Capital Increase Santiago, October 2010 Arranger and Placement Agent Antofagasta Coquimbo Santiago Viña del Mar Colchagua Pucón Puerto Varas Mendoza
Contents Investment considerations Enjoy Santiago Financials Characteristics of capital increase 2
Executive summary Enjoy: Leader in the Chilean gaming industry, with a successful track record dating back over 35 years Comprehensive casino, hotel, restaurant, bar, event, show and tour operator, with gaming as its core business Significant diversification and atomization of revenues (markets, activities and customers) Financial strengthening (BBB+ bonds, positive outlook / A- positive trend by Fitch / ICR) Steady cash flow growth perspectives based on: Recent investments New licenses Attractive projects Top-flight management and corporate government Only LatAm entertainment company listed on the stock exchanges Antofagasta Coquimbo Santiago Viña del Mar Colchagua Pucón Puerto Varas Mendoza 3
Contents Investment considerations Enjoy Santiago Financials Characteristics of capital increase 4
Chilean gaming industry backed by a solid regulatory framework New regulatory framework (law 19995 enacted in 2005) lays the groundwork for the stable, transparent and profitable development of this industry Maximum number of licenses Licenses awarded via investment project bids License terms Exclusive rights to relevant market Tax treatment Expanded from 7 to 25 (7 municipal and 18 under new law) All have been awarded Municipal until December 31, 2015 New licenses, 15 years from the start of operations 70 Km. radius 20% on net gaming income Strictly regulated 5
harboring vast potential for growth Recent industry makeover with the enactment of new gaming law Very appealing, draws investors interest: Proposals exceed US$ 4.5 billion Investments exceed US$ 1 billion Opportunities: Potential market growth New operations mismanaged, operational economies of scale available 250 200 150 100 50 0 Gross gaming revenues ($ k millions 1 ) 1994 1997 2000 2003 2006 2009 Source: Enjoy estimate 1 In currency of each year Entertainment spending and income (ThUS$ per capita) Spending 1,4 1,2 1,0 0,8 USA 0,6 Spain Australia 0,4 Argentina South Chile 0,2 Africa Mexico 0,0 Brazil 0 5 10 15 20 25 30 35 40 45 50 Source: Global Entertainment and Media Outlook: 2008-2012, IMF, INE Income Gaming spending/gdp (2008) 1,15% 0,76% 0,71% 0,42% 0,20% Spain UK USA Argentine Chile Source: GBCC 6
Enjoy is the gaming industry leader in Chile Enjoy is Chile s leading casino operator, with over 35 years experience The Company presently operates a chain of 8 casinos (1 in Argentina), with 5,444 slot machines, 258 gaming tables, 33 restaurants and over 1,000 bingo positions Alongside these casinos, Enjoy has 6 hotels for a total 765 rooms The Company implements a proven, successful one-stop entertainment model, becoming an industry benchmark in Latin America Market shares in Chile # 1 # 1 # 1 Others 58% Gross Revenues CLP$ 250 billion Enjoy 42% Others 51% Slot Machines Country Total 11,064 Enjoy 49% Others 49% Gaming Tables Country Total 667 Enjoy 51% 7 Source: SCJ and Enjoy estimate
and is the leading entertainment chain in the country 1 Antofagasta Coquimbo Viña del Mar Santiago Mendoza Colchagua Pucón Puerto Varas 8 Chiloé
Enjoy has a proven, successful business model With gaming its core business, this one-stop model allows it to: Meet a large number of entertainment needs in a single location: gaming, restaurant, hotel, tourism, events, congresses, children s games, night clubs and spa More patrons, longer permanence Diversified income sources and cross selling The above is leveraged by the synergies, customer loyalty and economies of scale of the chain One-stop supply Customer flow Quality service Cross selling 9
allowing it to rely on diversified revenues Atomized revenues leveraged by slot-machine gamers Cross-selling between products / services Markets diversified through multiple licenses / operations Premier-quality licenses in main population centers and areas with high tourism potential Revenues by line of business (Jun-2010) Revenues by business unit 1 (Jun-2010) Hotel 9% Shows 1% Others 4% Mendoza Antofagasta Puerto Varas 8% 22% 6% Food & Beverages 15% Pucón 13% Gaming 71% Rinconada 4% Coquimbo 25% Viña 22% Source: Enjoy 10 Source: Enjoy 1 Accounting guidelines require considering 50% of Puerto Varas and Mendoza
