USI | Company Research

Leisure and Resorts World Corp. (LR.PM)

Cheaper entry into the PH gaming industry

Share Price Performance

14

New earnings contribution from City of Dreams

China crackdown on Macau to benefit PH gaming industry
Cheaper entry into gaming
Rating: Buy

New earnings contribution from City of Dreams. LR will earn from

both rentals and part of the EBITDA of City of Dreams. By 2017,
profits from City of Dreams will contribute 45% of the total profits of LR
or Php750m.
Tapping Playtech. LR tapped Playtech, a gaming software
development company providing software for online casinos, online
poker rooms, online bingo games, etc., to develop its software games.
Playtech will provide the gaming software for LR to further enhance it,
which is targeted to boost revenues.
Macaus problems are Philippines upside. Macaus $44b gaming
industry is now in trouble as revenues continue to drop for an 8 th
straight month in January, the longest streak on record, and
expectations are growing that it may continue to persist another year
as Chinas clampdown on graft intensifies. As China widens its graft
and corruption campaign, with the government imposes tighter rules
for visiting Macau, high rollers are asking for easier gambling
destinations. Philippines is one of the choices.
Cheaper entry to gaming. Of the gaming companies in the
Philippines, LR remains undervalued compared to its peers. We still
remain bullish on the gamin sector despite the crackdown in Macau.
We believe that some of the market in Macau may start to look into
other countries such as the Philippines. And we think that LR is one of
the cheaper entries into the Philipping gaming industry, given that it is
trading below its peers. Maintain Buy.

FY Est. (2015)
LR
Wynn Macau Ltd.
Sands China Ltd.
MGM China Hold.
BLOOM
PLC
RWM
Region
FYE Dec. (Php m)
EBITDA
Revenues
Net Income
Profit Margin (%)
EPS
EPS Growth (%)
PER (x)
BPS
P/BV (x)
DVPS
Div. Yield (%)
ROE (in %)

Mkt Cap
(in mn $)
269
14,614
39,350
9,218
2,945
1,215
2,478

2013A
500
3,059
324
16.3
0.216
+16
46.2
2.489
4.0
0.08
0.8
8.84

PER
(x)
9.00
19.49
16.42
13.83
22.23
18.43
15.68
15.24

2014E
622
3,273
844
19.0
0.70
+160
14.3
4.63
2.3
0.19
1.8
15.56

EV/EBITDA
(x)
25.61
14.08
13.19
11.21
11.25
12.91
7.76
12.20

2015E
700
3,486
1,337
20.0
1.11
+58
9.0
5.45
1.9
0.30
2.9
20.83

Source: Company figures; Bloomberg; Unicapital Research

February 2015

2016E
752
3,655
1,504
20.5
1.25
+12
7.9
6.36
1.6
0.34
3.3
19.96

10000

12

8000

10
8

6000

4000

4
2000

2
0
28-Jan-14

28-Apr-14

28-Jul-14

LR

Absolute (%)
PSEi (%)

Nov
+22.4
+1.1

Stock Information
Rating
Bloomberg Ticker
Company Name
Sector
Subsector
Last Traded Date
Last Traded (Php)
Fair Value (Php)
Upside/Downside (%)
Par Value (Php)
Issued Shares (in mn)
Float (in mn)
Market Cap. (Php mn)
52-wk high/low (Php)
1-yr ADTO (Php mn)

0
28-Jan-15

28-Oct-14

PSEI Composite Index

Dec Jan
Feb
YTD
+0.5 -11.9 -4.0
-15.4
-0.9 +6.4
-1.0
+5.3

Buy
LR.PM
Leisure and Resorts World
Services
Casinos & Gaming
3-February-2015
9.98
13.30
+33
1.00
1,199
752
11,974
6.50-12.28
17.2

Company Description
Leisure and Resorts World Corp., through its
subsidiaries, operates bingo parlors nationwide. Most
of these bingo parlors are located in major shopping
malls in Metro Manila and in key provincial cities
Major Shareholders
Benitez, Alfredo
Zoraymee Holdings,Inc.
Grandshares, Inc.
Tanco, Eusebio

% Total
11.2
11.1
10.0
2.8

USI Equity Research

Lexter L. Azurin
Analyst
lla@unicapital-inc.com
(632) 844 4415

LEISURE AND RESORTS WORLD CORP.

