February 2015 1

USI | C

om

pany R

ese

arc

h

Share Price Performance

Nov Dec Jan Feb YTD

Absolute (%) +22.4 +0.5 -11.9 -4.0 -15.4 PSEi (%) +1.1 -0.9 +6.4 -1.0 +5.3

Stock Information

Rating Buy Bloomberg Ticker LR.PM Company Name Leisure and Resorts World Sector Services Subsector Casinos & Gaming Last Traded Date 3-February-2015 Last Traded (Php) 9.98 Fair Value (Php) 13.30 Upside/Downside (%) +33 Par Value (Php) 1.00 Issued Shares (in mn) 1,199 Float (in mn) 752 Market Cap. (Php mn) 11,974 52-wk high/low (Php) 6.50-12.28 1-yr ADTO (Php mn) 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 % Total

Benitez, Alfredo 11.2 Zoraymee Holdings,Inc. 11.1 Grandshares, Inc. 10.0 Tanco, Eusebio 2.8

0

2000

4000

6000

8000

10000

0

2

4

6

8

10

12

14

28-Jan-14 28-Apr-14 28-Jul-14 28-Oct-14 28-Jan-15

LR PSEI Composite Index

Leisure and Resorts World Corp. (LR.PM) Cheaper entry into the PH gaming industry 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 8th 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) Mkt Cap (in mn $)

PER (x)

EV/EBITDA (x)

LR 269 9.00 25.61 Wynn Macau Ltd. 14,614 19.49 14.08 Sands China Ltd. 39,350 16.42 13.19 MGM China Hold. 9,218 13.83 11.21 BLOOM 2,945 22.23 11.25 PLC 1,215 18.43 12.91 RWM 2,478 15.68 7.76

Region 15.24 12.20

FYE Dec. (Php m) 2013A 2014E 2015E 2016E

EBITDA 500 622 700 752 Revenues 3,059 3,273 3,486 3,655 Net Income 324 844 1,337 1,504 Profit Margin (%) 16.3 19.0 20.0 20.5 EPS 0.216 0.70 1.11 1.25 EPS Growth (%) +16 +160 +58 +12 PER (x) 46.2 14.3 9.0 7.9 BPS 2.489 4.63 5.45 6.36 P/BV (x) 4.0 2.3 1.9 1.6 DVPS 0.08 0.19 0.30 0.34 Div. Yield (%) 0.8 1.8 2.9 3.3 ROE (in %) 8.84 15.56 20.83 19.96 Source: Company figures; Bloomberg; Unicapital Research

USI Equity Research Lexter L. Azurin

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

LEISURE AND RESORTS WORLD CORP.

February 2015 2

Figure 1. Earnings contribution

2013 2014E 2015E 2016E 2017E

First Cagayan 175 201 216 232 248 ABLE 150 233 316 365 415 Belle Corp 75 560 641 691 749 Others 31 33 61 58 63 Midas Hotel 28 94 107 127 148 Techzone -34 105 18 14 23

LR Net Income 425 1,226 1,359 1,487 1,646

Source: LR Figure 2. Valuation summary PH Gaming

Stock Mket Cap Php mn

PER (x) 2015E

P/B Ratio 2015E

ROE (%) 2015E

LR 11,974 9.0 1.9 20.8 BLOOM 125,595 21.1 4.5 25.9 RWM 110,921 14.0 2.6 17.7 PLC 59,459 20.0 3.7 20.5 PH Industry

20.1 2.9 22.6

Source: Bloomberg estimates; Unicapital

LEISURE AND RESORTS WORLD CORP.

