Wynn Macau JPM

Asia Pacific Equity Research
24 August 2010
Initiation
Overweight
Wynn Macau Ltd 1128.HK, 1128 HK
Price: HK$14.28
High earnings quality justifies premium valuation
Price Target: HK$17.50
• Initiating coverage with OW rating and Jun-11 PT of HK$17.5: Hong Kong

Wynn Macau’s effective market positioning, premium brand and prime Gaming
located properties are competitive advantages that have allowed it to Kenneth Fong , CFA
AC
become the most profitable casino in Macau. We think the niche best-in- (852) 2800-8597
class market positioning also allows WM to be customer-captive, earn kenneth.kc.fong@jpmorgan.com
superior returns and maintain its profitability, even in challenging Benjamin Lo, CFA
conditions such as when industry supply doubled and concessionaries (852) 2800-8598
started a commission war in 2008. benjamin.mc.lo@jpmorgan.com
Sylvia Chan
• Misplaced concerns on WM: WM’s share price has been held back by (852) 2800-8593
several market concerns, among which lack of growth potential (WM’s sylvia.sw.chan@jpmorgan.com
next opening on Cotai would be in 2014, at the earliest) and perceived Joseph Greff
rich valuation (WM trades at industry-average multiple). Growth (1-212) 622-0548
potential: By table productivity, WM’s peak performance was in 2Q08. joseph.greff@jpmorgan.com
If WM can achieve this level again, it has already increased its revenues J.P. Morgan Securities (Asia Pacific) Limited
by 40% without adding new capacity. We believe WM has plenty of
room for growth by improving efficiency. Valuation: WM is trading in Price Performance
line with peers on JPMe 2011 EV/EBITDA. However, we argue that 14

WM’s EBITDA quality is superior, as it has: (1) lower debt (i.e. higher HK$ 11
cashflow); and (2) strong market positioning and a sticky customer base.
8
We believe WM deserves a premium valuation owing to its earnings
Aug-09 Nov-09 Feb-10 May-10 Aug-10
quality, strong balance sheet, good management track record and high
1128.HK share price (HK$
free cashflow. HSI (rebased)
• Catalysts and share price drivers: Continued ramp up of Wynn Encore YTD 1m 3m 12m
and any updates or further progress on its Cotai project could both help Abs 45.5% 3.4% 25.9% 37.9%
drive the share price higher, in our view. Rel 50.0% 3.0% 19.0% 36.2%
• Price target, valuation and key risks: We value WM on 14.5x FY11E

EBITDA. Key risks to our PT include: (1) slower-than-expected ramping
up of Wynn Encore; and (2) regulatory risks from China such as visa
restrictions.
Reuters: 1128.HK; Bloomberg: 1128 HK)
HK$MM, Y/E Dec FY08 FY09 FY10E FY11E FY12E
Revenue 14,711 14,077 21,592 24,412 26,614 52-week range (HK$) 8.67 - 14.52
EBITDA 3,138 3,209 5,587 6,105 6,785 Market cap (HK$MM) 74,078
Net profit 2,040 2,069 4,295 4,771 5,496 Market cap (US$MM) 9,529
EPS (HK$) 0.39 0.40 0.83 0.92 1.06 Shares outstanding (MM) 5,188
DPS (HK$) 0.00 0.00 0.00 0.00 0.00 Avg daily value (HK$MM) 120
ROE (%) 52.9% 91.8% 72.6% 45.6% 35.3% Avg daily value (US$MM) 15.4
P/E (x) 36.3 35.8 17.2 15.5 13.5 Avg daily volume (MM shares) 9.4
Div yield (%) 0.0% 0.0% 0.0% 0.0% 0.0% Exchange rate 7.77
EV/EBITDA (x) 25.3 24.0 13.1 11.0 8.9 Index (HSI) 20,981.82
EBITDA margin (%) 21.3% 22.8% 25.9% 25.0% 25.5%
Source: Company reports, Bloomberg, J.P. Morgan estimates. Share price as at 20 August, 2010
See page 29 for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may
have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their
investment decision.
Kenneth Fong Asia Pacific Equity Research
(852) 2800-8597 24 August 2010
kenneth.kc.fong@jpmorgan.com
Company description NAV sensitivity metrics

FY11E industry growth PT
assumption (%) (HK$)
WM, led by CEO Mr Stephen A. Wynn, is one of the Bear case
0% 15.2
concessionaries in Macau. The company was listed in Hong 5% 16.0
Kong in October 2009. WM currently owns one casino 10% 16.7
property in Macau, Wynn Macau, which was opened on Base case 14% 17.5
September 6, 2006. Wynn Encore, an extension of WM’s 20% 18.0
property, was opened in 2Q10. Mr Wynn has been involved
25% 18.5
in casino development and operations for over 40 years, and Bull case 30% 19.2
has been responsible for developing, building and operating
some of the world’s most recognized resorts and hotels,
Source: J.P. Morgan estimates.
including The Mirage, Treasure Island, Bellagio, and
affiliates Wynn Las Vegas and Encore at Wynn Las Vegas.
Wynn Resorts owns 72.3% of Wynn Macau. Price target and valuation analysis
Our PT for WM is based on 14.5x FY11E EBITDA,
the high-end of the industry range, as we believe its
EBITDA breakdown for FY10E high earnings quality (high free cashflow with sticky
gaming customers), future growth potential on Wynn Encore
12% ramp-up, solid management track record and optimally
leveraged balance sheet deserve a premium compared
to its peers.
Key risks to our PT include: (1) slower-than-expected

VIP ramping up of Wynn Encore; and (2) regulatory risks
53%
from China such as visa restrictions.
Mass
35%

EPS: J.P. Morgan vs consensus
HK$ J. P. Morgan Consensus
FY10E 0.83 0.75
FY11E 0.92 0.84
Source: BEST, J.P. Morgan estimates.
Table 1: Valuation summary

Bloomberg Rating Mkt Cap Share price PT Potential EV/EBITDA (x) P/E (X)
code (US$m) (HK$) (HK$) upside 09 10E 11E 09 10E 11E
SJM 880 HK OW 4,871 7.38 11.0 49% 15.1 7.6 5.9 40.7 12.9 10.1
Wynn Macau 1128 HK OW 9,529 14.28 17.5 23% 24.0 13.1 11.0 35.8 17.2 15.5
Shun Tak 242 HK OW 1,260 4.84 6.3 30% 7.5 11.9 8.7 3.6 12.1 10.5
Sands China Ltd 1928 HK N 12,837 12.40 13.0 5% 18.5 13.8 13.2 60.2 28.9 26.4
Galaxy 27 HK N 3,101 6.11 5.8 -5% 25.8 17.4 11.6 21.0 24.0 18.3
Melco 200 HK N 529 3.34 3.4 2% NM NM NM NM NM NM
Source: Bloomberg, J.P. Morgan estimates. Share price data as at 20 August, 2010
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(852) 2800-8597 24 August 2010
Investment summary
We initiate coverage on Wynn Macau (1128.HK) with an Overweight rating and Jun-
11 price target of HK$17.5, implying 23% upside potential from the current level.
Competitive advantage drives superior return

Wynn Macau (WM) is the most profitable casino in Macau, even when assessed
based on multiple operating matrixes—win/table/day, property EBITDA margin,
profit per unit area and RoIC. WM tops each of these scales because WM’s branding,
market positioning and location advantage have enabled it to defend its market share
and to generate and maintain what we view as remarkable returns in this highly
competitive market.
Since its opening, WM has been focused on building up its best-in-class casino brand
and image in Macau. WM’s effective positioning and premium branding have helped
instill loyalty among its customers and in turn maintain high margins amid an intense
competitive environment. A good example was in 2008, when other VIP operators
entered into a commission war, WM did not get dragged in as it opted to differentiate
itself using customer service; this did not stop WM from gaining market share. Till
today, though paying less commission than other properties, WM has the highest
market share in the VIP market by single property.
Not only virtual market positioning, but its physical location also helps set WM
apart; situated right across from the 40-year old Lisboa, WM is ideally located to
capture time-pressured, hard-core gamblers on the Peninsula.
Refuting six market concerns

1. WM lacks growth opportunities as they have no Cotai exposure
Market worries that further growth is deterred by capacity constraint as WM’s Cotai
project is not scheduled to open until 2014. We disagree.
By table productivity, 2Q08 was WM’s peak performance. If WM can achieve this
level again, it has already increased its revenues by 40% without adding new
capacity. Wynn Encore has opened with additional 400 hotel rooms, or a 67%
increase in hotel capacity and a 44% rise in VIP table capacity, and we think this
gives WM the necessary additional capacity to outgrow what it achieved in 2Q08.
WM can grow through better productivity management which includes changing
table limits, re-arranging VIP and mass table mix, being more selective in giving out
complimentary rooms, and better dealer efficiency, etc. A casino does not necessary
need new openings for growth.
2. WM is a VIP-centric play
In fact, it has the second-highest mass market share, with 40% of its EBITDA being
derived from the mass market in 2009.
3. WM’s margin could see gradual erosion post Encore opening

As Wynn Encore opens with more VIP revenue, its margin could decrease. But this
is not related to costs, but just a shift in business mix. WM is focused on what it does
3
(852) 2800-8597 24 August 2010
the best now—strengthening its footprint among high-worth customers in the VIP
market, which we believe is a sensible strategy.
4. WM is not growing its higher-margin direct VIP

