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Melco Crown Entertainment Limited Message Board

drjackcar 291 posts  |  Last Activity: 11 hours ago Member since: Feb 8, 2006
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  • Reply to

    MPEL coverage today...tgt..$51.43

    by lawstuff22 Jun 10, 2014 9:26 AM
    drjackcar drjackcar Jun 10, 2014 1:39 PM Flag

    Not questioning that it's true, but I can't find it anywhere on the wires. Anybody got a source?

  • And that is because of the lateness of the downgrades, coming in MPEL's case AFTER the fall of nearly 35%.

    Don't look now but valuations are very, very cheap (14x 2015 eps is stupid cheap). A fact these downgrades ignore.

    Because if you block out what is being written and concentrate on what is happening you'll find very little movement in MPEL's net adjusted income numbers.

  • Reply to

    About this sector's "analysts"

    by squeezetracker Jun 10, 2014 8:33 AM
    drjackcar drjackcar Jun 10, 2014 8:56 AM Flag

    To your point on Bain, I was just reading how Morgan Stanley has lowered their EBITDA estimates for the group to negative sequential growth from Q1 to Q2.

    Bain already had MPEL being down 3% on a QoQ basis. A decline factored in to his $1.77 estimate for 2014.

    But none of those details add up to a proverbial hill of beans. As we have seen rational thought and reasonable valuations have no chance of making a difference when fear and selling momentum take over. If the headlines don't get any worse MPEL is probably within 10% of the bottom. But going higher, that's going to take a total reversal of perception or a recognition the group is fast becoming a value play with the kicker being the huge growth that is coming.

  • drjackcar drjackcar Jun 9, 2014 5:09 PM Flag

    "and we all have to admit "low single digit june numbers" coming off of a single digit 9.3% may is not the steroid growth numbers the spoiled brat wall street analysts want.."

    At times like these I suppose reasons sound like excuses.........but..........I'd be remiss if I didn't point out the multiple one off factors (weather, hold, Dragon Fest holiday, exam period) had on May's GGR, tracking at +15% for the first 25 days. That plus the coming WC will completely skew June and July's numbers. So while I don't doubt the macro climate in China would have slowed VIP in H2, it is being artificially depressed by extraneous events..............something the market is failing to account for.

  • and what matters most to MPEL, it's this.........

    June 1 - 9 results included a visitation increase driven by the Dragon Boat Festival (long weekend). Macau visitation during the festival was + 17.9% versus the equivalent period last year.

    So if visitation was essentially up 18%, but GGR was only up 5%, the obvious conclusion is the GGR number is attributable to less VIP play, unless hold was extraordinarily low. +5% is more or less in the middle of GGR guesses for June given the expected impact from the WC.

    It is impossible, as far as I know, to extrapolate what the mass revenue increase was from the visitation number. But here are a couple of things to keep in mind for Q2's earnings. 1. The premium mass area of COD (COD representing about 90% on MPEL's revenue makes it a good proxy for the company) was under construction during Q1 so that segment is likely to improve in Q2. 2. VIP was only up 3% (vs +16% for Macau) at COD in Q1, owing to the shift of tables to mass/premium mass. So,as discussed, poor VIP roll doesn't hurt MPEL very much. 3. Mass play over April/May in Macau is up by approx. 35%. The implication of which is 75% of MPEL's higher profit mass biz was up by around 35% and showing no slowdown in June. 4. Bain's $0.42 estimate already factors in a 3% revenue decline from Q1. That said I don't know what assumptions for June are in his EBITDA/EPS model.

    Not that I expect any of this to effect MPEL's stock price in the near term. I just think it is useful to understand just how far out of whack the price decline has gotten as opposed to what is happening with the bottom line for Q2 and the rest of 2014 for that matter.

  • drjackcar drjackcar Jun 9, 2014 2:43 PM Flag

    forward p/e is 14.5, EPS growth 25%. Yes, it's over done.

  • Downgrades the sector after MPEL has lost 33% off the high. The reasons, a rehash of largely discredited "noise" items and the revelation that the WC will slow growth in June and July. Brilliant analysis.

  • because of better than expected mass growth?

  • drjackcar by drjackcar Jun 9, 2014 9:33 AM Flag

    June Macau GGR: Decent start to month
    Our Call

    According to our channel checks, Macau table-only gross gaming revenue (“GGR”) is MOP7.8b (USD$980m) through June 8. The June GGR run-rate is ~+5% year over year (“YoY”) or MOP30.4b (USD$3.9b), including slot assumptions. Our June YoY GGR outlook is between -2% and +3%. Recall that we expect some GGR headwinds from the World Cup, beginning June 12 and ending July 13.


    This morning, there were initial reports that the first 9 days of GGR amounted to MOP7.8b, which would have shown a slower than expected start to June (-4%). Those reports were incorrect.