Figure 1. Earnings contribution

First Cagayan
ABLE
Belle Corp
Others
Midas Hotel
Techzone
LR Net Income
Source: LR

2013
175
150
75
31
28
-34
425

2014E
201
233
560
33
94
105
1,226

2015E
216
316
641
61
107
18
1,359

2016E
232
365
691
58
127
14
1,487

2017E
248
415
749
63
148
23
1,646

Figure 2. Valuation summary PH Gaming

Stock

Mket Cap
Php mn
11,974
125,595
110,921
59,459

LR
BLOOM
RWM
PLC
PH Industry
Source: Bloomberg estimates; Unicapital

February 2015

PER (x)
2015E
9.0
21.1
14.0
20.0
20.1

P/B Ratio
2015E
1.9
4.5
2.6
3.7
2.9

ROE (%)
2015E
20.8
25.9
17.7
20.5
22.6

LEISURE AND RESORTS WORLD CORP.

Appendix
Figure1. Income Statement
In Millions of PHP except Per Share
Revenue
+ Other Operating Revenue
- Operating Expenses
Operating Income
- Interest Expense
- Foreign Exchange Losses (Gains)
- Net Non-Operating Losses (Gains)
Pretax Income
- Income Tax Expense
Income Before XO Items
- Extraordinary Loss Net of Tax
- Minority Interests
Net Income
- Total Cash Preferred Dividends
Net Inc Avail to Common Shareholders

FY 2011
3,846.5
0.0
4,035.1
-188.6
46.3
-5.0
-180.1
-49.8
-54.2
4.3
0.0
40.7
-36.4
0.0
-36.4

FY 2012
4,429.0
0.0
4,315.5
113.5
38.0
3.9
-297.8
369.4
21.9
347.5
0.0
68.1
279.4
0.0
279.4

FY 2013
5,084.7
0.0
4,709.1
375.6
182.3
17.2
-327.9
504.0
80.1
423.9
0.0
100.2
323.8
70.1
253.7

FY 2011

FY 2012

FY 2013

944.3
-161.9
17.7
457.2
1,581.0
200.6
532.6
893.4
360.9
1,473.9
2,207.1
3,788.1

191.1
0.0
102.5
16.0
478.8
788.4
1,743.1
629.1
1,097.0
467.9
962.8
3,335.1
4,123.5

295.7
0.0
149.6
9.8
567.3
1,022.5
2,460.6
615.2
1,158.8
543.5
5,093.5
8,169.3
9,191.8

467.2
125.2
281.4
873.7
32.3
40.7
73.1
946.8
-143.9
2,113.9
497.7
2,755.5
3,702.4

423.1
108.1
532.8
1,064.0
29.3
66.1
95.4
1,159.5
0.0
166.5
2,113.9
683.6
2,964.1
4,123.5

574.6
539.9
594.8
1,709.2
2,663.0
83.1
2,746.2
4,455.4
1,613.5
186.8
2,313.9
622.3
4,736.4
9,191.8

Figure 2. Balance Sheet

In Millions of PHP except Per Share
Assets
+ Cash & Near Cash Items
+ Short-Term Investments
+ Accounts & Notes Receivable
+ Inventories
+ Other Current Assets
Total Current Assets
+ LT Investments & LT Receivables
+ Net Fixed Assets
+ Gross Fixed Assets
- Accumulated Depreciation
+ Other Long-Term Assets
Total Long-Term Assets
Total Assets
Liabilities & Shareholders' Equity
+ Accounts Payable
+ Short-Term Borrowings
+ Other Short-Term Liabilities
Total Current Liabilities
+ Long-Term Borrowings
+ Other Long-Term Liabilities
Total Long-Term Liabilities
Total Liabilities
+ Total Preferred Equity
+ Minority Interest
+ Share Capital & APIC
+ Retained Earnings & Other Equity
Total Equity
Total Liabilities & Equity

February 2015

LEISURE AND RESORTS WORLD CORP.

