Yum Cha 飲茶. December 14, TALKING POINT: EVs Are Becoming Mainstream RESEARCH NOTES. Analyst: Mark Po, CFA. INDICES Closing DoD%

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1 Yum Cha 飲茶 INDICES Closing DoD% Hang Seng Index HSCEI Shanghai COMP Shenzhen COMP Gold BDIY Crude Oil, WTI(US$/BBL) Crude Oil, BRENT(US$/BBL) 62.4 (1.4) HIBOR, 3-M SHIBOR, 3-M RMB/USD 6.6 (0.0) DATA RELEASES DUE THIS WEEK Source: Bloomberg TALKING POINT: EVs Are Becoming Mainstream December 14, k Units YoY (%) NEV monthly sales volume YoY (%) /14 03/15 06/15 09/15 12/15 03/16 06/16 09/16 12/16 03/17 06/17 09/17 Source: WIND, CGIS Research Toyota and Panasonic announced yesterday that they are jointly exploring the development of prismatic cells and that the collaboration will include solid-state batteries. We believe that the cooperation between Toyota and Panasonic shows that Toyota wants to maintain its market position in the global auto market after Volkswagen AG and General Motors announced their roadmaps on electric vehicles. Recall that Toyota is focusing more on the development of hydrogen-based (fuel-cell) vehicles than EVs. Toyota management also mentioned that the Company is open to other companies joining the partnership to speed up the pace of development. According to Toyota, the Company aims to have electric components in 50% of all its vehicle sales by 2030, including hybrid cars. Toyota also wants to increase hybrid cars sales to 4.5m by Toyota is likely to focus on the development of EVs powered by solid-state batteries, which it expects to launch by early According to industry news flow solid state batteries require shorter charging time, have a longer driving range and are safer than li-ion cell batteries. Toyota s recent partnership with Panasonic, in our view, confirms that: a) EVs are likely to become the mainstream of renewable vehicles, and b) battery development is one of the key factors for successful EV development. We believe that the potential cut in EV subsidies has capped the upside for the EV-related supply chain. But we still think the new policies will trigger industry consolidation, with the leading players continuing to gain market share. We also reiterate the view that the listing of CATL will be a potential catalyst for the industry. We think upstream names (battery and materials), such as BYD [1211.HK], Tianneng Power [0819.HK], Xinyi HK [8328.HK] and Honbridge [8137.HK], will attract market attention again after the release of the subsidies program. As with this year, the cut in subsidies may have a short-term impact on EV sales in 1H and, but they should recover strongly in 2H. However, we take a more neutral view on BAIC [1958.HK], which reported a wider YoY drop in sales volume for Beijing Hyundai and no major recovery in Beijing Motor s Analyst: Mark Po, CFA RESEARCH NOTES STOCK CONNECT UPDATE - We looked at the recent Southbound Stock Connect data. The Big News is Ping An Asset Management s notification that it has built up a 5% position in HSBC through Stock Connect channels. This implies that the other Stock Connect investors own less than HK$8bn in HSBC shares. Also, since we warned of net selling by Mainland investors, Sunny Optical and AAC Technologies have fallen substantially. Last week, Mainland investors started to buy back AAC Technologies, but not the other two tech stocks. Insurance companies, cement companies and some property stocks saw some selling, while there was buying in nonbank financials, IPPs and pharmaceutical companies. MACAU GAMING - Macau gaming stocks surged yesterday on expectations that December is going to be a strong month. We believe that stock picking is still the key, and as we noted previously, MGM China will benefit, given the opening of MGM Cotai next month and a significant performance lag earlier this year. Trading at 14x EV/EBITDA, its valuation is still reasonable. Galaxy Entertainment, at 15x EV/EBITDA, should also benefit as it remains the most balanced casino operator with new capacity coming onstream after