The controlled growth of relatively higher-margin direct VIP (vs. junket VIP) can be
seen as conservative to some investors but we think it is good for WM for it implies
good credit management. In fact, WM’s casino receivables in 2009 was less than 5%
of its EBITDA, this compared with 30% for Sands China.
5. Wynn Encore did not contribute much business volume in 2Q

Lastly, investors were worried to see only a 7% growth in rolling chips volume after
WE’s opening and its revenue seems to be driven solely by a high win rate. But we
think investors overlooked that the rolling volume is not only a function of the
gambling budget but also the win rate. A high win rate can depress the turn of the
rolling chips, and therefore the net rolling volume. WM’s 2Q10 rolling chips are
depressed by the high win rate, but this is not a representation of the low business
volume. Rolling chips cannot be evaluated on a standalone basis. We have a detailed
illustration on page 12 of the report.
6. WM’s valuation is rich

Since WM’s listing, the market has been concerned about WM’s relatively richer
valuation. Yet, the stock continues to be re-rated by the market with a 29% earnings
upgrade (second-highest among the sector) since the beginning of the year. Year-to-
date, the share price of WM has gained 50% and it has been the third best performer
in the sector.
On an EV/EBITDA basis, WM’s is trading at the industry average. However, we

argue that WM’s EBITDA quality is comparatively better than its peers as WM has:
(1) lower debt burden, i.e. a higher free cashflow; (2) strong market positioning and
sticky customers; and (3) its EBITDA is generated from an existing casino and not an
expected EBITDA for the new project.
Besides, we believe that investors should not focus solely on EV/EBITDA as this
could overstate the free cashflow and overlook the company’s debt burden. In
addition, there are many “non-recurring” items below the EBITDA line, the
classification of which is somewhat subject to management’s discretion.
WM is trading at 11x FY11E EBITDA, in line with the industry average. We argue
that WM’s combination of earnings quality, strong balance sheet, good management
track record and high free cashflow justifies a premium valuation.
Catalysts: More detail on Cotai and Wynn Encore ramp-up

On our estimates, the market has not priced in the value of WM’s future project in
Cotai. As management provides more concrete details (e.g. capex, timeline and table)
over the next two quarters, the market should start to assign this growth option to the
company which could trigger a share re-rating. Based on our expected 20% RoIC on
a USD1.6bn investment, we estimate it will add HK$2.5/share to Wynn Macau.
Wynn Encore has been opened since April 10 and is still in the ramp-up stage. Its
gradual operational pick-up could lead to earnings upgrades.
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(852) 2800-8597 24 August 2010
Investment positives
Competitive advantage drives superior returns
Apart from researching the quantitative factors in evaluating potential investments,
we believe it is important to review the company’s business as a whole. As investors
are buying a stock to get exposure to its multi-year earnings, it is vital to assess how
sustainable this income stream is. This is especially true for the Macau gaming
sector—a highly competitive, and to a certain extent, a commoditized industry.
All successful companies have some significant competitive advantages. A firm’s

competitive advantage allows it to earn superior return and determines how sticky
customers are and how secure their future earnings are amid intense competition.
Wynn Macau opened its flagship casino Wynn Macau Casino in 4Q06. Since then,
seven Macau flagship casinos have opened, and the number of gaming tables
doubled to 4,900 by mid-10. Competition intensified further in 2008 when operators
hiked junkets’ commissions to compete for the VIP business. Besides, over the past
two years, properties targeting WM’s customers including Four Seasons (a luxury
VIP casino) have entered the market.
Figure 1: WM’s VIP revenue and market share Figure 2: WM’s mass market revenue and share
(HK$ bn) Total market VIP w in (HK$bn) (%) (HK$ Wynn Mass Win (LHS) (%)
6.0 Wynn VIP market share (w in) 25 Wynn Mass market share (RHS)
1.2 14
5.0 12
20 1.0
4.0 10
0.8
15
8
3.0
0.6
10 6
2.0
0.4
4
5
1.0 0.2 2
0.0 0 0.0 0
1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10
Source: Company reports, J.P. Morgan estimates. Source: Company reports , J.P. Morgan estimates.
Despite all these challenges, WM was able to maintain a stable market share, with a
mass market share of 10% and a VIP share of 17% in 2Q10 (vs. 13% and 15% in
1Q07, respectively). At 1H 10 by different operating matrix (win/table/day, property
EBITDA margin, profit per unit area and RoIC), Wynn Macau is the most profitable
casino in Macau. We believe WM’s branding, market positioning and location
advantage have enabled it to generate and maintain remarkable returns in this highly
competitive market.
Strong WYNN branding and niche best-in-class positioning

Market positioning is about carving out a niche and in turn capitalizing on the
opportunities to secure a higher than its fair share of the market or to introduce new
products and services in a market area that was not served or was underserved.
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(852) 2800-8597 24 August 2010
Since its opening, WM has successfully positioned itself to be the best-in-class

casino brand in Macau. Being best-in-class is not only about building a luxurious
hotel, but setting up a well-balanced mix of good selection of food, top-end luxurious
retail space (by sales revenue WM has several leading luxury brand shops including
Cartier, Piaget and Vertu), and more importantly great service that requires attention
to detail. We believe its success is a combination of the strong WYNN branding as
well as management experience (WM’s president Mr. Ian Coughlan has experience
in managing a luxurious hotel like the Peninsula for more than three decades). As a
result, the property is able to attract more high-end customers and create an
atmosphere that further strengthens its market positioning.
This may sound abstract, but WM’s luxury positioning and strong branding have
enabled it to become a “customer captive” casino that can maintain high margins
amid an intense competitive environment. In 2008, when other VIP operators
increased junkets’ commissions to 1.33%-1.35% over the rolling chips turnover, WM
chose to keep its commission at 40% of win (or an equivalent 1.14% of rolling chips
turnover). Instead, it opted to use differentiated customer service to gain further
market share. Even today, when all other properties in Macau are paying much
higher junket commission (based on 1H 2010 numbers) WM has the highest market
share among VIP customers, based on single property share.
While customers may get 0.1%-0.15% more rebates from other casinos, the rebate is
just one of the many factors that visitors consider when choosing which casinos to go
to. At the end of the day, the win/lose of one individual’s hands is more than enough
to offset the slight difference in rebates. To these high net worth customers, the
whole gaming experience is more important. Hence, we believe Wynn’s strong
luxurious market positioning and branding help it differentiate itself among its
competitors and allow it to maintain its pricing discipline in this highly competitive
market.
Figure 3: WM’s EBITDA vs. EBITDA margin performance

(HK$m) Reported EBITDA (after corp exp & Royalty) (LHS) (%)
1,600 EBITDA margin (%) (RHS) 25
1,400
20
1,200
1,000 15
800
600 10
400
5
200
0 0
1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10
Source: Company reports, J.P. Morgan
The advantage of luxury positioning also allows WM to attract higher-yielding

customers—higher net worth individuals. In 2009, WM’s per table win/table/day was
30% higher than the industry average. Assuming a similar cost structure, higher table
productivity translates to a higher profitability. We think this is made possible only
by WM’s premium brand.
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(852) 2800-8597 24 August 2010
In our opinion, WM is able to retain its VIP patrons, strong pricing discipline and
profitability because of its strong market positioning.
Central location in the casino hub

Another positive is WM’s property location—it is situated within the central casino
hub, where it sits right across the symbolic 40-year old Lisboa and is surrounded by
Grand Lisboa, StarWorld and L’Arc, which are all within five-minute walking
distance from WM.
Location is a key factor in determining success in Macau, in our view. Macau

Peninsula has an advantage over Cotai as: (1) it has a group of densely located
medium-sized casinos, which facilitate traveling among different casinos, an
important factor for gamblers; and (2) it is a major immigration hub (80% of tourist
arrivals) for time-conscious day-trippers, which account for more than 50% of Macau
visitors, according to government statistics.
Besides, in terms of customer mix, we believe Peninsula serves those frequent and
hard-core gamblers, while Cotai has more family/entertainment-type of customers.
We believe those hard-core customers will yield higher on a per customer basis.
Hence, casino location plays a role in customer-targeting.
We believe it is unlikely that WM will lose its competitive advantage in the future,
given its strong branding, market positioning and location advantage, which are all
hard to replicate altogether.
Market concerns on WM’s: (1) growth potential; (2) VIP-

centric business; (3) margin contraction; (4) low direct VIP
and (5) the performance of Encore are misplaced
1. WM can grow even without new opening

There is a concern that WM may lack growth potential—after Encore opened, the
next project from Cotai will come only in 2014 at the earliest. However, we believe
that a company does not necessarily need to have new openings to generate growth;
in fact, we believe WM still has plenty of ways to grow earnings even before its next
new openings.
For a casino operator, we usually look at win/table/day as a productivity indicator. In

2Q10, WM generated approximately HK$287,000 daily per table win for its VIP
operation, compared with the highest per table win of HK$398,000 achieved in
2Q08. If we consider 2Q08 as a benchmark, WM is only achieving 72% of its best
yield in the past. So, we think even without a new opening, WM can deliver 40%
growth in its VIP business just by boosting its productivity back to its 2Q08 peak.
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(852) 2800-8597 24 August 2010
Figure 4: WM’s quarterly win/day/table

(HK$ '000)
450
400
350
300
250
200
150
100
50
0
1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10
Source: Company data, J.P. Morgan
A good example in our view would be Galaxy; the company has not opened any new
capacity or added any hotel rooms in the past year, but still, through better table
management and introduction of new junkets into its existing capacity, its business
volume doubled over the past three years versus what was achieved last year.
Figure 5: Galaxy VIP rolling chips volume and market share
MOP bn Monthly VIP rolling chips Market share (R.H.S.)

