Inside Asian Gaming

INSIDE ASIAN GAMING | December 2012 38 Macau gaming: Stock selection scorecard Valuation comparison DCF valuation for existing properties Source: CLSA Asia-Pacific Markets Source: CLSA Asia-Pacific Markets Source: CLSA Asia-Pacific Markets 2012-13 (versus Asia consumer of 2-3%) and dividend yield at 4-5% (versus Asia consumer of 3%). If we were to apply a discounted cashflow (DCF) valuation to the Macau gaming companies, we still see them as attractively valued. We apply conservative cashflow growth estimate of 5% per annum to forecast the free-cashflow generation of the existing properties operated by the gaming companies. We also apply a 10% WACC [weighted average cost of capital] and a terminal growth rate of 2% to derive the fair value of the existing casino properties. At current share prices, the Macau gaming operators are still trading at a 15-63% discount to the fair value of their existingproperties, not tomention that there is still upside potential to the company’s fair value as the upcoming Cotai project starts operation. We believe the valuations of the Macau gaming companies are still attractive at current levels and offer investors a reasonable margin of safety. Log onto www.asgam.com for the latest industry intelligence and a subscription to our digital edition—all absolutely free A Sure Bet IN FOCUS