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.
We never try to be smart, just to be successful allocating capital (LOL). Are you referring to our tiny trades in LVS yesterday or your own trading? We traded LVS twice this week, blowing out the first yesterday morning with cognac money (LOL) and the smaller second tiny chunk this morning with a dime gain. We've also traded WYNN and BYD several times this Q, every sleeve with a worthwhile (target) gain... but we owned no gaming stocks other than MPEL going into the call tonight... any such position would have been taking overline risk vs the MPEL concentration we love at these levels.
But as for "all signs screaming pullback", I disagree with that view, even on MPEL's competition after the last 3 months of shakeout and the stocks all down 20% or more. If one had any foreseeable premise to think LVS would be soft on 4 Seasons and the Penninsular properties despite fat holds, and that Vegas would suck despite a strong june for other companies and overall, and, most significantly, that Singapore results were going to be weak for yet another serial Q (esp after adj for the really fat hold there), then one should have gone short when the stock was $6 higher than tonight.
If "all signs were screaming pullback" tonight on LVS, then "all signs are [REALLY] screaming pullback on WYNN and MGM, but NOT on MPEL... We will be VERY surprised if both WYNN and MGM don't have significantly better results on RC than LVS had on Macau for the June Q, but RC almost does not matter to MPEL in Macau now... and we are close to certain they will be kicking #%@ on mass and premium mass for last Q and in the future.
What we did large was add to the mpel trade sleeve which we now consider our Core layer 2 if you want to think of it that way... in other words, our core position (put on between $12 and $23) is nice, but we are VERY comfortable owning MPEL large at sub $34 (ignoring the many successful trades/hedge gains taken out since last Fall).
VIP down to only 17% of LVS adj ebitda in Macau... Shel adds that Singapore is more VIP dependent, which we know because they butched up their direct credit (premium mass) efforts there. Shel also noting how flyins for VIP to Vegas still matter to them. That's an understatement, take VIP out of Vegas and the only "gaming rev" left is bluehair slots, machines, sports betting and poker. LOL
Shel spoke of low hold in premium mass, saying that "normalized", that means they would have had an additional $30m of revenues and i missed his ebitda number impact if he shared it... but what about the fat hold on RC in most properties on Macau and in Singapore Shel... Shel? LOL
Shel had a quality recap of the garbage and hindrances (World Cup) slung at the gaming business in Macau last Q though, reserving most venom for the bs press noise creating uncertainty... Hopefully Tam recognizes that his unwillingness to end the bs speculation on UnionPay, visas and all other garbage cost macau some serious tax revenue last Q...
LVS also continues to "measure" their adj ebitda and visitation in gross terms, always saying they have the most shares of all that... someone ought to tell shel that pound for pound (footprint/room count), MPEL is by far the best in group on mass, adj ebitda, adj ebitda growth, etc. And just now he's is boasting how LVS is all the shiz on MCE and that is the critical part of what an IR is he says... The MPEL and WYNN teams must be grinning listening to that ego posing as an analytical perspective. Gotta feel for the cfo sitting there on his hands saying nada.
Shel is stroking himself on being "THE DEVELOPER/RISK TAKER" now and how Singapore success makes them abig winner for new Asian venues -- a real yawn on Japan now... wake me up when they pass enabling legislation for IR there.
Last point before Q&A is buybacks.... we agree they did a bunch, but the modeling will emphasize they missed by more than $.05 on EPS if one adjusts for the overline retirement of shares during the June Q. At that pace, they will soon need a renewed and upped share buyback authorization.
Early take on a skim read through (glad we own MPEL large and no other positions in macau names going into the close today).
The stocks all took a slamdown for a few minutes, but LVS was not awful, just soft on VIP fior the most part (not a surprise) and still close to consensus numbers overall. Although the overall picture looks ok(other than light to lowered analyst consensus on revs and EPS, the latter despite heavy 2.2% shares bought back during Q at $76 ave), some of the details of their execution reveal why we think MPEL's mgmt continues to reflect best in group execution.
LVS' Cotai had some surprisingly uninspiring results, driven mostly by soft VIP (despite strong RC holds), the impact of which was largely offset by by their generally solid mass results. Still, overall 4 Seasons & Sands Cotai had soft revs down 17% and Sands looked soft too. The Penninsular (macau) looked worse (adj ebitda down 7%) with RC vol, ADR AND REVPAR DOWN 20%, 11% and 7%, repsectively. The U.S. operations look soft, too. Surprising to see Vegas properties looking adrift given Vegas was solid for the May-June GGR numbers.