CLP$ millons CLP$ Th CLP$ millones originating from profitable businesses All of Enjoy s businesses are profitable and generate synergies, significantly leveraging traffic flows Vast array of food and beverage varieties and points of sale (FF&BB) 33 restaurants Hotel complements the gaming and FF&BB businesses and raises demand for event centers Increase in 2008-2009 supply from 60 to 765 rooms Average annual occupancy > 60% and over160,000 guests in 2009 2.100 1.800 1.500 1.200 900 600 300 0 Evolution of FF&BB revenues 2010 2009 2008 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Hotel revenues Hotel occupancy Revpar/day 1 2010 2009 2008 2010 2009 2010 2009 1.200 90% 60 900 80% 70% 60% 50 40 600 50% 40% 30 300 30% 20% 10% 20 10 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 0% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 1 Average revenues per room per day 11 In $ of each month Source: Enjoy
growing and stable in the face of business cycles 4.000 Evolution of IPSA ($) 3.000 2.000 Asian Crisis Argentine Crisis 1.000 0 Fall of Lehman Brothers Gross gaming revenues evolution and mix 1 in casinos operated by Enjoy ($ millions) 90% 90.000 80% 70% 60.000 60% 50% 40% 30.000 30% 20% - 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Ingresos Gaming de Revenue Juego Salones Gaming de Rooms Juego (%) Tragamonedas Slot Machines (%) 10% 0% 1 Considers revenues plus VAT from slot machines, tables and bingo Source: Enjoy 12
Enjoy s licenses are also highly diversified, located in the main urban and/or tourist hubs License type Number of licenses Effective term Enjoy license Target population Start of operations End of concession Chile 31/12/2015 Coquimbo 201,000 1994 Dec. 2015 Municipal 7 31/12/2015 Viña 1 1,500,000 1975 Dec. 2015 31/12/2015 Pucón 350,000 1995 Dec. 2015 31/12/2015 Puerto Varas 250,000 2000 Dec. 2015 1 Antofagasta 285,000 Nov. 2008 Dec. 2023 2006 bid 15 15 years from start of operations Santiago 5,500,000 Aug. 2009 Aug. 2024 Colchagua 50,000 Sept. 2008 Sept. 2023 2008 bid 3 Castro 50,000 n.a. 15 years International 1 Indefinite Mendoza 800,000 Nov. 2008 Indefinite 1 Only property not owned by Enjoy Source: Enjoy More than 50% of the Chilean population lives in the vicinity of an Enjoy casino 13
Th CLP$ Th it possesses in-depth knowledge of its customers Developing the Enjoy brand, which consolidates the Company s operations, allowed it to rally its marketing efforts and launch programs addressed directly to its customers Enjoy Club loyalty program Knowledge of where 45% of Enjoy s revenues originate Allows it to increase cross-selling Over 440k customers Points trade-in rate exceeds 80% Evolution of Enjoy Club customers Evolution in spending 1 Evolution of trade-ins 450 400 350 300 250 200 150 100 50 0 2006 2007 2008 2009 2010 1 Based on a sample of almost 13,000 customers who have stayed at least 2 years in Enjoy Club. 14 Source: Enjoy
with solid Corporate Government Ownership structure Board of Directors Pier-Paolo Zacarelli 3.5% Habitat 6,1% Celfin 2,0% Others 11.0% Chairman Director Director Director Director Antonio Martínez Seguí Antonio Martínez Ruiz Darío Calderón González Ignacio González Martínez Leonidas Vial Echeverría LarrainVial 10,9% Director Director Vicente Domínguez Vial Pablo Turner González Martinez Seguí family 66.5% Source: SVS (September 2010) 15
Enjoy implemented an investment plan to consolidate its leading industry position Between 2006 and 2009, Enjoy implemented an ambitious investment plan totaling more than CLP 150 billion in seven projects With 86% of the investments complete, Enjoy successfully wrapped up its main project stage This was funded through a combination of own funds, capital increases and bank financing During 2009, Enjoy conducted a financial strengthening plan to bank on potentially profitable investment opportunities Thus, in March 2010 it closed the purchase of 70% of and a controlling stake in the Rinconada license to develop its Enjoy Santiago project Investment projects (CLP$ millions) Enjoy licenses Percentage completed Total investment Coquimbo 100% 49,761 Viña 100% 1,881 Pucón 100% 21,432 Puerto Varas 100% 19,950 Antofagasta 100% 51,015 Rinconada de los Andes 70% 63,600 Santa Cruz 100% 2,508 Castro 20% 19,551 Mendoza 100% 16,822 Total 211,800 246,520 Total (%) 86% 100% Source: Enjoy 16
