and so now we see overall Macau's VIP was down less than disastrously, and represented 60% of Macau GGR vs closer to 2/3s last year...
Think that through on MPEL -- last year VIP was still about half of MPEL's rev, and this years it is running less than 25%, likely less than 20% for the june Q, and cruising to less than that for MPEL on Macau (esp COD cotai) for the year. One more data point needed: for the June Q, mass/direct credit premium mass was up some 35%+ yoy.
Oh wait, we've done this math before...
and the "analyst" group has consensus revenues flat yoy? LOL
The theme of my comments is that the group analysts and lately the s head media have, over the long run, been late at calling turns up and down and really good at "wrong way" calls on the sector.
The reckoning is coming... if not within days (as when the stock bounced from $32 to $37 recently), then over the next few months at the outside.
Looking forward to Ho's update on the Manila opening... it will be more important than the zero revenues discounted by the street for 4Q14. LOL
Thanks for the article. great stuff as usual. And LOL re the new fan club showing up here this week.
I don't recall the Union gaming guy ever adding much to any topic, and that continues, but most of what he said here seemed reasonably accurate. His key point is that MASS gaming was likely not seriously hurt by the WC because the games were late as you first flagged here. He also emphasized that mass play continues to grow "30% or better" annually for many years. As you know, that pace continues. Mass (incl premium mass) grew at 35%+ last quarter.
He essentially dismissed the ban on smoking, esp for premium mass and VIP areas, and added that smoking rooms for mass will make even that non-issue.
He did focus on VIP being down as much as 15-20%, but he attributed that to the anti-corruption noise vs anything fundamentally changed about the "big players" desire to game when they get done "laying low" while the rugs were/are being shaken looking for fraud problems in the political arena. He is bullish on forward gaming revenue for macau and also commented he thinks new venues will not be a serious threat to Macau's gaming rev growth.
Re LVS, incorrect, again... We did two small trades with peanut gains, and had no position into the call. We have added to MPEL below $33 in recent days.
You also seem to not understand the key point. Yes the group is under a cloud, yes VIP has been compressed... and NO, MPEL should not be getting hurt on the drags suffered by LVS last Q and continuing into this Q, nor does MPEL have the issues with VIP that WYNN and MGM are likely to have, even though, as said above, both of those companies should be able to pick up the slack LVS and MPEL are leaving in the line on VIP as the latter two focus on mass. The annual growth rate for mass has compounded better than 30% since 1998, and during the mixed signal June Q, Macau mass (incl premium mass) has grown over 35%...Additionally, MPEL is doing mass and premium mass better than any other competitor relative to footprint (yes LVS mass $ have outpaced MPEL, but LVS has also more than doubled footprint t24m).
What I wrote about hedges above is a truism; anymore than do pissant trading sleeves of morons such as rajatratman, it doesn'tmatter to us whether you understand it or not. Unlike the trading club tarts and pissant sleeve daytraders running headline based algo shorts here, we are not playing for the next couple of hours or days.
Here's what you can see if we have largely correct though: assuming a flattish broad market, out PT is $50 by the time Dec Q earnings are out a couple of days. LOL
CMG has had the analyst group wetting itself over cost pressures (food price inflation on everything they sell) and pass through+ price increases to consumers that many thought would hurt SS sales... but CMG just reported SS sales up 17% yoy... that is one dazzling comp, and the stock is up 9% as i write to show for it as the unhedged shorts get decapitated and the box hedges will all come off in unison over the next couple of days.
The point of relevance to the Macau gaming stocks is that the day of reckoning is coming as hedged pm will, in our view, soon be ready to pull the box hedges and or exercise their calls and watch the puts (short puts) expire worthless. Interesting to see the group get dragged down with the market today and not follow through on the bullish HK tape (MPEL not the same as the LVS, WYNN and MGM HK tapes as discussed prior) like the gaming companies did there despite the shanghai softness, but more interesting to see WYNN rally today as WYNN is arguably the most Macau VIP dependent of the four U.S. listed companies.
On the fundamental/business plan picture Ho is pursuing better than any other company (top drawer mass and best in group premium mass/direct credit franchise development), we think MPEL is going to report substantially stronger overall results than LVS just put up; relative stock outperformance should follow.
And if VIP is up for the Q yoy, if not overall for macau than at least the far easily hurdle of at the companies still heavily reliant on VIP in macau (so MGM and WYNN), maybe that alone will get the group moving again... The analysts and "re-ratings" down were after the fact as they will be when the stocks move up and the "re-rating" bs back to positive framing will follow that. It doesn't matter that more of the penguins and parrots are now figuring it out... but it shouldn;t come as a surprise when the box shorts come off in a whoosh, and then more players try to own a chunk of the best growth story in the group.
reply part 3
and this part was the cake taker... withg Shuli feeling like she's so knowledgeable about the sector she's ready to teach now -- LOL
"How would an upturn in VIP revenue growth help the Macau market? VIP gaming growth is strongly correlated with P/E multiples. As the VIP segment recovers, we should expect re-rating in the Macau stocks."
