983129983129
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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
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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
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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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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
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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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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
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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
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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
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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
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B u y
P T
=
$ 6 5
4 - 1 1 - 1 3
B u y
P T
=
$ 7
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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
1 0 8 1 2
1 0 3 0 1 2
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2 2 0 1 3
3 1 3 1 3
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4 2 9 1 3
5 2 2 1 3
6 1 3 1 3
7 5 1 3
7 2 6 1 3
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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
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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
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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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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
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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
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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
010
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1 983112 1 0
2 983112 1 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 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
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
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1 983112 1 5 983109
2 983112 1 5 983109
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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
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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
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
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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
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
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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
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
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2 1 4 1 4
3 7 1 4
3 2 8 1 4
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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 517
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
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1 983112 1 0
2 983112 1 0
1 983112 1 1
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1 983112 1 3
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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
10
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90
100
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1 983112 1 1
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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
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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
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 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
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80
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
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
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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
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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
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
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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
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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
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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
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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
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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 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
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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
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