Melco Crown Opens Macau's Next Casino Resort October 27

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1 GTJA Research 国泰君安研究 : Melco Crown (MPEL US) Noah Hudson 公司报告 : 新濠博亚 (MPEL US) noah.hudson@gtjas.com Melco Crown Opens Macau's Next Casino Resort October 月 27 日, 新濠博亚将新开澳门下一家博彩度假村 On Oct. 27, Melco Crown will open Macau's next major integrated casino and entertainment resort, Studio City, in which the Company has a 60. interest. The Company also has a 68.6% interest in City of Dreams Manila, which began operations in December The Company's other current properties include: 1) City of Dreams (Macau), which currently has approximately 500 gaming tables and 1,400 gaming machines, 2) The Altira Macau, which mainly targets the VIP market with its approximately 120 gaming tables; and 3) Eight Mocha Clubs, which have a total of 1,200 gaming machines, equivalent to 8.5% of the total machine installation in Macau. We forecast adjusted Property EBITDA of US$1,027 million, US$1,185 million and US$1,248 million, representing growth of -20.1%, 15.4% and 5.4%, respectively. We forecast the Company's 2015 net revenue to decline by just 4.3%, much better than our forecast for Macau's 2015 GGR to decline by 34.6% as the Company's new casinos take market share from competitors. We initiate with target price of US$19.10 and recommend to "Accumulate" on price dips. We expect weak Macau GGR results for the remainder of this year due to tight liquidity in the VIP segment, which we expect will in turn drive share prices lower, creating a better entry point. However, we expect the Macau gaming market to begin to recover going into 2016, pushing valuations up, especially for Melco Crown, whose new Studio City targets the higher margin mass segment. 10 月 27 日, 新濠博亚持有 60. 股份的新濠影汇将开幕, 是澳门的下一个综合型赌场娱 乐度假村 另外, 公司持有 68.6% 股份的新濠天地马尼拉在 2014 年 12 月开始经营 公司 其他物业包括 :1) 新濠天地 ( 澳门 ), 目前有约 500 张赌台以及 1,400 台角子机 ;2) 澳 门新濠锋, 以约 120 张赌台主要瞄准贵宾分部 ; 以及 3)8 家摩卡俱乐部, 总共经营 1,200 台角子机, 相当于澳门总经营角子机的 8.5% 我们分别预期 2015 年至 2017 年调整后物业 EBITDA 为 亿美元 亿美元和 亿美元, 相当于 -20.1% 15.4% 和 5.4% 的增长 由于公司的新赌场从对手取得市场 份额, 我们预期公司 2015 年收入只略下降 4.3%, 大幅度好于我们对澳门 2015 年总博彩 收入下跌 34.6% 的预期 我们首次覆盖目标价为 美元, 建议逢低 收集 我们预期由于贵宾场的现金流收 紧今年剩下的几个月澳门总博彩收入仍较弱, 股价会有进一步下降的机会, 创造更有吸引 力的买入点 尽管如此, 我们预期澳门博彩业在 2016 年将恢复, 而估值也将提升, 尤其 是新濠博亚的估值, 因为它新开的新濠影汇瞄准较高利润率的中场 Rating: Accumulate Initial 评级 : 收集 ( 首次研究 ) 6-18m TP 目标价 : US$19.10 ADS price 股价 : Stock performance 股价表现 (10) (20) (30) (40) (50) % change US$ (60) Oct-14 Dec-14 Feb-15 Apr-15 Jun-15 Aug-15 Oct-15 Change in ADS Price ADS 价变动 NASDAQ COMP Index Melco Crown 1 M 1 个月 3 M 3 个月 1 Y 1 年 Abs. % 绝对变动 % (1.7) (16.0) (31.6) Rel. % to CCMP index 相对纳指变动 % (3.4) (10.0) (45.2) Avg. ADS price (US$) 平均 ADS 价 ( 美元 ) Source: Bloomberg, Guotai Junan International. Year End Turnover Net Profit Earnings / ADS Earnings / ADS PER BV/ADS PBR DP ADS Yield ROE 年结 收入 股东净利 每份 ADS 净利 每份 ADS 净利变动 市盈率 每份 ADS 净资产 市净率 每份 ADS 股息 股息率 净资产收益率 12/31 (US$ m) ( US$ m) (US$) ( %) (x) (US$) (x) (US$) (%) (%) 2013A 5, A 4, (4.4) F 4, (58.2) F 5, F 5, ADS in issue (m) ADS 总数 (m) Major shareholders 大股东 Melco Int & Crown Resorts 68.6% Market cap. (US$ m) 市值 (US$ m) 9,497.3 Free float (%) 自由流通比率 (%) month average vol. 3 个月平均成交股数 ( 000) 3, Net gearing (%) 2015 净负债 / 股东资金 (%) Weeks high/low (US$) 52 周高 / 低 / Est. NAV (US$) 2015 每份 ADS 估值 ( 美元 ) 23.0 See the last page for disclaimer Page 1 of 46

2 INDUSTRY UPDATE... 3 S.E. Asia Casino Development... 3 Anti-corruption and RMB Depreciation... 4 Smoking Ban... 4 Low Number of Gaming Tables Allowed at New Casinos... 5 Macau Visitors... 7 Planned Infrastructure Improvements Gross Gaming Revenue COMPANY History and Background Company Business FINANCIAL ANALYSIS Revenue Operating Expenses Non Operating Expenses Operating Income, EBITDA & Net Profit Dividends RISKS VALUATION FINANCIAL STATEMENTS AND RATIOS APPENDIX Property Revenue Models Macau Gaming Operators Comparison See the last page for disclaimer Page 2 of 46

3 INDUSTRY UPDATE S.E. Asia Casino Development Up to US$38 billion in casino capex is tentatively being planned in Macau's neighbouring gaming jurisdictions, which are specifically targeting mainland visitors. The Philippines, South Korea and Vietnam are all planning to develop into major gaming destinations. Moreover, they're specifically targeting mainland gamers and working with junkets on how to get mainland VIP players into their casinos. Table-1: South-East Asia Regional Casino Recent Casino Additions and Development Plans Planned Capex Casino Developer Project Name or Location Current Status Opening (US$ bn) Tables Slots Philippines 2015/3/13 Bloombery Resorts Corp Solaire Resort and Casino Operating , /2/2 Melco Crown (Philippines) City of Dreams Manila Operating ,400 4Q 2016 Universal Entertainment Manila Bay Resorts Under Construction ,000 ($750 Million Spent) 2017 Travellers International Resorts World Manila Phase II Under Construction * 353* & III 4Q 2018 Alliance Global Group Inc & Genting Bayshore City Resorts World Under Construction * 1,983* Hong Kong n.a. Leisure and Resorts World 10 to 15 Retail Gaming Planning * 157* Outlets Sub-Total 5.8 1,622 10,604 South Korea 2017 Genting Singapore and Landing In Jeju island Under Construction * 1,043* International Development 2017 Paradise Co. and Sega Sammy In Paradise City Under Construction * 806* 2018 Caesars Ent., Genting Sing., & Near the Incheon International Government * 474* Bloomberry Corp. airport Approved n.a. Mohegan Tribal Gaming Authority Near the Incheon airport with Planning Phase n.a ,500 private jet terminals n.a. Grand Korea Leisure Co.Ltd Yeongjongdo Casino Resort, Feasibility study n.a. n.a. n.a. Incheon Area n.a. Chow Tai Fook Enterprises Ltd In Incheon City Planning Phase * 759* n.a. Two to three U.S. and Chinese In North Jeolla province Planning Phase 9.1 1,328* 4,316* investment funds n.a. Incheon International Airport In Incheon City Planning Phase * 2,182* Sub-Total ,197 11,081 Vietnam 2015/7/13 Canadian Asian Coast The Grand at Ho Tram Strip Operating 0.5** 90 90* Development 2015/7/13 Canadian Asian Coast Ho Tram Strip Operating ,000 Development n.a. Vietnam Government In Phu Quoc Island Government * 2,000 Approved n.a. Macau's Suncity, VinaCapital and In the central province of Planning Phase * 2,000* Chow Tai Fook Enterprises Quang Nam Sub-Total ,090 Total Additions: ,789* 27,775* Source: Guotai Junan International, media reports. Note: * Guotai Junan International estimates based on planned investment amount. Note: ** 0.5 billion for the Grand at Ho Tram Strip is already included in Ho Tram Strip 4.0 billion investment. Japan not to pass casino bill in 2015 as had previously been hoped. Japanese lawmakers re-submitted a casino legalization bill, the "Integrated Resorts Promotion Bill ", to parliament on April 28. However, according to an Aug. 12 article from the Japan Times, newspaper reported that Japan s governing Liberal Democratic Party (LDP) has given up any attempt to push for passing the bill during the current legislative session, which ends Sept. 27. Yoshinori Oguchi, the Komeito party s chief of Diet affairs said that the LDP does not anticipate Diet deliberations on the casino bill during the current session because insufficient measures are in place yet to deal with gambling addiction. Another obstacle for the casino bill is increasing calls among some LDP lawmakers for putting off Diet debates on the measure until after the next Upper House election in the summer of See the last page for disclaimer Page 3 of 46

