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
So wait... does anyone know how many Nigerian healthcare workers are high end Macau gamers?
Have a look at the airlines... the Asian bird flu hurt that sector 10 years ago, and seek medical advice if meaningful to you personally, but this ebola requires fluid transmission (don't treat anyone with ebola if you have an open wound, but fret not about aerosol effects that bird flu (like any airborne flu). The airline stock collapse seems to be a cooked goose in recent minutes... maybe more than just us are adding to airline positions while they are on sale too? LOL
As for the gaming companies, we think even LVS and MGM are oversold down here so we just finished covering in the hedge shorts paired with the MPEL long. As for MPEL, they report tomorrow, so those trying to retest (again) the recent low of $29.76 ought to be in a big hurry... and who is buying up all those shares being thrown out with the bathwater?
Get out those knuckleball mitts (again) if you have one and the risk tolerance... Steve already told us what one needs to know about Macau 2H14.
For MPEL, consensus revenues are down to flat for the Q... that would make sense if 60% of MPEL's rev stream was VIP and they had group ave table yields on their main and premium mass floors. LOL
So the "esteemed" (LOL) analyst group thinks MPEL is going to fare worse on macau revenue generation YOY than did LVS, WYNN and now MGM? That is um... unlikely in our view... but fun to see the JPM report suggesting the end of the Macau GR growth story because of the VIP influences of late, as if that is the end of anything at all. And how about the Zacks piece of work? IBD's "journalist" repeating his ignorance? Shuli raging on?
You know, if Macau VIP gaming revenue was going to zero (it is down to a mere 1/2 of $50b annual run rate currently LOL), then MPEL, who is well ahead of the group on locking down elite mass/premium mass franchise players, would fare better than its peers on adj ebitda... but don't tell any of the "analysts" or media filling their days and clients' mailboxes with Chicken Little pieces entitled "The Sky is Falling on Macau, and the Sun will Never Shine Again There" ... LOL
Those who have followed the sector going back almost exactly two years ago or more have seen this ridiculously lame "expert opinion" before... the street went to hold or sell ratings with MPEL at $12, LVS at $38, WYNN at $90, and MGM at $9. Longtimers will recall we couldn't believe it then either... not so much the stupidity-- this sector has always had weak analysts going back to Murren's time as a sellsider (which makes his dissing of analysts on the CC even funnier than most realize) -- but for the opportunity to get very long the shares on the cheap again.
On that note, PIMCO's guy was referencing MPEL was cheapest iun the group on adj eps... hey Pimco, do that math on ebitda and adj ebitda metrics... and consider that the adj ebitda run rate will be close to double present levels in little more than 2 years.
We'll pass on a detailed review as it rattles the cage of the yahoos focused only on LVS or WYNN or MGM or the older, slower growing HK listed companies, but here's a quick recap of what the three "other" U.S. listed companies have shared for the Q.
Consider the peers broadly to see they are generally improving in ebitda despite their specific weaknesses this ytd. LVS has shied away from VIP much like MPEL and also had very fat holds that are not sustainable or consistent with the haircut numbers carried into the CC by the street. Yes the properties are full and adr's are up, but not great and where is the prgoress to come since they suck at direct credit as amply shown... and Singapore is ok, too... just not fabulous as they had hoped. Surprised the stock didn't get set back a bit more than it has.
WYNN's VIP orientation is now morphing into a copy of MPEL's elite mass business plan, replete with Steve's tip of his hat to Lawrence as a "couple of years ahead of us" of late. And Steve no, we nor any other sophisticated pm thinks 45% mass/direct credit premium mass holds are sustainable, and we know you won't keep on sending your jet fleet after the Asian guys now that they are figuring out the central planners are not headhunting VIP tours or their players with all the noise bs now on fade.
As for MGM, good thing is that the blue hairs still pull slots and that the MCE business is alive and well (if maxing now) in Vegas, but for all of Murren's bs re coming clean on THEIR construction timeline concerns for THEIR properties, he really ought to mind his own problems when others do not have the same issues. MGM's 2Q numbers sucked in macau on VIP (50% of the business down 20% = down 10%) and was ok on mass (50% of the business up 40%= up 20% so blended to up 10% for the Q). The serous pm get it Murren, even if the media and "analysts" you made fun of as not even reading [SEC files] do not.
MPEL Q? 20% VIP down 20, 80% mass up 35%+ = -4 + 28 = up 24%? LOL