Agree on all of that... broadly, the street group think is take Sep Q annualized, haircut that 5% and call it the "forecast" for 2015. As noted for a couple of years running here, the buyside firms don't pay much accord what the brokerage analysts in this sector have to say... Buyside teams know the sellside adds no meaningful vlaue to the conversation on these companies.
The good news is that a couple of the Macau companies are not dependent on VIP so much as others, and, in the case of MPEL, it has Manila opening up momentarily... and Studio City (the first phase that is) opening in another 8-9 months from now. The upshot of that is although MPEL is carrying the preopening costs of gearing up staff and training for these properties, they will soon have some revenue streams to go along with them.
The thing most of these "analysts" and the media pigeons that regurgitate every negative color point they can find and so all of them are still missing... is that STILL come 80% of VIP tour play is continuing in Macau. That is net of all diversions to other venues around the world and also those corrupt/indicted and soon to find themselves in one or the other of those buckets as a result of Xi's "tigers and flies" corruption routing (as pointed out more than once here).
As evidenced by the stocks clawing their way back from recent lows to the 50d emas, more than a few buysiders are growing increasingly comfortable that the worst is over. For the little AOL girls here, I'm not saying the group can;t find a reason to retest, just that the Golden Goose theme will likely soon prevail over Xi's political grab as "corruption witchunting" fades.
And the mass piece continues on better than any of the naysayers have been pouting about as discussed amply here...
Following up my reply to crnjms on hos new thread on chanos, if one wants to fret about something potentially harmful to Macau, I'll suggest it is the ongoing bs commentary of Tam re the bs table limit "guidelines". As noted prior, these "guidelines" are not law, nor are they even remotely being enforced to date as evidenced lately by the granting of 35, no 50 tables to a dockside concessionaire under the rationale that it is "good for growth in macau." To the extent they actually did enforce the guideline (in effect, really just a talking piece to coerce IR developers to actually do more than just build monolithic casinos) of 3% annual growth, that means that the tables Galaxy, Wynn, MPEL or LVS individually think they will be granted over the next two years would, INDIViDUALLY, more than spend the entire 3% "limit" for 2015 and 2016 COMBINED! Then there are another 4 new properties coming on line if we include the others and extend out to 2017.
simply stated, there is NFW Macau can actually be thinking this limit is going to be enforced, unless they want to go from having macau be the biggest gaming hub to being the biggest laughing stock of communist mishandling of commerce in the new century. What, some $25B or so of new capital has been committed to these new projects, and then they are going to tell them they can have the next three years allocation of tables (so less than 500 altogether) to split amongst them while they gave 50 to a party that is not even a legit resort? Notice how even Steve and Shel have gone quiet on this... no doubt the local govt has asked them to not say much and that things will work out as "promised" to the developers.
One could also try to emphasize the corruption angle and new office of corruption (LOL) as a legit concern. The reality is that the top VIP operators are still coming without friction -- some 80% of the peak level of play! Already, those with a corruption risk are either dead, hiding, or never coming back.
Chanos has been short China real estate developers, hoteliers, engineering firms, banks/insurance companies and the gaming companies for at least three years. As per my comments on his "interview" with IBD's weak sauce journalist Detar, Chanos is likely being squeezed hard by the recent surprising strength in China and turnaround in the gaming stocks... and he is prone to seeking air time when he wants to shout his themes publicly. He's been notably "right" on a lot of ideas over time (esp Enron where he made his name as a short specialist), but he has often been expensively "wrong" and he'd be the first to admit that.
China's economy is in transition away from production/construction build out to more consumer/service oriented growth -- witness Jack ma saying the future for Alibaba is not more exports but bringing western brands IN to China consumers -- and macau is going to figure prominently in the future of tourism/visitation for China or they have a ton of surrounding economic development projects that will soon be "see though" commercial and residential space... The central planners there do not want to see any erosion of their ~$20B year of tax revenue going to other places as the chorus will increasingly be singing over the next few months if Beijing becomes hostile to macau.
Note that Chanos emphasis has long been housing, commercial real estate and engineering outfits in china -- not so much about the gaming companies. In fact, he MPEL was long a couple of the gaming companies a few years ago... He public commentary since has been more about he "wouldn't own the casino companies in macau" -- but for the reason that the other aspects of the economy were going to tumble. He's been wrong on the broader issues, and the Macau companies too, but I would not be surprised if he has no short on them, esp down here now. As I wrote prior, he is a smart guy.
If you missed this one from last summer, it is also an excellent video on Macau developments... specifically, how key thought leaders (Shel/LVS, Lawrence Ho/MPEL and Pansy Ho/MGM) are thinking about the future development of macau and how customer preferences are changing rapidly (as told by Lawrence on the early May conference call and then by him and his sister on this later video.