4 Japanese lawmakers have been pushing for casino legalization already for some 10 years. The first step is for a bill to be submitted to Parliament. Next would be for lawmakers to deliberate the bill, then it would be voted on in the lower house of Parliament, and if passed there, voted on in the upper house where it would (or would not) be passed into law. The casino bill would set the basic legal framework for allowing casinos. If the bill does ever pass, local governments would then develop and propose specific casino plans which would then be debated and voted on in the parliament. Casino legalization bills were submitted in 2013 and again in 2014, but not passed. Opposition lawmakers are concerned about the social evils casinos might bring, such as gambling addiction and organised crime. Anti-corruption and RMB Depreciation People's Bank of China to work with Macau Monetary Authority to prevent money laundering. On August 21, the People's Bank of China announced on its website that it and the Macau Monetary Authority signed a memorandum of understanding on preventing money laundering and terrorist financing activities. We expect this to result in tightened liquidity flows to Macau, putting downward pressure on Gross Gaming Revenue ("GGR"). We expect Beijing's anti-corruption campaign to continue. Recent media reports indicate that Beijing continues to investigate government officials as part of its ongoing anti-corruption campaign, which began at the end of The Central Commission for Discipline Inspection (CCDI) on October 9 posted on its website that it is not easing up on the anti-corruption campaign. RMB depreciation could hamper Macau's Gross Gaming Revenue ("GGR"). Bloomberg consensus forecasts the RMB to further depreciate to 6.52 by the end of With a weaker RMB, mainland Chinese will be able to buy less MOP or HKD to use for gambling at Macau's casinos. Smoking Ban Measures of the newly proposed revised Tobacco Control Bill are still subject to public consultation and amendments and have not been finalized, but could include: Full ban on smoking lounges in mass gaming areas. Full ban on smoking in VIP rooms. Full ban on smoking e-cigarettes in all public spaces, including casinos. Full ban on sale of e-cigarettes in Macau. Tobacco sales tax increase and smoking fine increase from MOP400 to MOP1,500 (US$188). The Macau Gaming Inspection and Co-ordination Bureau estimates that a full smoking ban would reduce GGR by between 2.76% to 4.6 %. The regulator s estimate was based on data indicating that 23% of visitors to Macau smoke and that between 3 and 5 smoke while gambling. We think the revised Tobacco Control Bill could decrease GGR by up to 12% to 16%. QoQ net revenue growth at Melco Crown (MPEL US)'s eight Mocha Clubs was essentially flat at -1.9% and -0.3% in 2Q14 and 3Q14, respectively, when smoking was allowed. Then starting in October of last year, smoking was banned at the Mocha Clubs and their net revenue fell 15.5% and 11.6% QoQ in 4Q14 and 1Q15, respectively. We think the city-wide full smoking ban in casinos would have a negative effect on Macau's total GGR for some time. Macau government has reversed position and is now open to possibly allowing smoking lounges in casinos. On July 31, Macau's Secretary for Social Affairs and Culture, Alexis Tam Chon Weng ("Tam") said in a statement that the Macau government remained committed to its proposal for a full smoking ban inside casinos. However, Tam has softened his stance since then. Tam was quoted in the Macau Business Daily (Oct. 6) as saying The industry and the operators said it is possible to create a very good smoking lounge. We don t know. It will be depend upon the conditions. If they really have good See the last page for disclaimer Page 4 of 46

5 proposals, if the workers agree with it, it will be fine. We reverse our previous assumption and now expect that smoking lounges will continue to be allowed in casinos. Up till now, our expectation was that a full smoking ban would be implemented and go into effect around mid or late Now that the Macau government is open to allowing smoking lounges if they are effective, we think that the highly motivated casino operators will be able to deliver such lounges. If airports around the world can build workable smoking lounges, we think that with billions of dollars potentially at stake, the highly motivated Macau casino operators will be able to deliver effective smoking lounges. We expect that the revised Tobacco Control Bill will allow smoking lounges and will go into effect around mid or late In the beginning of the year, government officials stated that they expected the bill to be passed in early However, on July 22, Mr Chan Chak Mo, who oversees the committee in charge of the smoking bill, said that it " may take about a year to finish its report". Only after the committee has issued a report on the bill will the document return to the full assembly for its second and final reading. Table-2: Macau Casinos Smoking Ban Development Date 6-Oct-14 Smoking Bill enacted restricted smoking to VIP rooms and enclosed non-gaming smoking lounges on main gaming floors. 29-Jan Jan Jun Jun-15 Macau s Secretary for Social Affairs and Culture, Alexis Tam Chon Weng, announced that the government would propose a Revised Tobacco Control Bill that would fully ban smoking inside casinos. 58.4% of casino workers do not like working in VIP rooms where smoking is allowed; 75% of Macau residents support a full smoking ban in casinos (Macau Health Bureau 4-year review). 66% of surveyed casino workers support casino smoking lounges Casino operators' survey). Macau proposed Revised Tobacco Control Bill. 10-Jul-15 Macau s Legislative Assembly approved the first reading of the Revised Tobacco Control Bill (26 for votes, 2 against). 10-Jul Jul Jul Jul Jul-15 Aug 1 - Sept. 31, 2015 Social Affairs and Culture, Alexis Tam Chon Weng, said smoking lounges could still be a possibility if gaming operators could scientifically prove that smoking lounges could effectively prevent tobacco harm. Macau s Secretary for Social Affairs and Culture, Alexis Tam Chong Weng, reiterated that smoking lounges inside casinos would prevent proper control of secondhand smoke; We have a very firm stance on this matter [a full smoking ban] and our intention is to protect the health of Macau s population. Bill sent to second committee of Macau s Legislative Assembly for further debate. Mr. Chan Chak Mo, who oversees the Second Committee of Macau s Legislative Assembly: " may take about a year to finish its report" According to Legislator Chan, the members of the committee are divided on the casino smoking lounges issue. Public Consultation Period Mid 2016 (estimate) Only after the committee has issued a report on the bill will the document return to the full assembly for its second and final reading. Source: Guotai Junan International. Low Number of Gaming Tables Allowed at New Casinos Going forward, we expect the actual number of gaming tables allowed by the Macau government at new casinos to be far less than their built for capacities. Galaxy Macau Phase II opened on May 27 this year with capacity for 500 tables but was only allowed 150 new tables. Gaming table additions are capped by the Macau government such that total gaming tables cannot exceed 7,150 by With 5,704 gaming tables in operation as at 1Q15 plus the additional 150 tables already added at Galaxy Macau Phase II, that leaves room for only 1,296 more additions through 2023, which is just 46.9% of the total 2,761 tables planned to be added through See the last page for disclaimer Page 5 of 46

