2. We were also very correct when we suggested hedging a couple of times this yr, sharing that we were with paired shorts on LVS and MGM (taken off early i shared later when we covered with MPEL at $31), short dated call writes.
3. We made four tiny (3-5k shares) long trades on WYNN between $190 and $214 ytd, sharing our timing views each either here or on the destroyed WYNN board, and, just because it was so easy, we also flipped small trades on LVS several times, many of which we shared right here for fun.
4. We also have said MPEL would outperform on mass, which they have robustly done and likely will continue to do and Bain's and others' work on "channel checks" suggests is continuing up through last week as MPEL's share of crimped overall GGR (VIP dynamics) expanded to 13%. Great result vs others now trying to emulate MPEL's elite/premium mass execution.
5. We've also been very right that the Chinese economy would not collapse or even have the sky fall on it. LOL Those scenarios or Putin rolling tanks or another big terrorist event were the kinds of things we suggested could create global economic slowdown sufficient to drive left tail risk on MPEL to $27, but none of those things happened... yet we have touched $27 on the corruption and 13 other less real news items driving the low profile of whale play in Macau (and use of Steve's and others' private jet fleets to Vegas driving the surprising results there so far this summer -- n.b. we think that dynamic is unlikely to persist to the benefit of macau when that happens).
Where have we been "wrong since the beginning of the year"? cont
your comments are once again hardly worth placing back on keel, but i will for anyone confused by your weak sauce comments trying to dis me.
The gaming group is not buried. MPEL is still up over 30% since July 2013! The sector flush took out all the weak hands and the future is bright... just ask Packer and Ho owning 67% with their companies, why they haven't sold any shares and pushed the $500m buyback authorization through on top of their annual renewal of authority process.
You say I "have been totally wrong since the beginning of the yr". That is plain ridiculous, sounding like something gump barebutbob would say.
In context, recall that our price action calls between 2012 and January '14 were close to perfect at every turn, incl back in the core at $13, doubling at $22 July '13 on the pullback from $26, trading sleeves along the way up and in July (stock dropping to $21) calling for $30 and then 35 by EOY13 and then adding $40 was possible by EOY w/momo funds chasing it. I also wrote the pullback in late Fall '13 from $37 to below $34 was a fabulous chance to add shares (we did a bunch). The stock got within pennies of $40 by yr end... in fact all of that was spot on.
Now, let's review my 100% correct assessments shared this yr.
1. Selling out the trading sleeve at $43 and hedging (box short) half of our core position (owned @ $17 w ave) on the first top, suggesting the stock would likely soon pullback to the 50d ema (then $37.50 or so) to wash out the momo chase then going on. As pointed out twice prior here, several here disagreed with my view -- THAT was when YOU said the stock would go to $75 this yr, remember? Search the word "definitions" on the board back in mid January for a fun recap of me telling people to give some thought to who was hedging/selling out some shares above $43 (incl us, very LT bullish on this story and stock).
2. We were also very correct when we suggested hedging a couple of times this yr, sharing
Exceptionally well said... as you have processed well, we were saying the stock had gotten ahead of itself at $43 (it topped the next day) in january and so sold out our trading sleeve and hedged half of the core back to the 50d ema (then $37.50 or so without checking). After the double top at $45.50, we waited for the shares to ease again (which it promptly did) and tiptoed back in to load what is now our largest ever trading sleeve here just below $31.
We are very comfortable that will be a great trade for us before too long from now, even if we retest the left tail (which we thought would be as low as $27 as discussed here a few times) as the group grinds along the bottom here...
As you said well, essentially no one, not us, the group ceo players or any analysts foresaw VIP collapsing as the central planners waved their corruption hands and all of the noise crumpled the sector AFTER the WC crimp days in early July this year. We hedged some of the ride down from the mid $30s with paired shorts on the other U.S. listed co's and had fun with a few quick longs as shared here, but for the most part our view has been to let the core sit unhedged (owned at $17 w ave) and add a bunch sub $32 and then sub $30 and more the last two weeks while the fire sale continues. Several pm who were hedged (box shorts, pairs and OTM call writes) are now back to unhedged long; all are poised to join the RIP higher when the news flow turns.
