Paradise Entertainment Limited · HKEX:1180
Paradise Entertainment — Investor Presentation (August 2017)
41 slides from Paradise Entertainment's investor presentation, Aug 22, 2017
Slide 1: Paradise Entertainment Ltd Investor Presentation
Paradise Entertainment Ltd 匯彩控股有限公司 (1180.HK) Investor Presentation Information as of August 2017 1
Slide 2: Key investment thesis
Key investment thesis ▪ Casino Service ▪ Macau casino turnaround business model ▪ Focusing primarily grind-mass market with strong and stable cash flow ▪ Consolidation strategy of Macau Peninsula satellite casino operation ▪ Derive synergy from gaming system business ▪ Gaming System ▪ A leading Elec
Slide 3: Key statistics
Key statistics Market Statistics & Financial Metrics Historical Financial Summary (in HK$ millions except per share and dividend yield data) (in HK$ millions) 2014 2015 2016 Stock Price (30/12/16) 1.53 52 Week High HK$ 2.02 Revenue HK$ 1,192.3 HK$ 1,092.1 HK$ 1,163.3 52 Week Low HK$ 1.01 Gross profi
Slide 4: Content
Content I. Company Overview II. Gaming System – Macau III. Gaming System – Overseas IV. Casino Service IV. Gaming Technology V. Financials VI. Outlook VII. Appendix 4
Slide 5: Company Overview
, ale Company Overview “ Paradise
Slide 6: Paradise Entertainment at a Glance
Paradise Entertainment at a Glance Gaming System Casino Service LT Game LT Macau Development, sale and leasing of Licensed casino management electronic gaming equipment and service provider focusing on Mass system. market customers for various satellite casinos in Macau Casino turnaround busin
Slide 7: Gaming System – Macau
Gaming System – Macau 7
Slide 8: Gaming System: Live Multi Game (LMG)
Gaming System: Live Multi Game (“LMG”) ▪ Our flagship product (patent protected) in Macau ▪ Over 4,500 LMG terminals installed in 25 Macau casinos as at 31/12/2016 ▪ Dominates Macau’s ETG industry, 60% market share ▪ Average daily net win of c.HK$1,500 per terminal or implied daily net win of c.HK$1
Slide 9: Gaming System: Traditional Table vs. LMG
Gaming System: Traditional Table vs. LMG Summary of traditional table vs. LMG comparison Live Multi-Gaming Solved Improved Solved Traditional Gaming Table labour efficiency & regulatory Machine shortage profitability hurdles # of Hands/ hour <50 hands +70 hands P # of Players / Dealer 8-10 players²
Slide 10: Gaming System: LMG vs. Slot Performance in Macau
Gaming System: LMG vs. Slot Performance in Macau LMG performance in Macau Units MOP’m 5,000 LMG GGR 5-year CAGR growth 27% 2,500 4,000 2,000 3,000 1,500 2,000 1,000 1,000 500 0 0 2012 2013 2014 2015 2016 No. of LMG LMG GGR Slot performance LMG performance Units Slot performance in Macau MOP’m GGR yo
Slide 11: Gaming System: Macau Growth Opportunity
Gaming System: Macau Growth Opportunity Existing LMG Deployment in Macau Peninsula Cotai Total No. of Casinos 25 13 38 Casinos with LMG 13 12 25 LMG Installation 2,355 2,183 4,538 Lan Kwai Fong Hotel Diamond Satellite Flagship Babylon *Avg. Installation per Casino 50-150 200-300 Casinos under manage
Slide 12: Gaming System: Market Share in Macau
Gaming System: Market Share in Macau ETG market share by manufacturer in Macau, 2012-2016 1Q16 Paradise (LT Game) 60.2% Aruze 20.4% Interblock 9.0%Others 10.3% 2015 Paradise (LT Game) 62.5% Aruze 18.0% Interblock 9.5%Others 10.0% 2014 Paradise (LT Game) 60.3% Aruze 17.7% Interblock 12.5%Others9.5% 2
Slide 13: Gaming System: Deployment of LMG Terminals
Gaming System: Deployment of LMG Terminals Accumulative overall LMG deployment 2012 2013 2014 2015 2016 No. of units 1,852 2,989 3,402 4,022 4,916 Machine sold 1,680 units 715 1,120 1,393 1,777 1,137 1,869 2,009 2,245 Recurring 3,236 revenue units Macau Casino with 0 3 4 6 10 LMG Overseas 10 13 15 1
Slide 14: Gaming System: Deployment of LMG Terminals