As with last Q, MBS continues to surprise to soft side despite overline RC hold (3.4%) again this Q. So much for MBS being a GREAT growth story until they expand it in a couple years... with a normalized hold on RC, they essentially had no adj ebitda growth again this Q.
I look forward to the call and what Shel and Mike have to say about the 2H14, but after all the bs noise on Macau it really is not surprising to see some of the foregoing outcomes for LVS. Singapore is the part that likely has some pm longs concerned about the growth story...
We're glad MPEL has Ho's team, mass focus, COD and no U.S. operations!
Call starting right now...
shorts about to take a header on PCLN...
Longs? prepare for takeoff! LOL
see my posts re hotels here and on DAL for the airlines... great results coming and that and the hotels have driven a fabulous Q for PCLN
My fav Shel comments from last Q were Shel's on the 6000 year history of Asian gaming and how they finally got a fat hold out of singapore (apparently not realizing the normalized hold highlighted their direct credit forays in singapore have been weak sauce and that the Q wasn;t all that good for them there).
Lawrence's discussion of the "phenomenal Golden Week" along with his wink that annual GGR growth of 15% for 2014 was likely a good baseline [upod/sandbagged] estimate... said without reference to his front row seat on why conversion to direct credit "premium mass" away from VIP operator reliance having a poorly understood impact on VIP... Ho was humble pie about their Q and everything else, but it was excellent.
My fav about Steve's call was the brashness about how confident he was that they will get their 500 tables for the new Cotai resort (when all the key players will all but certainly get their needed tables)... and how he sighed his way through pointed questions that made it clear their Q wasn;t all that special either.
"Distract"? LOL Here's is some depth of knowledge on the players/companies you must not have to suggest that...
First of all, Lawrence's interest in russia is peanuts from a capital standpoint. This young man is out to show what he can do for himself and with MPEL... what's he got to show for it? Arguably the singular best positioned company in Macau and Manila, and running at the fore on japan with his relationships throughout Asia and accomplishments with COD Macau.
Second, the small russian concept is a nice test without risking the capital of MPEL, his full time job and primary source of wealth-building. If things settle down politically and Ho can make the business work, we won;t be surprised to see Ho bring MPEL's muscle into the foray at a later date.
Third, "Shelly" has several investment interests apart from LVS. Do some work ythhy.
Fourth, Shel is preoccupied with politics... he spends a lot of time and money on right wing endeavors, much of which has created flack and ill will toward him personally and more than once not to the best interests of LVS owners (Harry Reid comes to mind, a toll played well by Murren and others).
Fifth, Shel spends a lot of time massaging his own ego and trying to create dissension on that premise... Have you listened to Steve Wynn's running commentary putting Shel in his shadow on this and execution over the last 10 years? Steve flatters himself at Shel's expense (even moreso with Murren) with regularity.
Sixth, and last here, Shel has the baggage of U.S.operations and the threat of online gaming to wrestle with as major distractions... lawrence and MPEL have none of that negative energy in the mix...
it is Lawrence Ho's intl development company and has nothing to do with MPEL... any more than Crown Reosrts, Packer's company, efforts to build a casino in Australia have anything to do with Melco Crown (MPEL).
of course, anyone reading here or the documents for themselves and is not #$%$ knows these things...
Clearly it is more than iron ore demand/pricing and the railway projects picking up... and though Bloomberg didn't join the pack of idiots (Barron's blogger, IBD, Zacks et al) along with all of the weak sauce sellsiders with their incessant repeats of bs noise since March, it is great to see even the cheerleaders analysts now lowering their estimates (albeit by peenies a share for the year and next year too). Might the dippy press be going to turn positive just as the companies refute all the bs with some June Q performance realities? MPEL front of the pack, followed by LVS...
From the article this morning:
"China’s economic growth accelerated for the first time in three quarters after the government sped up spending and freed up more money for loans to counter a property slump.
Gross domestic product rose 7.5 percent in the April-June period from a year earlier, the statistics bureau said today in Beijing, compared with the 7.4 percent median estimate in a Bloomberg News survey of analysts. June industrial production and first-half fixed-asset investment exceeded projections.
Premier Li Keqiang’s government has brought forward railway spending, reduced reserve requirements for some lenders and cut taxes to protect an annual growth goal of about 7.5 percent..."
