NagaCorp 3918 / Chen Lip Keong

[winston]

not vested

Valuation discount unjustified

Phnom Penh gaming market more structurally sound compared to Macau as we expect positive growth in mass and VIP gaming for Naga.

Mass gaming drivers will be from operational enhancement and increases in nongaming elements.

VIP segment driven by low Chinese base and new capacity.

Upgrade from Hold to Add with a higher target price based on 8x FY16 EV/EBITDA.

Current 46% Macau discount not justified given better earnings visibility.

Strong earnings and improving sector sentiment are share price catalysts.

Source: CIMB

https://brokingrfs.cimb.com/6QRlRvNp90X ... 2i2kg2.pdf

[winston]

not vested

New report: Solid operations with attractive valuation EPS

We upgrade NagaCorp to OUTPERFORM (from Neutral) for its faster-than-peers growth momentum but undemanding valuation.
NagaCorp is trading at only 5x 2017 EV/EBITDA (below its historical avg of 6x) at a 60% discount to Macau (vs avg. 50%).

In VIP segment, despite the lower junket commission rate from 1 January, VIP growth remains robust (rolling +65% YoY in 1Q16),
suggesting the built up of traction with junket/players.

In massmarket, the growth trend has been solid (table buy-ins/EGM billsin +15%/32% YoY in 1Q16) thanks to improving traffic and
constant business optimisation of the floor.

We expect the solid growth to continue owing to:
(1) NagaCity Walk opening by August;
(2) improving accessibility to NagaWorld by Bassaka Air; and
(3) better player mix—Chinese visitations have been persistently growing at a faster pace.

We see upside risks to earnings from:
(1) the renewal of EGM operation contract;
(2) commencement of tele-betting; and
(3) nongaming revenue income from NagaCity Walk.

Its solid operation and potential earnings upgrade are likely to serve as re-rating catalysts.


VIP volume growth remain robust despite lower commission

Despite the scale back of junket commission from >70% of VIP GGR to a maximum of 70% since 1 January 2016, the VIP rolling chips
continued to grow robustly at 65% YoY in 1Q16 (2015: +27%).

On top of the junket events around the Chinese New Year and lower house luck, we believe this also suggests improving traction with junket/players.

As the business ramps up, the growth momentum is set to normalise. Yet, with a more accommodative regulation and junket commission scheme, we believe Naga could sustain a better-than-peers’ growth.


Solid growth to continue in 2H16, especially for mass-market

Aside from VIP, the constant optimisation of casino floor (e.g., allowing table buys-in and implement EGM TITO system) have been well received by players.

We forecast mass tables buy-ins could sustain its steady growth at 16% in 1H16 and EGM bills-in will show a +23% YoY growth.

The solid momentum is set to continue owing to:
(1) NagaCity Walk opening by August,
(2) improving accessibility as Bassaka Air expands coverage and frequency; and
(3) improving players mix, whereas the Chinese visitations, who are usually more serious gamblers, have been persistently growing at a faster pace.


Widened valuation discount against Macau appears unjustified; Upgrade to OUTPERFORM

Factoring in the potential EGM income, solid operating trend, and the CB conversion for Naga2, we revise our 2016-18E EPS by 18%/13%/-2% and raise our TP to HK$6.5 (from HK$5.2).

This is based on:
(1) 6.5x 2017 EBITDA on NagaWorld (a 50% discount to Macau, consistent with the historical average) and
(2) a DCF-value of HK$1.0/sh for Naga2.

Trading at only 5.2x 2017 EBITDA (vs the historical 6.1x) and at a 60% discount to Macau's 13.3x but with better operating trends, the widened valuation discount against Macau appears unjustified.

Source: CS

[winston]

vested

Unaudited condensed consolidated interim results for the six months ended 30 June 2016:-
Net profit increased by 24% to US$125.2 million
VIP rollings increased by 26% to US$4.5 billion
Mass Market table buy-ins increased by 17% to US$305.6 million
Mass Market EGMs bills-in increased by 18% to US$741.8 million
Basic earnings per Share of US cents 5.51

An interim dividend for Shareholders and a distribution for the holder of the Convertible Bonds of US cents 2.77 per Share/Conversion Share (or equivalent to HK cents 21.47 per Share/Conversion Share) has been declared, representing a payout ratio of 60% based on the net profit generated for the Period.

The interim dividend and distribution shall be paid on Tuesday, 13 September 2016

http://www.hkexnews.hk/listedco/listcon ... 808722.pdf

[winston]

vested

<Result Ann>NAGACORP Interim Net Profit Up 10.3%; Div US2.77 Cents

NAGACORP (03918.HK) announced the results for the first half ended June 2016.

Net profit gained 24% yearly to US$125 million, with EPS of US 5.51 cents.

