Now that the analysts have made it clear the impact will be minimal we are all left guessing as to why it made such a big splash in the first place. My take is since UnionPay is a state run enterprise the market got spooked over the impression the government was putting up a signal it frowned on the gobs of money being lost in Macau. IMO the government understands what a hugely unpopular move it would be to impose onerous restrictions on the Chinese in pursuing perhaps their favorite leisure activity. But they do want to make it clear they will not tolerate abuses of existing law or regulation. So the takeaway is while they don't want to allow Macau to become the wild west the moves they are making are essentially tweeks, not a heavy handed.............dare I say it...........crackdown.
Bloomberry Resorts Corp expects gaming revenue in its Solaire Resort and Casino in Manila to grow by 10 percent or more this year, Bloomberg reports.
The news agency quotes Bloomberry president Thomas Arasi as saying revenue from VIP and mass-market gaming alike has shown “double-digit” gains and that operating margins have “strongly” improved.
“We expect those trends to continue,” Mr Arasi said.
The Solaire casino-resort had PHP7.1 billion (US$162 million) in gross gaming revenue in the first quarter of this year, 27 percent more than in the preceding quarter.
It has 295 gaming tables and 1,400 slot machines.
The Monetary Authority of Macau has responded to reports that state-owned electronic payments system operator China UnionPay will curb the use of its cards to obtain cash in Macau and so close a loophole in the mainland’s currency controls.
The authority issued a written statement yesterday saying: “During the course of ongoing supervision of card acquiring services by banks, [the authority] may, in accordance with any changes in and development of the market, streamline or strengthen relevant risk management and ongoing customers due diligence [sic], with the objective of promoting healthy development of the sector.”
Meanwhile, Hong Kong’s South China Morning Post reports today that the authority will give casinos here until July 1 to get rid of illegal UnionPay hand-held card readers or face the consequences.
Here is a forward looking snipet from Bain's comprehensive report on MPEL issued a month or so ago..........
"We project MPEL’s EBITDA will grow 30%/27%/39% in its CY14/CY15/CY16, the highest
of US listed peers. However, its CY15E/CY16E EV/EBITDA is the lowest of US listed peers."
Anyone who wants to be cautious can adjust those numbers down by amounts comensurate with what the analysts think the negative impact of any visa restrictions or modifications to how UnionPay works will be. Just keep in mind there is zero evidence to date of any impact. The worst case scenario number I've seen is GGR takes a 5% hit in 2014. What isn't taken in to account is better than expected GDP growth in H2 and 2015. Anyway, as I said, even after downward revisions that may or may not be realized MPEL's stock is compelling at the current 18x 2014 (e)EPS. I find the "rich valuation" argument to be without merit.
She seems to have a tendency to be a bit one-sided with all her articles on both sides of the topic of Macau, the last two refuting her own earlier reporting.
On credit growth.........
"Barclays concurs, saying “the better-than-expected April M2 growth and total financing suggests that financing channels remain open to investments, led by supportive measures announced by authorities recently.”
On overblown Macau fears......
"1) the junket bad debt was primarily related to side-bets and associated with a small junket;
2) the potential shortening of the transit visa stay period to 3-5 days from 7 days by the Macau government should have little impact as average stay in Macau is only ~1.3nights;
3) crackdown on China-registered UnionPay would likely shift the demand back to jewellery shops and pawn shops in Macau."
Now if Macau and China can escape negative headlines for a while maybe MPEL can rebuild some upward momentum founded in rising EBITDA and EPS estimates as well as actual results.
Am I correct that you said the question on the buyback authorization did not appear on previous proxy ballots? If so, I think the possibility of an announcement in a little more than a week would be a motivator to get on the long side of the stock, or at least not be short, for hedgies with a toe in the water. I'm not as confident as you are about the authorization after hearing Ho comment about 2014 being an especially cap ex intensive year for MPEL. But if it is passed, coupled with a decent GGR # for May should the current run rate hold, the stock might get the kick in the #$%$ many are waiting for.
from Nomura..."Macau‘s gross gaming revenue in May is on track to grow 15-19% year-on-year, in line with consensus range, according to Nomura Securities."
from Sterne Agee....." As expected, average daily GGR declined following the Golden Week holiday, May 1 - 3. Our May YoY GGR outlook remains between +12% and +17%."