It has been rough to own any of these stocks, just like the OTAs were rough last year for a few months and the aiurlines the year prior. LOL From a strategic, tactical, financial and valuation standpoint, though, MPEL is better positioned than any of the 4 U.S. listed companies in the event of a flattish or even more moribund growth environment for VIP and mass environment in Macau. We like the risk reward math these days.
Last year I called the stock stupid cheap at $22 as we came close to doubling our rebought core position put on below $13 in late 2012. Here's a quick look at perspective then, and why it is even cheaper today.
Beginning with 2013 GGR growth vs 2012, the YOY comps for Macau GGR included the huge impact of all of LVS' new properties coming up the "opening ramp", meaning that unless a commensurate percentage increase in new property openings was happening this year, growing more than 15%+ in 2014 was going to be premised on solid mass growth (smoked that even if "slowing to 20% now as conversions are done) even without footprint growth for Macau this year and a fairly stable if slowing VIP growth curve. We know that VIP presumption aired by Ho and all other CEOs has been thumped on the conversion to premium mass effects as well as private jet fleets diverted to Vegas, AND of all the noisy corruption headlines and low profiling done by the tours, players and all the rest.
Still, comps of 14/13 YOY through May showed GGR growth was 16% vs 14%. June's (and later July's) data had the swing on the WC, VIP and other pieces this year, even having a net drop for June, against growth of 20% GGR for the 2013/12 period -- and STILL the stock traded off in early July 2013, down to the $21 level that was the thrust of my comment above. The ytd GGR yoy was 13% vs 15% 14/13. It is not until we compare July's data that we see ytd GGR down to 10% vs 16% the PY. In the lookback, it was the run up into EOY13 that made the 19% happen, particularly the 4th Q which included the 31% for Oct Golden Week.
Will key catalysts for the group (Golden Week, infrastructure progress, new IRs for MPEL, WYNN and MGM and Galaxy IRs) begin being discounted more favorably in days, weeks or months? How many days before MPEL-specific catalysts (COD manila, Studio City, Tower 5, Altira VIP repositioning, COD revamps) will be more appropriately be reflected in valuation?
Day follows night.
I didn;t see your reply to my comment until now, but the data sets/lookback add perspective consistent with the thrust of my comment, i.e., $22 was stupid cheap in early July 2013, relative to catalysts coming for MPEL, it is even cheaper right now at $29.
One day soon more than just the core institutional ownership is going to figure out that MSC's build out is going to be at least as valuable to the corporate owner as anything that will be built in Japan in no less than 5-6 years from now... Japan will be valuable, but on a discounted cash flow valuation basis, MPEL's story is stunningly cheap right now, right before the next doubling leg of ebitda growth and operating leverage kicks off in manila and then Studio City.
Studio City will be done in two phases now. One will be done mid year 2015, the "expansion phase" they are now telegraphing likely a couple years out -- maybe 2H17 behind Tower 5 at COD Cotai 1H2017? Meanwhile, the "expansion phase" now being planned for COD manila is going to be critical operating leverage capture as well. While we wait for that, it is fun to note that the highest published estimate for CY15 on COD Manila implies ROIC of less than half MPEL's run rate for 1H14 annualized.
btw, fun to point out that Macau Bus Daily and GRAsia articles this week errantly suggest "a filing" noted MPEL had a budget overrun of $300m update this week. LOL More "brilliant" reporting -- these guys might be good enough to make it as equity analysts! No, there is no new "overrun" in the foreign market 10Q... the $300m (MPEL's share) is as disclosed a while back when they increased the Studio City budget for as yet undisclosed project enhancements -- perhaps including initial planning and approval filings for the "expansion phase" now being discussed in MPEL's filings. Clarifying my earlier comments, that was done earlier this year, around April from recall or so when they increased the development budget for the INITIAL phase of COD Manila when they signed up Hyatt and Dreamworks and who knows what other cool entertainment ideas they have for that venue. Weak sauce reporting and sellside coverage of this sector is awful and too funny...
recapping MS as a prime example of the weak "analyst" group following this sector, excl Bain the entire confederacy of dunces really ought to be flushed out along with all of the stocks dragging, teeth first, along the bottom these days...