2 SNIPPETS Apple [AAPL.US; US$172.27, Not Rated] announced last night that the Company will invest US$390m in Finisar [FNSR.US] to build a new 700,000-square-foot manufacturing plant in Sherman, Texas. Finisar is going to hire 500 people to work on the laser sensor for the TrueDepth camera for the iphone X. According to the news flow, Apple s investment in Finisar is part of Apple s commitment to invest US$1bn in U.S.-based companies with its Advanced Manufacturing Fund. Apple says that Finisar is going to work on both R&D and high-volume production of optical communications components, such as vertical-cavity surface-emitting lasers (VCSELs) used in the iphone X for Face ID. According to the news flow, Finisar also works on proximity sensors, including those used in the AirPod. The new facility should be up and running at some point in the second half of Shares of Finisar were up 22.8% last night after Apple announced the investment plan. The news flow confirms our previous comment that the 3D sensing-related supply chain (for details, please refer to our industry update released yesterday) will remain a key development area of the handset industry. Apple still has the advantage on sourcing the key components. We also believe that the hybrid lens supply chain will benefit from the continuous development of 3D sensing modules. In HK, O-Net [0877.HK] has VCSEL capability and AAC [2018.HK] and Sunny Optical [2382.HK] are hybrid lens-related names. 2

3 Strategy Notes 14 December 2017 Stock Connect Recent Developments Analyst: Johnson Cheung Tel ) We looked at the recent Southbound Stock Connect data. The Big News is Ping An Asset Management s notification that it has built up a 5% position in HSBC through Stock Connect channels. This implies that the other Stock Connect investors own less than HK$8bn in HSBC shares. Also, since we warned of net selling by Mainland investors, Sunny Optical and AAC Technologies have fallen substantially. Last week, Mainland investors started to buy back AAC Technologies, but not the other two tech stocks. Insurance companies, cement companies and some property stocks saw some selling, while there was buying in non-bank financials, IPPs and pharmaceutical companies. The Question Is Who s Not Buying HSBC? On 12 December, HSBC plc issued an announcement stating that Ping An Asset Management had become its second largest shareholder, having accumulated 5.04% of HSBC shares, second only to Black Rock s 7% stake. Almost all of this stake, comprising 1,008m shares, was accumulated through China Securities Depository and Clearing Corp i.e. almost entirely through Stock Connect channels. Figure 1: HSBC share ownership Issued Shares CSDC Holding Ping An Holding Other Stock Connect investors Total number of shares (mn) % of Company While there is speculation about whether Ping An will further increase its stake, one interesting item is that according to the latest CCASS search, CSDC s shareholding in HSBC is only 1,099.56m shares, which means that the total purchases by Southbound investors other than Ping An is only 91m out of bn shares i.e. less than 0.4% of outstanding shares, worth only HK$7.8bn. This explains why on occasional days, trading in HSBC by Southbound Stock Connect investors can be very low. Given the underweight position by Mainland investors and more expected interest rate hikes by the Fed (up to 3 more hikes expected in 2018), we believe structural buying may still support HSBC s share price in the near term. Sale of Tech Stocks by Stock Connect investors Strong accumulation by Stock Connect investors has helped the share prices of three tech companies do very well in October and November. In our last report, however, we warned of aggressive profit taking by Stock Connect investors on tech names (SMIC, AAC Technologies and Sunny Optical), compared with the strong buying we saw in October. We now see some buying in AAC Technologies, which should help its share price performance. But last week Sunny Optical still saw significant selling (and SMIC, but to a much lesser extent), which will inhibit a Sunny Optical rebound.