Figure 3. Cash flow

In Millions of PHP except Per Share
Cash From Operating Activities
+ Net Income
+ Depreciation & Amortization
+ Other Non-Cash Adjustments
+ Changes in Non-Cash Capital
Cash From Operations
Cash From Investing Activities
+ Disposal of Fixed Assets
+ Capital Expenditures
+ Increase in Investments
+ Decrease in Investments
+ Other Investing Activities
Cash From Investing Activities
Cash from Financing Activities
+ Dividends Paid
+ Change in Short-Term Borrowings
+ Increase in Long-Term Borrowings
+ Decrease In Long-Term Borrowings
+ Increase in Capital Stocks
+ Decrease in Capital Stocks
+ Other Financing Activities
Cash from Financing Activities
Net Changes in Cash

FY 2011

FY 2012

FY 2013

-36.4
89.6
29.6
-1.4
81.3

279.4
126.0
-49.1
392.1
748.4

323.8
124.3
95.9
-127.5
416.4

1.1
-191.3
0.0
0.0
-106.2
-296.4

114.1
-132.4
0.0
0.0
-1,273.0
-1,291.3

0.0
-84.6
0.0
0.0
-4,761.8
-4,846.5

-48.4
-27.2
0.0
0.0
1,137.2
0.0
-3.8
1,057.8
842.7

-66.9
-24.2
-54.6
0.0
0.0
-113.0
-210.4
-753.2

-99.5
-4,142.5
-1,094.1
1,814.5
-217.0
-11.8
4,534.7
104.7

FY 2011

FY 2012

FY 2013

-1.73
-1.17
---

10.33
7.06
12.75
4.53

8.85
4.86
10.46
6.07

-2.57
-4.90
-6,665.04
-1.30
0.11
-0.95
-0.95

5.41
2.56
51.87
8.34
7.85
6.31
6.31

9.83
7.39
39.97
9.91
8.34
6.37
4.99

----

5.93
26.84
7.56

15.89
37.84
5.50

Key ratios
In Millions of PHP except Per Share
Returns
Return on Common Equity
Return on Assets
Return on Capital
Return on Invested Capital
Margins
EBITDA Margin
Operating Margin
Incremental Operating Margin
Pretax Margin
Income before XO Margin
Net Income Margin
Net Income to Common Margin
Additional
Effective Tax Rate
Dvd Payout Ratio
Sustainable Growth Rate

February 2015

LEISURE AND RESORTS WORLD CORP.

Unicapital Securities Inc

3/F Majalco Bldg, Benavidez cor. Trasierra Sts.
Legaspi Village, Makati City, Philippines 1229
Tel: +632-892-0991
Fax: +632-818-2127

Sales Team
Rommel M. Macapagal
rmm@unicapital-inc.com
Marlyne Y. Fernandez
mgy@unicapital-inc.com
Juan Paolo G. Martirez
jgm@unicapital-inc.com

Research Team
Lexter L. Azurin
lla@unicapital-inc.com
Jonathan J. Latuja
research@unicapital-inc.com

Ratings and Recommendations:

USI Research's fundamental views and ratings (Buy, Hold, Sell) are medium-term calls within a 12-month
investment horizon. Buy = More than 10% upside from the current price; Hold = Upside within +/-10% from the
current price; Sell = More than 10% downside from the current price. Meanwhile, USI Research's technical
comments and recommendations are short-term and trading oriented.
Disclaimer:
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February 2015