achieving significant diversification in its markets and licenses EBITDA by business unit 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2009 2010P 2011P 2012P 2013P 2014P Santiago Mendoza Puerto Varas Pucón Viña Coquimbo Antofagasta Source: Enjoy 1 Considers 50% of Puerto Varas and Mendoza 17
CLP$ millons CLP$ millons Enjoy s steadily growing consolidated operations Puerto Varas case Coquimbo case 12.000 Revenues EBITDA 24.000 Revenues EBITDA 8.000 16.000 4.000 8.000 0 1994 1996 1998 2000 2002 2004 2006 2008 0 1997 2000 2003 2006 2009 After achieving initial stability, Enjoy Puerto Varas revenues grew at a compounded annual rate of 22.1% during 2000-2009 In late 2009, Hotel de Los Volcanes was inaugurated, allowing it to increase its revenue scale (startup temporarily affects EBITDA for the period) Also, during 2009, it contributed more than $5 billion in EBITDA, i.e. 25% of the total Revenues grew at a compounded annual rate of 22.2% in 1997-2009 In 2009, it contributed over $6.7 billion in EBITDA One-Stop Model, with the new infrastructure and offering completed in 2008, gave the business renewed momentum In 2010, it continued with steady growth in all areas 18
CLP$ millons CLP$ millons Enjoy s steadily growing consolidated operations Pucón case Viña case 1 16.000 Revenues EBITDA 60.000 Revenues EBITDA 12.000 45.000 8.000 30.000 4.000 15.000 0 1996 1998 2000 2002 2004 2006 2008 0 1994 1997 2000 2003 2006 2009 1 Considers Total Revenues and EBITDA for Viña After the fire that gutted Hotel del Lago in 2007, supply was replenished with a new casino and the purchase of Gran Hotel Pucón It maintains its positioning despite more intense competition after casinos were opened in Temuco and Concepción Hotel capacity buffers seasonality factors One of Enjoy s most mature and consolidated operations, it maintains a significant growth rate After 2009 was marred by the crisis and the influx of new competitors, in 2010 it resumed growth focused on the important local market and weekend and summer visitors Significant EBITDA contribution to Enjoy, albeit diluted by the group s new operations and growth 19
CLP$ millons CLP$ millons And new markets offering vast potential Antofagasta case Mendoza case 2.500 2.000 1.500 1.000 500 0-500 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Revenues 2010 2009 EBITDA 2010 2009 (*) EBITDA for December includes one-timer effects from retroactive contributions (revaluation of property) and utility adjustments 1.600 1.400 1.200 1.000 800 600 400 200 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Revenues 2010 2009 EBITDA 2010 2009 Enjoy began its operations in Antofagasta in November 2008 Antofagasta offers vast growth potential thanks to a booming mining sector, higher per capita income, lower unemployment and few entertainment options After its startup period, from September 2009 onward Enjoy Antofagasta began moving along the path to steady growth in terms of both revenues and EBITDA It has become one of Enjoy s main operations in terms of EBITDA contribution and growth potential Enjoy Mendoza, inaugurated in late 2008, allowed the company to enter a mature and highly competitive market with excellent results In May 2010, authorization was given to open the San Juan Hall, increasing the supply of TGM by 200 units and thereby attaining almost 500 TGM This allowed the company to obtain significant increases in revenue and EBITDA, with a market share exceeding 30% in less than 18 months in business 20
Growth strategy along two complementary lines Deepen the business model Turnaround from unprofitable operations Delightful experience - Includes skiing, tourism, etc. Hotel Casino Casino with hotel - One-stop entertainment offering - Hotel, spa, restaurants and casino - Focus on casino - Support from hotel & restaurants - Acquiring unprofitable operations - Changing the value proposal - Replicating model in other territories Casinos - Gaming room with tables and slot machines Coquimbo Viña del Mar Colchagua Pucón 21
Contents Investment considerations Enjoy Santiago Financials Characteristics of capital increase 22
Enjoy Santiago