February 2015 3

Appendix

Figure1. Income Statement

In Millions of PHP except Per Share FY 2011 FY 2012 FY 2013

Revenue 3,846.5 4,429.0 5,084.7

+ Other Operating Revenue 0.0 0.0 0.0

- Operating Expenses 4,035.1 4,315.5 4,709.1

Operating Income -188.6 113.5 375.6

- Interest Expense 46.3 38.0 182.3

- Foreign Exchange Losses (Gains) -5.0 3.9 17.2

- Net Non-Operating Losses (Gains) -180.1 -297.8 -327.9

Pretax Income -49.8 369.4 504.0

- Income Tax Expense -54.2 21.9 80.1

Income Before XO Items 4.3 347.5 423.9

- Extraordinary Loss Net of Tax 0.0 0.0 0.0

- Minority Interests 40.7 68.1 100.2

Net Income -36.4 279.4 323.8

- Total Cash Preferred Dividends 0.0 0.0 70.1

Net Inc Avail to Common Shareholders -36.4 279.4 253.7

Figure 2. Balance Sheet

In Millions of PHP except Per Share FY 2011 FY 2012 FY 2013

Assets

+ Cash & Near Cash Items 944.3 191.1 295.7

+ Short-Term Investments -- 0.0 0.0

+ Accounts & Notes Receivable 161.9 102.5 149.6

+ Inventories 17.7 16.0 9.8

+ Other Current Assets 457.2 478.8 567.3

Total Current Assets 1,581.0 788.4 1,022.5

+ LT Investments & LT Receivables 200.6 1,743.1 2,460.6

+ Net Fixed Assets 532.6 629.1 615.2

+ Gross Fixed Assets 893.4 1,097.0 1,158.8

- Accumulated Depreciation 360.9 467.9 543.5

+ Other Long-Term Assets 1,473.9 962.8 5,093.5

Total Long-Term Assets 2,207.1 3,335.1 8,169.3

Total Assets 3,788.1 4,123.5 9,191.8

Liabilities & Shareholders' Equity

+ Accounts Payable 467.2 423.1 574.6

+ Short-Term Borrowings 125.2 108.1 539.9

+ Other Short-Term Liabilities 281.4 532.8 594.8

Total Current Liabilities 873.7 1,064.0 1,709.2

+ Long-Term Borrowings 32.3 29.3 2,663.0

+ Other Long-Term Liabilities 40.7 66.1 83.1

Total Long-Term Liabilities 73.1 95.4 2,746.2

Total Liabilities 946.8 1,159.5 4,455.4

+ Total Preferred Equity -- 0.0 1,613.5

+ Minority Interest 143.9 166.5 186.8

+ Share Capital & APIC 2,113.9 2,113.9 2,313.9

+ Retained Earnings & Other Equity 497.7 683.6 622.3

Total Equity 2,755.5 2,964.1 4,736.4

Total Liabilities & Equity 3,702.4 4,123.5 9,191.8

LEISURE AND RESORTS WORLD CORP.

February 2015 4

Figure 3. Cash flow

In Millions of PHP except Per Share FY 2011 FY 2012 FY 2013

Cash From Operating Activities

+ Net Income -36.4 279.4 323.8

+ Depreciation & Amortization 89.6 126.0 124.3

+ Other Non-Cash Adjustments 29.6 -49.1 95.9

+ Changes in Non-Cash Capital -1.4 392.1 -127.5

Cash From Operations 81.3 748.4 416.4

Cash From Investing Activities

+ Disposal of Fixed Assets 1.1 114.1 0.0

+ Capital Expenditures -191.3 -132.4 -84.6

+ Increase in Investments 0.0 0.0 0.0

+ Decrease in Investments 0.0 0.0 0.0

+ Other Investing Activities -106.2 -1,273.0 -4,761.8

Cash From Investing Activities -296.4 -1,291.3 -4,846.5

Cash from Financing Activities

+ Dividends Paid -48.4 -66.9 -99.5

+ Change in Short-Term Borrowings -27.2 -- --

+ Increase in Long-Term Borrowings 0.0 24.2 4,142.5

+ Decrease In Long-Term Borrowings 0.0 -54.6 -1,094.1

+ Increase in Capital Stocks 1,137.2 0.0 1,814.5

+ Decrease in Capital Stocks 0.0 0.0 -217.0

+ Other Financing Activities -3.8 -113.0 -11.8

Cash from Financing Activities 1,057.8 -210.4 4,534.7

Net Changes in Cash 842.7 -753.2 104.7

Key ratios

In Millions of PHP except Per Share FY 2011 FY 2012 FY 2013

Returns

Return on Common Equity -1.73 10.33 8.85 Return on Assets -1.17 7.06 4.86 Return on Capital -- 12.75 10.46 Return on Invested Capital -- 4.53 6.07

Margins

EBITDA Margin -2.57 5.41 9.83 Operating Margin -4.90 2.56 7.39 Incremental Operating Margin -6,665.04 51.87 39.97 Pretax Margin -1.30 8.34 9.91 Income before XO Margin 0.11 7.85 8.34 Net Income Margin -0.95 6.31 6.37 Net Income to Common Margin -0.95 6.31 4.99

Additional

Effective Tax Rate -- 5.93 15.89 Dvd Payout Ratio -- 26.84 37.84 Sustainable Growth Rate -- 7.56 5.50

LEISURE AND RESORTS WORLD CORP.

February 2015 5

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: Note: In the interest of timeliness, this report has not been edited.

The information provided in this report has been prepared without taking account of your objectives, financial situation or needs. You should, before acting on the advice, consider the appropriateness of the advice having regards to these matters and, if appropriate, seek professional financial, investment and taxation advice.

All observations, conclusions and opinions expressed in this report reflect the personal views of USI analysts and are subject to change without notice. The information this report has been obtained from sources USI believes to be reliable. However, USI does not warrant the accuracy, completeness or currency of, and will not be liable for any inaccuracies, omissions or errors in, or for any loss or damage (including any consequential loss) arising from reliance on, the information in this report.

USI does not guarantee the performance of any investment discussed or recommended in this report. Any information in this report relating to the distribution history or performance history of any investment should not be taken as indication of the future performance of the relevant investment.

In this report, USI may express an expectation or belief as to future events, results or returns generally or in respect of particular investments. USI makes such statements in good faith and believes them to have a reasonable basis; however, such forward-looking statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from such forward-looking statements. No guarantee of future returns is given or implied by USI.