An upturn in VIP revenue would increase revenue and ebitda and adj ebitda and eps (LOL)... that is how it would help the stocks of companies whose revenue streams remain largely dependent on VIP play.
If one has some basic quant knowledge and history on the sector, p/e ratios are not much correlated with p/e ratios. Back with LVS trading at $38 and call it a market multiple of trailing and forward eps, [Macau] VIP was "growing" at numbers like 50% YOY. Now, we could easily see WYNN report a 10% increase in VIP yoy, even though VIP was down for macau for the Q. Shuli, and MS and all other glittering genralities for that matter, have an outstanding chance of being less relevant and useful than wet tissue.
As for her "coinage" on "re-rating the macau stocks", that was stupid when CS used it 6 months ago... the sector has been beat down by weak hands selling, unhedged shorts trading algo to slam the tape, and, argunably the most significant sales hitting the tape, pom boxing out long positions and then crossing over directly vs longs to cover... and then reloading longs on days like today when the stock is trading stupid cheap and in size as nub pm think the sector is a good short based on dip S analyst notes (WFC, MS for example) and media bs from the likes of Shuli and IBD.
Re the stocks rallying 20% part, I meant to add that they rose without the analysts raising their just lowered estimate and opinions... after the stocks were up hard and record GGR and ebitda and adj ebitda kept on rolling in, THEN they raised their opinions basck to BUY and their PT by another 20%, only to see the stocks double F12M. It was all way too stupid to watch without making fun of the dopy analysts back then... and, in lvs' case, the stock was running hard despite the stupidity of shel's ego chasing the Spanish Empire Building we and everyone else managing money thought was ridiculous right up until they killed the idea ib late 2013 (with the stock at around $72 where we reloaded (having bailed at $72 on the way up.
You just can;t make this stuff up guys... the anaylsts as a group are wrong when it matters in this sector... and we think they will be again here.
p.s. fun to see WYNN rally on the lack of a labor protest outside their front door (LVS Venetian not) and perhaps the idea that the two analysts in Shuli's noise think is good news on VIP returning from the moth closet... Steve is going to be chasing Ho's progress on premium mass in the months to come, not everyone back to chasing VIP. Whacky whacky whacky analyst "insights" with darling Shuli's add on about p/e ratios following VIP GGR data. LOL
More stupidity from weak analysts and media outlets? Just to show how stupid MS and Shuli's comments are though, I'll dissect a couple of them.
"Morgan Stanley gave a historical example: After Macau’s VIP revenue fell 8% year-on-year in July 2012, stock prices fell by 10% on average. But as the revenue decline narrowed to 1% in the following August, the stocks rallied by more than 20% over the next three months."
Look at the chart back in 2012. EVERY analyst (no knowledge of Bain back then) had lowered their rev/eps est for ALL of the companies. MPEL dropped from 16 (April) to $9 on analyst bs and later, fear of a secondary for manila, and then began the 18 month run to $45; only after analysts had all gotten VERY negative on the group. Longtimers in the niche will recall we were very bullish on all that bs sentiment and that we pulled the box hedge on LVS at $38 ($2 above the late July low), calling it a GREAT opportunity. When MPEL got the manila financing done (no secondary) and the group reported improving outlooks after the Sep Q, ALL of the stocks were off to the RIP again. The buyside trades against sellsider/media bs. Time to BUY is now!
"[MS] has turned more negative towards Macau/LVS, which has higher exposure to the faster-growing mass market, citing “falling mass table yield growth and limited further movements of VIP tables to mass tables. Sands China’s 2Q14 results also suggest diminishing operating leverage, owing to rising labor costs and higher investment in premium mass.”
LVS yield is lower now because they have real mass players coming in to Cotai and way more tables having pulled them from VIP. Ho coined the "agnostic" table concept, but premium mass and mass are to stay and growing WAY faster than flattish VIP. The answers to the stated "issue" is machine play, higher table limits, weekday play, MCE business, etc. For MPEL? BEST IN CLASS premium mass franchise, table yields, adj ebitda (oper leverage) and new casinos coming f18m.
love the stock is like a baby tiger simile... lots of fun to play with until one day, when the tiger is ready and rears unexpectedly, that baby's big paws and a good swipe takes a man's head off with one good swipe.
