Sands China Limited(HKEx: 1928)Industry Description:

- Resort and Casino Industry in Macau

Group 41 :FENG Chen 52631053LAU Siu Fung, Stephen 52572884LIU Yang 53063842WONG Suet Sum 53075202SZE Hin Kwan 53465216Lee Taehoon 52911849

Agenda 1. Company background2. Capital structure analysis

Introduction of current and historical capital structure Comparison of the capital structure and key ratios with the competitors

Further study on Sands China’s strategy of capital structure

3. Summary of research results4. Conclusion on the effectiveness of current capital

structure based on the research result5. Forecast and suggestion

1. Company background

Company Background•A leading developer, owner and operator of multi-use integrated resorts and casinos in Macao

Main business: • The Venetian Macao• Sands Macao• The Plaza Macao & Sands® Cotai CentralOther business: • Cotai Expo (one of the largest convention and exhibition halls in Asia

• Cotai Water Jet

Business strategy• Develop Cotai for 4 integrated resorts• Leverage integrated resort business model create Asia's premier gaming, leisure and convention destination.

• Focus on the high-margin mass market gaming segment• Monetize non-core assets reduce net investment through the sale of retail malls & the sale or co-operativization of luxury apart-hotels

Relative Competitive Advantage • Diversified & Worldwide business

Subsidiary of Las Vegas Sands Corp. Sands Expo and Convention Center in Las Vegas, Sands

Casino Resort Bethlehem, Pennsylvania's first gaming resort destination in U.S.

Important Historical Event(22 March 2013)• Granting of the Share Repurchase Mandate to Directors to purchase shares on the Stock Exchange not exceeding 10% of the aggregate nominal amount of the issued share capital of the company

• Granting of the Issuance Mandate to the Directorsto allot, issue and deal with additional shares not exceeding 20% of the aggregate nominal amount of the issued share capital of the company

Important Recent Event(25 March 2014)• Entry into an Amendment & Restatement Agreement (i.e. new revolving loans)

fund the ongoing development of the VOL Casino Hotel Resort Project fund the development on Parcel 3 for working capital and other general corporate purposes of the Borrower and the Guarantors

Events to be expected• The introduction of The Parisian Macao, next development on Cotai (target to open by late 2015)contribute to Macao's position as a leading integrated resort business and leisure destination in Asia

• Complete the successful execution of Cotai Strip development strategy maximize market revenue & return by leveraging world-class amenities

Historical performance•-3-Year Stock Chart

•A continual upraise trend

Competitors in the industry• SJM Holdings Limited• Melco Crown Entertainment• Wynn Macau• Galaxy Macau • Macau Legend

Essential Issue•Resort Industry

•Cotai Strip

•Various external activities/events

Risk factors•Contingent liabilities

•Foreign Exchange Rate

•Capital Risk Management

•Land Concession

2. Capital Structure Analysis•Sands China Limited

• Current capital structure• Historical capital structure (over the past five years)

Company Current Capital Structure

•Debt US$3,229,689,000•Equity US$6,449,882,000

33%

67%

capital structureDebt Equity 6%

94%

Debt structureShort-term debt Long-term debt

D/E ratio=50.07%

Company Historical Capital Structure

SANDS CHINA

2013/12 2012/12 2011/12 2010/12 2009/12(US$’000)

Total Debt 3,229,689 3,260,584 3,409,215 3,133,201 3,087,305Equity 6,449,882 5,586,126 5,515,772 4,362,367 3,698,894Total Debt/Equity (%)

50.07 58.37 61.81 71.82 83.47

2009 2010 2011 2012 20130

50

100Total Debt/Equity (%)

Sands China

Competitors AnalysisSands China Limited VS

• SJM Holdings Limited• Melco Crown Entertainment• Galaxy Macau• Wynn Macau• Macau Legend

Capital Structure - Total Debt/ Equity

2009/12 2010/12 2011/12 2012/12 2013/12

-100

-50

0

50

100

150

200

250

83.47 71.82 61.81 58.37 50.07

Total debt/ equity Sands ChinaSJM HoldingsMeloc Crown

Year

%

Industry Comparison – Capital Structure

Sands China Industry Sector

Current Ratio (MRQ) 1.96 2.59 1.45

LT Debt to Equity (MRQ) 46.87 41.26 3.61

Total Debt to Equity (MRQ) 50.07 44.42 73.93

Return on Equity (TTM) 36.80 34.91 20.88Sources: Reuters.com

Industry Comparison – Capital StructureHigher Debt- equity ratio Enjoy high tax shield if high debt