6 Table-3: Macau Gaming Tables Capacity*, Slots Machines and Hotel Rooms, F 2012A Total Growth 2014 to CAGR Gaming Tables Capacity* 5,485 5,750 5,711 6,711 8,227 8, %* 16.2% yoy Growth 3.5% 4.8% -0.7% 17.5% 22.6% 8.5% Slot Machines 16,585 13,106 13,018 15,518 20,593 21, % 18.4% yoy Growth 3.3% % 19.2% 32.7% 4.9% Casino Hotel Rooms 13,859 16,690 16,790 19,960 26,790 28, % 19.7% yoy Growth 35.2% 20.4% 0.6% 18.9% 33.6% 7.5% Source: Gaming Inspection and Coordination Bureau Macao SAR, Government of Macao Special Administrative Region Statistics and Census Service. Note*: Due to Macau government restrictions on the number of gaming tables, actual gaming tables added will be significantly less than gaming tables capacity. Table-3: Macau Total Number of Casinos by Company, F Operators F 2016F 2017F S.J.M. (00880 HK) Sands China (01928 HK) Galaxy (00027 HK) Wynn Macau (01128 HK) Melco Crown (MPEL US) MGM China (02282 HK) Louis XIII Holdings (00577 HK) TOTAL Source: Gaming Inspection and Coordination Bureau Macao SAR, the Companies, Guotai Junan International. Table-4: Macau Development Timeline Expected Opening 27-May-15 Developer Galaxy Ent. (00027 HK) Project Name Broadway at Galaxy Macau Current Status Investment (Billion) Casino Tables Capacity* Slots Hotel Rooms Opened US$ May-15 Galaxy Ent. (00027 HK) Galaxy Macau Phase II Opened US$ ** 1,000 1, Oct-15 Melco Crown Studio City Under US$ ,500 1,600 (MPEL US) (Melco Crown) Construction 2015 Total: US$7.3 1,000 2,500 3,170 1H 2016 Wynn Macau (01128 HK) Wynn Palace Under Construction US$ ,000 1,700 July or later 2016 Sands China (1928 HK) The Parisian Macao (Sands) Under Construction US$ ,500 3,300 Mid-2016 Louis XIII Hds. (00577 HK) Louis XIII Under Construction US$ Fall 2016 MGM China (02282 HK) MGM Cotai Under Construction US$ ,500 1, Total: US$10.7 1,516 5,075 6, SJM Hds. Lisboa Palace Under US$ ,000 2,000 (00880 HK) (SJM) construction 2017 Total: US$ ,000 2,000 Galaxy Ent. (00027 HK) Galaxy Macau Phases 3 & 4 Site investigation US$6.4-US$7.7 n.a. n.a. n.a. Not Determined US$6.4-US$7.7 n.a. n.a. n.a. Total Additions: US$29.0 3,261 8,575 12,000 Source: Guotai Junan International, the Companies: Wynn Macau (01128 HK), MGM China (02282 HK), Sands China (01928 HK), SJM (00880 HK), Galaxy Entertainment (00027 HK), Louis XIII Hds. (00577 HK) and Melco Crown Entertainment (MPEL US). Note*: Due to Macau government restrictions on the number of gaming tables, actual gaming tables added will be significantly less than gaming tables capacity. Note**: Galaxy Macau Phase II was granted permission from the government for just 150 gaming tables, much less than its 500 table capacity. See the last page for disclaimer Page 6 of 46

7 Table-5: Macau Casino Operators' Number of Gaming Tables Q15 2Q15 Galaxy Ent. (00027 HK) ,059 Melco Crown (MPEL US) MGM China (02282 HK) SJM (00880 HK) 1,769 1,775 1,765 1,739 1,733 Sands China (01928 HK) 1,383 1,510 1,527 1,537 1,513 Wynn Macau (01128 HK) Total 5,431 5,748 5,705 5,704 5,814 Source: the Companies, Gaming Inspection and Coordination Bureau of Macao SAR. Table-6: Macau Casino Operators' Number of Slot Machines Q15 2Q15 Galaxy Ent. (00027 HK) 1, ,028 1,911 3,542 Melco Crown (MPEL US) 3,467 2,838 1,331 1,324 1,138 MGM China (02282 HK) 1,272 1,368 1,197 1,126 1,144 SJM (00880 HK) 3,776 3,308 2,856 2,793 2,751 Sands China (01928 HK) 4,992 5,612 4,841 4,885 4,910 Wynn Macau (01128 HK) Total 16,688 14,899 12,932 12,688 14,192 Source: the Companies, Gaming Inspection and Coordination Bureau of Macao SAR. Macau Visitors Mainland China visitors on transit visas can now stay in Macau for seven days instead of five; however, we think this won't have much impact on GGR since the average length of stay of overnight mainland visitors is only around two days. Starting from July 1, the Macau government began allowing Chinese passport holders with a transit visa to stay in Macau for seven days, up from five days previously. The transit stay limit for a second visit remains the same, namely, if a Chinese passport holder with a transit visa enters Macau a second time within 60 days he/she can only stay for one day. Since overnight visitors to Macau from mainland China only stayed for on average 2.2 days in June, we think the increase from 5 to 7 days will not have a significant impact on increasing GGR. Figure-1: Average Stay Duration of Macau Visitors from All Origins All Visitors All Overnight Visitors Days Figure-2: Average Stay Duration of Macau Visitors from Mainland China Days Mainland China Visitors Mainland China Overnight Visitors Source: Gaming Inspection and Coordination Bureau of Macao SAR. Source: Gaming Inspection and Coordination Bureau of Macao SAR. More visitors to Macau are going for day trips instead of overnight stays, leading to lower hotel occupancy. The proportion of overnight visitors to Macau decreased from 46.2% in 2014 to 44.6% in 1H15. The number of overnight visitors declined by 7.6% YoY in 1H15, compared to a 0.7% decrease in the number of day-trippers. See the last page for disclaimer Page 7 of 46

8 Figure-3: Same Day Vs. Overnight Visitors Same-day Visitors Overnight Visitors 48.3% 48.7% 46.2% 46.4% 44.6% 51.7% 51.3% 53.8% 53.6% 55.4% H14 1H15 Source: Government of Macao Special Administrative Region Statistics and Census Service. Figure-4: Same Day Vs. Overnight Visitors, Growth (YoY) Same-day Visitors Growth (YoY) 15% 1 5% -5% % 15.6% % 5.1% 3.8% Overnight Visitors 12.6% 2.1% -0.7% -7.6% H15 Source: Government of Macao Special Administrative Region Statistics and Census Service. 1H15 hotel occupancy rates declined considerably, indicating quantity of hotel rooms is no longer a bottleneck. For all star rated hotels in Macau, occupancy rate fell from 87. in 2014 to 79.3% in 1Q15, and further to 77.8% in 2Q15. Looking at just the hotels of the listed gaming operators, the average occupancy rate fell from 95.2% in 2014 to 92.6% in 1Q15, and fell further to 91.8% in 2Q15. The lower hotel occupancy rates in 1H15 were due to the decrease in the number of overnight visitors and not due to more room supply, since from the end of 2014 to June Star rated hotel room supply only increased by 1.6%. Figure-5: Macau Star Hotels Occupancy Rates Total 5-star hotels 4-star hotels 3-star hotels 2-star hotels 9 85% 8 75% 84.2% 83.6% % 77.8% Figure-6: Macau Casino Hotels Occupancy Rates Galaxy (00027 HK) Melco Crown (MPEL US) MGM China (02282 HK) Sands China (01928 HK) SJM (00880 HK) Wynn Macau (01128 HK) Avg % 96.8% 96.2% 96.5% 95.2% % 91.8% 7 85% 65% Q15 2Q15 75% 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 Source: Government of Macao Special Administrative Region Statistics and Census Service. Source: the Companies. Table-7: Macau Star Hotel Rooms Growth (Sequential) June star hotels 18.5% 17.1% 10.7% % 4-star hotels -0.1% 28.4% 0.7% % 3-star hotels 0.6% % 4.2% 1. 2-star hotels % % Total 11.4% % 0.7% 1.6% Source: Government of Macao Special Administrative Region Statistics and Census Service. Total GGR per visitor plunged 35.4% YoY for the first eight months of After 2014 experienced the first decline in GGR per visitor since record-keeping began in 2008, the situation has only worsened so far this year. In 1H15, mass Market GGR per visitor dropped 26. YoY, and VIP was even worse, down 39.8% YoY. See the last page for disclaimer Page 8 of 46

