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Macau Gaming:A Parisian Wynn

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Event.

We attended Sands’ grand opening of the Parisian and the subsequentinvestor meeting. We also met with Wynn Resorts’ CFO Mr Cootey in Macau.

We consider the Parisian an impressive project featuring stunning MacauEiffel Tower and fireworks. Management is confident that the new project willhelp grow Cotai market and targets 20% ROIC for Parisian by 2018. Wereiterate our bullish view on Macau gaming and expect this project and WynnPalace, with all their non-gaming features, to move Macau a big step forwardto becoming a world-class tourism and leisure destination.

Impact.

Parisian is impressive. The US$2.7bn property has a premium-mass focus,mainly targeting middle-class and family customers. Parisian offers 3,000hotel rooms (33-72 sq. m. per room). We consider the room a bit small forpremium-mass customers, but this is expected to be compensated by 170retail shops, 1,200-seat Parisian theatre, 5,200 sq. m. meeting venues, andthe iconic Macau Eiffel Tower. Management targets 20% ROIC for Parisianafter full ramp-up by 2018; and expects it to be the second biggest earningsdriver after Venetian. We expect Parisian to fully ramp up in c6 quarters andforecast cUS$340mn FY17E EBITDA for Parisian, in line with consensus. Inaddition, according to the management, both premium mass and grind massdid well in July and August; and Sands China (1928 HK, HK$34.15, Neutral,TP: HK$28.80) targets to maintain its current dividend payout ratio of over100% over the long term.

Wynn Palace well on track. According to the company, both Wynn Palaceand Wynn Macau are running well on track. Management is confident with itsFY17 EBITDA target of US$630-850mn for Wynn palace and US$540-700mnfor Wynn Macau. We consider consensus numbers too conservative and ourEBITDA forecasts for FY17 and FY18 are 18% and 30% above consensus(see Wynn Palace to surprise market).

Channel checks suggest 1% decline for Sep GGR. Channel checksconducted by Asia Pacific Gaming Consultancy (APG) indicate an averagedaily run rate of HK$518m in September thus far. With slots revenueestimated to be HK$950m for the full month, this run rate would lead to anoverall GGR of HK$16.5bn, a 1% decline YoY for September. We expectMacau GGR to be roughly flat in Sep, and grow 3% YoY in Oct, benefitingfrom the new openings (note link).

Macau published final version of Five-year plan. The Macau governmentis working closely with the Central Government and targets to build Macauinto a world-class tourism centre and Portuguese trade platform. Details onpage 2.

Outlook.

We are bullish on Macau gaming sector (Viva Macau!), given (1) theCentral Government’s support; and (2) huge gaming demand from China butshortage in supply. We project an 8% GGR CAGR till 2020, driven by themass segment, validated by our proprietary Macquarie Macau Gaming Index(MMGI 2.0). Wynn Macau (1128 HK, HK$13.22, OP, TP: HK$18.80) is our toppick.





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