(Macau casino tax rate: Fixed part: 35% + Variable part: 2-3%)

More aggressive in financing its growth with debt

However, Volatile earnings as a result of the additional interest expense Lower current ratio, raising default risk and liquidity problem

Overall Higher return on equity

Earnings>Cost of debt (interest)

Financial Strategy - Dividend Payout Ratio

2009/12 2010/12 2011/12 2012/12 2013/120

20

40

60

80

100

120

0 0

106.11 111.79

76.76Sands ChinaSJM HoldingsMeloc CrownWynn Macau

Remarks: Galaxy Macau and Macau Legend haven’t pay dividends.YEAR

%

Industry Comparison - Dividend Payout Ratio

Sands China Industry SectorDividend Yield 2.94 2.44 2.20Dividend Yield - 5 Year Avg. 2.94 2.46 1.84

Dividend 5 Year Growth Rate

--(start paying dividend from 2011)

2.08 -0.37

Dividend Payout Ratio 81.21 50.96 6.41Sources: Reuters.com

Higher dividend yield and payout ratio than industry average

Further study on Sands China’s capital structure and strategy

Change in the Capital Structure

SANDS CHINA

2013/12 2012/12 2011/12 2010/12 2009/12(US$’000)

Total Debt 3,229,689 3,260,584 3,409,215 3,133,201 3,087,305

Equity 6,449,882 5,586,126 5,515,772 4,362,367 3,698,894Total Debt/Equity (%)

50.07 58.37 61.81 71.82 83.47•No target (stable) D/E ratio•Over the past five years, D/E ratio decreased mainly due to the increase of equity.Dec-09 Dec-10 Dec-11 Dec-12 Dec-13

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

Change in debt and equityEquity Total debt

Why there is little change in total debt over the past five years? (necessity or contingency)

strategies of debt financing12/31/2013USD’000,000

12/31/2012USD’000,000

12/31/2011USD’000,000

12/31/2010USD’000,000

12/31/2009USD’000,000

Long Term Borrowings

0.0 0.0 3,201.5 749.3 611.9

Reduction In Long Term Debt

48.8 186.3 2,889.0 669.1 856.7

Net increase -48.8 -186.3 312.5 80.2 -244.8•From 2009 to 2011, the new long term borrowings offset the repayments of old long term debt•In 2012 and 2013 Sands China neither issued new long term borrowings nor repaid much of old long term debt.•Sands China tends to maintains the value of total debt at about $3.2 billion.

Why there is a continually significant growth in equity over the past five years?

Main projects in past five yearsYear Capital expenditures for main

projects2010 US$255.4 million for Parcels 5 and 6 of the

Cotai Strip development

2011 US$717.4 million for Sands Cotai Central

2012 US$815.7 million for construction activities at Sands Cotai Central

2013 US$470.9 million for construction activities at Sands Cotai Central and The Parisian Macao Huge investment in several

projects in previous years increase the value of fixed assets.

Cash flowsSands China(US$’000,000)

2013 2012 2011 2010 2009

Net cash generated from operating activities

3,078.7

1,900.6

1,376.1

1,362.9 821.4

Net cash used in investing activities

(597.8)

(986.3)

3.1 (1,098.5)

(272.2)

Net cash used in financing activities

(1,481.3)

(1,466.6)

67.4 (128.8) (58.4)

Net increase in cash and cash equivalents

999.6 (552.3)

1,446.5

135.5 490.8

Cash and cash equivalents at end of year

2,943.4

1,948.4

2,491.3

1,040.8 908.3From 2009 to 2013, increase in cash and cash equivalents are mainly due to significant increases of operating cash flows.

Net Income12/31/2013USD’000,000

12/31/2012USD’000,000

12/31/2011USD’000,000

12/31/2010USD’000,000

12/31/2009USD’000,000

Net Income

2,216.8 1,237.5 1,135.3 670.3 215.2

Net Income Margin

24.89% 19.01% 23.26% 16.18% 6.52%

From 2009 to 2013, continual increase of net income contributed to the increase of operating cash flow.

