20171103-招商证券_香港_-新濠国际发展-00200.HK-MLCO_3Q17_beat__4Q_trends_good_5页_1mb

Melco Intl Development (200 HK) Summary

Core Content

This report provides an analysis of Melco Resorts (MLCO US) and its Hong Kong-listed subsidiary, Melco Group (200 HK), focusing on financial performance, valuation, and investment outlook for Q3 2017 and beyond.

Main Points

Financial Performance

• 3Q17 EBITDA: Reached US$366 million, a 40% YoY and 25% QoQ increase, beating expectations by 10% and 21% respectively.
• Net Revenue: Grew 19% YoY and 6% QoQ to US$1,377 million.
• CoD Performance: Delivered record-high EBITDA since Q1 15, with a 45% YoY and 41% QoQ increase, driven by favorable VIP hold, lower daily opex, and recovery of doubtful debts.
• CoD Manila: Showed strong YoY growth but QoQ decline due to a lower VIP win rate of 2.5% compared to 3.5% in Q2 17.

Earnings and Valuation

• Earnings Beat: The performance was attributed not only to one-off factors but also to consistent cost control and stable market share.
• P/E and EV/EBITDA: MLCO currently trades at 24x FY18E P/E and 10x EV/EBITDA.
• NAV Discount: The stock is attractive at a 41% FY18E NAV discount, compared to a 5-year average of 33%.
• Target Price (TP): Revised TP to HK$25.40, reflecting a 33% FY18E NAV discount.

Key Financial Metrics

Revenue

• FY15: HK$395 million
• FY16: HK$23,853 million
• FY17E: HK$40,700 million
• FY18E: HK$42,697 million
• FY19E: HK$44,766 million

Core Net Profit

• FY15: HK$101 million
• FY16: HK$-20 million
• FY17E: HK$1,807 million
• FY18E: HK$2,189 million
• FY19E: HK$3,182 million

Core EPS (HK$)

• FY15: 0.07
• FY16: -0.01
• FY17E: 1.18
• FY18E: 1.43
• FY19E: 2.07

Core P/E (x)

• FY15: 339.9x
• FY17E: 18.9x
• FY18E: 15.6x
• FY19E: 10.7x

EV/EBITDA (x)

• FY17E: 8.8x
• FY18E: 7.5x
• FY19E: 6.4x

Dividend Yield (%)

• FY15: 0.2%
• FY17E: 0.4%
• FY18E: 0.4%
• FY19E: 0.4%

Core ROE (%)

• FY15: 1%
• FY17E: 9%
• FY18E: 10%
• FY19E: 13%

Investment Highlights

• Investment Rating: BUY
• Target Price (TP): HK$25.40, representing a 14% upside from the current price of HK$22.25.
• Market Cap: US$4,406 million
• 52-Week Range (HK$): 9.88 / 23.25
• Avg. Daily Volume (mn): 5.6
• BVPS (HK$): 12.3
• Shareholding Structure:
  • Ho Lawrence, Yau Lung: 53% (819 million shares)
  • Southeastern AM: 6% (92 million shares)
  • Free float: 41%
• No. of Shares Outstanding: 1,545 million

Peer Valuation Table

SOTP Valuation

Investment Outlook

• The report reiterates a BUY rating for Melco Group, citing strong performance and a favorable valuation.
• The stock is considered attractive due to the 41% NAV discount, which is higher than the 5-year average of 33%.
• The company is expected to maintain its market share and benefit from the upcoming opening of the fifth tower, Morpheus, in 1H18E.
• The report suggests that the earnings beat was not solely due to one-off factors but also due to improved cost control and market stability.

Conclusion

Melco Group's Q3 2017 results exceeded expectations, driven by strong performance at City of Dreams and effective cost management. The company is currently undervalued relative to its net asset value, making it an attractive investment opportunity. The updated target price of HK$25.40 reflects a 33% NAV discount and is in line with historical averages, indicating potential for growth. The report maintains a BUY rating, highlighting the company's solid fundamentals and positive outlook for future performance.