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Melco Crown Entertainment Limited Message Board

  • drjackcar drjackcar Apr 26, 2014 1:34 PM Flag

    squeeze

    Because I think you probably have this info committed to memory (and because I'm lazy) could you lay out the share ownership of MPEL or at least give us a rough figure of how much of the public float could be taken out of circulation if, theoretically, they bought 10% of OS. Thx.

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    • Fun to think about, huh. Since I know more than a handful of pm read this board (well, all the putzes on ignore but the posts of a few here anyway -- LOL), let's go ahead discuss what will soon be discounted once the street figures out what is happening (some pm ahead of the sellside "analysts" understand and have been buying right along with us down here LOL).

      To answer your point directly, they have approximately 1,665,984k FD shares outstanding a/o year end, of which Packer and Ho control call it 2/3s or some 1,116,209k. To simplify, let's flip to 555m ADS equivalent shares, of which Packer and Ho each control 1/3 or roughly 372m shares in total.

      That means there is only 183m FD shares in public hands (less than that in float if one excludes the insider incentive shares). So taking out the 10% or 55.5m shares will ("when" as in quickly done and decidedly not "if") reduce "FD float" from that 183 by another 55m+ = 128m shares remaining. N.B. I'm ignoring the temporary ceiling on float floor of 25% of total shares for this purpose.

      Here's a few subtleties fun to think through.

      1. Although not holding us out as Chinese securities law experts, they likely do not need shareholder approval, and even if only Crown Resorts and Melco vote for the proposal, that would be 67% of ownership voted in favor of the provision when likely they need no more than a simple majority of the quorum (shares voting) to pass all of the proposals. We think call it 100% of shares voted will be in favor of the proposal.

      2. Under governing regulations, they need to have at least 25% of the shares out there as publicly held float. Since 67% is controlled by Packer- and Ho-related parties/entities, that means on current o/s shares they can only take out call it 8% of o/s shares as of 12/31/14 share count, but shares issued upon incentive share exercise (e.g., options, restricted stock) , but over the next two years let's call that 10% available.

      cont.

      • 1 Reply to squeezetracker
      • 2. cont.
        While the company wants flexibility to repurchase shares when they are available on the cheap, the clearer optics are that Packer needed/wanted the initial dividend money right now for non-MPEL projects, but over time they want to control a bigger piece of the pie now that they see how successful MPEL is going to be. As per my post on your other thread, without any meaningful progress increasing GGR over the next two years, they have enough ebitda to take out 10% of the shares without issuing debt to do so. Stunning!

        3. D'ya think maybe MPEL control parties believe COD Manila, MSC and then Tower 5 just might add to the company's GGR, ebitda and EPS? LOL Discussed prior, but the company is delivering best in group adj ebitda ROIC in excess of 30% -- we're highly confident that Ho understands that math and has no intention of diluting returns and forward realization of shareholder value by doing projects that dimish returns on deployed capital.

        4. Our only beef with the proxy is that they say buybacks will increase net asset value. Whoever wrote that may have gone to Princeton and then Harvard b school (LOL), but share repurchases do not do THAT. They reduce capital and cash (unless incremental debt is issued). What buybacks DO INCREASE is the percentage ownership each residual share has of adj ebitda, earnings and capital.

        Here's the upshot. Ho and Packer have been enormously successful in Macau and likely will be everywhere they choose to go. Packer and Ho now want to see their own (and all other shareholders) control another 10% of the company which is what the buybacks will do. It will also mean significantly higher EPS and capacity to pay more special and common dividends per share, and we believe they will want to get ALL of the first buyback done LONG BEFORE Manila, MSC and Tower 5 hit their stride.

        The stock should be WAY higher now, and soon will be. Toodles to the funds selling out down here! And LOL at the unhedged shorts on this.

 
MPEL
32.85+0.14(+0.43%)Jul 25 3:59 PMEDT

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