Sellside analysts are supposedly adding value, but in this sector (ex Bain) they are a joke good mostly for the buysider pm/staff entertainment. Consider that MS had a buy on at $42 with a raised price target of $50 in March... and then lowered it to "market perform" (~same as sell) at $32 in mid-June, and now, at $29, ups it to a buy with a PT of $33? I think that team and their "research" director need to be replaced after publishing such laughingstock "recommendations."
good comments guys.
Pending better news flow for the group, WYNN keeping its private jet fleet east of the Pacific (so just "Latin America" LOL) vs weekend extraction from HK so VIP can play in Vegas with a low profile, and the serious outperformance coming for MPEL as the new properties come on line, there are plenty of dippy media noise and concerns about wether gaming revenue will forever remain stuck on flush. LOL
Conversely, pm who actually understand the markets and the business continued adding MPEL shares during 2Q (between $30 and $37 - see chart and the "13F" thread posted last week), and hopefully MPEL will have used a bunch of the $500m buyback authority before renewing the shareholder approval process again in the 2015 proxy as they have laid out for themselves.
Given that packer and Ho's companies will own some 69% or so of the shares once the initial $500m repurchase program is completed, longs are riding with good company from a shareholder wealth creation standpoint.
Surprise surprise... NOT
Shuli Ren, Barron's pseudo journalist wannabe analyst with "real time market making news" quotes WFC's first call piece today on how VIP is maybe not going so hot (she doesnl't seem to grip that is a variable impact and disparate outcomes on even just VIP there) and another cheesy blog today on why MS' "analyst" group thinks Vegas is still buyable as a "recovery story" (based on occupancy and MCE book? -- note GGR is not discussed in the report or by Ren), but fails to note the little detail that in a separate piece MS went back to BUY on MPEL today?
Gee, is it possible Shuli Ren is getting used and or spiffed by goofy Asian hedge funds short the shares. LOL
SOON EVERY ANALYST WILL BE RAISING RATINGS ON MPEL... and the real firms should also soon be replacing research directors and the "analysts" in this sector (Bain excluded).
However, this upgrade timing, as with WFC "analyst" McKnight's dippy comments this morning, has its biggest value as comedy...
Remember that the MS team kept their buys on this and the sector on all year as the group stocks stocks dropped on all of the bs noise, changing VIP scene, and, in MPEL's case, the dislocation associated with momo players exiting and serious sector pm hedging longs.
Further, MS lowered their longtime overweight (buy) rating to hold in mid-June, a week after the low just below $30 and with the stock trading at $32 -- just in time for the stock to RIP rally 20% to $37 two weeks later. LOL
So now they go to BUY on near term catalysts, mass market execution, MPEL's ongoing focus on ROIC and new capital management (Buyback) plan?? Wow... there is some stunning value added thinking! As I wrote above, it is close to time where everyone with a brain figures out that monthly hold and VIP ala WFC's bs last night does not matter to MPEL doubling adj ebitda once manila, Studio city Phase 1 and COD Cotai Tower 5 are up and running, and then "phase 2" expansions coming at Studio City and Manila Bay to push adj ebitda higher on top of that...
Surprised MS didn't say they think Japan is worth at least 2 cent per share not currently reflected in the share price, which is trading at just about half the group ebitda metrics -- PRECISELY when it should be discounting the significant relative outperformance coming.