70 18%
60 16%
14%
50
12%
40 10%
30 8%
6%
20
4%
10 2%
0 0%
Apr 08
Aug 08
Nov 08
Apr 09
July 09
Aug 09
Nov 09
Apr 10
Jan 08
Feb 08
May 08
Jun 08
Jul 08
Sep 08
Jan 09
Feb 09
May 09
June
Sep 09
Jan 10
Feb 10
May 10
Jun 10
Jul 10
Mar 08
Oct 08
Dec 08
Mar 09
Oct 09
Dec 09
Mar 10
Source: Company data.
Wynn Encore has opened with 400 more hotel rooms, or a 67% increase in hotel
capacity and a 44% increase in VIP table capacity, in our view giving WM the
necessary capacity to outgrow what it achieved in 2Q08.
A casino does not necessarily need to spend billions or to open a new casino to grow.
Better productivity management, which includes changing table limit, re-arranging
VIP and mass table mix, being more selective in giving out complimentary rooms,
better dealer efficiency etc. can also generate better results.
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(852) 2800-8597 24 August 2010
The opening of new casinos over the past few years has raised the bar for new
attractions, as evidenced by low visitor traffic and return for properties opened in the
past two years (The Plaza and City of Dreams). In addition, concessionaries have
been introducing various loyalty programs to retain customers. Thus, it is becoming
more difficult and costlier for new properties to gain market share, hence leading to
lower returns. As such, an attempt to deliver profitable growth through new openings
is getting riskier.
2. WM is not VIP-centric; WM has the second-highest mass market share in

Macau
WM’s high-end market positioning has often caused it to be misinterpreted as a VIP-
focused casino. In fact, based on 2009 data WM not only has the second-highest
mass market share and highest slot market share by property, it also has one of the
most profitable mass gaming businesses. In 2009, WM’s mass table win/table/day
was HK$46,000, or 50% higher than the industry average. Assuming a similar cost
structure, higher table productivity translates into a higher profitability. We believe
this was made possible only by WM’s premium brand.
Table 2: Flagship properties’ market share ranking in 2009

Overall VIP Mass Slot
#1 Venetian Macao 15% Wynn Macau 16% Venetian Macao 19% Wynn Macau 22%
#2 Wynn Macau 14% Venetian Macao 13% Wynn Macau 11% Venetian Macao 22%
#3 Grand Lisboa 9% StarWorld 11% Grand Lisboa 11% Altira/ Mocha club 12%
#4 MGM Grand Macau 9% Altira 10% Sands 10% MGM Grand Macau 10%
#5 Starworld 8% MGM Grand Macau 9% MGM 8% City of Dreams 5%
Source: Company reports.
While WM generated 71% (vs. industry average of 67%) of its FY09 gaming
revenue from its VIP segment, given junket commission, the EBTIDA margin of VIP
is only one-third that of the mass market business. Thus, a higher VIP revenue
contribution does not imply a higher share of EBITDA. Even after Encore’s opening,
we estimate that WM’s mass and slot segment contributes 35% of the group
EBITDA, compared with Sands China’s 50%.
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(852) 2800-8597 24 August 2010
Figure 6: WM's mass market share was steady at 10-12% despite all new casino openings
MOP bn
Monthly Mass revenue Market share (R.H.S.)
0.45 20%
0.40 18%
0.35 16%
14%
0.30
12%
0.25
10%
0.20
8%
0.15
6%
0.10 4%
0.05 2%
0.00 0%
Apr 08
Aug 08
Nov 08
Apr 09
July 09
Aug 09
Nov 09
Apr 10
Jan 08
Feb 08
May 08
Jun 08
Jul 08
Sep 08
Jan 09
Feb 09
May 09
June
Sep 09
Jan 10
Feb 10
May 10
Jun 10
Jul 10
Oct 08
Dec 08
Oct 09
Dec 09
Mar 08
Mar 09
Mar 10
Source: Company reports and J.P. Morgan estimates.
3. Margin decreased due to the change in business mix and not cost
There is another market concern that WM’s margin could be eroded with Wynn
Encore opening with higher operating cost and more focus on low margin VIP
business. We take a different view. If a company’s margin contracts with flat
revenue, the company is not managing its costs. However, if the margin decline is a
result of the change in business mix, rather than a cost issue, it is a different story.
We believe this is the case for WM.
WM’s margin decline is driven by a change in the business mix (more percentage of
earnings coming from VIP) as Encore introduced more VIP facilities (hotel and VIP
gaming tables). Instead of spending billions to build a mega resort now to attract
mass market which may not be successful in the end, WM focused on what it does
best—strengthening its footprint among luxurious customers in the VIP market.
Although its margin may decline in the end, the increase in business volume and
earnings can more than offset that impact. Besides, now that Wynn Encore has
opened, WM can gain some economies of scale and cost improvement in operating
leverage; in short, we think the margin decline can be more than offset by the growth
in VIP business volume.
4. WM chose not to grow direct VIP, which we see as a positive

Under the Macau Law, concessionaries are permitted to extend credit to players. And
the credits are typically unsecured. As direct VIP business does not involve junkets,
its EBITDA margin may be 2.5x greater. To improve margin and market share,
casino operators, especially foreign ones, are increasingly extending credit directly to
customers (also known as direct VIP). This is also one of the driving forces for VIP
gaming revenue since 3Q09. In 2Q10, Sands China had 25% of its total VIP revenue
coming from direct VIP.
While an increase in the direct VIP business is good for headline growth and slightly
improves margins, we are cautious on the potential credit risks involved. Unlike in
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(852) 2800-8597 24 August 2010
the US, Macau gaming players mainly come from China, where gaming debt
collection is not enforceable based on local jurisdictions. We estimate that given that
more than 60% of gaming revenue comes from mainland Chinese, these direct VIPs
probably include some mainlanders. So, gambling debt to Mainlanders could see
higher bad debt risks.
It takes time to build relationship and understand the credit risk of a customer one by
one. We therefore don’t think it is right to compare the pace of junket VIP with that
of the direct VIP, which will always be slower.
Besides, aggressiveness in building a direct VIP program could also create tension
between the casino and junkets operators. First, they could be chasing the same
group of customers. Second, direct VIPs normally involve a customer rebate of 0.8-
1%. This indirectly puts pressure on the junkets to at least match the rebate in order
to maintain competitiveness, thus narrowing junkets’ profit margin. The fact that we
saw Sands China’s (SC) market share of junket rolling chips decreasing from ~20%
in 1Q09 to currently only 12% in 2Q10 could be a result of SC’s intentional change
in business focus, but we believe to a certain extent, the drop could represent the
departure of junkets.
Hence, we consider that WM’s prudence in developing direct VIP business is a plus
as it properly manages the credit risks of the company and fosters a harmonious
partnership with junkets.
Figure 7: Casinos’ direct VIP exposure
180,000 Junket Direct VIP

160,000
140,000
120,000
100,000
80,000
60,000
40,000 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q
3Q 4Q 1Q 2Q
20,000
0
Sands Venetian City of Dreams Wynn Four Seasons
Note: 3Q & 4Q of 2009; 1Q & 2Q of 2010
Source: Company data, J.P. Morgan estimates.
5. Wynn Encore’s 2Q performance distorted by high win rate

Some investors were disappointed with the performance of Wynn Encore (opened on
April 10) for having generated what some see as a low 7% increase in VIP rolling
chips volume, just in line with the market growth. Some worried that the strong
revenue growth of WM in 2Q10 was merely because of luck, but the actual gambling
volume is lower than expected. We don’t think this is the case. We believe that some
investors could have misinterpreted the numbers and the inter-link between luck
factor (win rate) and volume (rolling chips).
11
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Rolling chips are a casino revenue measurement as the gross sum of the chips bet by
VIP players. The win rate/hold rate is the amount casino wins from the player
divided by total rolling chips turnover (i.e. the total betting amount). For example, if
a customer plays four rounds with an equal bet of HK$1,000. In the end, he wins 1
game and loses 3. Net-net, he would have lost HK$2,000 to the casino out of the
HK$4,000 bet he places on the gaming table. The win rate for the casino will
therefore be 50% (HK$2,000/HK$4,000).
Table 3: Rolling chips vs. win rate example

Bet amount Net win/loses
(HK$) (HK$)
1st Hand: Player wins 1,000 1,000
2nd Hand: Player loses 1,000 0
3rd Hand: Player loses 1,000 -1,000
4th Hand: Player loses 1,000 -2,000
Total rolling chips 4,000 <Sum of the total amount bets>
Casino win rate 50% <2,000/4,000 = 50%>