4 Figure 2: Most actively traded stocks by Southbound Stock Connect investors SMIC Sunny Optical AAC Technologies Value of Stock Connect Holding (HK$m) Nov 30th 8,886 4,777 7,513 Dec 6th 8,940 4,829 7,639 Current 8,959 4,414 7,859 Share Price Performance since (%) Nov 30th 3.1 (17.4) (6.7) Dec 6th 9.1 (1.5) 5.0 Most Significant Stock Connect Trading Figure 3 lists the companies which saw the most aggressive buying by Stock Connect investors, based on China Clearing s numbers. They are ranked by net purchases in absolute value since 6 December. At the top of the list is HSBC; we now know most of the transactions were by one buyer, Ping An Asset Management. Apart from that, buying was still focused on Chinese financials. What is different is the buying in AAC Technologies. Other stocks which saw significant buying were the non-bank financials, Legend Holdings, MGM China, and healthcare names.. Figure 3: Top 20 Net Buying in Stock Connect Positions in Nov 2017 Bbg Share Price Current Stock Net Buy Since(HK$m) Name Code (HK$) Connect Hold 6th Dec end-nov end-sept HSBC HOLDINGS PLC 5 hk % 3, , ,767.3 TENCENT HOLDINGS LTD 700 hk % , ,499.0 IND & COMM BK OF CHINA-H 1398 hk % ,074.3 CHINA MERCHANTS BANK-H 3968 hk % ,528.0 CHINA CITIC BANK CORP LTD-H 998 hk % ,673.4 AAC TECHNOLOGIES HOLDINGS IN 2018 hk % ,340.0 GREAT WALL MOTOR COMPANY-H 2333 hk % ,013.7 CHINA CONSTRUCTION BANK-H 939 hk % ,990.5 CHINA RESOURCES BEER HOLDIN 291 hk % HONG KONG EXCHANGES & CLEAR 388 hk % LEGEND HOLDINGS CORP-H 3396 hk % CNOOC LTD 883 hk % YANZHOU COAL MINING CO-H 1171 hk % HAITONG SECURITIES CO LTD-H 6837 hk % SINO BIOPHARMACEUTICAL 1177 hk % MGM CHINA HOLDINGS LTD 2282 hk % CITIC SECURITIES CO LTD-H 6030 hk % SHANGHAI FOSUN PHARMACEUTI-H 2196 hk % FULLSHARE HOLDINGS LTD 607 hk % SHANGHAI ELECTRIC GRP CO L-H 2727 hk % CHINA INTERNATIONAL CAPITA-H 3908 hk % ,083.4 GUANGZHOU AUTOMOBILE GROUP-H 2238 hk % CHINA POWER INTERNATIONAL 2380 hk % CHINA EVERBRIGHT BANK CO L-H 6818 hk % POLY PROPERTY GROUP CO LTD 119 hk % CGN POWER CO LTD-H 1816 hk % SBIO INC 1530 hk % BANK OF COMMUNICATIONS CO-H 3328 hk % PEOPLE'S INSURANCE CO GROU-H 1339 hk % ,163.7 HUATAI SECURITIES CO LTD-H 6886 hk %

5 Figure 4: Top 20 Net Selling in Stock Connect Positions in Nov 2017 Bbg Share Price Current Stock Net Sell Since (HK$m) Rank Name Code (HK$) Connect Hold 6th Dec end-nov end-sept 1 SUNNY OPTICAL TECH 2382 hk % (416.0) (363.5) GEELY AUTOMOBILE HOLDINGS LT 175 hk % (404.1) (542.9) (1,683.6) 3 SUNAC CHINA HOLDINGS LTD 1918 hk % (344.4) (198.8) PING AN INSURANCE GROUP CO-H 2318 hk % (253.6) (98.5) 7, CHINA NATIONAL BUILDING MA-H 3323 hk % (228.1) (158.8) MELCO INTERNATIONAL DEVELOP. 