9 Figure-7: Macau GGR per Visitor Figure-8: Macau GGR per Visitor, Growth (YoY) VIP Mass Market Total VIP Mass Market Total 4 HK$ ('000) 28.9% 29.7% 25.5% % 13.6% 26.8% 5.8% % % 8.3% % % % % H H15 Source: Government of Macao Special Administrative Region Statistics and Census Service. Source: Government of Macao Special Administrative Region Statistics and Census Service. We expect GGR per visitor to continue to decline in 2H15 as Macau adds more non-gaming attractions to attract a broader range of tourists and diversify Macau s offerings to include more than just gaming. Besides casinos, the opening this year of new developments from Galaxy Entertainment (00027 HK, GEG ) and Melco Crown (MPEL US) will include many non-gaming and family related attractions. Opened on May 27, GEG s Galaxy Macau Phase II and Broadway will bring new non-gaming attractions making Galaxy Macau one of the most expansive water parks in Greater China. GEG s Broadway has a 3,000-seat Broadway Theatre, a 10 screen 3D Cineplex and UA Galaxy Cinemas. Melco Crown s Studio City, opening in mid 2015, will have a Batman Dark Flight virtual-reality ride, the Warner Bros. Family Entertainment Center, Asia's highest Ferris wheel, a 30,000 sq. foot Family Entertainment Center for kids, the House of Magic, a 5,000-seat Studio City Entertainment Center for live entertainment, a fully-operational TV broadcast studio, Pacha Nightclub, and an exotic jungle river-themed water ride, among other things. As more visitors go to Macau for non-gaming entertainment, GGR per visitor will continue to decline. Macau s total number of visitors from Jan.-Aug decreased by 1.8% YoY to 20.7 million, worse than previous expectations of 2015 full year increase of 5%. The decline comes after the Macau Government Tourist Office had announced in January this year that it expected tourist arrivals to increase by 5% in The Tourist Office also got it wrong (this time in the other direction) in January 2014 when they forecast visitor growth of less than 5%, but actual 2014 growth turned out to be 7.5%. The number of visitors from P.R. China from Jan.-Aug decreased by 4.1%. The proportion of visitors to Macau from mainland China in the first eight months of 2015 decreased by 2.8 ppt YoY to 65.8%. In recent years, improved travel infrastructure, including high speed rail, has made it easier and more convenient for mainlanders from further away provinces to travel to Macau. In 2014, more direct flights connecting Macau to mainland cities including Tianjin, Xian and Shijiazhuang also helped support travel from far away provinces, and the number of Macau visitors from all regions of China surged, the lowest being 8.8% growth in visitors from North China. This contrasts to 1H15, where the highest growth was just 2.5% YoY, from Northwest China. With the downturn in gaming and organic decline in visitors so far this year, the Macau government has eased up on its previous position to restrict the number of mainland visitors. In February this year, Macau's Secretary for Social Affairs and Culture, Alexis Tam Chon Weng ("Tam") indicated that due to overcrowding, the Macau government wanted to limit to the number of mainland visitors. However, this has become a non-issue, at least for now, since so far this year the number of mainland China visitors has decreased without any limits having been imposed. On Oct. 6, Macau Business Daily reported that Tam clarified that Macau does not plan to reduce the number of tourists, but rather to have them arrive at different periods of the year instead of creating huge influxes at peak times. The Macau government is planning for more resources and products in order to attract more visitors and prolong their stay, and Macau should still have capacity to accept more tourists in the current economic downturn. A recent survey by the Institute for Tourism Studies indicated that Macau has capacity for around 31.5 million visitors, which would be more than the number of visitors in 2015 if extrapolating from the current run-rate. See the last page for disclaimer Page 9 of 46

10 Individual visit scheme could be expanded. On Oct. 14, Dai Bin, president of the China Tourism Academy, said on the sidelines of a forum that the central government would consider allowing more residents of cities across the mainland to visit Hong Kong and Macau under the individual visit scheme. The number of mainland cities under the scheme currently stands at 49, whereas China has nearly 660 cities. The Individual Visit Scheme began on 28 July 2003 and allows travellers from Mainland China to visit Hong Kong and Macau on an individual basis instead of only on business visas or in group tours. Figure-9: Macau Visitors by Place of Origin, Growth (YoY) Mainland China Hong Kong 3 Taiwan, China Total 22.2% % 1.6% % 4.6% 4.4% 0.3% -6.6% -4.4% -11.8% -6.6% 14.1% 7.5% % 0.3% -4.7% H15-3.9% Source: Government of Macao Special Administrative Region Statistics and Census Service. Figure-10: Macau Visitors by Place of Origin, % of Total 10 Mainland China Hong Kong Taiwan, China Other % 10.8% % 5.7% 4.3% 3.8% 3.4% % 27.1% 25.2% 23.1% 20.4% 21.5% 57.7% 60.2% 63.5% 67.4% 69.5% H15 Source: Government of Macao Special Administrative Region Statistics and Census Service. Figure-11: PRC Visitors by Region, % of Total South Central China East China North China Northeast China Southwest China Northwest China % % 4.5% 4.9% 5.1% 6.8% 6.6% % % 20.9% 20.8% 20.5% 19.6% % 63.5% 63.3% 62.9% 63.8% H15 Source: Government of Macao Special Administrative Region Statistics and Census Service. Note*: South Central China includes Guangdong, Hunan, Hubei, Henan and, Guangxi; East China includes Fujian, Zhejiang, Jiangsu, Shanghai, Jiangxi, Shandong and Anhui; North China includes Beijing, Hebei, Shanxi, Inner Mongolia and Tianjin; Northeast China includes Liaoning, Heilongjiang and Jilin; Southwest China includes Sichuan and Chongqing; Northwest China includes Shaanxi. Figure-12: PRC Visitors by Region, Growth South Central China East China North China Northeast China Southwest China Northwest China H15 2.5% 1.7% 1.3% -1.9% -4.6% -8.8% Source: Government of Macao Special Administrative Region Statistics and Census Service. Note*: South Central China includes Guangdong, Hunan, Hubei, Henan and, Guangxi; East China includes Fujian, Zhejiang, Jiangsu, Shanghai, Jiangxi, Shandong and Anhui; North China includes Beijing, Hebei, Shanxi, Inner Mongolia and Tianjin; Northeast China includes Liaoning, Heilongjiang and Jilin; Southwest China includes Sichuan and Chongqing; Northwest China includes Shaanxi. See the last page for disclaimer Page 10 of 46

11 Table-8: PRC Visitors by Province/Municipality and by Region, % of Total H15 Province/Region Guangdong 56.2% % 50.6% Fujian 6.4% 5.3% 4.9% % Hunan 3.7% 3.9% 4.1% 4.1% 4.3% Zhejiang 3.9% 4.1% % 3.4% Hubei 2.8% 3.2% 3.4% 3.7% 3.6% Jiangsu % 3.2% 3.2% 2.9% Shanghai 3.2% 3.3% 3.3% Henan 1.9% 2.1% 2.3% 2.8% 2.5% Guangxi 2.3% 2.4% 2.5% 2.8% 2.8% Jiangxi % 2.3% 2.5% 2.4% Sichuan % 2.4% 2.2% 2.3% Beijing 2.2% 2.1% 2.2% 2.1% 2. Hebei 1.1% 1.5% 1.5% 1.9% 1.8% Liaoning 1.7% 1.7% 1.8% 1.9% 2. Helongjiang 1.2% 1.4% 1.5% 1.7% 1.7% Shandong 1.2% 1.4% 1.7% 1.7% 1.7% Chongqing 1.2% 1.3% 1.4% 1.4% 1.4% Anhui 1.2% 1.4% 1.4% 1.4% 1.4% Shanxi % 1.3% 1.4% 1.3% Jilin 1.1% 1.2% 1.1% 1.3% 1.3% Shaanxi % 1.2% Inner Mongolia % 0.8% 0.8% 0.8% Tianjin 0.7% 0.8% 0.8% 0.8% 0.7% Region* South Central China 66.9% 63.5% 63.3% 62.9% 63.8% East China 20.9% 20.9% 20.8% 20.5% 19.6% North China % 6.6% % Northeast China 4.1% 4.3% 4.5% 4.9% 5.1% Southwest China 3.2% 3.5% 3.7% 3.6% 3.7% Northwest China % 1.2% Source: Government of Macao Special Administrative Region Statistics and Census Service. Note*: South Central China includes Guangdong, Hunan, Hubei, Henan and, Guangxi; East China includes Fujian, Zhejiang, Jiangsu, Shanghai, Jiangxi, Shandong and Anhui; North China includes Beijing, Hebei, Shanxi, Inner Mongolia and Tianjin; Northeast China includes Liaoning, Heilongjiang and Jilin; Southwest China includes Sichuan and Chongqing; Northwest China includes Shaanxi. See the last page for disclaimer Page 11 of 46