See the thread I updated last night on the MPEL board if you are a serious long on any of the macau names, but here is what I wrote on Jan 19, exactly six months ago, in part #$%$ on this yourbiggestdufusintheworld pedantic putz for trying to dis me with his ridiculous ignorance and arrogance. If you read the whole thread, you'll see we thought WYNN (then $250) and MGM were due for a fall and that LVS was still buyable (it was up 14% a month later), but then at $45+, we also made it clear we thought at $45 MPEL was too frothy to own unhedged and or without selling out some of the 270% gain t15m . (Read more to learn we blew out our large trading sleeve (round 30 or so) and hedged half the low basis core (which later posts reveal we covered at the 50d ema and then got back to 100% long for the double top retest... before again hedging back to the 50d ema -- and also began tip toeing back in to what is now our largest ever sleeve with a basis below $34. LOL) We own the core unhedged.
"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."
I detailed why we had gone from very positive to negative on MPEL to serious longs asking why on that board back then, and the best part is that the risk reward matrix is EXACTLY switched out back top positive on MPEL now. Unlike the morons on both boards who try to dis us and have a penchant for being on the wrong side of both our serious allocations and short term trades, we actually understand the markets, the sector and all four of the U.S. listed companies doing business in macau.
CNN's latest news 12 minutes ago:
So far only 1 person has been reported killed -- struck by a falling pole...
"By 7 a.m., the typhoon appeared to have changed course slightly, heading in a more westerly direction. It has been expected to hit Manila head-on, but it now seems to be veering away.
The real danger, however, could be the 2- to 3-meter storm surge that's expected to follow. Coastal areas are highly vulnerable to storm surges, and could easily flood.
Marco Savio of Plan International spoke to CNN from Makati, Manila's business district. He said he expected the storm to be at its most severe in Manila around 2 p.m. local time (2 a.m. ET). More than an inch rain was falling per hour in the city, many areas of which are susceptible to flooding.
Savio said while communities along the path of the typhoon have been evacuated, the government was not moving people out of the capital. "(The) majority are living in areas prone to floods. Schools are closed, offices and buildings closed."
see the updates, but things are worse than expected now. Two hours later winds atrengthened up to 125 mph, surprising the U.S. air force and other data center forecasts. As with the big one last year, we hope people get their families WAY out of low lying areas, and we are glad COD Manila won't be ready for another 3 months or so as the forecast is now for a storm surge of up to 10' is possible (it was only 3" forecasted earlier today!).
See the photos on "mashable" site as the mid coast homes on the eastern side are only about 5 feet above storm tide (so 10' will put those shanty huts 5' under the waves!
Thankfully, the last center report said winds were moderating as the storm hit the Northern mountains -- Manila is on the other side, but there will likely still be some street flooding there.
Re my comment in late April, a few days ahead of LVS talking about how excellent the mass and premium mass development was coming along and Ho calling Golden Week "phenomenal" two weeks later later:
"Those who think China's sky is falling ought to have a look at iron ore prices firming of late... why stockpile iron ore if your economy is collapsing?"
Check out the RIO news tonight. Iron ore shipments (largest customer is china for those who don't follow RIO) are up 10% yoy, well ahead of the guidance and significantly outstripping production run during the June Q. So the fundamental demand is still cranking in China... not the least of which is building that darling rail.
Combine this with the running notes on the banking system, including drjack's series tonight, and it is pretty clear the now debunked series of noise bs is trail dust. LVS' call should be a great update for Macau tomorrow... time for these two stocks to giddy up... not so much for WYNN and MGM as they are likely taking the brunt of the VIP crimp, at least for the noisy 2Q.
Those who have not been around or forget how several here tried to dis me for calling the stock "frothy" above $45 and suggesting, on january 18 and 19 (the first of the double top highss -- see comments below ) that some who had nice gains along with us might want to consider hedging or selling some along with more reasons for that assessment, might want to read this thread top to bottom.
I'll also suggest that we are now precisely opposite that thinking on the risk reward matrix as I wrote a few weeks ago when we suggested the "bottom is in" around the retested $30 floor. Just as the sentiment was way too positive then, it is far too negative now... precisely the kind of opportunity we like to do our own risk/reward matrix on before going large.
MPEL is currently our largest allocation -- by far. And oh... we are 100% long (no hedge) and long a small trade in LVS we will likely own into the CC tomorrow. Hell, we may even go large if the sleeve daytraders try to press today's ill-fated short bets on LVS. Again, we think that WYNN and MGM will suffer the most on the VIP news, because those two are well behind MPEL and LVS on dialing in direct credit players ("premium mass"). Fun times for those with a little capital to spec with in here...