Casinos are statistically proven to be profitable businesses
Figure 1: Different layouts of a roulette wheel

Table 1: House edge of various casino games
| Game | House edge |
| European roulette (single zero) | 2.70% |
| American roulette (double zero) | 5.26% |
| Baccarat (no tie bets) | 1.20% |
| Blackjack (average player) | 2.00% |
| Craps | 1.58% |
| Sic Bo | 8.00% |
| Slots | 5% to 15% |
| Keno | 5% to 35% |
| Source: Wizard of Odds, iFAST Compilations | |
Factors that will propel the future growth of NagaCorp
Figure 2: NagaCorp’s gaming revenue expected to climb further on higher visitor arrivals and the addition of Naga 3

Table 2: Nagaworld’s gaming capacity will more than double when Naga 3 is completed
| Naga 1 | NagaCity Walk | Naga 2 | Naga 3* | |
| Launch Date | December 2016 | August 2016 | November 2017 | 2025 (expected) |
| Project Type | Integrated casino and hotel | Underground duty free shopping mall | Integrated casino and hotel | Integrated casino and hotel/condotel |
| Floor Area (sqm) | 113,000 | 13,000 | 108,000 | 544,000 |
| Gaming Capacity | 250 gaming tables, 1700 EGM | - | 300 gaming tables, 2500 EGM | 800 gaming tables, 2500 EGM |
| Hotel Capacity | 700 rooms | - | 900 rooms | 4,720 rooms |
*Currently in development
Source:
Company Data, Moody’s Investors Service, Morgan Stanley Research |
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Table 3: NagaCorp’s gross gaming revenue growth far outpaces its regional peers
| 2015 | 2016 | 2017 | 2018 | 2019E | 2020E | 2021E | |
| Macau | 28,852 | 27,896 | 33,093 | 37,372 | 36,814 | 39,220 | 41,921 |
| -3% | 19% | 13% | -1% | 7% | 7% | ||
| Singapore | 4,778 | 4,164 | 4,605 | 4,555 | 4,194 | 4,219 | 4,261 |
| -13% | 11% | -1% | -8% | 1% | 1% | ||
| Philippines | 2,463 | 2,823 | 3,027 | 3,560 | 4,226 | 4,730 | 5,282 |
| 15% | 7% | 18% | 19% | 12% | 12% | ||
| Malaysia | 1,436 | 1,359 | 1,367 | 1,557 | 1,486 | 1,461 | 1,476 |
| -5% | 1% | 14% | -5% | -2% | 1% | ||
| NagaCorp | 481 | 501 | 926 | 1,434 | 1,785 | 2,003 | 2,244 |
| 4% | 85% | 55% | 24% | 12% | 12% | ||
Source: Bloomberg, Company Data,
JPMorgan estimates Gross gaming revenue is presented in USD (millions) |
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Attractive upside potential and dividend yield
Figure 3: Over the long-run, share prices are driven by earnings

Table 4: Strong earnings growth for NagaCorp expected
| 2018 | 2019E | 2020E | 2021E | |
| Forward PE Ratio | 12.81 | 15.86 | 14.6 | 13.53 |
| Expected Earnings Growth | 14.00% | 35.91% | 6.12% | 11.54% |
| EPS (HKD) | 0.71 | 0.96 | 1.02 | 1.14 |
| Source: Bloomberg, iFAST Compilations | ||||
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