12 In 1H15, 47.9% of Macau s visitor arrivals entered at the Gongbei Border crossing in Zhuhai. Of all Macau visitors, 54.1% arrived by land, 39. by ferry boat and only 6.9% by air. A number of infrastructure projects are slated to be completed from 2015 to 2039 which will make for easier access to Macau. The expanded capacity for handling incoming travelers will help shorten time at the borders and encourage more tourist arrivals. Table-9: Macau Visitors by Entry Point H15 NUMBER OF VISITORS Gongbei Border Gate 14,161 13,591 14,250 15,574 7,030 Other land 1,139 1,239 1,568 1, By land 15,300 14,830 15,817 17,390 7,948 Outer Harbour 7,125 7,042 7,072 7,363 3,585 Inner Harbour Provisional Ferry Terminal in Taipa 3,422 3,902 3,982 4,244 1,997 By sea 11,021 11,485 11,558 12,081 5,727 Airport 1,656 1,739 1,907 2,027 1,008 Heliport (Outer Harbour) By air 1,682 1,768 1,950 2,055 1,014 Total 28,002 28,082 29,325 31,526 14,689 GROWTH Border Gate 17.8% % 9.3% -6.7% Other land 7.1% 8.8% 26.5% 15.8% 1.4% By land 16.9% -3.1% 6.7% 9.9% -5.8% Outer Harbour 10.3% -1.2% 0.4% 4.1% -0.4% Inner Harbour 35.2% 14.2% % -44.3% Provisional Ferry Terminal in Taipa -0.3% % 6.6% 0.8% By sea 7.6% 4.2% 0.6% 4.5% -2. Airport 2.8% % 6.3% 2.1% Heliport (Outer Harbour) 14.7% 12.1% 49.9% -34.7% -61.4% By air 2.9% 5.1% 10.3% 5.4% 1.1% Total 12.2% 0.3% 4.4% 7.5% -3.9% % OF TOTAL VISITORS Border Gate 50.6% 48.4% 48.6% 49.4% 47.9% Other land 4.1% 4.4% 5.3% 5.8% 6.2% By land 54.6% 52.8% 53.9% 55.2% 54.1% Outer Harbour 25.4% 25.1% 24.1% 23.4% 24.4% Inner Harbour 1.7% 1.9% 1.7% 1.5% 1. Provisional Ferry Terminal in Taipa 12.2% 13.9% 13.6% 13.5% 13.6% By sea 39.4% 40.9% 39.4% 38.3% 39. Airport 5.9% 6.2% 6.5% 6.4% 6.9% Heliport (Outer Harbour) 0.1% 0.1% 0.1% 0.1% 0. By air % 6.6% 6.5% 6.9% Source: Government of Macao Special Administrative Region Statistics and Census Service. See the last page for disclaimer Page 12 of 46

13 Planned Infrastructure Improvements The Macau Intercity Light Rail Transit is expected to partially open in When completed, the Macau Intercity Light Rail Transit (LRT) will run through the Macau Peninsula, Taipa and Cotai and access major border checkpoints such as the Gongbei Border crossing, the Outer Harbor Ferry Terminal, the Lotus Bridge and the Macau International Airport. It will also provide a convenient way to travel to all the major casino destinations both in the Macau Penninsula and in Cotai. After a number of delays, the new start date for only the phase one Cotai section of the LRT is now expected to be September 2017, according to the Transportation Infrastructure Office. No opening dates for the Macau Peninsula and Taipa section has been announced, but it is unlikely to open until after 2018 or Figure-13: Macau Intercity Light Rail Transit System We think the LRT is Macau's most important infrastructure development since intercity travel is a major bottleneck. Macau's 21.3 million visitors from mainland China in 2014 surpassed Macau's infrastructure capacity. Speaking at the Legislative Assembly in mid-april, Macau s Secretary for Social Affairs and Culture, Alexis Tam Chon Weng, said the city has the capacity to receive 21 million mainland visitors per year. That number could increase once the city s transport infrastructure is improved, including the Intercity Light Rail Transit. New and expanded border crossings won t do much good in driving incremental visitation to Macau if Macau s inter-city infrastructure is insufficient to handle more visitors. Source: Macau Transportation Infrastructure Office. The Pac On (or "Taipa") ferry terminal will have capacity of up to 15 million passengers per year, more than the total 12.1 million passengers who entered Macau by ferry at all harbors combined in The MOP3.2 billion (US$400.8 million) Pac On (also called "Taipa") Ferry Terminal is located near the airport on Taipa Island and will facilitate travel to the nearby Cotai casino resorts. It will be able to handle about 40 ferries an hour, have capacity of up to 15 million passengers per year (more than the total 12.1 million passengers who entered Macau by ferry at all harbors combined in 2014) and have 19 berths and a helipad, making it Macau s largest ferry terminal. A scaled down temporary ferry terminal, located just beside the final Pac On ferry terminal s construction site, has serviced Taipa since The Pac On (or "Taipa") ferry terminal is expected to open in mid 2016, but could likely be delayed, as has happened continuously since construction began in On Sept. 8 this year, the director of the Macau Marine and Water Bureau, Susana Wong Soi Man, confirmed that construction of the new ferry terminal should be completed by the end of 2015 and it would then take around six months to have the facility operational. However, given the Macau government s track record of infrastructure project delays, we won't be surprised if it is delayed again past Construction began in 2005 and was first intended to be up and running by 2007, but had instead been delayed several times. The HK-Zhuhai-Macau Bridge, which could be completed as early as 2017 or 2018, will facilitate travel from Zhuhai and Hong Kong (Hong Kong accounted for 20.4% of all entries into Macau in 2014). According to Chinahighway.com, by 2035 the HK-Zhuhai-Macau Bridge will handle 50,00 to 60,000 vehicles per day, allowing for 230,000 to 250,000 people to border-cross each day (84 million to 91 million per day). The under-construction Hong Kong-Zhuhai-Macau Bridge is a series of bridges and tunnels that will connect the west side of Hong Kong to Macau and to the mainland Chinese city of Zhuhai. It will shorten the distance from Hong Kong to Macau from 60 km to 30 km, and reduce the journey time to from ~3 hours currently to 1/2 an hour, for an estimated charge of RMB each way. Construction began on 15 December After a series of delays, it will most likely be further delayed until 2017 or even later, said Li Chunhong, the director general of Guangdong s Development and Reform Commission, according to the South China Morning Post. See the last page for disclaimer Page 13 of 46