The stock was up cal it 60 cents+ or some 2% before najarian's comments... and yes it spiked (as no float, touchy shares will tend to do) before easing off the spike back to pre najarian comment levels (now drifting higher as more shorts figure out they are dead down here. Notice the slew of new and old alias dufuses are all chortling on their Woody Allen socks full of horse manure today vs trying to dis anyone with quality posts shared here? Funny as hell...
Najarian has said he is long the stock since it last pulled back to the 50d ema... on fundamentals, quant and the chart, that should have been a good entrance level, just ask all the 13F filers adding shares 1Q between $37 and $45. Today he said he bought some weeklies, chasing those with others buying them in size. Who is buying them in size? The morons who were unhedged shorting yesterday we suspect... LOL Now the game is on for those option monkeys... when they expire, the box hedges are still out there to fry the unhedged shorts. Who is selling them those ultra short-dated otm calls? LOL
The following week will be more interesting as it runs up into MPEL's release which should be excellent given the data sets LVS has shared where non-VIP play Macau saved the Q for them... All of the hedge shorts and option offsets will be gone then...
Still, your comment re the beta is good quant point... this trades enough for sleeve guys to f around with it like a baby tiger, especially given mgmt has recently said they won't be buying in stock just yet, followed by announcements that they have a second phase planned for MSC, a $300m increase in the COD budget contemporaneously with signing up Hyatt for the third hotel there, and likely tower 5 will also run the budget bumps seen at MSC, Manila and so on... all good stuff, but precluding a buyback anytime soon. glad they are focused on ROIC hurdles (see 10k) and that it is best in group and going to get better on operating leverage.
not sure any shorts got hurt yesterday... between the employment/housing news, Obama's flimsy saber rattling on sanctions for Russia, the MH flight and the tanks/bombing runs in Gaza, the market had plenty of reasons to quiver, and LVS' overline holds and soft Singapore and U.S. results also mollified the generally solid news out of Macau on mass for them.
btw, in addition to the likely buyback bid on LVS yesterday (if they loved it at $82 w ave last Q and $76 w ave cost of buybacks during the June Q and believe their own comments about 2H14, Shel and team ought to REALLY love the stock at $72!), there was likely some serious buying going on to remove box shorts (hedges protecting against a horrid Q that did not materialize for LVS or macau and now look to be all rear view items established against bigger long positions). Additionally, those short LVS on paired trades (i.e., where LVS was the short side) really need to cover in as quietly as possible now. The sky is not falling on china, the realty bond default there, and certainly not on Macau. Some analysts and others have suggested that lots of mass play and VIP was spooked away last Q by all the noise and tianamen sq and other one-offs, and that is likely the case but the Cotai properties are all running fuller than ever anyway.
The concentrated ownership/constrained float on MPEL (Ho and Packer control 67%) has previously created chop for MPEL in down markets and certainly has since 2011. The big reason for that is pm desirous of hedging their positions (and big gains since 2012 especially) in chop times. Although we are 100% long MPEL, a few pals long here since 2012 have put on box shorts of late as discussed several times here -- renewed following the June 'mystery." As noted prior, box hedges are beautiful on high beta/ low when reversal rockets are lit, since any shares hitting the tape (vs simply journaled to cover) add rocket fuel to the RIP higher as the unhedged shorts get quashed.
good to see the smartest of the daytraders cover in late in the day... the latest in a line of violent reversals coming up as they all need to cover once the FUD ends on MPEL.
And on LVS, that was one impressive display of what an ambitious buyback program can do to ameliorate a rough report into the teeth of a all four reasons that stock should have been beat down today... when instead it outperformed the group and much of the market.
LOL... when you look at a map, do you think East is on the right and West is on the left? South is down; North is up? You comments on LVS results in Macau are upside down too.
LVS numbers in Macau were LVS' best, by far!
Singapore continues to struggle on a normalized hold level, and even with the fat holds. Bob calls it "cHALLENGING" AND KIND OF A MYSTERY TO THEM.
The U.S. properties numbers were awful hold adjusted -- worse than flat!
Now that the facts are set forth in the prior three sentences, go read your posts again. Really hilarious, huh!
I'm not talking about running HFT shorting on MPEL, one would have to be a moron to be shorting MPEL down here... I am talking about the broad market, especially anything with international exposure as today had lots of tags those pernicious, or, more objectively, those little opportunistic dark pools and HFT programs would jump all over like a cheap suit... You know, words like: "weak employment report, soft housing data, passenger plane shot down by Russia, was the missile attack intentional or an act of terrorism, another terrorist attack, Israel defending itself by waging war on Palestine, Israel launches rockets and rolls tanks into Gaza strip, war breaks out in the middle east, and so on...
But let's recap why the market got slammed so broadly:
First we had the weak sauce US employment and housing data (though permits were better than shitey).