Interim dividend was US2.77 cents.

Source; AAStocks Financial News

[winston]

vested

NAGACORP Jumps Nearly 8%; Interim Net Profit Up 24% with Increasing Div

NAGACORP (03918.HK) peaked at $5.82 this morning, hitting more than 11-month high.

It last stood at $5.81, up 7.8%, on surging volume to 12.78 million shares.

The company reported 24% yearly rise in interim net profit to US$125 million, with EPS of US5.51 cents.

Interim dividend rose 3.7% yearly to US2.77 cents.

During the period, operating revenue jumped more than 10% to US$288 million.

Source: AAStocks Financial News

[winston]

not vested

NAGACORP: Cambodia Project 2nd Phase Adds 200 Gaming Tables

NAGACORP (03918.HK) finance director Philip Lee Wai Tuck said at the results conference that the hotel market of Phnom Penh, Cambodia is now short of supply and lack of entertainment facilities, but he believed the situation will turn around when the second phase of the group's project is open next year.

The project was expected to increase 200 gaming tables and 500-1,000 electronic gaming machines.

Source: AAStocks Financial News

[winston]

not vested

NagaCorp to open second casino

by Carrie Chen

NagaCorp (3918), the operator of a casino in the Cambodia capital Phnom Penh, is to open its new casino, Naga2, next year, with 200 gaming tables and up to 1,000 slot machines.

Visitors to Cambodia rose 2.4 percent to two million in the first five months of this year from a year back.

Also, China's anti-graft campaign is seeing more mainlanders visiting Naga casino in Phnom Penh instead of Macau.

Chief marketing officer of South East Asia Mike Ngai said despite this, most of its customers continue to come from the Southeast Asia, especially Malaysia.

Chairman Timothy Patrick McNally said the firm also expects revenue to grow from NagaCity, a pedestrian mall offering Chinese duty-free goods in Phnom Penh.

Net profit jumped 24 percent to US$125.2 million (HK$976.56 million) in the first half, thanks to local economic growth and rising visitors. An interim dividend of 2.77 US cents per share was recommended.

Revenue from VIP gamblers jumped 26 percent from a year earlier to US$4.5 billion, chief financial officer Philip Lee Wai-tuck said, adding growth is expected to exceed 20 percent for the whole year.

On worries of a tax burden due to a new lottery law in Cambodia, Lee believes the government will arrange the tax issues to keep local casinos competitive with those in Thailand and Vietnam.

Naga shares jumped 7.24 percent to HK$5.78 yesterday - the highest mark since last September.

Source: The Standard

[winston]

not vested

Strong execution

1H16 net profit expanded 24% yoy, helped by one-off EMG fees

Both mass and VIP revenue saw yoy growth, of 11% and 4%, respectively

Gross margin improved 2% pts due to cost control and stronger mass volumes

Interim dividend of HK$0.21, 60% payout ratio, in line with expectations

Maintain Add and target price, based on 8x 2016F EV/EBITDA

Source: CIMB

https://brokingrfs.cimb.com/j22OVVLcbMk ... WorMA2.pdf

[winston]

vested

NAGACORP (03918.HK) Places Shares to Raise $930M via Top-up Placing

NAGACORP (03918.HK) plans to place a total of 190 million shares to no less than six placees by way of top-up placing, representing approximately 7.72% of issued share capital.

The placing price of $5 per share is equivalent to approximately 8.9% discount against the closing price of the previous trading day.

Net proceeds amounted to roughly $930 million.

Source: AAStocks Financial News

[winston]

vested

Maintain OUTPERFORM

Additional tax payment not a total surprise; solid operating trend remains intact

According to local media, NagaCorp may be required to pay more than US$10 mn in additional taxes for its non-gaming operations this year after a tax audit (recurring going forward). A higher non-gaming tax may be levied on the upcoming Naga2 as well. The government also looks for higher tax charge from other casinos in Cambodia.

Given the constant social pressure to lift tax collections from casinos and an additional tax (US$9.4 mn) was paid in 1H15, this news is not a total surprise. We expect a new gaming bill to be tabled for legislation by end-2016. We believe a higher (yet still among the lowest in the region) effective tax rate of 5-7% on GGR is possible.

Factoring in the additional tax payment and top-up placement announced earlier to fund the fit-out of Naga2, we trim our 2016-
18E EPS by 8-17% and lower TP to HK$6.0 (from HK$6.5).

Even on a fully diluted basis, Naga trades at only 10x EV/EBITDA (33% disc to Macau), but with a more solid outlook amid
(1) increasing mass traffic (likely to be further fueled by the opening of NagaCity Walk and the more frequent Bassaka Air and
(2) improving VIP margins (lower commissions) but solid volumes (1H16 +26%).

OUTPERFORM.

Source: CS