500彩票网(WBAI)

　　A revenue-free 3Q; resumption before year-end unlikely

　　500.com reported 3Q results with no revenue, given the continuingmoratorium around online lottery sales. The company recorded an adjusted netloss of RMB46m. 500.com claims to have been doing the testing for thenational sport lottery system. The company claims that the provisional lotterysales approval previously granted by the MOF is still valid and has not beenrevoked or amended. Given persistent regulatory uncertainty, we assume aresumption in sales as unlikely to happen before year-end. We expect updatesfrom the MOF after the 2016 Chinese New Year. Maintain Sell.

　　Government streamlines approval process

　　The State Council last month announced new guidelines to streamline theapproval process for new lottery product launches, special prize settings, andprize payouts nationwide. We view a simplified administration structure as apositive sign for the market. Despite the improving sentiment around aresumption in 1H 2016, the Sports Administration Centre claims to haveestablished no clear timeline around resumption. We believe the leading lotterydistribution platforms, including 500.com, should be allowed to connect to thenational system once launched, and thus resume sales. We meanwhile wouldexpect new lottery products relating to mobile lottery and sports lottery tobecome new catalysts of sales growth upon sales resumption.

　　Rolling forward forecast years; TP of US$13.8, Maintain Sell

　　We roll forward our forecast years to 2016-2018, and lift our TP by 2% toUS$13.8. Our TP is based on a 0.8x PEG ratio (reflecting regulatory uncertainty)on non-GAAP EPS FY16E of US$0.26 (vs prior FY15 US$0.19) and EPADSCAGR FY16-18E of 66% (vs prior FY15-17 91%). Upside risks: faster businessresumption, success in connecting the national system, fewer licenseapprovals to peers.[Deutsche Bank AG]
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