14 The Zhuhai-Macau New Channel pedestrian border crossing, which could be ready as early as 2016, would have a huge impact on easing congestion at the Gongbei border. The new 24 hour pedestrian border crossing, to be located in IIha Verde,would have capacity of up to 200,000 crossings per day, rivaling the 350,000 daily capacity at the Gongbei Border crossing. The New Channel was first announced in May 2012, and is to be located at the North-West end of Macau, just 800 meters from the Gongbei Border crossing at the North-East end of Macau. The New Channel crossing would be for pedestrians only and not have facilities for vehicles. The completion date has not been determined but construction is expected to begin this year. Obstacles to construction remain, including that currently there is a wholesale market at the proposed location of the crossing which would have to be relocated. Macau International Airport expected to increase capacity by 33% to 5 from 6 million to 8 or 9 million passengers per year in The Macau International Airport Company (CAM) will launch construction on an expansion to the airport this year, according to contruction-post.com. CAM had previously announced plans to increase airport capacity by extending the passenger terminal. CAM expects the expansion to be completed in 2018, increasing airport capacity from 6 million passengers per year currently to 9 or 10 million. However, the current capacity for planes hasn t been saturated; there were only 2 million arrivals at the Macau Airport in The expansion is expected to allow for more airlines and flight routes. We think the airport expansion is Macau s least important infrastructure project since 1) only 6.4% of visitors arrived via the airport in 2014; and 2) only 2.0 million visitors arrived to Macau via the airport in 2014, meaning that current airport capacity of 6 million is more than sufficient. Table-10: Macau Planned Infrastructure Projects 2014 Capacity Planned Capacity Completion Date Macau Intercity Light Rail Transit - Cotai Section 0 n.a Macau Intercity Light Rail Transit - Macau Peninsula Section 0 n.a. Not Scheduled Pac On (Taipa) Ferry Terminal n.a. 15 million / Year Mid 2016 HK-Zhuhai-Macau Bridge 0 84 mn to 91 mn / year* 2017 / 2018 Zhuhai-Macau New Channel Pedestrian Border 0 200,000 / Day 2016 Macau International Airport 6 million / Year 8 to 9 mn / Year 2018 Source: Guotai Junan International. Note: * By 2035, the HK-Zhuhai-Macau Bridge is expected to handle 50,00 to 60,000 vehicles per day, allowing for 230,000 to 250,000 person-border crossings per day (84 million to 91 million per year). See the last page for disclaimer Page 14 of 46

15 Gross Gaming Revenue We think weak Gross Gaming Revenue in June through September indicates that new casinos are failing to stimulate significant new gaming demand as was once hoped. After the May 27 grand opening of Galaxy Macau Phase II, Macau's June GGR declined by 14.7% MoM to MOP17.4 billion, which was the lowest amount since November July GGR was MOP18,615 million, down 34.5% YoY and up 7.3% MoM, which was the second lowest amount since January August GGR was down 35.5% YoY to MOP18,623 million, marking the 15th consecutive month with a YoY decline, and MoM growth was 0., which is especially weak considering that 1) new demand had been expected from Galaxy Macau Phase II and Broadway which both continue to ramp up to full operations as more stores and attractions open, and 2) August GGR usually rises MoM due to seasonality and summer holidays; from 2008 through 2014, August GGR on average increased by 4.6% MoM. This year's August MoM 0. change hasn't been so low since September GGR was even worse, down 33. YoY and down 8. MoM to MOP17,133 million, marking the absolute lowest amount since Sept We think the lousy June through September GGR indicates that future casino openings, including Studio City, scheduled to open on Oct. 27, 2015, will also fail to stimulate significant new gaming demand. Figure-14: Macau Total GGR and Growth (Monthly) GGR (L) YoY (R) MoM (R) MOP Mllion Historical High of MOP 38 B. on Feb ,000 30,000 25,000 20,000 15,000 10, Source: Gaming Inspection and Coordination Bureau of Macao SAR. Mass market GGR stabilized in 3Q15 with QoQ growth of 0.3%. Total GGR in 3Q15 was MOP52,788 million, down 34.4% YoY and down 4.4% QoQ. VIP GGR for the quarter plunged by 38. YoY and fell by 8.2% QoQ to MOP 28,147 million, marking the sixth consecutive quarter of QoQ declines. Mass market GGR fell 29.7% YoY but increased 0.3% QoQ to MOP 24,641 million. This was the first time since 1Q14 that mass GRR was positive, suggesting that the mass segment is stabilizing. Figure-15: Macau Total, VIP & Mass GGR Growth (YoY) Mass (YoY) VIP (YoY) Total GGR (YoY) Figure-16: Macau Total, VIP & Mass GGR Growth (QoQ) Mass (QoQ) VIP (QoQ) Total GGR (QoQ) Q15A 2Q15A 3Q15A 4Q15F 1Q16F 2Q16F 3Q16F 4Q15F 15% 1 5% -5% -1-15% - -25% 1Q15A 2Q15A 3Q15A 4Q15F 1Q16F 2Q16F 3Q16F 4Q15F Source: Gaming Inspection and Coordination Bureau of Macao SAR, Guotai Junan International. Source: Gaming Inspection and Coordination Bureau of Macao SA, Guotai Junan International. See the last page for disclaimer Page 15 of 46

16 We think that the mass segment has bottomed and will start to gradually improve. Although a number of negative pressures persist, we think that the new casinos opening in 2016 will drive at least some incremental new demand. In addition, on Oct. 2, Macau radio and television network Teledifusao de Macau, quoted Li Gang, the director of the Chinese government s local liaison office, as saying that China will introduce policies this year to support Macau s economy and gaming in particular (although no specifics were given). We expect Macau GGR growth to be more stable in 2016 as the contribution from VIP is diminished and the market becomes mass market dominated. We expect the VIP segment to continue to deteriorate going into the rest of Neptune Group (00070 HK), a Macau junket, reported a net loss of HK$828 mn for FY15, compared to net profit of HK$155 mn in FY14. During 2HFY15, Neptune suffered an impairment loss of trade receivables of HK$344.3 mn "as a result of steep turnaround of VIP gaming performance from slowdown to a full year of depression". The Company said that "A Yuan devaluation, government clampdown on money flows added concerns to this industry. Possibly if tighter junket regulations are adopted, we think further negative impact on VIP gaming volumes would be inevitable, driven by the likely accelerating junket room closures." Moreover, we expect a liquidity crunch in the VIP segment in the aftermath of a recent theft at major junket operator Dore. Macau police are investigating complaints from parties including Dore on theft of HK$330 million (US$43 mn). The news is spooking junket fund investors who are pulling out cash, which will lead to even less liquidity. Moreover, in response to the incident, Macau s casino regulator is now studying new rules to disclose more information publicly, including a list of directors, shareholders, key employees and collaborators. We forecast 2016 Macau GGR growth of 5.7%. We expect VIP GGR to decline MoM in October due to the liquidity crunch, but to stabilize in November and to show mild MoM growth of around 1% starting from December and into For the mass segment, we expect positive MoM growth going forward, with MoM growth of about 4% in This translates into 2016 GGR Total, VIP and Mass growth of 5.7%, -12.4% and 27.5%, respectively. Figure-14: Macau Total GGR and Growth (Monthly) Total GGR Growth (YoY) Mass Market GGR Growth (YoY) VIP Market GGR Growth (YoY) % % 18.6% 13.7% 5.7% % -2.6% 7.5% % % -12.4% % % F 2016F Source: Gaming Inspection and Coordination Bureau of Macao SAR. See the last page for disclaimer Page 16 of 46

17 COMPANY History and Background Melco International Development Limited (00200 HK) and Crown Resorts Limited (CWN AU) each own 34.29% of Melco Crown Entertainment Limited (MPEL US, "Melco Crown" or the "Company")'s equity. The Company was initially formed as a 50/50 joint venture between Melco International Development Limited (00200 HK) and Publishing and Broadcasting Limited ("PBL"), an Australian listed corporation that is now known as Consolidated Media Holdings Limited as their exclusive vehicle to carry on casino, gaming machine and casino hotel operations in Macau. The Company was originally called Melco PBL Entertainment (Macau) Limited, and was founded in December On 12 December 2007, Crown Resorts Limited (CWN AU), an Australian-listed corporation, acquired all the gaming businesses and investments of PBL, including PBL s stake in the Company. In May 2008, the Company changed its name to Melco Crown Entertainment Limited. Figure-8: Company Corporate Structure Melco International Development Limited (00200 HK) Crown Resorts Limited (CWN AU) Treasury Shares Melco Leisure and Entertainment Group Limited (BVI) Crown Asia Investment Pty. Ltd. (Victoria) Public 0.89% 34.29% 34.29% 30.53% The Company (Cayman Islands) 10 MCE Finance Limited (Cayman Islands) 10 MCE Holdings Limited (Cayman Islands) Public 68.58% 6 Managing Director 31.42% Melco Crown (Philippines) Resorts Corporation (Philippines) Studio City International Holdings Limited (BVI) Melco Crown (Macau) Limited (Macau) MCE Leisure (Philippines) Corporation (Philippines) Studio City Finance Limited (BVI) 10 Studio City Company Limited (BVI) Melco Crown (COD) Hotels Limited (Macau) 96% 96% 96% 10 Melco Crown (COD) Developments Limited (Macau) Altira Hotel Limited (Macau) Altira Developments Limited (Macau) 10 Studio City Developments Limited (Macau) See the last page for disclaimer Page 17 of 46

