You are a bright guy and actually understand the quant here, but Ho's commentary today really clarifies and bridges the gaps between Steve's group not wanting to clarify anything about converting VIP to mass, Murren's confusion over their 3% ebitda Cotai performance (compare with over 20% at COD) and Shel's discussion of only the low holds while ignoring the overline holds in explaining why things were softer there than anticipated. It's also pretty clear LVS didn't use the private jets 2Q the way Steve did either...
Shuli's article again underscores that she and her sources have no idea what they are even talking about. Premium mass players with the house have direct credit arrangements -- they are not out in parking lots swiping UnionPay cards on unauthorized card machines... and, as noted on other threads in more detail both today and prior, once the conversion of a bunch of the VIP to premium mass is done, the pool from which to draw additional conversion is depleted. Perhaps hard for some to sift through, but Ho told the world today so much as others are now pursuing the same tactics they have a two year head start on, but from here forward it will not be as easy to add to the pool of desirable high end players -- for MPEL or any other companies. Do your own math, but if mass is going to grow at Ho's reset of say only 20% for Macau (before considering the market share slice up implications of coming footprint expansion for MPEL and others) and VIP (now down to say 55% of total macau GGR vs almost 70% last year) is going to flatline for the near term, that speaks to mid single digits GGR for Macau, again, a big change from his 15% guidance in May.
It has been a tough couple of weeks and day for all sector longs, even those with box or paired trade hedges of say 50% or more vs long positions, but good to see the stock holding on quite well considering the magnitude of Ho's reset outlook today.
All of us are disappointed with the MPEL reset of expectations and execution shared today, but trying to dis me as wrong on this story is the commentary of a dolt. You must not recall you were the one suggesting back around year end, that $75 was going to happen on this stock this year?
Here's a review of my reply to the last time you tried to dis me.
"Since your posts discussing $75 was coming this year, pretty much all of your posts have been worth reading -- one of the handful or so of posters here in that category. Alas, on this thread, your appeal is to two of the putz aliases rating thumbs up.
You have since "adjusted" your PT thinking, I know, but we suggested that $75 was far too ambitious for 2014 and repeated then, and now again, that our baseline PT remains at $50 as shared in late November with the stock pulling back to ~$33, and which we said may well surge up to $40+ by EOY as paid bashing was likely to fade to paid hyping consistent with momo chasing and more than just us were pulling box hedges and the stock had gotten too cheap again.
All that happened into EOY and the chase ran up the pole to mid $45 in the new year -- after we bailed out at $43 on the trade sleeve and hedged the core suggesting 50d ema would soon be in play -- remember? You even had a thread noting it if I recall. In fact, since 2012 this story has pretty much gone right on script with the add-on of the double top at $45+ in March and then the china economy noise/sky is falling bs from media, analysts and paid dip S bashers all converging on the sector incl MPEL, all to the effect of giving those who can think a brilliant chance to add shares down here."
N.B. the 50d ema was about $37 back then. As amply discussed here today, Ho has seriously reset expectations today - not just for MPEL, but all companies and also explaining the group drop. Pending further sector updates (this is all about quant) , our reset PT is now set at the single point at $40 by the Feb CC week.
Same... but give that some more thought...
Easy to be #$%$ at their unbridled enthusiasm on May12th CC: "Golden Week was phenomenal", unconcerned with competition, no concerns about VIP recovering later in the year and generally super positive on the Q underway including being entirely dismissive of the noise now "reclassified" as the various uncertainties over china's players, suggesting they were comfortable with Ho's prior estimates of 15% overall GGR growth for Macau CY14, etc.
Now all of that has morphed into: solid/market-matching mass revenue growth (35% ytd but going to 20% he suggests with flattish VIP meaning single digit GGR for Macau -- about half what he said 3 months ago), 20% ebitda growth for MPEL (solid considering the 10% ramp in compensation costs yoy and ongoing ramp of preopening/carry costs for MSC and Manila gear ups without any rev to show in those venues yet) , and suggestion that VIP is likely to remain subdued for the near term, perhaps resuming enough to drive GGR growth for Macau early CY15.
Altogether, there has been a sea change and clearly Ho is resetting the bar on where they see things unfolding, and no, not just for them but Macau broadly, but those lowered sights are still dramatically better than Vegas (incl the puff Q just ended).
Clearly they knew things were going to come up a punch in the face short of what the street was expecting for the 2Q before they had June results in (so at the latest say on May 13th if one is not a cynic) -- and not just for them but Macau broadly.