200 hk % (193.9) (316.2) (233.3) 7 CHINA LIFE INSURANCE CO-H 2628 hk % (133.8) (298.7) (132.4) 8 NEW CHINA LIFE INSURANCE C-H 1336 hk % (111.4) , COUNTRY GARDEN HOLDINGS CO 2007 hk % (111.0) (159.8) 1, CHINA EVERBRIGHT LTD 165 hk % (100.4) (96.1) (87.2) 11 GALAXY ENTERTAINMENT GROUP L 27 hk % (94.4) (71.7) (0.9) 12 PETROCHINA CO LTD-H 857 hk % (81.2) CHINA TELECOM CORP LTD-H 728 hk % (79.4) (128.5) (471.2) 14 ZTE CORP-H 763 hk % (77.7) (35.6) 1, ALUMINUM CORP OF CHINA LTD-H 2600 hk % (74.4) (104.6) (947.5) 16 HUANENG RENEWABLES CORP-H 958 hk % (71.9) (72.0) BANK OF CHINA LTD-H 3988 hk % (70.4) , HENGAN INTL GROUP CO LTD 1044 hk % (70.3) (64.9) CHINA MOLYBDENUM CO LTD-H 3993 hk % (65.6) (67.0) (244.9) 20 TSINGTAO BREWERY CO LTD-H 168 hk % (65.6) (103.2) CHINA CINDA ASSET MANAGEME-H 1359 hk % (62.1) (77.1) (33.6) 22 KINGSOFT CORP LTD 3888 hk % (60.3) (26.1) CHINA RESOURCES PHOENIX HEAL 1515 hk % (59.3) (44.6) CHINA VANKE CO LTD-H 2202 hk % (51.0) , CHINA HONGQIAO GROUP LTD 1378 hk % (45.2) (96.8) (628.2) 26 ANHUI CONCH CEMENT CO LTD-H 914 hk % (42.1) BAIC MOTOR CORP LTD-H 1958 hk % (39.0) (80.5) (412.7) 28 CHINA EASTERN AIRLINES CO-H 670 hk % (36.7) (24.2) UNI-PRESIDENT CHINA HOLDINGS 220 hk % (36.4) (36.6) (237.2) 30 AGILE GROUP HOLDINGS LTD 3383 hk % (33.8) (18.9) (168.2) There was net selling in Sunny Optical and the insurance companies. We saw some switching from Geely to Great Wall. Other companies that saw substantial selling included China property stocks and the cement companies. Trading as a Percentage of Market Cap Figure 5 lists the companies which saw the most aggressive buying by Stock Connect investors, based on market capitalisation. This includes Legend Holdings, electrical equipment companies, such as Shanghai Electric and Dongfang, and IPPs, such as Datang, and China Power. The top net reductions were in CNBM and some of the property companies.

6 Figure 5: Top 20 Net Additions in Stock Connect Positions in November 2017 Bbg Share Price Current Net Purchase since (% of Market Cap) Rank Name Code (HK$) Connect Holding 6th Dec end-nov end-sept 1 LEGEND HOLDINGS CORP-H 3396 hk % 1.9% 2.8% 6.1% 2 SHANGHAI ELECTRIC GRP CO L-H 2727 hk % 1.1% 1.2% 2.3% 3 DATANG INTL POWER GEN CO-H 991 hk % 1.0% 1.0% 1.1% 4 XINHUA WINSHARE PUBLISHING-H 811 hk % 1.0% 1.6% 1.5% 5 YANZHOU COAL MINING CO-H 1171 hk % 0.9% 1.7% 3.0% 6 GREAT WALL MOTOR COMPANY-H 2333 hk % 0.8% 1.0% 3.7% 7 HISENSE KELON ELEC HLD-H 921 hk % 0.8% 1.0% 4.3% 8 XINJIANG GOLDWIND SCI&TEC-H 2208 hk % 0.8% 1.3% 7.2% 9 POLY PROPERTY GROUP CO LTD 119 hk % 0.6% 0.9% 1.1% 10 DONGFANG