Gaming System: Deployment of LMG Terminals Accumulative overall LMG deployment 2012 2013 2014 2015 2016 No. of units 1,852 2,989 3,402 4,022 4,916 Machine sold 1,680 units 715 1,120 1,393 1,777 1,137 1,869 2,009 2,245 Recurring 3,236 revenue units HK$m Gaming system – Revenue breakdown 400 337 300 1
Slide 15: Gaming System: Macau Growth Opportunity
Gaming System: Macau Growth Opportunity LMG replenishment cycle to kick-start in 2017 + New opening casinos Installations kick-start at + Additional table constrict various new flagship casinos + Mass strategy focus followed by Sands installation + New type of products 1200 drive the LMG demand and
Slide 16: Gaming System – Overseas
ale Gaming System — Overseas “4X Paradise
Slide 17: Focused Overseas Market – North America and Australia
Focused Overseas Market – North America and Australia North America Australia Macau 1,000+ Casinos 38 60 Casinos Casinos 18,000+ 197,000+ Electronic 860,000+ Electronic Electronic Gaming Gaming Machines Machines Gaming Machines 25 Casinos 4,500+ LMG Deployment of Electronic Gaming Machine terminals
Slide 18: North America Slot Market Overview
North America Slot Market Overview North America Slot Replacement Overview North America 1,000+ Average Annual Casinos Replacement Demand ~60,000 units 860,000+ Electronic Gaming Machines Average Annual Average Annual Replacement Replacement Cycle Rate 8-12 years 7-10% Source: Slots & tables forecas
Slide 19: Gaming System: Overseas Growth Opportunity
Gaming System: Overseas Growth Opportunity ▪ Deepen relationship with strategic partner Paradise: IGT: ▪ Leading electronic table game provider in Macau ▪ The leader in gaming entertainment with 33+ years in ▪ Distribute LMG exclusively in Macau, owns business various patent and technology in electr
Slide 20: Gaming System: Overseas Growth Opportunity
Gaming System: Overseas Growth Opportunity ▪ Economics of patent & technology assignment and license agreement Receive US$12.95m (~HKD101m) upfront payment Receive ongoing earn-out payment for each placement of earn-out products ¹ (include LMG, RNG ETG for Roulette, and RNG ETG products) Earn-ou
Slide 21: Economics Analysis of License Agreement with IGT
Economics Analysis of License Agreement with IGT ETG Market Overview in U.S. # of Estimated Slots Tables Table Slots per Table Positions Projected Increase from Current casinos ETG Seats Positions ETG Seat per ETG Seat Market Level 952 7,300 773,676 21,814 130,887 106 3 15,150 7,850 ETG Marketplace
Slide 22: Economics Analysis of License Agreement with IGT
Economics Analysis of License Agreement with IGT Cash Flow Analysis of LMG/RNG Global Deployment (US$, thousands) Worst Case Scenario LMG¹ : NA-25%, EMEA-5%, APAC-5% 4,500 RNG¹: NA-1%, EMEA-1%, APAC-1% 4,000 Sales²: NA-20%, EMEA-40%, APAC-60% 3,500 Base Case Scenario 3,000 LMG¹: NA-35%, EMEA-10%, AP
Slide 23: Casino Service
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Slide 24: Casino Service Overview
Casino Service Overview Granted Casino Service Management License by the Macau government in 2008 (exemption from Macau Complementary Tax as same as other gaming concessionaries), mainly focus on Satellite casino (3rd party managed casino) management and now we are currently managing TWO stand-alone
Slide 25: Casinos Service – Target Market
Casinos Service – Target Market A long term & sustainable targeted market Overnight Visitors Hong Kong-Zhuhai-Macau Bridge (Cross- Delta Bridge) aims to open in 2018 VIP New policy favors day-trip market Tend to be same-day visitors Extension of border operating hours – Border Tend to be overn
Slide 26: Gaming Technology
ale Gaming Technology “qs Paradise
Slide 27: Technology: New Gaming Products
Technology: New Gaming Products Introduction of New Products (Gaming Equipment) E-Baccarat Table Fast Betting Machine ▪ Live dealer ▪ High Speed Betting ▪ Interaction and gameplay experience unchanged ▪ Two 32-inch size of betting screens ▪ Digital chips to increase efficiency and game ▪ Improves se
