Merrill Lynch noted that the gold sector (03918.HK) rating from "neutral" rose "buy", mainly due to attractive valuations, coupled with optimistic about its business development Lounge, and slot machine business is expected to recover in the fourth quarter.
Group just in the end of August and September with the two companies signed a cooperation between Macao intermediaries that Asian gamblers begin to contribute to the gold sector. Lounge and estimated 2015 growth forecast for the slot machine business, from the original 25% and 10%, rising to 30% and 15%, believe that the gold sector in the future will introduce more intermediary companies.
In addition, the mall's part NagaCity Walk will be completed end of this year, has a number of duty-free shops to attract more mainland visitors, believed to further promote the 2015 pension sector casino midfield growth.
Based on the slot machine area renovation project is nearing completion, is expected to further improve the business performance in the fourth quarter, the increase in 2014/15 EBITDA forecast 1% / 5%, the target price from 8.1 yuan to 8.3 yuan. Price equivalent to about EV / EBITDA 7.7 times price-earnings ratio of 11.2% and dividend yield of 5.6 cm, and the current global peers of 8.9 times, 19.1 times and 2.5% compared to attractive valuations.
Alert: Solid VIP and Mass Growth in 3Q14
3Q14 GGR +23% YoY – NagaCorp reported its 3Q14 Key Performance Indicators
(KPIs). Gross Gaming Revenue in 3Q14 improved 23% YoY, tracking ahead of our
FY14 forecast of 18% YoY growth. Mass drop improved 17% YoY (vs +15% YoY in
FY13). 9M14 mass growth of 21% is largely in-line with our 20% YoY FY14 growth
forecast. Slot/EGT volumes improved 16% YoY, better than our expectation. VIP
rolling volume growth accelerated to 32% in 3Q (vs. 14% in 1Q and 25% in 2Q),
likely showing signs that Naga’s VIP initiatives are increasing volumes at the casino.
Figure 1. NagaCorp – Quarterly KPIs (US$’000)
US$'000 3Q13 4Q13 1Q14 2Q14 3Q14 YoY %
Public Floors Gaming Tables Buy-ins 97,526 110,564 115,647 119,509 114,311 17.2%
Electronic Gaming Machines Bills-in 268,065 272,065 273,250 301,655 311,319 16.1%
Junket VIP Rollings 1,254,008 1,305,721 946,097 1,475,943 1,657,107 32.1%
Gross Gaming Revenue 74,213 108,986 76,875 103,462 91,528 23.3%
Source: Company Report; Citi Research
Cambodia International Tourist Arrivals +4.5% in 7M14 – Cambodia’s Ministry of
Tourism reported international arrivals in July 2014 were largely flat at +0.4% YoY.
YTD, total international arrivals reached 2.5m visitors, +4.5% YoY. Visitors from Asia
accounted for 75.9% of the 7M14 arrivals (vs 72.0% a year ago), in which the top
three markets represented 42.4% of the total. During 7M14, visitation from China
improved by 19.0% YoY, while visitation from Vietnam and South Korea softened by
3.0% and 0.1% YoY, respectively. YTD, Vietnam accounted for 19.4% of total
visitation, followed by China at 12.5%, and Korea at 10.5%. Outside of Asia, the US
was the largest source of international arrivals (up 2.7% YoY) and contributed 4.6%
of the total, followed by France at 3.3% and the UK at 3.2%.
Visitors arriving by air accounted for 51.4% of the total in 7M14, +13.2% YoY, likely
reflecting the strong traffic from China. Meanwhile, 46.6% of international visitors
arrived by land (-4.2% YoY). Only 2% of visitors arrived by sea.