MPEL'S updated thinking on VIP for next year? Use the 5 Star rated Altira for that...
part of the grand plan to "shape the future of Asian gaming"...
"Repeating myself, we think MPEL's story is great and so is the mgmt team, but the stock is now ahead of itself and the risk reward math is upside down from last year at this time. Remember? No one wanted to buy it last year, except the very knowledgeable institutional and hedge fund sponsorship already long then. Now, based on the parabolic run up last yr and another hot 20%+ this month, we can see the stock is being chased hard... but think through who is selling/hedging it out for now."
So now, some 7 months later, we have almost perfect symmetry from the double top at $45 (where several here were "unhappy" I was suggesting the stock was too hot and ahead of itself... through to now when the stock is, as it was in October 2012 at $12 and july 2013 at $22, stupid cheap. Have a look at a weekly log scale chart to see it well.
Further repeating myself, it matters not what the retail investor does long short or neutral here... what matters is what the smart money is doing as the year progresses... Although the reset is now robustly discounted, the upside coming is absolutely not in opur view. Put simply, although the left tail to $27 we discussed here a few months ago is now in, we don't think Macau or MPEL's brilliant future is a bust anytime soon. LOL
Have a good weekend longs... now that everyone thinks China and Macau are hosed the stock can begin to lift soon.
Our take is that we are scraping along the bottom and have been since Ho's reset comments on growth expectations for 2H14... Frankly, it has been refreshing to see the group hold up well since. Again, smart money added what the putz pm will short and or out of breath selling by weak/fed up hands.
The really great aspect is that we have washed out to key support levels from last year, a 50% retracement, a head & shoulders washout, a succesful double bottom retest, diminishing volume at the bottom, all driving thrashed RSI and taking the entire sector to bottom wrungs on the relative (sector) performance metrics. All of that and other key technical indicators indicate the stock is washed out... if they had excessive debt, weak institutional sponsorship, a dead albatross market such as Vegas, no prospects for quality footprint and adj ebitda expansion "in the bank", it would all be bleak... Yet none of that draconian downside feel is present; instead, we view it as a great wealth building opportunity to add as do many pm who know the sector well.
Precisely opposite my view from 1/19/14 ($45 SP) below:
"it is obvious to us that the easy money in MPEL and the group has already been made. Last year the stock ran over 270%! As you know, we sold out MPEL at $16 then rebought at $12, and called it a screaming buy when it reset from $26 back to $21+ last summer, and made accurate calls on how pm lockdowns of 2013 gains would influence the tape. We've also been taking advantage of frothy trade for the last 13 months with trading sleeves as shared right here on the board for those who have been around (same on many names). We are still long the core, but hedged to only 50% net long, meaning we want to stay on while the frothy momo players chase it, but we don't want to find ourselves needing to sell out a large allocations when the pullback or sector snap happens, as it will like night follows day...
Repeating myself, we think MPEL's story is great" cont
They are now just managing Steve's money, but their deifinition of "research edge" as SAC was the art of using material nonpublic information to conduct illegal insider trading as the norm there. Frankly, given they have long been a go go trading firm, I hope they came on at $38 and blew it out at $30.
Most of the serious June 30 allocations of size are in the the hands of very solid sector investors -- guys who actually understand the markets, business, companies, and hedging... good to see such additions given that knowledge.
We'd like to see all of the hot/momo money sell out down here while the pissant funds paying the tarts to post here trying to shake out a few thousand shares per month from weak retail hands continues... Those pm dopes must not understand that when the ~3% buyback authorization is spent, Packer and Ho's companies will own 69% or so of MPEL. Those are the positions that matter most -- those guys are playing for another double+ on adj ebitda and share price F24-36M.
Do you realize that less than 5-6% max of the shares are in retail hands? They can't or they wouldn't waste 3 cents/post on these idiots posting drivel here. LOL
Talk about weak sauce and lack of insight - she and Robin are the two weakest of the weak group of sellsiders (Bain aside).
