vested
NagaCorp Limited
Maintain OUTPERFORM
3Q16 volume growth moderated on high base; removal of overhangs to serve as re-rating catalyst
NagaCorp reported 3Q16 operating data. By segment, VIP rolling chips volume was -11% YoY (3Q15: +40%) while mass table buyin growth moderated to +6% (2Q16: +18%; 3Q15: +25%) on high comparison base. However, EGM bill-in growth accelerated to +11% YoY in 3Q (2Q16: +6%), which suggested that better traffic and ongoing optimisation were well received.
Local media reported that tax audit over NagaWorld is completed and an additional tax of US$16.6 mn may be levied. Although the
amount is higher than our previous assumption (US$10 mn), removal of this overhang is likely to serve as a re-rating catalyst.
On higher tax provision for FY16 and slower growth in 3Q, we trim our FY16-18 earnings estimates by 4-10% and lower TP to
HK$5.8 (from HK$6.0). Our assumption of tax payment based on 5% of GGR from FY17E onwards remains unchanged.
In our view, the benefit from NagaCity Walk (soft opening in midAugust) is yet to be seen and Naga2 is priced in. Given the
undemanding valuation and overhangs being removed, we suggest accumulating on a dip.
Source: CS