Investment Considerations Casino nearest to Santiago, the country s largest market Longer duration of Enjoy s concessions Consolidates the Enjoy chain and contributes additional synergies in marketing, customer loyalty, etc. In-depth knowledge of the market in central Chile a well-positioned brand The casino running allows for immediate cash flows; very good prospects for future expansion High expected return on investment and generation of free cash flow Acquisition of 70% of property and takeover 24
The casino nearest to Santiago Shorter travel time than the most direct competitor Multiple access roads In vicinity of largest target market Enjoy operations Enjoy Santiago Competing operations 25
consolidating the Chain and contributing additional synergies More than 116,000 members in Enjoy Club in Santiago 26
Millones generating immediate cash flows Effect of the entry of Enjoy WIN 1 in Enjoy Santiago ($ millions, monthly) 2.000 1.800 1.600 1.400 1.200 1.000 800 600 400 200 0 6 times Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 1 Gross Gaming Revenues WIN average after the acquisition is 6 times the trailing average as of that date. 27
generating immediate cash flows 80.000 60.000 40.000 20.000 Average weekly spending per visitor ($) 0 5-11 jul 19-25 jul 2-8 ago 16-22 ago 30 ago -5 sep 13-19 sep 27 sep-3 oct Weekly patronage 12.000 3 times 8.000 4.000 0 5-11 jul 19-25 jul 2-8 ago 16-22 ago 30 ago -5 sep 13-19 sep 27 sep-3 oct Average weekly WPD TGM (win per day) 50.000 40.000 30.000 20.000 10.000 0 3 times 5-11 jul 19-25 jul 2-8 ago 16-22 ago 30 ago -5 sep 13-19 sep 27 sep-3 oct 28
with a sensible, focused and effective business strategy for its target public Based on customer knowledge Plan began progressive deployment starting the 2 nd week of September Sectors with high purchasing power Selective media presence Ambassadors and promotions 29
with vast growth potential Vast market potential in Santiago and prospects of capturing market share from competitors Study prepared by The Innovation Group 1 in relation to the new facility adjoining the Metropolitan Region: WIN estimated in excess of US$130 million 2,100 TGM for unmet demand Enjoy Santiago Comparable CAPEX US$ 130 million US$ 247 million Supply 904 TGM, 50 tables 1.500 TGM, 80 tables Revenues 1 st month of operation 2 $1.715 billion $1.767 billion 1 Considers present supply adjoining the Metropolitan Region (May 2006) 2 Enjoy Santiago: September 2010, comparable: October 2008 Source: SCJ, Annual Report 2009 Sun International, Enjoy Evolution of revenues in comparable casino from first month of operation 3 ($ million) Enjoy Santiago Comparable 6.000 5.000 4.000 3.000 2.000 1.000 0 Month 1 Month 3 Month 5 Month 7 Month 9 Month 11 Month 13 Month 15 Month 17 Month 19 Month 21 Month 23 3 First month of stable operations at Enjoy Santiago: September 2010, comparable: October 2008 30
Development Plan Stage I: 2Q 2010 200 slot machines 13 gaming tables, bingo 2 Bars, 1 Restaurant, 1 Cafeteria 1-shift operation: 8pm to 4am Remodeling work Personnel training Improved service and operations Integration of Enjoy systems and processes Development of road connections, expanded parking spaces, additional purchase of gaming equipment, and construction of Hotel, Convention Center, Spa, restaurants and additional Bars, VIP hall. 31
Development Plan Stage II: Q3 and Q4 2010 Expansion to almost 1,000 slot machines 50 gaming tables, VIP Hall, Bingo Enjoy Club Refurbished Bars, Restaurant, Cafeteria and Gaming Rooms Road connection with overpass 1.400 parking spaces 2-shift operation Completion of construction works for Hotel, Convention Center, Spa, additional Restaurants and Bars 32
Development Plan Stage III: Q1 2011 Incorporation by: 50 gaming tables, VIP Hall, Bingo Bars, Restaurants 5-star 120-room hotel Convention Center Spa, Outings 1,400 parking spaces Operations 24/7 Entertainment leader in the Metropolitan Region 33
Master Plan for potential development of Enjoy Santiago allows for expanded supply 34
Contents Investment considerations Enjoy Santiago Financials Characteristics of capital increase 35
Financing for Enjoy Santiago Rinconada casino received fixed asset investments at March 31, 2010, totaling USD 57.3 million and app. USD 90 million at September 30 Additional investment in remodeling and expanding the Gaming Casino plus the construction of the Hotel, Convention Center, Parking Spaces, Spa and facilities estimated at USD 66.6 million (UF 1,650,000) Total investment in fixed assets is USD 130 million. Financing structure contemplates: Capital increase through Enjoy s purchase of an ownership interest- in the sum of USD 29,960,000, totaling USD 37,500,000 Equipment financing for USD 15 million Real estate financing for USD 71 million 36