18 Table-11: Company Milestones Date June 2004 July 2004 Dec Dec March 2005 Dec April 2006 Sept July 2007 July 2007 April 2009 Dec June 2009 Dec Dec Feb June 2015 Milestone Melco Intl. Dev. Ltd. (00200 HK) acquires 8 interest in Mocha Clubs. Melco Intl. Dev. Ltd. (00200 HK) acquires remaining interest in Mocha Clubs from Dr. Stanley Ho. Originally called Melco PBL Entertainment (Macau) Limited, the Company is founded as a 50/50 joint venture between Melco Intl. Dev. Ltd. (00200 HK) and Crown Resorts Limited (CWN AU). Crown Macau Hotel Casino (currently "Altira") construction begins. Mocha Slot Group Limited, the owner of the Mocha Clubs, becomes a subsidiary of the Company. The Company completes its IPO listing on the NASDAQ. City of Dreams construction begins. The Company obtains its Macau gaming license. Crown Macau Hotel Casino (currently "Altira") fully opens. The Company acquired a 6 interest in Studio City. Crown Macau Hotel Casino is rebranded as "Altira". The Company completes its listing on the Hong Kong Exchange. City of Dreams opens. The Company acquires a 68.6% interest in City of Dreams Manila. City of Dreams Manila has its soft opening. City of Dreams Manila has its Grand opening. Delisting of the Company's shares from the Hong Kong Exchange. Planned Oct Opening of US$2.3 bn Studio City (Macau). The Company listed on the NASDAQ on Dec. 19, 2006 and listed in Hong Kong on Dec. 7, Melco Crown completed the initial public offering of its ADSs, each of which represents three ordinary shares, and listed its ADSs on the NASDAQ on December 19, Melco Crown's ordinary shares were listed by way of introduction on the Main Board of the Hong Kong Stock Exchange and began trading under the stock code on December 7, Melco Crown (06883 HK) was voluntarily delist from the Hong Kong Stock Exchange on June 29, 2015 due to low trading volume. Since the Hong Kong listing up through Dec. 31, 2014, 99.75% of the Company's dual listings' trading volume had been done on the NASDAQ. Maintaining the listing on the HKSE would require additional and duplicative ongoing regulatory compliance resulting in significant additional costs and administrative work, which is why the Company decided to delist from the HKSE. Co-Chairman and CEO Mr. Lawrence Yau Lung Ho is the son of Dr. Stanley Ho of SJM Holdings ( HK). Dr. Stanley Ho was a director and the Chairman of the Company until he resigned from those positions in March His son, Mr. Lawrence Yau Lung Ho, was appointed executive director in Dec and has served as co-chairman and CEO since Dec As a member of the National Committee of the Chinese People s Political Consultative Conference, Mr. Lawrence Ho also serves on numerous boards and committees of privately held companies in Hong Kong, Macau and mainland China. Through the leadership and reputation of Mr. Lawrence Ho, the Company has a broad network of business relationships in Macau, Hong Kong and elsewhere in Greater China. These relationships are important to the successful development and operation of the Company. For example, Melco Crown s local relationships helped it to initially secure an interest in the Mocha Clubs, the Crown Macau (currently "Altira") and the City of Dreams. In addition, Melco Crown s relationships have helped it to identify and secure sites for the Mocha Club venues on attractive economic terms and helped expand the Mocha Clubs into the largest non-casino based operations of gaming machines in Macau. See the last page for disclaimer Page 18 of 46

19 The Company has 10 interest in subsidiary Melco Crown Macau, one of the six companies licensed to operate casinos in Macau. The Company operates its gaming and non-gaming businesses in Macau through Melco Crown Macau. The Company has a 6 interest in Studio City (Macau). On July 27, 2011, the Company acquired a 6 equity interest in SCI, the developer of Studio City, a large-scale integrated entertainment, retail and gaming resort being developed in Macau expected to open on October 27, The Company has a 68.6% interest in City of Dreams Manila. On December 19, 2012, Melco Crown completed the acquisition of a majority interest in the issued share capital of Melco Crown (Philippines) Resorts Corporation (MCP PSE) ("MCP"). In March 2013 the Company injected 10 equity interest of its subsidiary, MCE Leisure (Philippines) Corporation, into MCP. MCE Leisure (Philippines) has been granted the exclusive right to manage, operate and control the Company's Philippines integrated casino resort project, City of Dreams Manila, within Entertainment City in Manila. See the last page for disclaimer Page 19 of 46

20 Company Business In 2013 and 2014, 94.1% and 93.4% of Melco Crown's revenue came from casino gaming. The remainder of revenue comes from hotel rooms, food and beverage, entertainment and retail. Figure-9: Melco Crown Revenue Breakdown 1H15A Casino 2014A 90.4% 2.7% 4.5% 93.4% 1.7% 2.8% 2.2% 2.3% Room Food & Beverage Entertainment & Retail Source: Guotai Junan International. Melco Crown currently has two major casinos in Macau, City of Dreams and Altira Macau, as well as gaming machine operations at its Mocha Clubs. The Company is a developer, owner and operator of casino gaming and entertainment resorts primarily in Macau but more generally in Asia. Melco Crown currently owns and operate two Forbes 5-Star hotels in Macau: Altira Macau and The Crown Towers hotel. The Company has a 60. interest in Studio City, a cinematically-themed integrated entertainment, retail and gaming resort, expected to open on October 27, Current and future operations are designed to cater to a broad spectrum of gaming patrons, from high-stakes rolling chip gaming patrons to gaming patrons seeking a broader entertainment experience. The Company has a 68.6% interest in City of Dreams Manila in the Philippines' Entertainment City. In the Philippines, the Company's subsidiary MCE Leisure Philippines currently operates and manages City of Dreams Manila, a casino, hotel, retail and entertainment integrated resort in the Entertainment City complex in Manila, which opened in December Figure-10: Macau Taipa Casino Map (Company Casinos Outlined in Blue) Source: See the last page for disclaimer Page 20 of 46

21 City of Dreams Macau City of Dreams Macau, an integrated casino resort in Cotai, opened in June 2009 and currently has approximately 500 gaming tables and approximately 1,400 gaming machines. City of Dreams is a premium-focused property, targeting high end customers and VIP rolling chip players. As of December 31, 2014, City of Dreams featured a casino area of approximately 448,000 square feet with approximately 500 gaming tables and approximately 1,400 gaming machines. City of dreams currently has three hotels. The Crown Towers hotel, a Forbes 5-Star hotel, and the Hard Rock Hotel each offers approximately 300 guest rooms, and the Grand Hyatt Macau hotel offers approximately 800 guest rooms. City of Dreams includes around 30 restaurants and bars, approximately 70 retail outlets, recreation and leisure facilities, including health and fitness clubs, three swimming pools, spas and salons, and banquet and meeting facilities. The Club Cubic nightclub offers approximately 26,200 square feet of live entertainment space. The Dancing Water Theater, a wet stage performance theater with approximately 2,000 seats, features the internationally acclaimed and award winning The House of Dancing Water show, which is the live entertainment centerpiece of the overall leisure and entertainment offering at City of Dreams. The retail precinct at City of Dreams is being expanded and is anticipated to open in 1H16. Also, a fifth hotel tower is in an early stage of development and the Company is currently reviewing its development plan and schedule. City of Dreams has won numerous industry awards. In 2010 City of Dreams won the Best Leisure Development in Asia Pacific award in the International Property Awards, which recognizes distinctive innovation and outstanding success in leisure development, and in 2011 won the Best Casino VIP Room and Best Casino Interior Design awards in the International Gaming Awards, which recognizes outstanding design in the casino sector. City of Dreams was also recognized for its outstanding customer service and diverse range of unique world class entertainment experiences with the Best Customer Experience of the Year award in the International Gaming Awards in City of Dreams site is located on two adjacent land parcels in Cotai with a combined area of 113,325 square meters (1.2 million square feet) under a 25-year land lease which is renewable for successive periods of up to ten years each. The Macau government granted the land lease in August Figure-11: City of Dreams Macau Figure-12: City of Dreams Macau, House of Dancing Water Source: Source: Altira Macau The upscale Altira Macau, with its award winning hotel and approximately 120 gaming tables, first opened in 2007 and mainly targets the VIP market. Originally, the Crown Macau Hotel Casino opened in July 2007, and was renamed "Altira" in April The casino had been filled with all tables and no slot or gaming machines, but then in 2Q15 56 slot machines were added. Altira Macau has a casino area of approximately 173,000 square feet in a multi-floor layout comprised primarily of designated gaming areas and private gaming rooms for VIP players. There is also a smaller general gaming area for the mass market that offers various table limits. See the last page for disclaimer Page 21 of 46