In this context, it is really interesting to see the BOD authorize the share repurchase plan in between. If I knew things were going to soften up to the extent they saw by week, I'd have waited to announce beginning a buyback too... until right after we got a chance to reset the bar as I've been discussing here today. Yeah... especially if I owned 67% of the Company as Packer and Ho's other companies do.
they are all in here for years not days.
so far today, the tape suggests pm long the stock are seeing through the tea leaves to understand what is happening... MPEL is restting the bar as discussed on other threads here today.
I'll share more later, and there is no question Ho wanted to telegraph a major expectation reset... but MPEL should be flattered that others are chasing their strategy, and MPEL has said they will continue to anticipate that and strive to make their COD venues the place of choice for elite mass gaming and attractions. Ignoring their hold was light vs LVS and WYNN's being way overline strong for the Q, MPEL's 20% ebitda growth is still excellent vs the broad market, massively outperforming most of the group (e.g., MGM at 3% in Macau or even 10% with the "rebranding" charge #$%$ that is)... and, repeating myself, especially WYNN but the others too are being more than a bit coy about VIP being down while their "conversion" efforts (i.e., chasing VIP into direct credit) continues as they chase what the "smart guys" (MPEL) have done so brilliantly over the last two years.
See Shuli's piece today... she does not get it and neither do the analysts she quotes, but the conversion game is soon to be understood by more than a few... and we highly doubt that Steve or any other player is going to outperform MPEL at the high end mass business in macau -- or anywhere else MPEL sets up shop.
dismissing the hold differential of $30m ebitda impact yoy (when WYNN and LVS had favorable holds), 20% ebitda growth is decidedly not the "weakest report of the bunch"... MGM was 3% in Macau (10% taking out the "rebranding" one time costs)... And if you hold adjust WYNN to mid 30s on mass, WYNN was decidedly not better. But MPEL has raised the bar so high on their own execution that it is clear the Q was off vs even haircut expectations.
My quick take is that their VIP was weak as telegraphed, but the mass piece was only decent, well below their outstanding execution and haircut expectations... Lawrence also went out of his way to say the days of 30%+ growth in mass are done, suggesting that more like 20% is where things are for Macau pending infrastructure progress and removal of the other uncertainties created over china in recent months.
This is certainly a big expectation reset, but the VIP falloff at Altria alone yoy basically covers the overall rev miss... and that is before considering the bigger rolling chip decline at COD...
As rough as those chunks are, that was a big yuck relative to their optimism on the May 12 call to be sure... we're in the Army on the 2nd layer now (glad we own the low basis core and did some pair offsets of late) and glad they announced the buyback (that makes the point that FCF is huge enough to do the development queue, dividends AND take out shares)... after the dust settles, hopefully the sector gets back to just the real cadre of solid hands vs the momo chase up and rundown players seen here since January.
the VIP number is not a surprise, but the mass numbers, while looking sound in a vacuum, are a disappointment relative to what MPEL has been accomplishing relative to the mass table roll numbers over time. Dismissing the hold differential overall (favorable last year and unfav this year to the tune of more than $25m, the ebitda numbers are less than thrilling on the mass growth being lower than trendline growth. Still, the story strength is mnass/premium mass -- but easy to see why Steve didn't share much detail on the conversion numbers...
glad to see the $500m buyback underscoring the ample free cash flow to handle the development queue and that they understand their pm longs care about the stock price.
Ho's comments should be interesting -- call starting now.
I'll pass on repeating again how many pm go into cluttered conference calls with a significant box short on their long positions... Beyond that posturing by learned professionals wary of chop markets...
The market is still trying to process why VIP is down and whether it marks, as suggested by the weakest of the weak media and "analysts," the end of growth" for Asian gaming in Macau. Our view is simple -- there have been many reasons for tour operators to be low profile and their patrons too... We also have seen that WYNN and others put their private fleets to work bringing in players to Vegas last Q to counter all of the noise in Macau in particular.
It is also clear that while knowledgeable pm understand MPEL's strategy of focusing on developing premium mass and high end mass play in its properties and that Manila and japan will be additional venues to demonstrate their prowess getting that done, we now have venerable Steve Wynn not only congratulating the MPEL team but also following the strategy directly with the coming, all suite WYNN palace on Cotai. All of this is good news for macau and MPEL.. As for 2Q? The dust should settle out quickly after desperados trying to paint the tape while hacking themselves... This should still be a GREAT 2H14 story.
just poached another 90 cents on peanut 3k shares sloppy trading for us...
we'll likely play again tomorrow because HLF can;t let this stand... LOL
And to wrap the day, a few comments on pm box hedges...