The dichotomy of analyst's recommendations and the street's, lets say caution, underscores that there is now a wall of worry surrounding the Macau names. Unfounded says all the analysts, we'll see says the street. Once results force the concerns to fade it goes higher, choppy headline driven action 'til then. Friday MPEL outperformed the group, today is catch up day for them. Plus I suppose there could be a little disappointent w/ the market share # after it was over 14% in April.
According to our channel checks, Macau table-only gross gaming revenue (“GGR”) is MOP12.8bb (USD$1.60) through May 11. The May GGR run-rate is ~+26% year-over-year (“YoY”) or MOP37.4b (USD$4.7b), including slot play assumptions. As expected, average daily GGR declined following the Golden Week holiday, May 1 - 3. Our May YoY GGR outlook remains between +12% and +17%.
Week-over-week GGR decline expected, bit better than last year. May 6 - 12 average daily table GGR declined ~26% (from May 1 - May 4). This is unsurprising as the first 3 days of May encompassed a Golden Week holiday. Last year, May’s week 2 table GGR declined 34% following the same Golden Week holiday, according to our checks. GGR typically declines weeks before and after holiday periods.
Market Share. According to our checks, table-only market share through May 11 is: SJM at 23.5% (vs. table-only May share of ~25.3%), Galaxy at 21.3% (vs. ~19.1%), LVS at 21.3% (vs. ~21.8%), MPEL at 11.5% (vs. ~14.0%), WYNN at 11.9% (vs. ~10.6%), and MGM at 10.5% (vs. ~9.2%).
Whether it is or it isn't is much more about sentiment than results. If the stock traded on fundamentals and the pipeline of coming growth, not hyped headlines, it would never have broken below $40.
I am hardly an authority in these matters. But my understanding is Macau has SAR (Special Administrative Region) status and as such has a degree of autonomy when it comes to Beijing. So while gaming is clearly dependent on the majority of visitors it receives coming from China, Macau has, for example, its own legal system and taxing authority. So my guess is no, gaming taxes go the government of Macau and not to Beijing.
Recognizing that Article IV, Section 20 of their Provisional Licenses expressly provides that the License Fees that are paid to PAGCOR are "in lieu of all taxes," PAGCOR and the Licensees have agreed to adjust the license fees commencing April 1, 2014 by ten percentage points (10%) of Gross Gaming Revenues. This adjustment will address RMC 33-2013 dated April 17, 2013 which imposes income tax on the Entertainment City Licensees. The 10% License Fee adjustment is a temporary measure to address the unilateral BIR action and is not intended to modify, amend or revise the Provisional License/s. The parties agreed to revert to the original license fee structure under the Provisional Licenses in the event the BIR action is permanently restrained, corrected or withdrawn. PAGCOR and the Licensees also agreed that the 10% License Fee adjustment is not an admission of the validity of BIR RMC No. 33-2013 and it is not a waiver of any of their remedies against any assessment/s by the BIR for income tax on their gaming revenue.
License holders pay a tax of 27% on mass gaming revenue, 17% on direct VIP revenue and
15% for junket VIP revenue. This compares to Macau at 39% for both segments, and
Singapore with a 12% tax on VIP and 21% tax on mass. (However, Singapore also has a 17%
income tax rate.)
Initially, license holders were not subject to corporate tax. However, last year, a Bureau of
Internal Revenue memo called for a 30% corporate income tax. It is expected that PAGCOR
will reduce gaming tax fees to offset the increase in corporate income tax.
Admittedly backward looking and incomplete data but from 4/15-4/30 it doubled to slightly over 6M shares. With one positive Q1 report after another being issued there was a lot of motivation to slam the shares down since the average cost looks to be over $34 based on the 4/15-4/30 price range. Just sayin'.
You are making the potentially erroneous assumption that her editor gives a shyte about the credibility of her reporting. We live in the era of Rupert Murdock journalism when the size of the audience is the only thing that matters. I'm surprised her articles aren't accompanied by a photo of a topless woman. If her work gets hits on the net they can sell more toothpaste, everybody makes money, and they don't care if hundreds of stockholders get fleeced.
But Melco Crown has attractive valuation. It currently trades at around 12 times 2014 EBITDA, far below the 20 times historical average.
So now that the UnionPay issue has been largely dismissed by analysts and company execs she follows up with a growth de-acceleration story. Perhaps she forgot MPEL's footprint is about to get much bigger yet it trades below its historic EV/EBITDA valuation and sports the lowest valuation in its peer group.
At least she included an insider quote this time.