ELECTRIC CORP LTD-H 1072 hk % 0.5% 0.8% 2.8% 11 SKYWORTH DIGITAL HLDGS LTD 751 hk % 0.5% 0.3% 1.0% 12 SHANGHAI FOSUN PHARMACEUTI-H 2196 hk % 0.5% 1.3% 3.5% 13 KINGDEE INTERNATIONAL SFTWR 268 hk % 0.5% 0.3% 0.6% 14 CHINA POWER INTERNATIONAL 2380 hk % 0.5% 0.4% -0.3% 15 BBMG CORP-H 2009 hk % 0.4% 0.6% -0.1% 16 YUZHOU PROPERTIES CO 1628 hk % 0.4% 0.7% 1.0% 17 CHINA INTERNATIONAL CAPITA-H 3908 hk % 0.4% 0.7% 4.5% 18 DONGJIANG ENVIRONMENTAL-H 895 hk % 0.4% 0.6% 4.6% 19 SINOPEC OILFIELD SERVICE -H 1033 hk % 0.4% 0.6% 2.9% 20 SICHUAN EXPRESSWAY CO-H 107 hk % 0.4% 0.4% 1.3% Figure 6: Top 20 Net Reductions in Stock Connect positions in November 2017 Bbg Share Price Current Stock Net Selling since (% of Market Cap) Rank Name Code (HK$) Connect Holding mid-nov end-oct end-sept 1 CHINA NATIONAL BUILDING MA-H 3323 hk % -1.2% -0.8% 1.0% 2 HUANENG RENEWABLES CORP-H 958 hk % -0.6% -0.6% 2.0% 3 MELCO INTERNATIONAL DEVELOP. 200 hk % -0.6% -0.9% -0.7% 4 MAANSHAN IRON & STEEL-H 323 hk % -0.5% -0.1% -0.8% 5 CHINA RESOURCES PHOENIX HEAL 1515 hk % -0.5% -0.4% 1.0% 6 ALUMINUM CORP OF CHINA LTD-H 2600 hk % -0.4% -0.5% -4.9% 7 CHINA MOLYBDENUM CO LTD-H 3993 hk % -0.4% -0.4% -1.4% 8 ZTE CORP-H 763 hk % -0.4% -0.2% 6.4% 9 CHINA EVERBRIGHT LTD 165 hk % -0.4% -0.3% -0.3% 10 SUNNY OPTICAL TECH 2382 hk % -0.4% -0.3% 0.4% 11 TSINGTAO BREWERY CO LTD-H 168 hk % -0.3% -0.5% 0.0% 12 SUNAC CHINA HOLDINGS LTD 1918 hk % -0.3% -0.2% 0.5% 13 CHINA SOUTH CITY HOLDINGS 1668 hk % -0.2% -0.1% 0.6% 14 KINGSOFT CORP LTD 3888 hk % -0.2% -0.1% 2.3% 15 BAIC MOTOR CORP LTD-H 1958 hk % -0.2% -0.4% -2.1% 16 NEW CHINA LIFE INSURANCE C-H 1336 hk % -0.2% 0.3% 6.0% 17 GEELY AUTOMOBILE HOLDINGS LT 175 hk % -0.2% -0.3% -0.7% 18 GUANGZHOU BAIYUNSHAN PHARM-H 874 hk % -0.2% -0.3% -4.5% 19 CHINA EASTERN AIRLINES CO-H 670 hk % -0.2% -0.1% 1.5% 20 CHINA CINDA ASSET MANAGEME-H 1359 hk % -0.2% -0.2% -0.1%

7 Stock Connect still skewed towards large caps in October As Figure 7 shows, from a longer time perspective, the weighting of the Stock Connect positions is still heavily skewed towards HSBC, CCB, Tencent, and ICBC. Tencent slipped to No.3 due to its poor share price performance. Figure 7: Top 30 Stock Connect Positions on 23 rd November 2017 Bbg Share Price Value of China Connect Holding (HK$bn) Rank Name Code (HK$) current 6th Dec end-nov end-sept 1 HSBC HOLDINGS PLC 5 hk CHINA CONSTRUCTION BANK-H 939 hk TENCENT HOLDINGS LTD 700 hk IND & COMM BK OF CHINA-H 1398 hk SUNAC CHINA HOLDINGS LTD 1918 hk GEELY AUTOMOBILE HOLDINGS LT 175 hk PING AN INSURANCE GROUP CO-H 2318 hk CHINA MERCHANTS BANK-H 3968 hk NEW CHINA LIFE INSURANCE C-H 1336 hk BANK OF