Based on the initial reactions as contrasted with the quant realities, it is beginning to look like buysiders are deciphering what is happening in macau and the others progress on mass and unsustainably high holds at LVS and WYNN are coming in off the high horse over time. Yeah, it seems clear the buyside is beginning to fiugure out what we have been saying abgout MPEL's U.S. listed peers' performance all of the sudden... MGM still a good pair offset we took off too early today.
Just a hunch, but given that likely 95% of MPEL's trade is sleeve trades done with HFT algos, we suspect the box hedge is very large going into tomorrow premarket conference call. Although headline revenue and adj eps numbers don't really matter to MPEL's business plan anytime soon, growth of mass and adj ebitda do... we expect those numbers will be terrific for MPEL and that Ho's outlook will be less than scary too... gee, maybe they will even include some kind of schedule for opening Manila now so people can begin booking their initial visits to COD there? What do you say Lawrence? That combo of updates will cause EVERYONE hedge short to race taking it off, leaving only the unhedged shorts out there to swim in the big waves.
As for the other names? WYNN will be fine over time as they follow MPEL's business plan from here forward. And the others will be ok too... Macau has plenty of game left for years to come, even though all of the idiots who have no idea what "rolling chip" even means are writing about how Macau's growth days are done now. Even a few "analysts" are penning such drivel this week. Ridiculous.
the street has rev estimates up 25% for cy15 and eps up call it 22%... yet they can get close to those bumps on organic mass up alone, even if mass grows at only half this year's rate next year and VIP is flat to this year's potentially flattish growth overall for Macau play... and it would be old news from us, but we don't think the story is being managed for revenue numbers or eps -- it is all about adj ebitda and expanding footprint in Asia for the next several years as they "Shape the future of Asian gaming" to quote their mission statement.
Those rev and eps estimates are fun though. Since they can come close to the consensus CY15 eps without much other than organic growth of mass. Then they have the MSC and COD Manila pieces. The initial phase of Studio City, the next major resort coming on Cotai is due to open 4Q15 and it won't take much from that or Manila to add more zing to the revenue line as well, esp since MPEL has been carrying the costs for Manila and now MSC in meaningful size as current period G&A expense going back to early 2012.
As you know, Bain has haircut his numbers a bit for next year, largely premised on noncash expense haircuts from our cursory look... but he hasn't added anything to his revenue outlook for some time (though he was top of street for Manila and MSC contributions next year last time we reviewed his work).
I think he is still top of street on 2014 and 2015 for that matter... as I wrote above, only Bain seems to have a clue of the sellside group.
And now people must be doing the quant on the other companies as they all drop. And MPEL down to $29.64? That's another ugly retest of the early June low ($29.76) which was a test of the early May low.
Talk about bumping along the bottom. We're back to last Sep lows -- before the Manila plans were locked down and building was just underway... before MSC was pouring up.. before tower 5 design and pouring got started, and adjusted ebitda runrate was about 30% lower.
Now trading well below the cost of Stiritz, Pelz, and Chapma's positions... what a gift courtesy NUS...
No current position, but this is a compelling trade at $48.70 today.
If they were to announce they are writing off the entire investment there and abandoning the venue then the current stock price would make some sense. We don;t think that is happening... LOL
We have yet to see a single published estimate include revenue for Manila during 4Q. Only Bain and two others have any kind of number of size in there estimates for 2014... in this "Chicken Little and the Sky is Falling" environment for the Asian gaming stocks, that is not surprising. Analysts can be wrong and not get fired, but they can not be wrong alone and MPEL's comments have made it easy for analysts to play turtle: last Q Ho said ~"We are going to get it right and be 100% ready before we open because we have learned the hard way opening our own properties and watching others that opening early is a bad idea for customer service."
Still, based on Bain's numbers for COD Manila, a number he published BEFORE the recent bump up in budget once they had Hyatt signed on for the third hotel in the complex at COD Manila, they were predicated on ROIC of about half the current run rate for MPEL overall. We don;t think MPEL's BOD or Lawrence plan to have that kind of performance dragging down ROIC for the Company, even if it takes say a year or even 18 months to get it up and running the way they must be planning.