Source: J.P. Morgan.
For Macau, the baccarat win rate on dead chips is 2.85% based on historical average.
In other words, if a customer begins with HK$1 million and plays until he loses
every penny, he would have generated on an average HK$35 billion (HK$1
million/2.85%) of rolling chips turnover. That said, it is important to understand that
2.85% win rate is just an historical average, and it tends to fluctuate month over
month based on the luck of customers vs casinos.
The tricky part is that the win rate and the rolling chips will also affect each other. A
customer can lose his entire gambling budget in just one round (low roll and high
win rate) or he can lose everything in multiple rounds (high roll and low win).
To put that in context, we can re-visit the example above: Scenario 1: Win rate at
2.7% - a customer who starts with HK$1 million would generate a total rolling
volume of HK$37 billion (HK$1 million/2.7%) given the win rate; Scenario 2: Bump
win rate up to 3.2%—a customer will still start with HK$1 million, but the rolling
volume will drop sharply to HK$31 billion (HK$1 million/3.2%) as a higher win rate
implies that he is losing to the house at a much faster rate. Hence, even though we
are looking at the same customer with the same amount of gaming budget, based on a
different win rate, he would have generated a vastly different amount of rolling chips
for the casino.
This was what happened for Wynn Macau in 1Q10 and 2Q10. In 1Q10, WM
reported a VIP rolling chip volume of HK$157 billion at a 2.70% win rate; in 2Q10,
it reported a rolling chip volume of HK$169 billion at a 3.22% win rate. Some
investors were disappointed with the performance of Wynn Encore (opened on April
10) for having “only” generated 7% more in VIP volume. However, we caution that
the two quarter rolling chips volume should not be considered for a apples-to-apples
comparison as 1Q has a win rate that is “below” theoretical, while that of 2Q is
“above”. Therefore, to say that Wynn Encore disappointed as its rolling chips were
tracking behind expectation is in our view not totally correct nor fair.
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Instead, we believe the overall trend, instead of considering a single/month revenue

would be a more reasonable indicator. Since the opening of WM’s extension (Dec-
09) and Wynn Encore (Apr-10), WM’s both market share and VIP volume are
consistently on the upward trend. In 2Q, we estimate that Wynn Encore has already
delivered 70% of occupancy rate which we think is pretty impressive considering
that it was only opened for two months.
Figure 8: WM’s VIP revenue and market share trend

MOP bn Monthly VIP revenue Market share (R.H.S.)
2.50 25%
2.00 20%
1.50 15%
1.00 10%
0.50 5%
0.00 0%
Apr 08
Aug 08
Nov 08
Apr 09
July 09
Aug 09
Nov 09
Apr 10
Jan 08
Feb 08
May 08
Jun 08
Jul 08
Sep 08
Jan 09
Feb 09
May 09
June
Sep 09
Jan 10
Feb 10
May 10
Jun 10
Jul 10
Oct 08
Dec 08
Oct 09
Dec 09
Mar 08
Mar 09
Mar 10
Source: J.P. Morgan calculations.
Valuation undemanding at 11x FY11E EBITDA or 16x FY11E

P/E
Since WM was listed, the market has been concerned about WM’s relatively richer
valuation. Yet, the stock continues to be re-rated by the market with a 30% earnings
upgrade (second-highest among the sector) since the beginning of the year. Year-to-
day, the share price of WM has gained 50% and is the third performer within the
sector.
Is WM’s valuation rich? It depends on how you look at it. On an EV/EBITDA front,
WM’s valuation is at first glance trading at the high-end compared with the industry
average. However, we argue that WM’s EBITDA quality is comparatively better
than its peers as WM has: (1) lower debt burden, i.e. a higher free cashflow; (2)
strong market positioning and sticky customer base; and (3) its EBITDA is generated
from an existing casino and not from an expected EBITDA for new project.
Besides, we believe that investors should not focus solely on EV/EBITDA as this can
overstate the free cashflow and overlook a company’s debt burden. Besides, there are
always lots of “non-recurring” items below the EBITDA line, of which its
classification is somewhat subject to management’s discretion.
Look passed EBITDA, also at P/E and cash flow

While it is a common practice for the Street to value casinos operators using
EV/EBITDA multiple, we believe the market may overlook the importance of
earnings and cashflow. By focusing on EBITDA alone, investors could overstate the
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free cashflow and overlook the company’s debt burden. In this low interest rate
environment, interest expenses may be low in coming few years; hence, a bigger
portion of the company’s EBITDA will be accrued to the equity holder. However,
once interest rates gradually normalize going forward, the free cashflow available to
investors could be much lower.
After all, we think earnings should be what drives shareholder value and dividend
payment (if any) in the end. From a P/E prospective, WM’s 16x 2010F P/E is the
second-lowest in the sector based on our estimates, and is also in line with the
average for China consumer stocks.
WM’s EBITDA quality is higher

Some may argue that WM does not deserve to trade at a premium as it lacks growth
potential from the Cotai angle. However, we believe that earning multiples should
not be driven purely by the growth of new openings but by a combination of: (1)
earnings quality; and (2) whether there is profitable growth.
In terms of earnings quality, as we have argued before, we believe WM’s strong

competitive advantage has enabled it to generate income from a group of sticky
customers. History has demonstrated that WM is able to maintain its margin and
profitability despite the irrational commission war in 2008. We think this track
record should reassure investors that WM should be able to fend off potential
competition when new competitors enter the market.
Second, investors not only look for top line growth, but more importantly bottom line
growth—i.e. profitable growth. As we have argued, Cotai still lacks the location and
casino inter-connectivity which are both essential to pull customers from the Macau
Peninsula. So, having Cotai exposure does not necessarily mean profitable growth.
We observe that WM is able to demonstrate organic growth after increased capacity
of Wynn Encore and gradual productivity improvement. And we believe that WM’s
higher quality stream, when coupled with organic growth potential, should allow it to
command a premium.
Consensus earnings has not recognized Wynn Encore’s potential

It is true that based on market consensus 2010 EV/EBITDA multiple, WM is
currently trading at 15x, the higher end of the sector. However, we believe that the
Street’s earnings estimate needs to be revised. The current consensus 2010E
EBITDA for WM approximately equals the annualized 1H10 number. However,
1H10 EBITDA only includes two months’ operation of Wynn Encore which has
increased the casino capacity by ~30% after it opened. Besides, 2H is historically
stronger than the first half. Hence, we see upside in consensus earnings, and believe
that the earnings multiple based on consensus earnings have overstated WM’s
valuation.
WM’s valuation does not contain option value, in our view

When comparing relative valuations, the market is increasingly using forward, i.e.
2011E or 2012E earnings multiples. However, we caution that many of the
2011E/2012E market earnings estimates for other companies in this sector also
include the projected earnings of new projects to be opened. First, the projected
earnings are based on market expectations without the backing of any track record.
Second, the project openings are also subject to potential delay risk—for example, if
we assume that their Cotai projects to be opened on time, Galaxy’s and Sand China’s
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2011E EBITDA multiples may look undemanding at 12x and 13x, respectively.
However, if the projects are delayed for just one quarter (which is often very likely
given the tight labor market in Macau), the forward multiples will look less attractive
at 14x and 13.5x, respectively.
So, when comparing forward multiples, WM’s valuation is based on the projection of
its existing operations with a track record but some of its peers could include the
expected earnings to be generated by its new project. Hence, we think earnings
certainty for WM is higher and should therefore command a valuation premium than
its peers.
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Investment risks
1. Slower-than-expected ramp-up of Wynn Encore
Wynn Macau opened Wynn Encore on April 2010. A new casino normally takes
three-six months to ramp up operation. A slower-than-expect ramping-up of the
operation could pose a downside risk to the share price.
2. Regulatory risks from China

Visa restriction is a source of China regulatory risk which Macau faces. If China
restricts the number of people or visits each person can make over a period, that
could have implications on the velocity at which money can be gambled on Macau
soil and in turn impact the overall gaming revenue.
Among others, credit tightening measures are another regulatory risk. It could affect
Macau’s VIP business as that might dictate the gambling pattern of VIP customers as
well as lengthen their repaying reschedule. Again, this would slow down the gaming
revenue growth in Macau.
3. Unpredictable event that affects willingness and ability

for customers to travel
As majority of the revenue is generated from overseas tourist, and more importantly,
Chinese tourists, the gaming business may be affected by events that hamper
customers ability or willingness to travel. Events such as the regional political events,
outbreaks of infectious diseases such as swine flu, SARS could pose downside risk to
the business.
4. Dependent upon gaming promoters for a significant

portion of gaming business
A substantial portion of the total gaming revenue (65%) is derived from rolling chips
or VIP revenue which is highly relied on the gaming promoters to bring in business.
So, the business is contingent upon the company's ability to foster good relationship
with the gaming promoters. A loss of one or more key gaming promoters could have
a material adverse effect on the business, financial condition, results of operation and
cashflow.
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Valuation and share price analysis

EV/EBITDA-based price target of HK$17.50
Casinos are asset-heavy with typically high depreciation charges. They require multi-
year development and relatively stable cash flows after initial investment. Variations
in financial gearing (high for those with project pipelines) among different operators
also makes industry comparisons difficult. Hence, we normally use EV/EBITDA
multiples for valuing the companies and pegging price targets.
The long-term average for the US casino operators is around 9.5x forward EBITDA.
As Macau operators have higher growth, the concessionaries are exempted from
paying corporate tax on gaming income; Macau operators pay a gaming tax of 40%
which is incorporated in the EBITDA. So, the free cash flow of Macau operators is
higher and we believe a range of 12x-14.5x is a fair range for Macau operators.
We value WM based on 14.5x FY11E EBITDA, the high-end of the industry range,
as we believe its high earnings quality (high free cash flow with sticky customers),
future growth potential on Wynn Encore ramp-up, solid management track record
and optimally-leveraged balance sheet deserve a premium compared to its peers.
Table 4: WM’s target valuation computation