Then we had the plane shot down by a Russian missile, with FUD creating FUBAR BUNDY, SNAFU and TARFU for the market...
Followed by Israel rolling tanks into Gaza and launching rockets into known Hamas rocket launch sites and weapons depots (you know, in schools, mosques and residential housing areas).
Yeah... drjack and others are correct, MPEL was unduly slammed yet again today. We sold out PCLN and GS this morning to make room for more MPEL... missed $31.80, but there scooping on the turnaround at $31.90 and happy to add more if hedge and other shorting continues. MPEL certainly has been unduly punished since dropping below $35 and share buybacks are screamingly indicated down here, but we think the 2H14 will prove rewarding... F the shorts here... this is set up for a good mashing again (about like $22 last July).
bob's take on the importance of VIP was much more reality driven than shel's,esp as regards MBS.
As for the crossover effects, Ho has been clear that they are all about developing the driect credit (premium mass) franchise with wealthy patrons, and he has said several times that former VIP patrons are a great source for this process.
I haven;t studied bob comments on the premium mass and VIP interchange, but he was less in denial about the effects than old shel wants to acknowledge (perhaps he just does not know). If you have followed Shel's story for a decade or so, he is not receptive to anyone offering ideas contrary to his own, not even his c suite guys say much so hat is off to Bob on last night's call (he went out of his way to tip his hat to the junket operators at MBS where VIP is STILL what half of adj ebitda vs less than 17% in Macau now.
And consider that as "premium mass" picks up in LVS properties, their holds have eroded serially... why? because some of those guys actually understand the table. I think grftt's comments on a few threads re machines and MPEL using them advantageously is going to matter... that is the place for lower tier mass players over time in the premium venues.
What a F moron... every time you post here it is incredibly stupid commentary, and while i didn;t go back to check, it is likely you that has commented on Russia and HK trading as if it is significant to MPEL many times. Surprised i didn't already have you on ignore for your demonstrated stupidity and 4th grade antics.
Ho and Packer are the founders of MPEL. Melco Int'l Development Corp (Ho's investment vehicle) and Crown Resorts (Packer's company) have both owned 33+ percent interests in MPEL since inception as discussed here in different contexts many times.
Now go read below to learn something meaningful about the small casino development effort in Russia , but tax your mind to see if you can remember that MPEL is not involved from a capital standpoint, anymore than are any of MPEL's other registered owners (Wellington, Pimco or any other 13F filer). LOL
LVS clearly has its own issues, and until VIP improves in Macau, WYNN and MGM will have a challenge generating exciting ebitda growth as well.
MPEL is a much different and better story these days... and soon the street will figure it out.
MPEL is clearly the best positioned of the four given what is happening in Macau, and between Ho and Sy's junket connectivity throughout Asia, COD Manila is going to be a great addtion to the ebitda story... so is the mass/premium mass targeting of MSC (initial and development phases) and Tower 5, specifically intended for the MPEL's elite premium mass franchise players.
back before the LVS board was ruined, if you were there, you know we owned lvs large from $38 (where we pulled the offset hedge $2 above the bottom two years ago) until $72 where we bailed early... we agree Shel's myopic focus is on dividends... the buysiders we know would like to see them emphasize buybacks which they are now doing better with... but LVS will need to prove up sustainable growth -- all the noise aside, not so good on that last Q with many properties. LVS longs can hope 2H14 is better in singapore and in the U.S. markets... Macau mass results should be solid for the company...
The shorthand version of the larger thread from last night is this: A whopping 16k shares (5334 ADS equivalent) traded on HK exchange today down the ADS equivalent of 17 cents...
Seems the HK crowd quickly figured out that the weaknesses in LVS' June Q results do not apply to MPEL and that MPEL has none of the baggage LVS carries.
But as to the strengths of LVS performance on mass revenues and ebitda? Shel thinks that room counts and MCE facilities are the end all, but what really matters is identifying and locking down the best of the quality mass and premium mass opportunity. In Cotai, no company has done that better than MPEL. MPEL is simply better positioned and connected to the cream of the crop of the Asian players than any other company and carries none of the deadweight/rust belt baggage that the other U.S. listed companies are saddled with in the U.S.
At the end of the call, Bob acknowledged they have continued to struggle with Singapore "direct credit" [for reasons he didn't mention but we have discussed here several times] and that they will continue to try to make progress on it, because table roll is still disappointing to them (VIP and premium mass there because they #$%$ the junkets off with their bull in a China shop approach).
Everyone who missed it should listen to the replay of the CC... Bob is VERY complimentary of the guys who are VERY good at building premium mass relationships and doing a better job than LVS has on (my words) building this most desired part of the franchise... No one has made more progress or done a better job on this key objective than MPEL -- "the Asian way" as Ho calls it.