Not surprisingly the numbers are coming down across the board. For MPEL the PT goes to $36 from $39. The EPS range is now $1.20, $1.00, $1.45 from $1.33, $1.47, $2.06 for 2014, 15, and 16 respectively. MPEL remains SA's #1 pick.
Thanks for the help. But I was talking more from an earnings standpoint, not repatriation. I was watching the options show on CNBC Friday and they were talking about how the Q's look to be rolling over due to tech's exposure to the strong dollar. Just trying to gauge the possible impact to SWKS.
"Morgan Stanley Sees Macau Turnaround As Early As January"
Maybe she turned over a new leaf for 2015. Included in the MS comments is their assumption MSC will not open until late Q3. That sounds about right since these openings are never on schedule.
A lot of people don't understand the origins of the legacy debt on SUNE's balance sheet, how they plan to offload project debt to TERP in the future, or how quickly the outflow of cash from TERP to SUNE will increase nor the magnitude of that increase once we get past 2015. The only negative I see is project costs will increase when interest rates go up. Something that will be offset in part by the lower cost of materials and their greater efficiency in the coming years.
It seems like a long way to go but seeing as the only reason the stock isn't already over $25 is oil I believe $40 can be hit simply by further educating the investing public on the model they created and executing on the biz plan.
Given the grossly under valued nature of the stock with the biz as it stands right now and the progress they will make during 2015 (2.2 gig backlog, EM yieldco, TERP increasing the divi) I'll go out on a limb and say $40 is achievable in 12 months.
Last week, we hosted investor meetings with MPEL Co-Chairman and CEO Lawrence Ho and CFO Geoffrey Davis. While meetings comforted our intermediate and longer-term Buy thesis, management was clear they see no near-term V-shaped recovery for Macau’s gross gaming revenue (“GGR”). Still, MPEL believes Macau GGR, with expansions, will grow next year.
Worse than the financial crisis? Management believes China’s anti-corruption campaign is having a deep negative psychological impact on high-end Macau patrons. With the financial crisis, China was able to fuel the market with liquidity to establish a relatively speedy consumer recovery. With the anti-corruption campaign, high-end Macau patrons are taking a low-profile approach to spending, and their state of mind is unlikely to change from any one lever. Balance sheets, on the other hand, are in far superior condition than during the financial crisis.
Confidence in the long-term. MPEL cites +8% year-to-date visitation despite no new supply as demonstrative of patron demand despite the current spending environment. It believes the anti-corruption campaign slowly gives way to the underlying desire of high-end Chinese patrons to loosen their discretionary purse strings. MPEL also mentioned recent Mainland policy moves, such the recent interest rate cut and loosening of property curbs as evidence the Mainland may be beginning to shift its focus “back to business.” It also continues to view Macau as a supply driven market – and new supply is on its way – coupled with recently extended border-crossing hours and ingress/egress infrastructure, including the permanent Cotai ferry terminal and the Hong Kong/Zhuhai/Macau bridge.
The alternative view from at least one analyst comes from Deutsche Bank. This was taken from an article at Benzinga suggesting the interest rate cut in China (and possibly more to come) will have a positive effect on VIP.
"After a rough 2014, analysts at Deutsche Bank believe that now is the time to buy battered Macau gaming stocks.
A recent research report laid out the bank's case for Macau.
Interest Rate Cut
Historically, Macau’s gross gaming revenue (GGR) has had a high correlation with China’s interest rate.
Last week, China’s surprise interest rate cut of 40 basis points was its first rate cut in more than two years. Deutsche Bank analysts point to China’s last rate cut in the summer of 2012 and the VIP gaming growth that began about a month later."
This was cut and pasted from an article you can see by going to the page for the HK listing of MPEL, 6883.HK. MPEL is the only casino stock this guy is recommending but the overall tone for the sector is decidedly bearish.
Cash in your chips now and wait for a better hand to be played. That’s the advice from Macquarie analyst Jamie Zhou who has taken over coverage of the Macau gaming sector. Macquarie has a cautious view on the sector as it attributes the slowdown in gaming revenue this year to the tightening of shadow banking lending in China which has negatively affected small and medium enterprises (SMEs), the ultimate source of VIP/premium mass players. Marquarie forecasts a -2% gaming growth rate (GGR) for 2015 but rebounding to 10% in 2016. It says that consensus is too bullish and “may be overlooking the negative operating leverage from structural labour cost inflation, especially for new openings in the next three years.”
Zhou notes that, contrary to consensus belief, Macau’s slowdown is not so much driven by anti-corruption as it is by a structural tightening in the liquidity of the high-rollers’ source of wealth:
“Macau experienced two slowdowns in the recent past (2009 and mid-2012), both of which were followed by strong recoveries ignited by unprecedented credit growth in shadow banking. Growth rates in Macau’s GGR and PBOC’s shadow bank lending move in tandem, with the latter leading by one quarter. V-shaped recovery following the 2009 and 2012 slowdowns is unlikely to repeat this time as Beijing is firm on curbing shadow banking. The current administration is careful not to repeat past policy mistakes and limit systemic risks on what is already a debt-burdened economy.”
There are reasons to remain optimistic in the long run as new Cotai openings over the next three years should drive 13% CAGR (compound annual growth rate) in overnight visitation, however, there is no guarantee visitation will proportionally translate into high-margin mass gaming revenue.
I don't believe I have ever seen a trade as stupid as oil down solar down. Pork bellies have the same degree of impact on solar, that being none.
That is the title of an article at Benzinga predicting the rate cut in China will aid a VIP recovery in 2015.