Valuation methodology 2011E Per share Comp
NAV
HK$MM HK$ in %
Wynn Macau 14.5x 2011E EBITDA 88,520 17.1 93%
less net debt/(cash) 2011E year-end forecast 6,722 1.3 7%

Price target by Dec-2011E 81,753 18.4 100%
Price target by June-2011E Discount 1/2 year by 10% 77,949 17.5

We also provide a valuation sensitivity analysis using different mass and VIP
revenue growth assumption for 2011 to our price target:
Table 5: WM’s valuation sensitivity

Mass market growth
17.50 5% 10% 15% 20% 22% 25% 30%
0% 15.2 15.5 15.8 16.1 16.3 16.4 16.7
VIP volume growth
5% 15.7 16.0 16.3 16.6 16.7 16.9 17.2

10% 16.1 16.4 16.7 17.0 17.2 17.3 17.7
15% 16.6 16.9 17.2 17.5 17.6 17.8 18.1
20% 17.0 17.3 17.6 17.9 18.1 18.3 18.6
25% 17.5 17.8 18.1 18.4 18.5 18.7 19.0
30% 17.9 18.2 18.6 18.9 19.0 19.2 19.5
We have not factored in WM’s potential development in Cotai until management

provides a clear time-line and details of the new project. But we have performed a
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sensitivity valuation on the potential value accretion per share based on different
Return on invested capital assumption and size of investment.
Table 6: WM’s Cotai project valuation accretion analysis in HKD/share

RoIC
2.53 14% 15% 18% 20% 22% 25% 30%
1.00 0.1 0.2 0.6 0.9 1.2 1.6 2.3
Capex (US$bn)
1.20 0.5 0.6 1.1 1.4 1.8 2.3 3.1
1.40 0.8 1.0 1.6 2.0 2.4 2.9 3.9
1.60 1.2 1.4 2.1 2.5 3.0 3.6 4.7
1.80 1.6 1.9 2.6 3.1 3.6 4.3 5.5
2.00 2.0 2.3 3.1 3.6 4.2 5.0 6.3
2.20 2.4 2.7 3.6 4.2 4.8 5.6 7.1
Figure 9: WM’s one-year rolling forward P/E Figure 10: WM’s one-year rolling forward EV/EBITDA
(HK$) Price (LHS) P/E (RHS) P/E (x) (HK$) Price (LHS) EV/EBITDA x
15 17 15.5 1-yr forw ard EV/EBITDA (RHS) 13
14 16 14.5
12
13 15 13.5
12 14 12.5 11
11 13 11.5 10
10 12 10.5
9
9 11 9.5
8 10 8.5 8
Oct-09
Nov-09
Dec-09
Jan-10
Feb-10
Mar-10
May-10
Jun-10
Jul-10
Oct-09
Nov-09
Dec-09
Jan-10
Feb-10
Mar-10
May-10
Jun-10
Jul-10
Apr-10
Aug-10
Apr-10
Aug-10
Source: Bloomberg, J.P. Morgan estimates. Source: Bloomberg, J.P. Morgan estimates.
Table 7: Gaming companies’ valuation comparison

Bloomberg Market Share price Price Potential NAVDiscount to P/B P/E
Stock Ticker Rating Cap (USDm) (Loc) Target (Loc) upside (Loc) NAV (%) 10E 09A 10E 11E
Macau Conglomerate
Shun Tak 242 HK OW 1,260 4.84 6.30 30% 11.0 (56.03) 0.7 3.6 12.1 10.5
Bloomberg Market Share price Price Potential EV/EBITDA (x) P/E (x)
Stock Ticker Rating Cap (USDm) (Loc) Target (Loc) upside 09A 10E 11E 09A 10E 11E
Macau Casino Operators (HK-listed)
SJM 880 HK OW 4,871 7.38 11.0 49% 15.1 7.6 5.9 40.7 12.9 10.1
Wynn Macau 1128 HK OW 9,529 14.28 17.5 23% 24.0 13.1 11.0 35.8 17.2 15.5
Sands China Ltd 1928 HK N 12,837 12.40 13.0 5% 18.5 13.8 13.2 60.2 28.9 26.4
Galaxy 27 HK N 3,101 6.11 5.8 -5% 25.8 17.4 11.6 21.0 24.0 18.3
Melco 200 HK N 529 3.34 3.4 2% NM NM NM NM NM NM
Macau Casino Operators (HK-listed) Average 20.8 13.0 10.4 32.3 19.0 16.2
Macau Casino Operators (US-listed)

Las Vegas Sands LVS US OW 19,578 29.63 32.0 8% 26.8 15.3 12.2 330.7 42.1 33.3
Melco-Crown MPEL US OW 2,223 4.18 5.0 20% 37.2 9.7 8.6 NM NM NM
MGM Resorts MGM US OW 4,378 9.92 14.0 41% 13.2 13.7 10.9 NM NM NM
Wynn Resorts WYNN US N 10,819 87.60 90.0 3% 16.7 11.5 9.9 369.9 52.9 36.3
Macau Casino Operators (US-listed) 23.5 12.5 10.4 347.1 47.5 34.8
Macau Casino Operators 22.2 12.8 10.4 122.2 27.2 21.5
Source: Bloomberg, J.P. Morgan estimates. Share prices are as of 20 August, 2010.
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Company overview
Company background
WM, led by CEO Mr Stephen A. Wynn, is one of the concessionaries in Macau. The
company was listed in Hong Kong in October 2009. The company currently owns
one casino property in Macau, Wynn Macau, which was opened on September 6,
2006. Wynn Encore, an extension of WM’s property, was opened in 2Q10. Mr Wynn
has been involved in casino development and operations for over 40 years and has
been responsible for developing, building and operating some of the world’s most
recognized resorts and hotels, including The Mirage, Treasure Island, Bellagio, and
affiliates Wynn Las Vegas and Encore at Wynn Las Vegas.
Figure 11: SJM group structure
WYNN RESORTS LTD (WYNN US) Free float

(72.3%) (27.7%)
WYNN MACAU LTD (1128 HK)
Wynn Macau Wynn Encore Wynn Cotai
Source: Company reports.
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SWOT analysis
Strength Weakness
- Clear market positioning and a strong brand breed - Lack of Cotai exposure in the short-run may hinder
customer loyalty growth potential if the Cotai market (customers looking
- Wynn Macau and Wynn Encore are located in the Macau for all-round entertainment) grows faster than expected.
Peninsula casino hub with strong traffic - If market continues to perceive valuation as rich based
- One-property market share maintained over 13% since on EV/EBITDA, which could prevent the stock from
inception despite growing supply and competition significantly outperform.
- 45% of EBITDA is derived from sticky VIP mass
customer base.
- Strong balance sheet, which we forecast will be in net
cash by the end of 2010
Opportunities Threats
- Materialization of the Cotai project could present new - Market share from Wynn Encore ramps up slower-than-
opportunity for the company to expand and further tap expected may put the share price under pressure
into the high-end mass market - Mass market demand ramps up faster-than-expected in
- Further ramping up of Wynn Encore Cotai
- Cotai project takes longer to come through
- Chinese government’s policy restrictions
Financial analysis
Revenue assumptions
We apply a top-down approach to forecast WM’s financial performance, based on
WM’s market revenue and market share, and cross checking it with reasonable
win/unit/day data. We estimate that Macau’s gaming industry is likely to grow 44%
in 2010E and normalize into a still strong 14% growth in 2011.
We estimate that WM’s VIP market share in FY10E will increase to 16.9% from
15.7% in FY09 after the opening of Wynn Encore in 2Q10 and the addition of 44%
VIP gaming capacity. In 2Q10, WM had already achieved 17.4% share in the VIP
segment, and with limited supply in FY10, we believe a 17.6% share in 2H10 is
achievable. Looking into 2011E, when Galaxy Macau opens, we expect WM’s
market share to come down to 16.8% on a larger base. We believe the target market
for Galaxy Macau (mid-end mass Chinese) is very different from WM (high-end
high net worth individuals); hence, the opening of Galaxy Macau should have limited
impact on the property.
We expect its mass market share to dip 1% to 10% in FY10 from 11% in FY09 as
City of Dreams gradually ramps up its mass market option. It should gradually
decrease to 9.5% in 2011E when Galaxy Macau opens.
On the gaming revenue front, we expect the VIP segment (~75% of revenue) to be
the main contributor.
EBITDA/earnings
We expect WM’s EBITDA to improve from HK$3.3 billion in FY09 to HK$5.6
billion in FY10E, due to: (1) an expected 53% gross gaming revenue increase after
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(852) 2800-8597 24 August 2010
adding 44% VIP gaming tables and strong industry growth; (2) an increase in non-
gaming revenue after the opening of Wynn Encore in 2Q10; and (3) slight operating
leverage improvement gained by the opening of Wynn Encore which allows
economies of scale.
Our full-year forecast is 6% higher than the 1H10 run rate of HK2.6 billion. As
Wynn Encore was opened on April 10, we believe the gradual ramp-up of the
operation together with the full earnings contribution in 2H will help it achieve our
EBITDA forecast.
Balance sheet and cashflow

WM’s balance sheet is the second-strongest among the six operators based on our
2010 estimates. With an annual EBITDA of HK$6 billion and minimal capex (no
more projects scheduled after Wynn Encore), we expect WM to turn into net cash by
FY10E of HK$0.13/share. That said, instead of paying dividend out of the excess
cash, we expect WM to preserve the cash for potential development of property in
Cotai which management has said will open at the earliest by 2014. We expect Wynn
Cotai project would cost around HKD12 to 20 billion (or USD1.5 to 2billion) to
build, with an expected net cash balance of HK$13 billion in 2012E and an annual
EBITDA run rate of HK$6 billion, we see that WM should be able to self-finance the
project from its own cashflow.
Another positive for WM is its conservativeness in managing its account receivables.