    Overall, while we see Macau consensus GGR going to ~11% from +15%/+16%, we note the consensus decrease is being driven by low-margin VIP GGR (comprising over 60% of GGR total – so this is a majority of the headline number – not EBITDA), while high-margin mass continues to ouperform consensus estimates. We believe investor sentiment has braced for lower GGR estimates driven by May’s final result and the VIP outlook, in general.



    June 1 - 9 results included a visitation increase driven by the Dragon Boat Festival (long weekend). Macau visitation during the festival was + 17.9% versus the equivalent period last year.



    However, as written previously, we expected some general Mainland travel postponements to Macau overall ahead of China’s June 7 college entrance exam (travel is often negatively impacted ahead of this exam as parents often choose to stay close to home – especially given China’s historical One Child Policy).



    A look at June – World Cup; Tougher VIP comps. Since 2005, June’s average GGR decline from May is ~11%, with 2013, 2012, and 2011 declining 4%, 11%, and 14% month-over-month, respectively.

    However, during the last World Cup (2010), June GGR declined from May by 20%. If we were to assume June 2014 declines 20% from May 2014, June 2014 GGR would end at -8% YoY.



    The 2014 World Cup begins on June 12 and ends July 13.

  • Reply to

    Sterne Agee correcting initial note

    by drjackcar Jun 9, 2014 9:03 AM
    drjackcar drjackcar Jun 9, 2014 9:16 AM Flag

    "first weak of June."

    Freudian slip.

  • D. Bain sent out a note earlier this morning saying GGR was off to a -4% start (his source was apparently wrong), but is now in the process of writing a corrected note saying GGR was +8% in the first weak of June.

    Details to follow.

  • drjackcar by drjackcar Jun 8, 2014 10:27 AM Flag

    Since the stocks in the group are more effected by the daily flucuations in GGR predictions than quarterly EBITDA and earnings we are seeing a retest of the recent lows on the heals of racheted down expectations. Maybe now that annual GGR estimates in some circles have dropped as low as 10% for 2014 there's an opportunity for upside "surprises" rather than disappointments. After all, perception is all that matters, right?

    9.3% growth in May was taken to mean "growth is slowing faster than we thought" if you believe the headlines. That it slowed in the last 6 days due to a upcoming holiday, low hold, and torrential rain was the lead that was buried.

    June now has the chance to come in better than expectations. Meaning VIP players wouldn't have paid as much attention to the World Cup than previously thought. The well documented history of the WC's influence on VIP play seemed like news to some last week, making mid single digit June GGR estimates seem more dire than they are following May's end of the month drop off. One day investors will wake up to the reality of GGR's decreasing impact on the concessionaire's earnings, but it clearly has not happened yet.

    The confoundingly overlooked subtext to all of this being mass revenue growth, returning 3x the profit margins of VIP, grew faster in May than it did in April at 36% vs. 34%. Both numbers being better than consensus estimates for 30% growth. Great news for MPEL, if only anyone cared.

  • In Macau, proliferation of gaming has been good for the very big junket customers, as it has sparked competition among the junket providers and the casino operators, giving the players the keenest deals. But that has also put some pressure on VIP play’s margins, especially in a market with an effective 39-percent tax rate on gross gambling revenue. At the same time, Macau’s table cap combined with growth in player numbers has also bumped some lower-tier players out of rolling chip programmes. That creates opportunities for operators in neighbouring jurisdictions.

    “In terms of the junket side of the business, we’re going to be able to offer very competitive commission and revenue share programmes because of our tax structure here in the Philippines,” states Mr Hurst.

    Tax on VIP play in the Philippines is the equivalent of 15 percent of the gross – once the 5 percent gross gaming revenue tax from Pagcor and the 30 percent corporate tax on casinos’ net profit from the Bureau of Internal Revenue is taken into account.

    The mass table games tax rate is the equivalent of 27 percent of gross gaming revenue, i.e., 15 percent plus 2 percent for charity contributions, plus the corporate tax.

    “That’s versus an effective tax rate on all casino gaming of 39 percent in Macau, so we have a very clear advantage in that regard,” says Mr Hurst.

    He states: “I know the incentive programmes that are currently running in the market here in the Philippines. You have 1.4 percent [rolling chip] commission programmes – maybe a bit more with the food and beverage comps – or 50 percent revenue share, versus in Macau 40 percent or 42.5 percent revenue share. So that’s appealing for junkets.”

  • drjackcar drjackcar Jun 6, 2014 12:23 PM Flag

    For those of you not following the bouncing ball that means the segment MPEL has a 75% concentration in grew by 36% last month and 34% the month before. But hey the World Cup is coming so what does it matter?

  • "Casino operators in Macau are taking on the opportunity of shifting table supply to more profitable premium mass floors, which could explain some of the VIP softness in May, says U.S.-based Telsey Advisory Group.

    Macau’s casino gross gaming revenues for May reached MOP32.35 billion (US$4.05 billion), a year-on-year increase of 9.3 percent. May revenue grew by the slowest in four months.