CHINA LTD-H 3988 hk CHINA CITIC BANK CORP LTD-H 998 hk FULLSHARE HOLDINGS LTD 607 hk CHINA PACIFIC INSURANCE GR-H 2601 hk CHINA TAIPING INSURANCE HOLD 966 hk AGRICULTURAL BANK OF CHINA-H 1288 hk GUANGZHOU AUTOMOBILE GROUP-H 2238 hk SEMICONDUCTOR MANUFACTURING 981 hk GREAT WALL MOTOR COMPANY-H 2333 hk AAC TECHNOLOGIES HOLDINGS IN 2018 hk FOSUN INTERNATIONAL LTD 656 hk CSPC PHARMACEUTICAL GROUP LT 1093 hk CHINA SHENHUA ENERGY CO-H 1088 hk CHINA EVERGRANDE GROUP 3333 hk CHINA HONGQIAO GROUP LTD 1378 hk CHINA OVERSEAS LAND & INVEST 688 hk CHINA MINSHENG BANKING-H 1988 hk BANK OF COMMUNICATIONS CO-H 3328 hk CHINA SOUTHERN AIRLINES CO-H 1055 hk PICC PROPERTY & CASUALTY-H 2328 hk SUNNY OPTICAL TECH 2382 hk Figure 8 lists the companies with the highest concentration of Stock Connect ownership. At the top of the list is Digital China, with a significant 42% of the company cornered by Mainland investors, including corporate ones. Other companies in which Stock Connect ownership remains high (despite recent reductions) are those trading at a steep A-H premium and auto companies.

8 Figure 8: Top 30 Companies with the Highest Level of Stock Connect Ownership Bbg Share Price Current stock Previous levels (% of Market Cap) Rank Name Code (HK$) Connect Holding 6th Dec end-nov end-sept 1 DIGITAL CHINA HOLDINGS LTD 861 hk % 42.06% 42.04% 41.09% 2 NEW CHINA LIFE INSURANCE C-H 1336 hk % 34.45% 33.97% 28.27% 3 NANJING PANDA ELECTRONICS-H 553 hk % 30.49% 30.71% 30.13% 4 TECH PRO TECHNOLOGY DEVELOPM 3823 hk % 30.17% 30.17% 30.69% 5 GREAT WALL MOTOR COMPANY-H 2333 hk % 28.49% 28.29% 25.52% 6 XINJIANG GOLDWIND SCI&TEC-H 2208 hk % 27.96% 27.37% 21.54% 7 SHANDONG XINHUA PHARMACEUT-H 719 hk % 28.32% 28.26% 26.41% 8 GUANGZHOU BAIYUNSHAN PHARM-H 874 hk % 25.56% 25.70% 29.87% 9 SICHUAN EXPRESSWAY CO-H 107 hk % 24.69% 24.63% 23.76% 10 DFZQ-H 3958 hk % 24.99% 24.60% 15.51% 11 ZHENGZHOU COAL MINING MACH-H 564 hk % 24.87% 24.73% 18.68% 12 SUNAC CHINA HOLDINGS LTD 1918 hk % 24.71% 24.61% 23.93% 13 LUOYANG GLASS COMPANY LTD-H 1108 hk % 24.08% 23.64% 20.81% 14 DALIAN PORT (PDA) CO LTD-H 2880 hk % 23.97% 23.96% 21.98% 15 DONGFANG ELECTRIC CORP LTD-H 1072 hk % 23.10% 22.81% 20.85% 16 HUADIAN POWER INTL CORP-H 1071 hk % 23.38% 24.00% 23.52% 17 SHANGHAI ELECTRIC GRP CO L-H 2727 hk % 22.42% 22.29% 21.18% 18 GUANGZHOU AUTOMOBILE GROUP-H 2238 hk % 22.62% 22.43% 22.58% 19 FULLSHARE HOLDINGS LTD 607 hk % 22.26% 22.22% 20.85% 20 CHINA SOUTHERN AIRLINES CO-H 1055 hk % 20.95% 20.91% 17.28% 21 BEIJING JINGCHENG MACHINER-H 187 hk % 20.69% 20.71% 21.27% 22 ZIJIN MINING GROUP CO LTD-H 2899 hk % 20.43% 20.06% 21.77% 23 CHINA CITIC BANK