Our modeled range starts below Bain's implied ROIC (on the new capital allocation), but gets to 40% above his number for CY15 on the optimistic case.
Given the stock's dismal performance of late, and understanding the BOD is not about short term outcomes aside, Ho really needs to share the updated timeline for opening COD Manila tomorrow... and they need to give the weak sauce sell siders some input too... otherwise, only Bain has a clue about what is coming.
VIP runs 3% before operator commissions... MPEL had 36% hold on mass/premium mass table games (mostly baccarat as you know) last Q -- with no commissions owing on that table play. WYNN just reported 45% as if that would be there forever... that is unsustainably high in our view -- even Shel would not suggest that will win rate hold up (dual pun intended for fun) over time.
LOL what that mytek99 moron wrote on that alias to demonstrate his stupidity...
Anyone paying attention to our posts over the last couple of years knows we've had no loss on HLF in dozens of trades (long and short) or on the big core at $38 which we sold out at $80. Based on today's NUS butch dragging dowen HLF though, it is likely getting close to another fun trade zone for those who like spec trades. Insiders bought a bunch in the open market last week.
As for MPEL, we own the core split about 60/40 at sub $13 and between $21 and 23, and we now have an even bigger position we think of as C2 on below $33.40. We've also done MANY trades and hedges here going back to 2010 as longtimers know... Most of those were posted as we went.
Now as for morons who should end the misery for themselves and those around them? We would not wish ill will on anyone, not even complete dufus trying to dis us with stupidity.
refresher course for the nubs shorting this today.
and as i wrote a few months ago, remember that PIMCO began buying during 1Q, so they liked the stock between $38 and $45.
So they must love the stock down here and are likely buying heavy 2Q based on their comments this week. LOL
NUS over-stepped authorized product distribution... and they are being slain for it. THAT is a great short!
HLF has been and is being careful to make friends there and follow all the rules while dotting the "i's and crossing the "t's". Notice no regulatory action has headhunted them there? LOL
China will soon enough be HLF largest market. Almost time to go back in with more than peanuts after a few lucky in/out same day trades of late.
lots of box hedging this week matrix... we just pulled our paired trades on MGM and LVS as MPEL's revs may be flattish, but MPEL's VIP is going to be down more like 40% or so as the mix is now running closer to 80%+ mass/premium mass.
Again, the drop in VIP 2Q in Macau is largely accounted for by LVS and MPEL alone emphasizing mass/premium mass play mix. One day soon more than just sector pm (and those comprehending the story here) will figure it out and this ignorant valuation on MPEL shares will be over with everyone wondering why they didn't buy more while the shares were so stupid cheap.
Same as it was in october 2012 and again last July...
what i have said following all of the noise and bs hurled at the sector is (targeting to see Dec Q results in early Feb not year end of late), getting to $40 seems about like getting to $30 did last July when this stock was at $21. When MPEL hit $30 last fall, we said we thought it could get to $35 or even 40 by EOY. As you know it got to $39.70 or so.
Again, the first time we set out $50 as the upside target for this stock several analysts and posters here were talking about numbers like $58, $60-65 and even $75. I wrote those all seemed a bit too optimistic given where things were at the time, but the stock was already at $40, too, and soon thereafter double topped at $45.
If things recover in Macau for 2H14 as Lawrence said last CC with his 15% GGR estimate for Macau (in MPEL's case, almost entirely focused on mass/premium mass in Macau for the 2H14) and Steve suggests is already happening (though perhaps still slow at MGM based on Murren's update this week LOL), then we think $40 is coming up quickly -- again, about like $30 for MPEL by 12/31/13 felt 12 months ago with the stock at $21.
As for $50? We definitely think that is still attainable, though when we said it 7 months ago the entire sellside had numbers at or above that level and we were at the low. What is needed for that? The buyside needs to understand that China's economy is not collp[asing, nor is wealthy Chinese patronage to macau or related GR, even if VIP numbers are flattish into EOY as the conversion to prmeium mass is clearly the undercurrent at all of the U.S. listed companies -- again, led by MPEL.
All that said, do your own thinking instead of relying on anyone else's thoughts, especially the idiots calling themselves "journalists" and analysts in this sector.
p.s. Good to see the airlines, banks and med stocks bounce a bit. down 8/10 days is WAY oversold down here... and see my peer group post if you missed it. MPEL is painted with the group brush today, but CC is tomorrow