Other than the Macau data on GGR showing signs of progress in august (two days after everyone else published the "news" that August is showing some signs of modest and early turnaround), Karen Tang's 5th grader report is another in a long line of weak "updates" from her. Her latest report also lowers WYNN to a "sell" rating... she's one smart cookie alright -- concerned, she is, that based on revised expectations for VIP and Ho's reset on mass for Macau two weeks ago and counting, along with a more detailed review of WYNN's mass hold and softer ebitda after normalized mass hold is considered and -- wait for it -- given that labor costs are rising and some low tier mass players [as premium mass and VIP areas have private rooms] may not play anymore because of smoking bans LOL (did you ever hear the one about gnat's on an elephant's butt? LOL), well gee whiz, maybe WYNN's results 2Q were not as good as some thought when they were released two weeks ago. Really? Some might recall this "news" here 3 wks ago. So MGM's weak Macau results the only part of the four U.S. listed companies' reports any analyst (excl Bain) actually understood?
At this "piercing insights and timely analysis" level of "research", in another couple of weeks Tang may figure out that Vegas VIP for the second Q actually did not mark the start of a robust secular or cyclical recovery for Vegas gaming revenue. In that regard, she may, only then, become the "thought leader" on the companies with significant Macau and U.S. operations. LOL
She also lowered pretty much the rest of the group PT to current levels. Brilliant (not). This is an almost exact replay of the herd all slashing estimates and PT for the group during the summer of 2012, just in time for the start of the 18 month rally leading to a 250% RIP for MPEL shares and more than a double on WYNN, MGM and LVS.
Good to hear from you here Dave. There is so much bs on this board it is down to about 1 post a day worth scanning. Too bad the old white men freeforum club won't let the yahoo dufus reside there. That way he'd have all his old friends back! LOL
As for Macau, Ho is winking about the completions coming... add to the Industrial Zone idea you shared above say a new bridge and a rail and soon there will be legit access and flow to Macau.
We have owned MPEL, LVS and WYNN many times over the years. No other company is as well positioned as MPEL is in terms of the next 18 months and programmed percentage increases in footprint expansion (Macau AND Manila), ebitda, adj ebitda, footprint expansion, and, toward the end of that period, adj EPS.
Your comments on MSC 2017-18 must be referring to the "expansion phase" they just began talking about in the 10k. The "initial" phase will have 1100 rooms, but the capex budget for the expansion phase implies twice as much construction budget. To be clear, the "initial phase will hit the ground at full throttle in mid 2015 (NOT 2017 or 2018).
As for the group, things are so hammered they are all buys, but of the four U.S. listed companies, quality analysis would lead those with legit sector comprehension to conclude this order of preference: MPEL, WYNN and then LVS and MGM.
Re your comments on LVS "dry spell", not sure what cyclical dip you are referring to, but we owned it 100% net long for the run from $38 to $72, selling out early, but then reloading it for the second bump from low $70s to $80 when they finally pulled Shel's nutty Spain idea that we suggested was hutrting the stock from $80 back to below $70...
Again, we think straightforward analysis makes it obvious MPEL is poised to outperform the group, but WYNN is the second stock we'd add if we were adding another name in the sector.
In addition to the brazilbound joker, now we have another genius saying that "TA says sell"...
No, it does not. The stock is jcall it 1% below the recent pivot (buy point), and now consolidating recent gains... and likely will soon RIP past the pivot at ~$1291.
Our PT is $1400 by the Dec Q earnings call.
MPEL's focus on elite mass/premium play is not yet even close to valued appropriately, but that discount will fade with ongoing execution. With the new revelations last week that MPEL is "repurposing" Altira for the big VIP operators -- with mass/premium mass being the focus of COD and,next year, Studio City, MPEL will be in the A1 slot on Macau...
Fun to read the VIP recovery already underway in Macau as Deutsche's Tang published Monday night.