CORP LTD-H 998 hk % 19.57% 19.40% 17.63% 24 DONGJIANG ENVIRONMENTAL-H 895 hk % 19.22% 19.05% 15.06% 25 BEIJING NORTH STAR CO LTD-H 588 hk % 18.59% 18.34% 16.99% 26 TRULY INTERNATIONAL HOLDINGS 732 hk % 18.40% 18.09% 12.87% 27 SHANGHAI FOSUN PHARMACEUTI-H 2196 hk % 17.13% 16.31% 14.15% 28 SINOPEC OILFIELD SERVICE -H 1033 hk % 17.18% 16.98% 14.71% 29 FIRST TRACTOR CO-H 38 hk % 17.11% 16.85% 15.07% 30 CHINA MOLYBDENUM CO LTD-H 3993 hk % 17.58% 17.60% Sources: Bloomberg, HK Exchanges, CGIS 18.57%

9 December 14, 2017 COMPANY / INDUSTRY NEWS 14 th December 2017 GGR (Bil MOP) Macau Dealings Analyst: Johnson Cheung (johnsoncheung@chinastock.com.hk; Tel: (852) ) Macau gaming stocks surged yesterday on expectations that December is going to be a strong month. We believe that stock picking is still the key, and as we noted previously, MGM China will benefit, given the opening of MGM Cotai next month and a significant performance lag earlier this year. Trading at 14x EV/EBITDA, its valuation is still reasonable. Galaxy Entertainment, at 15x EV/EBITDA, should also benefit as it remains the most balanced casino operator with new capacity coming onstream after According to certain consultancies, the GGR in December, based on the first 10 days numbers, could be 20-25% higher than in Dec November s YoY growth figure was 22.6%. Figure 1: Macau GGR YoY Growth (%) YoY Change (%, LHS) Jan- 11 Jun- 11 Nov- 11 Apr- 12 Sep- 12 Feb- 13 Jul- 13 Dec- 13 May- 14 Oct- 14 Mar- 15 Aug- 15 Jan- 16 Jun- 16 Nov- 16 Apr- 17 Sep GGR (Bil MOP, LHS) YoY Change (%, RHS) 0 Sources: Gaming Inspection and Coordination Bureau Macao SAR, CGIS Research According to various channel checks, both VIP baccarat and mass gaming have been strong. We believe MGM China s share price, despite going up 15% MTD, will see buying interest, given the underperformance earlier this year and the anticipation of MGM Cotai s opening in January Its EBITDA should increase 26%YoY from 2017E s HK$4,147m to HKD5,922m with the addition of 1,400 more rooms and over 300 gaming tables, Figure 2: Valuation of casino operators Casino Operators Bloomberg Price Mkt. Cap. EV/EBITDA PER (x) P/B(x) Since Since Since Name Code 12/14/2017 (US$ mil) FY16 FY17E FY18E FY16 FY17E FY18E FY19E FY17 MTD Oct 31st Sept June SANDS CHINA LTD* 1928 HK , (2) 11 GALAXY ENT 27 HK , WYNN MACAU LTD 1128 HK , MGM CHINA* 2282 HK , SJM HOLDINGS* 880 HK , (6) (12) (24) MELCO CROWN ENT* MLCO us , MEDIAN MELCO INTERNATIONAL 200 HK , (2) 4 (2) 6 Sources: Bloomberg, CGI Estimates *Consensus Estimates Sources: Bloomberg, CGIS Research

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