In 2009, WM's account receivables balance is only 10% of its EBITDA, this
compared with the 40% of Sands China and close to 100% of Melco Crown.
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Table 8: Profit and loss and forecast statement

Year to December (HK$m) 2008A 2009A 2010E 2011E 2012E
Profit & Loss

Revenue
Casino 17,663 16,991 26,476 29,757 32,636
Less: Promotional allowances (3,779) (3,806) (6,426) (7,182) (7,819)
Net gaming revenue 13,883 13,186 20,050 22,575 24,817
Rooms 453 437 565 790 802

Food & beverage 413 392 509 553 561
Other 537 663 1,278 1,421 1,443
Less: Promotional allowances (575) (601) (810) (927) (1,009)
Net non-gaming revenue 827 891 1,542 1,837 1,797
Total Revenue 14,711 14,077 21,592 24,412 26,614
EBITDA 3,138 3,209 5,587 6,105 6,785
Depreciation (697) (718) (996) (1,167) (1,192)
EBIT 2,442 2,490 4,591 4,938 5,593
Interest income 94 6 7 42 57
Interest expense (320) (317) (194) (109) (63)
Net Interest Income/(Expense) (226) (312) (187) (67) (6)
Non-recurring items 0 0 0 0 0
Pre-opening costs 0 (11) 0 0 0
Property charges and other (78) (19) (20) (20) (20)
Share based payment (32) (45) (45) (40) (40)
Other non-recurring items (123) (29) (30) (20) (10)
Pre-tax Profits 1,982 2,074 4,310 4,791 5,516
Tax 57 (6) (15) (20) (20)

Net Profit 2,040 2,069 4,295 4,771 5,496
Non recurring items (120) (29) (30) (20) (10)

Recurring Net Profit 2,159 2,097 4,325 4,791 5,506
Source: Company data, J.P. Morgan estimates
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Table 9: Balance sheet and forecast statement

Balance Sheet
Non Current Assets
Property and equipment 7,047 8,528 9,658 8,789 7,895
Leasehold interest in land 372 464 446 428 410
Goodwill 398 398 398 398 398
Other non-current assets 255 283 277 272 266
Total Non Current Assets 8,072 9,674 10,780 9,887 8,970
Current Assets
Cash and restricted cash 2,544 5,229 5,636 9,092 14,741
Account receivable 208 325 342 359 377
Inventories 199 203 205 207 209
Prepaid exp and other current assets 166 161 162 164 166
Total Current Assets 3,118 5,918 6,345 9,822 15,492
Current Liabilities
Accounts payable 487 727 749 771 794
Other payables - incl gaming tax & chips 1,573 2,621 2,936 3,229 3,552
Other current liabilities 158 205 215 226 237
Total Current Liabilities 2,218 3,553 3,899 4,226 4,583
Non Current Liabilities

Interest bearing debts 7,973 8,017 4,896 2,370 1,255
Other long-term liabilities 262 251 263 276 290
Total Non Current Liabilities 8,235 8,268 5,160 2,646 1,546
Shareholders Equity
Share Capital 0 5 5 5 5
Share reserves 709 1,924 1,924 1,924 1,924
Retained earnings 29 1,842 6,137 10,908 16,404
Other reserves 0 0 0 0 0
Total Shareholders Equity 738 3,771 8,066 12,836 18,332
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Table 10: Cash flow and forecast statement

Cashflow Statement
Net income 2,040 2,069 4,295 4,771 5,496
Depreciation & amortization 697 718 996 1,167 1,192
Interest income (94) (6) (7) (42) (57)
Interest expenses 320 317 194 109 63
Working capital adjustment (114) 1,309 345 325 355
Others 322 110 0 0 0
Cashflow from Operating Activities 3,170 4,517 5,822 6,330 7,050
Investing cashflows
Purhase of fixed assets (1,546) (2,167) (2,108) (280) (280)
Interest received 94 6 7 42 57
Restricted cash 0 - - - -
Others (68) (12,797) 0 0 0
Net Investing Cashflows (1,520) (14,958) (2,101) (238) (223)
Financing Cashflows
Proceed from borrowings 3,900 3,894 - - -
Repayment of borrowings - (3,893) (3,120) (2,527) (1,114)
Share issuance - 14,490 - - -
Interest paid (320) (355) (194) (109) (63)
Dividend (8,320) (1,009) 0 0 0
Others 101 (0) 0 0 0
Net Financing Cashflows (4,639) 13,126 (3,314) (2,636) (1,178)
Net Cashflow (2,989) 2,685 407 3,456 5,649

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(852) 2800-8597 24 August 2010
Table 11: WM operating statistics and assumptions

2006A 2007A 2008A 2009F 1Q10 2Q10 3Q10E 4Q10E 2010E 2011E 2012E
REVENUE
VIP segment
Market share 0.0% 16.4% 18.0% 15.7% 15.1% 17.1% 17.3% 17.8% 16.9% 16.8% 15.5%
Rolling chips volume (HK$m) 63,180 292,500 432,120 423,540 157,560 169,260 180,937 205,844 713,601 812,943 885,044
Win rate 2.5% 3.1% 3.0% 2.9% 2.7% 3.2% 2.9% 2.9% 2.9% 2.9% 2.9%
Win/table/day (HK$) 78,433 300,336 286,573 212,121 241,163 287,022 260,703 296,591 272,146 295,239 321,424
VIP revenue (HK$m) 1,546 9,126 12,953 12,207 4,254 5,450 5,157 5,867 20,728 23,169 25,224
Mass segment
Market share 0.0% 12.5% 12.4% 11.0% 9.5% 9.8% 10.0% 10.0% 9.8% 9.5% 9.0%
Win/table/day (HK$) 14,146 36,943 41,750 46,393 52,448 51,460 50,631 56,675 52,852 56,208 63,771
Mass revenue (HK$m) 862 2,954 3,484 3,480 935 999 1,029 1,152 4,115 4,780 5,423
Slot machine
Slot market share 7% 19% 22% 20% 18% 19% 22% 21% 20% 19% 19%
Win/slot/day (HK$) 3,151 3,682 2,697 3,005 3,518 3,565 3,496 3,671 3,567 3,670 4,037
Slot revenue (HK$m) 138 697 1,225 1,304 355 388 434 456 1,633 1,808 1,989
Less: Allowance (HK$m) (476) (2,579) (3,779) (3,806) (1,319) (1,690) (1,599) (1,819) (6,426) (7,182) (7,819)
Gaming revenue (HK$m) 2,070 10,198 13,883 13,186 4,225 5,147 5,022 5,656 20,050 22,575 24,817
Non gaming revenue (HK$m) 223 660 827 891 345 353 414 430 1,542 1,837 1,797
Group Total revenue (HK$m) 2,293 10,858 14,711 14,077 4,570 5,500 5,436 6,086 21,592 24,412 26,614
EBITDA (HK$m) 339 2,449 3,138 3,209 1,192 1,421 1,385 1,589 5,587 6,105 6,785
Group EBITDA margin 14.8% 22.6% 21.3% 22.8% 26.1% 25.8% 25.5% 26.1% 25.9% 25.0% 25.5%
Source: Company reports and J.P. Morgan estimates.
25
(852) 2800-8597 24 August 2010
All Data As Of 23-Aug-10
Q-Snapshot: Wynn Macau Ltd.