Slide 28: Technology: New Products
Technology: New Products Introduction of New Products Intelligent Cash Access Machine E-Drop QFX (Currency Exchange) ▪ TITO ▪ High Speed Cash Counting ▪ Currency exchange ▪ 1 second to count 16 notes ▪ Allows patrons to redeem cash ▪ Minimizes security risks and/or buy tickets ▪ Accurate and Extensi
Slide 29: Financial Overview
; , ale Financial Overview hy Paradise
Slide 30: 2017 Interim Results Highlights
2017 Interim Results Highlights Group revenue recorded HK$489.3 million (-5.9% yoy) Casino services revenue recorded HK$399.1 million (decreased by HK$3.6 million or -0.9% yoy) Gaming systems revenue recorded HK$90.2 million (decreased by HK$26.9 million or -23.0% yoy) Group Adjusted EBITDA
Slide 31: 2017 Interim Results Highlights
2017 Interim Results Highlights Revenue (HK$m) Net Cash (HK$m) 236.0 250.6 519.8 489.3 117.1 (23%) 90.2 (18%) 1H2016 1H2017 402.7 399.1 1H 2016 1H 2017 (77%) (82%) Segment Adj. EBITDA (HK$m) -1.4 0.9 49.1 44.9 -28.4 -36.2 -15.6 -14.3 1H2016 1H 2016 1H2017 1H 2017 1H 2016 1H 2017 Casino services Gami
Slide 32: 2017 Interim Results Analysis
2017 Interim Results Analysis (in HK$m) 1H2016 1H2017 Remarks Revenue 519.8 489.3 Casino services 402.7 399.1 Partly due to the change of the contractual arrangement of the Casino Macau Jockey Club Gaming systems 117.1 90.2 EBITDA -1.4 0.9 Casino services -36.2 -28.4 Streamlining cost across casinos
Slide 33: Outlook
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Slide 34: Outlook - Pronged growth strategies
Outlook - Pronged growth strategies Entered into a LOI in relation to the proposed acquisition of Hotel & Casino LKF Macau Highlights of the proposed acquisition 5 stars standard with 209 guest rooms Casino with 84 licensed gaming tables Restaurants and other commercial outlets Synergies
Slide 35: Outlook - Pronged growth strategies
Outlook - Pronged growth strategies Align with our long term growth strategy Increase table under management and market share Enlarge type of patrons with own hotel business Improve operational efficiency via repositioning market strategy, optimizing table and gaming machine ratio and improv
Slide 36: Outlook - Pronged growth strategies
Outlook - Pronged growth strategies A diverse product portfolio Over 100 Fast Betting Terminals deployed at Parisian Macau and expecting new business model New products roll-out at MGS Entertainment Show 2016, including Power Dragon, Advance Multi Game Virtual Sports, Virtual Horse Racing Fast
Slide 37: Appendix
ale Appendix “qs Paradise
Slide 38: Corporate Timeline
Corporate Timeline 2002-2006 2007 2008 2010 2011 2012 2013 2014 2015 2016 • Macau • Company • Granted • LMG Patents • First 200 • First LMGs • U.S. patents •LMG sales •Opened •Star world government name Casino filed in LMGs sold in sold injected into license officially new gaming and Galaxy ended ch
Slide 39: Patents
Patents U.S. Patents • Patent 8308559 – Issued November 13, 2012 and expiring on May 7, 2027 • Patent 8323105 – Issued December 4, 2012 and expiring on August 31, 2027 • Patent 8727892 – Issued May 20, 2014 and expiring on March 15, 2033 • Patent 8808077 – Issued August 19, 2014 and expiring on Sept
Slide 40: Analyst Coverage
Analyst Coverage China Merchants Securities Bank of America Merrill Lynch Citigroup Global Markets Ltd (HK) CICC (HK) Ltd Aras Poon Chris Kwai Ronald Leung Angela Han Lee Haitong Int’l Research Ltd Macquarie Capital Securities SWS Research Co., Ltd DBS Vickers (HK) Ltd Donald Cheng Jake Lynch Roger
Slide 41: Contact Information
Contact Information Hong Kong Office Corporate Strategy & Investor Relations Unit C, 19/F., Entertainment Building, Bryan Wu, Investor Relations Manager 30 Queen’s Road Central, Hong Kong SAR bryanwu@hk1180.com Tel: (852) 2620 5303 (852) 2916 0817 / 9168 6118 Fax: (852) 2620 6000 (853) 6332 5228 Mac
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