Reasons behind•Diversified, high quality integrated resort offerings with substantial non-gaming amenities;

•A focus on high-margin mass market gaming.

•Established brands with broad regional and international market awareness and appeal

Companies Net Margin

Sands China 24.89%

Wynn Macau 24.57%

MGM China 20.73%

GALAXY ENTERTAINMENT 15.22%

SJM Holdings Limited 8.79%MELCO CROWN ENTERTAINMENT 10.89%

Decrease in financing cash flow Dividend payment

Dividend Information

Type DeclaredEx-

Dividend Record Payable

Dividend per Share (in HKD)

Total amount

(US$’000)2012 Final

May 31, 2013

Jun 05, 2013

Jun 07, 2013

Jun 21, 2013

0.66 685,180

2012 Interim

Jan 25, 2013

Feb 14, 2013

Feb 19, 2013

Feb 28, 2013

0.67 696,366

2011 Final

Jun 01, 2012

Jun 06, 2012

Jun 11, 2012

Jun 22, 2012

0.58 599,729

2011 Interim

Jan 31, 2012

Feb 13, 2012

Feb 20, 2012

Feb 28, 2012

0.58

601,759

An obvious change of policy in dividend payment

Sands China 2013 2012 2011 2010 2009Dividends paid (US$’000)

1,381,546

1,201,488

— — —

Reasons for the high dividend payment policy

•Started paying dividend from 2011•Higher dividend yield (2.94%) and payout ratio (81.21%) than industry average Sufficient reserves and cash for expansion Shows its strengths on generating income Convince investors on their financial status and liquidity ability

Raise attractiveness to investors Easier to raise fund in future

3. Summary of research results

Summary of research results• D/E ratio of the industry and Sands China declined significantly over the past five years.

• Current D/E ratio of Sands China is slightly higher than the average of industry.

• Despite no target (stable) D/E ratio, it seems that Sands China means to maintain the value of long- term debt at a level about 3.2 billion which is necessary for the ongoing projects

• The decrease in D/E ratio over the past five years mainly resulted from the increase in asset given a stable amount of debt.

• Its business features and competitiveness led to substantial growth in net income and bring huge amount of cash to Sands China

• Change of the policy in dividend payment.

4. Conclusion on the effectiveness of current capital structure

Are the current capital structure and strategy effective?• Though the D/E ratio is higher than the industry average, we believe the strong operating cash flow and many liquefiable assets can reduce the financial distress risk. Hence there may be no need to decrease the D/E ratio currently.

• The increase in D/E ratio enables Sands China to enjoy higher tax shield. However, Sands China is expected to continue the growth opportunities. For a high-growth company it is not wise to increase the D/E ratio.

• Given that the amount of cash is excessive and debt enables to fund the underway projects, paying high dividend is also an effective strategy.

•Therefore our conclusion is that the current structure and strategy are effective and efficient in terms of company’s strategy and conditions.

5. Forecast and suggestions

Future advantage and concerns

Huge potential marketIncreasingly more open Chinese government policiesIncreasing consumption power of Chinese peopleConstruction of Hong Kong–Zhuhai–Macau Bridge(HZMB) will be completed in 2016

Absence of new hotel rooms and tables in 2014Labor shortage which could delay the Parisian opening or with less amount of tableRegulatory risk from China (the new leader show his strong resolve against corruption)a bubble in this industry may have been formed

optimistic about the long term future

Cautious about the near future rife with uncertainty

Suggestions Short term1. Maintain or decrease the amount of debt over the

next two year given that the growth could be slower. Otherwise the investor’s confidence on the solvency of Sands China could be affected once the growth does not reach the expectation.

2. Without decreasing the dividend payment, if necessary use more internal financing given the strong operating cash flow.

Long term3. May increase the debt ratio to fund more projects

if the uncertainty and risk are eliminated

Reference• http://www.reuters.com/finance/stocks/financialHighlights?symbol=1928.HK

• http://www.aastocks.com/EN/Stock/CompanyFundamental.aspx?CFType=4&symbol=01928

• http://www.reuters.com/finance/stocks/overview?symbol=0027.HK

• http://www.reuters.com/finance/stocks• http://www.aastocks.com/en/default.aspx• http://www.investopedia.com

Thank you!