22 The Altira Hotel, located within the 38-storey property, has approximately 230 guest rooms, including suites and villas. A number of restaurants and dining facilities are available at Altira Macau, including a leading Italian restaurant Aurora, several Chinese and international restaurants and several bars. Altira Hotel also offers a spa, gymnasium, outdoor garden podium and sky terrace lounge. Altira Macau has been awarded the "Forbes 5-Star" rating in both Lodging and Spa categories by the Forbes Travel Guide for the sixth year in February Altira Macau also won the Best Luxury Hotel in Macau award in the TTG China Travel Awards 2010 and the Best Business Hotel in Macau award in the TTG China Travel Awards Altira Macau is located on a plot of land in Taipa of 5,230 square meters (56,295 square feet) under a 25-year land lease agreement which is renewable for successive periods of up to ten years each. The Macau government granted the land on which Altira Macau is located in March Figure-13: Altira Macau Figure-14: Altira Macau Source: Source: Mocha Clubs The Company's eight Mocha Clubs have a total of 1,200 gaming machines in operation, which represents 8.5% of the total machine installation in Macau. Mocha Clubs comprise the largest non-casino based operations of gaming machines in Macau. They focus on general mass market players, including day-trip customers, outside the conventional casino setting. Except for Mocha Altira located at Altira Macau, the Company operates its Mocha Clubs at leased or sub-leased premises or under right-to-use agreements that expire at various dates through June 2022, which are renewable upon reaching an agreement with the owners. The eight Mocha Clubs operate at premises with a total floor area of approximately 89,400 square feet. The gaming facilities at Mocha Clubs include the latest technology for gaming machines and offer both single-player machines and multi-player games. In addition to slot machines, each Mocha Club site offers electronic table games without dealers. Games, including progressive jackpots, and multi-player games where players on linked machines play against the house in electronic roulette, baccarat and sicbo, a traditional Chinese dice game. Figure-15: Mocha Club Taipa Best Western Figure-16: Mocha Club Source: Source: See the last page for disclaimer Page 22 of 46

23 Table-12: Mocha Clubs Mocha Club Opening Date Location Gaming Area (square feet) Royal Sep-15 G/F and 1/F of Hotel Royal 8,450 Taipa Square Jan-05 G/F, 1/F and 2/F of Hotel Taipa Square 9,200 Sintra Nov-05 G/F and 1/F of Hotel Sintra 5,000 Mocha Altira Dec-08 Level 1 of Altira Macau 2,950 Macau Tower Sep-11 LG/F and G/F of Macau Tower 21,500 Golden Dragon Jan-12 G/F, 1/F, 2/F and 3/F of Hotel Golden Dragon 20,500 Inner Harbor Dec-13 No Seaside New Street 12,800 Kuong Fat Jun-14 Macau, Rua de Pequim No. 174., Centro Comercial Kuong Fat Cave A 9,000 Total 89,400 Source: the Company. City of Dreams Manila City of Dreams Manila opened in December 2014 and as of December 31, 2014, had 1,508 slot machines, 158 electronic table games and 188 gaming tables in operation. City of Dreams Manila had its soft opening on December 14, 2014 and its Grand Opening on Feb. 2, The property is located on an approximately 6.2 hectare site at the gateway of Entertainment City, Manila, close to Metro Manila s international airport and central business district. City of Dreams Manila is the Company's first entry into an entertainment and gaming market outside of Macau and an incremental source of earnings and cash flow outside of Macau. The property has approximately 14,026 square meters (approximately 150,727 square feet) of aggregate gaming space and total gross floor area of approximately 300,100 square meters (approximately 3.2 million square feet). The property is authorized by PAGCOR (Philippines Amusement and Gaming Corporation, the Philippines regulatory body with jurisdiction over gaming activities) to operate up to 1,700 slot machines, 1,700 electronic table games and 380 gaming tables. City of Dreams Manila has three hotels comprising Crown Towers hotel, Nobu Hotel and Hyatt City of Dreams Manila, with approximately 950 rooms in aggregate. City of Dreams Manila also features three separate entertainment venues: DreamPlay, a family entertainment center (which is expected to open in 1H15); Centerplay, a live performance central lounge within the casino; and night clubs Chaos and Pangaea Ultra-Lounge. City of Dreams Manila also features a retail boulevard. Through its subsidiary, the Company is a co-licensee of City of Dreams Manila. The Company's subsidiary, MCE Leisure Philippines, operates the casino business of City of Dreams Manila. Under the gaming license issued by PAGCOR, the Company, along with three other parties (SM Investments Corporation, Belle Corporation and PremiumLeisure and Amusement, Inc.) are co-licensees to establish and operate City of Dreams Manila. Under this structure, the Company must make monthly payments as well as a percentage of EBITDA or revenue to PremiumLeisure and Amusement based on the gaming operations performance. Melco Crown retains all revenues from non-gaming operations. In addition, the Company must make payments to Belle Corporation for lease of the land and certain of the building structures for City of Dreams Manila which is expected to expire on July 11, 2033 Figure-17: City of Dreams Manila Figure-18: City of Dreams Manila Source: Source: See the last page for disclaimer Page 23 of 46

24 Studio City Studio City is a large-scale cinematically-themed integrated entertainment, retail and gaming resort which is expected to open in 3Q15. Studio City, upon completion, will include gaming facilities, five-star hotel offerings and various entertainment, retail and food and beverage outlets to attract a diverse range of customers. Studio City is designed to capture the increasingly important mass market segment, with its destination theme, unique and innovative interactive attractions, including Asia s highest ferris wheel, a Warner Bros. themed family entertainment center, a fully-operational TV broadcast studio, the world s first Batman film franchise digital ride, a 5,000-seat multi-purpose live performance arena and a live magic venue, as well as approximately 1,600 hotel rooms, a vast array of food and beverage outlets and approximately 350,000 square feet of themed and innovative retail space. Studio City is located in Cotai, directly adjacent to the Lotus Bridge immigration checkpoint, which should offer it competitive advantage in the mass market segment. Studio City s site is on a plot of land of 130,789 square meters (equivalent to approximately 1.4 million square feet) in Cotai, Macau. Melco Crown estimates that total capex for the first phase of Studio City will be approximately US$2.3 billion. Studio City has an approved gross construction area of 707,078 square meters (equivalent to approximately 7.6 million square feet). Plans for an expansionary phase at Studio City are already under review by the Company. Melco Crown has 6 interest in Studio City. On July 27, 2011, the Company through its subsidiary, MCE Cotai Investments Limited, acquired a 6 equity interest in SCI, the developer, owner and operator of Studio City. The total consideration was US$360 million. New Cotai Holdings, an entity incorporated in Delaware and controlled by funds managed by Silver Point Capital, L.P. and Oaktree Capital Management, L.P., retains the remaining 4 interest in SCI. As of December 31, 2014, a total of US$1,280 million has been funded for Studio City, with 6 (US$768 million) contributed by the Company and 4 (US$512) million by New Cotai Holdings. Figure-19: Studio City Figure-20: Studio City Source: Source: See the last page for disclaimer Page 24 of 46