    “Overall mass revenues grew 36 percent in May, up from 34.3 percent growth in April, with all operators reporting solid growth in the month,” the research house said in its latest report following a trip to Macau.

    Premium mass-market players use bets measured in many thousands of Hong Kong dollars per hand. Operators have said premium mass players provide higher margins than VIP gamblers because they don’t require the casinos to pay commissions to junket operators.

    “For the second month in a row, VIP volume was nearly flat, while the mass market shows no signs of slowing,” Telsey Advisory Group said.

    “The VIP market weighted on results in May, with overall volumes down 1.4 percent over last year, with slightly lower hold leading to a 1.8 percent decline in win,” said the research house.

    “We believe that VIP softness can be attributed to operators shifting table supply to mass floors, while weather and the confluence of one-off events also likely had a notable impact,” it added.

  • Reply to

    illustrating my point

    by toast22342000 Jun 6, 2014 9:13 AM
    drjackcar drjackcar Jun 6, 2014 10:12 AM Flag

    When a high growth stock gets sold down to 15x 2015 earnings and is still estimated to grow EPS by 50% in the next 18 months you know the market has tuned out anything and everything to do with financial metrics. That is when you buy.

  • drjackcar by drjackcar Jun 5, 2014 9:25 AM Flag

    According to a source it was down 1.4%. Hard to imagine with the GGR run rate being up 15% for the first 25 days that the drop in VIP play did not occur in the last week. And if so that it was due to anything other than one off reasons already mentioned.
    Not to fall in to the camp of taking Macau's temperature on a daily basis but if the shortfall was due to factors like the Dragon Boat Festival one would expect some flow thru of delayed visitation in the first few weeks of June.

  • Bloomberry Resorts and Hotels Inc, the subsidiary of Bloomberry Resorts Corp operating the casino in Manila’s Solaire Resort & Casino, has filed a court case that could potentially end a truce between the country’s gaming industry and the country’s taxman.

    The lawsuit, lodged on Wednesday with the Philippines’ Supreme Court, questions the validity of an April 2013 memo issued by the Bureau of Internal Revenue (BIR). It imposed corporate income tax at a rate of 30 percent on the private sector casino operators licensed by the country’s gaming regulator-cum-operator, the Philippine Amusement and Gaming Corp.

    Bloomberry said in a filing on Thursday to the Philippine Stock Exchange it would argue that the tax office’s memo was contrary to a presidential decree issued in 1983. That states that because of Pagcor’s proven ability to contribute to the country’s tax base, any private sector partners it recruited as casino operators should face “governmental audit only to the determination of the 5 percent franchise tax [levied on casino licensees] and the government’s share of 50 percent of the gross earnings”.

  • Las Vegas Sands Corp says it is not worried about the reported crackdown on unregistered China UnionPay terminals in Macau.

    “We are not concerned. There may be some changes but [the] long-term is just fine,” Rob Goldstein, president of global gaming operations for LVS, said during its annual shareholder meeting on Wednesday.

    Macau authorities and China UnionPay are allegedly cracking down on the use of bogus transactions done in Macau to circumvent mainland China’s tight cross-border money controls. That is thought by some analysts to have had an impact on mass-market gambling in recent weeks.

    “UnionPay is an international programme. UnionPay was not made for Macau, it’s all over the world and it’s the biggest Chinese credit card [company],” said Sheldon Adelson (pictured), chairman and chief executive of U.S.-based LVS.

    From our standpoint, the only thing they are changing is cutting the [card] swiping completely and moving the UnionPay jewellery shops outside the casino. Nothing to worry about,” he added.

  • Reply to

    it can not be re-iterated enough that

    by drjackcar Jun 4, 2014 12:01 PM
    drjackcar drjackcar Jun 4, 2014 8:53 PM Flag

    To illustrate the point more emphatically consider these numbers. MPEL's total revenue (which essentially equates to Macau GGR, or gross revenue) for Q1 2014 was up by 19%. But their EBITDA increased by 31%.

    Those of you who "get it" understand how that is possible. Simply put, the reason is MPEL's approx. ratio of derived EBITDA being 25% VIP, 75% mass. So when it is reported that May's GGR was a miss according to consensus estimates (a miss attributed largely to a VIP shortfall for reasons already discussed) what is the takeaway for MPEL stock holders? It should be that MPEL's overall market share of 12.8% fell in to the normal range, and that lower VIP play has the least impact to MPEL than any other Macau concessionaire. It should be that +9.3%, given the strength of mass play within that number, means MPEL is still on track to hit Q2 estimates.

    In the larger context of the health of Macau gaming, which seems to be the driving force behind the price movements instead of MPEL's individual revenue stream, we now know there were various, non-secular reasons for the shortfall explained in earlier posts.

    Translation........the 6% haircut the stock took on Tuesday had nothing to do with financial metrics. It was a fear driven emotional response based on a flawed interpretation of the data.

MPEL
33.995+0.055(+0.16%)Jul 9 4:00 PMEDT

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