IB Presentation

Hilton and Hyatt…

Primarily ran hotels and resorts like Hope

What other functions did some of the comps in the hotel industry have?

Franchising, movie theatres, time-shares… didn’t relate to Hope as much

Precedent Transaction

Valuing a company at a multiple used in an actual deal/takeover

Why did precedent deal make share price higher?

Because the valuation includes the control premium

What precedent transaction did we look at?

Looked at Mariott’s offer to acquire Starwood (but limited financial details, only offer amount and EBITDA multiple)

Limitation of precedent transaction in this analysis

Only one of them and limited info on how similar the deal is to ours

Penn National Gaming and Wynn Resorts…

Excluded for very low multiples, and conversely high multiples and a negative B/M ratio (terrible because liabilities > assets, doesn’t reflect Hope)

Triangulating…

We triangulated results based on multiples analysis and the precedent transaction we were given…

What does WACC represent?

Represents the expected return on an investment with a similar risk profile

Why compute a WACC for Hope (why not Carter)?

Carter is way more hotel-focused with fewer holdings in gaming, opposite to Hope - represents different cap structures and levels of risk

Competition (threat of compressed margins)

The report identifies that and I quote “newer casinos had been failing financially” - Mitigant is that Hope is an established player and more importantly we accounted for compressed margins in our valuation and it still holds up well.

Macro (threat of economic downturn)

Report mentions that demand for rooms remains favourable in 2016 with economic expansion and high employment (high levels of discretionary income) - What if economic downturn anyway? - Mitigant is that ‘high roller’ customer bases are less sensitive to these changes

Regulation (tightening regulations)

Tightening regulations in Macao forced stock prices down for companies like Wynn Resorts that were heavily invested there… Mitigant is that Hope has a long history dealing with regulation with a casino in AC and one in LV