Quant Return Drivers (a Score >50% indicates company ranks 'above average') J.P. Morgan Composite Q-Score
Score 0% (worst) to 100% (best) vs Country vs Industry Raw Value
100% HIGH/STRONGER
Value
P/E Vs Market (12mth fwd EPS) 27% 55% 1.3x C
75%
P/E Vs Sector (12mth fwd EPS) 70% 88% 0.8x O
EPS Growth (forecast) 73% 70% 31.2% U
50%
Value Score 61% 84% N
Price Momentum T
25%
12 Month Price Momentum 0.0% R
1 Month Price Reversion 33% 22% 9.8% Y 0% LOW/WEAKER
Momentum Score
0% 25% 50% 75% 100%
Quality
Return On Equity (forecast) 98% 98% 54.4% INDUSTRY
Earnings Risk (Variation in Consensus) 66% 57% 0.10 Quant Return Drivers Summary (vs Country)
Quality Score 99% 99%
100%
Earnings & Sentiment
Earnings Momentum 3mth (risk adjusted) 97% 95% 204.3 75%
1 Mth Change in Avg Recom. 30% 34% -0.02 50%
Net Revisions FY2 EPS 80% 80% 78% 25%
Earnings & Sentiment Score 97% 93%
0%
COMPOSITE Q-SCORE* (0% To 100%) 99% 99% VALUE PRICE QUALITY EARNINGS
Targets & Recommendations** EPS Revisions** EPS Momentum (%) Historical Total Return (%)
20 Targets Recoms 10 25.0 35 29
Consensus Changes (4wks)
Consensus Changes (4wks)
30
(Local Currency %)
15 8 20.0
25
6 15.0 20
(%)
10
4 10.0 15 10
5 10
2 5.0
5
0 0 0.0 0
Up Dn Unchanged Up Dn Unchanged -1 Mth -3 Mth 1Mth 3Mth 1Yr 3Yr
FY1 FY2 FY1 FY2
Consensus Growth Outlook (%)
60.0 50.0
50.0
40.0
30.0
20.0 12.4 10.4 9.1
13.2
10.0
0.0
EPS Actual To FY1 EPS FY1 To FY2 EPS FY2 To FY3 Cash Flow FY1 To FY2 Sales FY1ToFY2
Closest in Country by Size (Consensus. ADV = average daily value traded in US$m over the last 3 mths)
Code Name Industry USD MCAP ADV PE FY1 Q-Score*
763-HK ZTE CORP H Telecommunications Equipment 9,888 22.36 20.8 34%
293-HK Cathay Pacific Airways Ltd. Airlines 9,842 13.05 7.2 96%
1109-HK China Resources Land Ltd. Real Estate Development 9,840 31.50 18.0 12%
1766-HK China South Locomotive & Rolling Stock Corp. LtTrucks/Construction/Farm Machinery 9,752 6.29 25.9 52%
291-HK China Resources Enterprise Ltd. Food Retail 9,744 14.59 35.6 5%
1128-HK Wynn Macau Ltd. Casinos/Gaming 9,533 17.12 19.7 99%
1618-HK Metallurgical Corp. of China Ltd. Engineering & Construction 9,001 4.91 10.6 62%
1038-HK Cheung Kong Infrastructure Holdings Ltd. Construction Materials 8,761 5.22 15.1 56%
1099-HK Sinopharm Group Co. Ltd. Medical Distributors 8,714 23.99 46.1 11%
83-HK Sino Land Co. Ltd. Real Estate Development 8,582 12.57 19.3 7%
144-HK China Merchants Holdings (International) Co. Ltd Other Transportation 8,297 18.77 19.4 43%
Source: Factset, Thomson and J.P. Morgan Quantitative Research. For an explanation of the Q-Snapshot, please visit http://jpmorgan.hk.acrobat.com/qsnapshot/
Q-Snapshots are a product of J.P. Morgan’s Global Quantitative Analysis team and provide quantitative metrics summarized in an overall company 'Q-Score.'
Q-Snapshots are based on consensus data and should not be considered as having a direct relationship with the J.P. Morgan analysts’ recommendation.
* The Composite Q-Score is calculated by weighting and combining the 10 Quant return drivers shown. The higher the Q-Score the higher the one month
expected return. On a 14 Year back-test the stocks with the highest Q-Scores have been shown (on average) to significantly outperform those stocks with the
lowest Q-Scores in this universe. ** The number of up, down and unchanged target prices, recommendations or EPS forecasts that make up consensus.
26
(852) 2800-8597 24 August 2010
JPM Q-Profile
Wynn Macau Ltd. (MACAU / Consumer Discretionary)
As Of: 20-Aug-2010 Quant_Strategy@jpmorgan.com
Local Share Price Current: 14.28 12 Mth Forward EPS Current: 0.79
16.00 0.90
14.00 0.80
12.00 0.70
0.60
10.00
0.50
8.00
0.40
6.00
0.30
4.00 0.20
2.00 0.10
0.00 0.00
Jul-95
Jul-96
Jul-97
Jul-98
Jul-99
Jul-00
Jul-01
Jul-02
Jul-03
Jul-04
Jul-05
Jul-06
Jul-07
Jul-08
Jul-09
Jul-10
Jul-95
Jul-96
Jul-97
Jul-98
Jul-99
Jul-00
Jul-01
Jul-02
Jul-03
Jul-04
Jul-05
Jul-06
Jul-07
Jul-08
Jul-09
Jul-10
Earnings Yield (& local bond Yield) Current: 5% Implied Value Of Growth* Current: 27.22%
8% 12Mth fwd EY US BY Proxy 0.60
7%
0.50
6%
0.40
5%
4% 0.30
3%
0.20
2%
0.10
1%
0% 0.00
Jul-95
Jul-96
Jul-97
Jul-98
Jul-99
Jul-00
Jul-01
Jul-02
Jul-03
Jul-04
Jul-05
Jul-06
Jul-07
Jul-08
Jul-09
Jul-10
Jul-95
Jul-96
Jul-97
Jul-98
Jul-99
Jul-00
Jul-01
Jul-02
Jul-03
Jul-04
Jul-05
Jul-06
Jul-07
Jul-08
Jul-09
Jul-10
PE (1Yr Forward) Current: 18.2x Price/Book Value Current: 67.3x
25.0x 80.0x PBV hist PBV Forward
70.0x
20.0x
60.0x
15.0x 50.0x
40.0x
10.0x 30.0x
20.0x
5.0x
10.0x
0.0x 0.0x
Jul-95
Jul-96
Jul-97
Jul-98
Jul-99
Jul-00
Jul-01
Jul-02
Jul-03
Jul-04
Jul-05
Jul-06
Jul-07
Jul-08
Jul-09
Jul-10
Jul-95
Jul-96
Jul-97
Jul-98
Jul-99
Jul-00
Jul-01
Jul-02
Jul-03
Jul-04
Jul-05
Jul-06
Jul-07
Jul-08
Jul-09
Jul-10
ROE (Trailing) Current: Dividend Yield (Trailing) Current: 0.00
60.00 1.0
0.9
50.00
0.8
0.7
40.00
0.6
30.00 0.5
0.4
20.00
0.3
0.2
10.00
0.1
0.00 0.0
Jul-95
Jul-96
Jul-97
Jul-98
Jul-99
Jul-00
Jul-01
Jul-02
Jul-03
Jul-04
Jul-05
Jul-06
Jul-07
Jul-08
Jul-09
Jul-10
Jul-95
Jul-96
Jul-97
Jul-98
Jul-99
Jul-00
Jul-01
Jul-02
Jul-03
Jul-04
Jul-05
Jul-06
Jul-07
Jul-08
Jul-09
Jul-10
Summary
Wynn Macau Ltd. 9440.01 As Of: 20-Aug-10
MACAU 16.50303 SEDOL B4JSTL6 Local Price: 14.28
Consumer Discretionary Hotels Restaurants & Leisure EPS: 0.79
Latest Min Max Median Average 2 S.D.+ 2 S.D. - % to Min % to Max % to Med % to Avg
12mth Forward PE 18.19x 17.94 22.07 19.71 19.77 22.49 17.06 -1% 21% 8% 9%
P/BV (Trailing) 67.28x 45.00 67.28 52.77 53.65 70.01 37.30 -33% 0% -22% -20%
Dividend Yield (Trailing) 0.00 0.00 0.00 0.00 0.00 0.00 0.00
ROE (Trailing) 21.93 52.93 52.93 40.53 71.42 9.63
Implied Value of Growth 27.2% 0.27 0.47 0.39 0.39 0.52 0.25 0% 72% 44% 43%
Source: Bloomberg, Reuters Global Fundamentals, IBES CONSENSUS, J.P. Morgan Calcs * Implied Value Of Growth = (1 - EY/Cost of equity) where cost of equity =Bond Yield + 5.0% (ERP)
27
(852) 2800-8597 24 August 2010
Wynn Macau Ltd: Summary of financials

Year to December (HK$m) 2008A 2009A 2010E 2011E 2012E Year to December (HK$m) 2008A 2009A 2010E 2011E 2012E
Profit & Loss Balance Sheet

Revenue Non Current Assets
Casino 17,663 16,991 26,476 29,757 32,636 Property and equipment 7,047 8,528 9,658 8,789 7,895
Less: Promotional allowances (3,779) (3,806) (6,426) (7,182) (7,819) Leasehold interest in land 372 464 446 428 410
Net gaming revenue 13,883 13,186 20,050 22,575 24,817 Goodwill 398 398 398 398 398
Other non-current assets 255 283 277 272 266
Rooms 453 437 565 790 802 Total Non Current Assets 8,072 9,674 10,780 9,887 8,970
Food & beverage 413 392 509 553 561
Other 537 663 1,278 1,421 1,443 Current Assets
Less: Promotional allowances (575) (601) (810) (927) (1,009) Cash and restricted cash 2,544 5,229 5,636 9,092 14,741
Net non-gaming revenue 827 891 1,542 1,837 1,797 Account receivable 208 325 342 359 377
Total Revenue 14,711 14,077 21,592 24,412 26,614 Inventories 199 203 205 207 209
Prepaid exp and other current assets 166 161 162 164 166
EBITDA 3,138 3,209 5,587 6,105 6,785 Total Current Assets 3,118 5,918 6,345 9,822 15,492
Depreciation (697) (718) (996) (1,167) (1,192) Current Liabilities

Accounts payable 487 727 749 771 794
EBIT 2,442 2,490 4,591 4,938 5,593 Other payables - incl gaming tax & chips 1,573 2,621 2,936 3,229 3,552
Other current liabilities 158 205 215 226 237
Interest income 94 6 7 42 57 Total Current Liabilities 2,218 3,553 3,899 4,226 4,583
Interest expense (320) (317) (194) (109) (63)
Net Interest Income/(Expense) (226) (312) (187) (67) (6) Non Current Liabilities
Interest bearing debts 7,973 8,017 4,896 2,370 1,255
Non-recurring items 0 0 0 0 0 Other long-term liabilities 262 251 263 276 290
Pre-opening costs 0 (11) 0 0 0 Total Non Current Liabilities 8,235 8,268 5,160 2,646 1,546
Property charges and other (78) (19) (20) (20) (20)
Share based payment (32) (45) (45) (40) (40) Shareholders Equity
Other non-recurring items (123) (29) (30) (20) (10) Share Capital 0 5 5 5 5
Pre-tax Profits 1,982 2,074 4,310 4,791 5,516 Share reserves 709 1,924 1,924 1,924 1,924
Retained earnings 29 1,842 6,137 10,908 16,404
Tax 57 (6) (15) (20) (20) Other reserves 0 0 0 0 0
Net Profit 2,040 2,069 4,295 4,771 5,496 Total Shareholders Equity 738 3,771 8,066 12,836 18,332
Non recurring items (120) (29) (30) (20) (10)