CLP$ millons Evolution of main P&L accounts Evolution of quarterly P&L accounts Revenues EBITDA Net Income 26.000 20.000 14.000 8.000 2.000-4.000-10.000 Effect of Profit from higher value of investment 1Q 2009 2Q 2009 3Q 2009 4Q 2009 1Q 2010 2Q 2010* 37 Source: Enjoy *2Q 2010 based on IFRS Starting in 2010, the results of the investment plan implemented become noticeable
Financial strengthening plan Net Indebtedness 1 Total Short Term Long Term 7 6,42 6 5 4 3 2 1 0 4,47 3,88 3,43 3,08 2,88 2,66 1,78 1,75 2,07 1,94 1,36 1,00 1,01 0,99 0,78 0,42 0,74 2005 2006 2007 2008 2009 Jun 2010 Source: Enjoy 1 (Liabilities-Cash on Hand) / (Owner s Equity+ Minority Interest) 38
Financial strengthening plan During 2009, shareholders capitalized loans previously made to Enjoy and totaling CLP 11 billion. In July 2009, the IPO was launched, placing 30% of the shares in the capital market, raising CLP 23.1 billion, which proceeds were used to pay off debts In October 2009, a syndicated loan was finally structured for CLP $41.575 billion with 8 banks, also used to pay off short-term debts In June 2010, corporate bonds were issued in the sum of UF 3 million, allowing the company to lengthen debt duration, lower indebtedness rates and generate more space for new debt In early September 2010, and taking advantage of excellent market conditions, an additional UF 2 million were placed in bonds to finance the Enjoy Santiago project 39
CLP$ millones Financial strengthening plan Enjoy amortization profile 30.000 Initial 1st Bond 2nd Bond 20.000 10.000 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Source: Enjoy Financial Covenants under Enjoy Bonds 2010 2011 2012 2013 onward Leverage (Net Financial Debt to Net Worth) 3.0x 3.0x 2.5x 2.0x Net Financial Debt to EBITDA n.a. 5.0x 4.5x 4.0x Keep unsecured assets [x] times the unsecured financial debt 1.0x 1.15x 1.30x 1.50x 40
Contents Investment considerations Enjoy Santiago Financials Characteristics of capital increase 41
Characteristics of capital increase Purpose: Financing of acquisition of and investment in Enjoy Santiago Capital increase Current number of subscribed-for and paid-up shares 1,540,015,942 Number of shares to be subscribed for and paid up 242,857,142 Number of shares post capital increase 1,782,873,084 % to be placed on post-increase shares 13.62% Price of preemptive option $70 Market symbol ENJOY 42
Tentative placement timetable September October November L M W J V S D L M W J V S D L M W J V S D 1 2 3 4 5 1 2 3 1 2 3 4 5 6 7 6 7 8 9 10 11 12 4 5 6 7 8 9 10 8 9 10 11 12 13 14 13 14 15 16 17 18 19 11 12 13 14 15 16 17 15 16 17 18 19 20 21 20 21 22 23 24 25 26 18 19 20 21 22 23 24 22 23 24 25 26 27 28 27 28 29 30 25 26 27 28 29 30 31 29 30 Activity timetable September 23 October 14 to October 26 October 20 November 19 Board sets the price Road show Start of preemptive option for current shareholders End of preemptive option 43
Capital Increase Santiago, October 2010 Arranger and Placement Agent Antofagasta Coquimbo Santiago Viña del Mar Colchagua Pucón Puerto Varas Mendoza
Disclaimer The contents of this document are based on financial information provided to LarrainVial by the Company and LarrainVial has not verified its consistency with the Company s actual results, nor whether it accurately reflects the present market values of the assets or liabilities. This document has been prepared by LarrainVial together with Enjoy to provide general information on the latter. Sources have been public and internal information of the Company, LarrainVial does not assume any liability under the law regarding the accuracy of the projections indicated herein and whether they will be actualized in the future. Said estimates and projections are based on a set of assumptions subject to significant uncertainty and economic and market contingencies that are difficult to predict, and therefore the is no certainty whatsoever as to the extent to which these estimates, projections and/or underlying assumptions could be fulfilled. 45