Recurring Net Profit 2,159 2,097 4,325 4,791 5,506
2008A 2009A 2010E 2011E 2012E Year to December (HK$m) 2008A 2009A 2010E 2011E 2012E
Per Share and key ratios Cashflow Statement
Shares issued at year end (m) 5,188 5,188 5,188 5,188 5,188 Net income 2,040 2,069 4,295 4,771 5,496
EPS 0.39 0.40 0.83 0.92 1.06 Depreciation & amortization 697 718 996 1,167 1,192
yoy change 47% 1% 108% 11% 15% Interest income (94) (6) (7) (42) (57)
Recurring EPS 0.42 0.40 0.83 0.92 1.06 Interest expenses 320 317 194 109 63
yoy change 56% -3% 106% 11% 15% Working capital adjustment (114) 1,309 345 325 355
BVPS 0.14 0.73 1.55 2.47 3.53 Others 322 110 - - -
yoy change -89% 411% 114% 59% 43% Cashflow from Operating Activities 3,170 4,517 5,822 6,330 7,050
DPS 0.00 0.00 0.00 0.00 0.00
Investing cashflows
P/E 36.3 35.8 17.2 15.5 13.5 Purhase of fixed assets (1,546) (2,167) (2,108) (280) (280)
Recurring P/E 34.3 35.3 17.1 15.5 13.5 Interest received 94 6 7 42 57
P/BV 100.4 19.6 9.2 5.8 4.0 Restricted cash 0 - - - -
Dividend yield 0.0% 0.0% 0.0% 0.0% 0.0% Others (68) (12,797) 0 0 0
EV/EBITDA 25.3 24.0 13.1 11.0 8.9 Net Investing Cashflows (1,520) (14,958) (2,101) (238) (223)
RoE 52.9% 91.8% 72.6% 45.6% 35.3% Financing Cashflows

Net debt/(cash) 5,429 2,788 (740) (6,722) (13,485) Proceed from borrowings 3,900 3,894 - - -
Group EBITDA 3,138 3,209 5,587 6,105 6,785 Repayment of borrowings - (3,893) (3,120) (2,527) (1,114)
Net debt /EBITDA 1.7 0.9 (0.1) (1.1) (2.0) Share issuance - 14,490 - - -
Interest paid (320) (355) (194) (109) (63)
Capex breakdown Dividend (8,320) (1,009) 0 0 0
Wynn Macau 347 250 200 200 200 Others 101 (0) 0 0 0
Wynn Encore 1,199 1,931 1,908 80 80 Net Financing Cashflows (4,639) 13,126 (3,314) (2,636) (1,178)
Wynn Cotai - - - - -
Total capex 1,546 2,181 2,108 280 280 Net Cashflow (2,989) 2,685 407 3,456 5,649
Source: Company reports, J.P. Morgan estimates.
28
(852) 2800-8597 24 August 2010
Analyst Certification:
The research analyst(s) denoted by an “AC” on the cover of this report certifies (or, where multiple research analysts are primarily
responsible for this report, the research analyst denoted by an “AC” on the cover or within the document individually certifies, with
respect to each security or issuer that the research analyst covers in this research) that: (1) all of the views expressed in this report
accurately reflect his or her personal views about any and all of the subject securities or issuers; and (2) no part of any of the research
analyst’s compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the
research analyst(s) in this report.
Important Disclosures
• Lead or Co-manager: JPMSI or its affiliates acted as lead or co-manager in a public offering of equity and/or debt securities for
Wynn Macau Ltd within the past 12 months.
• Client of the Firm: Wynn Macau Ltd is or was in the past 12 months a client of JPMSI; during the past 12 months, JPMSI provided
to the company investment banking services.
• Investment Banking (past 12 months): JPMSI or its affiliates received in the past 12 months compensation for investment banking
services from Wynn Macau Ltd.
• Investment Banking (next 3 months): JPMSI or its affiliates expect to receive, or intend to seek, compensation for investment
banking services in the next three months from Wynn Macau Ltd.
Wynn Macau Ltd (1128.HK) Price Chart
Date Rating Share Price Price Target

24 (HK$) (HK$)
10-Nov-09 OW 10.30 12.00
OW 27-Feb-10 OW 9.75 12.20
18 12-May-10 OW 11.30 --
OW HK$12 OW HK$12.2
Price(HK$)
12
0
Oct Nov Jan Mar May Jul Aug
09 09 10 10 10 10 10
Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.
Initiated coverage Nov 10, 2009. Break in coverage May 12, 2010 - Aug 23, 2010. This chart shows J.P. Morgan's
continuing coverage of this stock; the current analyst may or may not have covered it over the entire period.
J.P. Morgan ratings: OW = Overweight, N = Neutral, UW = Underweight.
Explanation of Equity Research Ratings and Analyst(s) Coverage Universe:

J.P. Morgan uses the following rating system: Overweight [Over the next six to twelve months, we expect this stock will outperform the
average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Neutral [Over the next six to twelve
months, we expect this stock will perform in line with the average total return of the stocks in the analyst’s (or the analyst’s team’s)
coverage universe.] Underweight [Over the next six to twelve months, we expect this stock will underperform the average total return of
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analysts use the same rating categories; however, each stock’s expected total return is compared to the expected total return of the FTSE
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29
(852) 2800-8597 24 August 2010
J.P. Morgan Equity Research Ratings Distribution, as of June 30, 2010

Overweight Neutral Underweight
(buy) (hold) (sell)
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IB clients* 49% 46% 31%
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IB clients* 68% 61% 53%
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(852) 2800-8597 24 August 2010
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Asia Pacific Equity Research

• Initiating coverage with OW rating and Jun-11 PT of HK$17.5: Hong Kong

line with peers on JPMe 2011 EV/EBITDA. However, we argue that 14

• Price target, valuation and key risks: We value WM on 14.5x FY11E

Company description NAV sensitivity metrics

Key risks to our PT include: (1) slower-than-expected

Source: J.P. Morgan estimates.

Source: BEST, J.P. Morgan estimates.

Table 1: Valuation summary

Competitive advantage drives superior return

Refuting six market concerns

3. WM’s margin could see gradual erosion post Encore opening

4. WM is not growing its higher-margin direct VIP

5. Wynn Encore did not contribute much business volume in 2Q

6. WM’s valuation is rich

On an EV/EBITDA basis, WM’s is trading at the industry average. However, we

Catalysts: More detail on Cotai and Wynn Encore ramp-up

All successful companies have some significant competitive advantages. A firm’s

Strong WYNN branding and niche best-in-class positioning

Since its opening, WM has successfully positioned itself to be the best-in-class

Figure 3: WM’s EBITDA vs. EBITDA margin performance

Source: Company reports, J.P. Morgan

The advantage of luxury positioning also allows WM to attract higher-yielding

Central location in the casino hub

Location is a key factor in determining success in Macau, in our view. Macau

Market concerns on WM’s: (1) growth potential; (2) VIP-

1. WM can grow even without new opening

For a casino operator, we usually look at win/table/day as a productivity indicator. In

Figure 4: WM’s quarterly win/day/table

Source: Company data, J.P. Morgan

Figure 5: Galaxy VIP rolling chips volume and market share

MOP bn Monthly VIP rolling chips Market share (R.H.S.)

Source: Company data.

2. WM is not VIP-centric; WM has the second-highest mass market share in

Table 2: Flagship properties’ market share ranking in 2009

Source: Company reports.

4. WM chose not to grow direct VIP, which we see as a positive

Figure 7: Casinos’ direct VIP exposure

180,000 Junket Direct VIP

5. Wynn Encore’s 2Q performance distorted by high win rate

Table 3: Rolling chips vs. win rate example

Total rolling chips 4,000 <Sum of the total amount bets>

Casino win rate 50% <2,000/4,000 = 50%>

Instead, we believe the overall trend, instead of considering a single/month revenue

Figure 8: WM’s VIP revenue and market share trend

Valuation undemanding at 11x FY11E EBITDA or 16x FY11E

Look passed EBITDA, also at P/E and cash flow

WM’s EBITDA quality is higher

In terms of earnings quality, as we have argued before, we believe WM’s strong

Consensus earnings has not recognized Wynn Encore’s potential

WM’s valuation does not contain option value, in our view

2. Regulatory risks from China

3. Unpredictable event that affects willingness and ability

4. Dependent upon gaming promoters for a significant

Valuation and share price analysis

Table 4: WM’s target valuation computation

Wynn Macau 14.5x 2011E EBITDA 88,520 17.1 93%

less net debt/(cash) 2011E year-end forecast 6,722 1.3 7%

Price target by June-2011E Discount 1/2 year by 10% 77,949 17.5

Table 5: WM’s valuation sensitivity

5% 15.7 16.0 16.3 16.6 16.7 16.9 17.2

Source: J.P. Morgan estimates.