The timing of this re-airing as part of the "Best of Titans" series is interesting. All four of the US listed stocks have just reclaimed their 50d ema, some are buying back stock despite heavy capex for new property development in Macau (MPEL in Manila too), confident about their future in Macau (the 3 with Vegas/other US venues not so much) and all four mgmt teams are essentially saying, SFW that VIP is down we are focused on mass/premium mass (none so effectively or early as has MPEL) as the future of Macau... and just now, a quarter later, all are reporting surprisingly solid ebitda progress on mass gaming despite all the hubbub about VIP being down 20% YOY... of course, most here likely know MPEL's business and assets are principally focused on mass/premium mass and that it has the highest percentage of mass/total rev and best mass and overall ebitda/table of the group for a long while running.
This morning I mentioned the other video was on Bloomberg's re-airing schedule... because it came up easily when I searched for my earlier post. Actually, though, this is the video Bloomberg aired very early this morning. This one showcases more about MPEL's ceo and co-chairman (Lawrence Ho) and his vision for MPEL assets in Macau. Shel is as narky as ever and fun to watch too. Pansy Ho? Not so fun -- looks like she drink vinegar instead of coffee in the morning -- same as ever with her..
google the thread title for the video... another 23 minutes of worthwhile viewing for MPEL longs
Ed, thanks you are correct. We have three other companies reporting Tuesday.
"financial results for the third quarter of 2014 on Form 6-K with the U.S. Securities and Exchange Commission ("SEC") on November 6, 2014, to be followed by a conference call on the same day at 8:30 a.m. Eastern Time (or 9:30 p.m. Hong Kong Time)."
Bloomberg re-aired this 23 minute show this morning. If you are long and have not seen it, you might consider goog the title to watch start to finish for a great overview of macau and MPEL's posturing there. Fun to highlight that with the 8 new properties currently underway in Macau, concessionaires are upping their bets on Macau by some $26B worth of new construction, most of it on Cotai... apparently they all feel good about Macau's future as the "look back" moment of Fall 2014 starts to look and feel like thefinal bottom now that more than just sophisticated longs understand VIP growth is not needed to generate solid ebitda leverage for MPEL and LVS (in particular), or even WYNN and MGM. Again, even MGM China, more heavily reliant on VIP than all but WYNN, put up ebitda growth of 12% YOY for the Sep Q -- not bad considering VIP is down ~20% in aggregate for the period.
MPEL has what they are now calling "the initial phase" of Studio City coming on line mid-2015 and COD Tower 5 (which will become the iconic tower on the Cotai strip dedicated to premium mass) is now under construction as well. As disclosed in April, MPEL is currently developing its plans for the "expansion phase" of Studio City, which will more than double the room count of the first phase...
MPEL also disclosed a few months ago that they have more than the initial 967 rooms for COD Manila planned there... as with Studio City, they are now working on their "expansion phase" for that best in class facility opening within weeks from now in Manila.
MPEL reports Tuesday, Nov 4, and should have a solid report all considered... and chance would have it that now is their turn for better than thin RC holds.
Chanos is a cpa and smart guy, and he's made several great calls on his short orientation HF... enron the big one in my recall... but he has been calling China a bubble and ready to collapse for years now, saying the housing and shadow banking mires would swamp China's economy and take the world with it since before COD opened! today he tells Detar at IBD, "corruption, credit crunch, all we have been saying", as if he called the real crunch seen since Xi's corruption campaign started causing guys to jump off of tall building last summer... and lots of folks to lay low... in their foxholes Steve said a few days ago -- a fun term we have been using here for a month or so. LOL
glad to see Chanos out there talking to the weak-minded droids who will publish his "hot air" thesis... a sure sign his shorts are crunching his positions and he's getting a tad pinched. Hey Shuli, you let Detar get out there first with this "real time, market making news." ROTFL
anyway, it is all good fun and, based on the Abe news today (nice) and surprisingly decent ebitda generation out of even MGM in the "troubled" quarter in what Nomura's analyst framed as the "dangerous VIP" decline as if it was the end of the business in macau (LOL), it is increasingly looking like $24 was the bottom for now... we'll leave the short puts out there until they expire next month. We even added a few shares again when they drooped below $27... soon that "little" trade sleeve of ours will be in the money again.
fwiw, we also put on a small (5k) WYNN trade this morning. The quant premise is simple -- Macau is not dead whether Chanos and his media and sell side analyst pigeons like it or not, and WYNN is the second best positioned and second cheapest in the group, so it should be outperforming LVS and MGM. That said, all four stocks are still on sale and WYNN will soon be back above $200 (speculating) and the special and regular dividends totaling $2.50 go ex next Thursday.
Some MPEL longs might enjoy reading through the MGM transcript. Seems they finally have a legit construction process underway for MGM Cotai and even have three floors above ground now. They pushed back their "tentative" opening date from mid 2016 to "Fall 2016" but at least they are building and apparently done saying that they (and everyone else) are stalled and uncertain about when construction will get going there; since the last Q call, someone must have told Murren not to say everyone is stalled/uncertain about completion targets since Galaxy, MPEL Studio City and Wynn Palace are capping/installing interiors now.
They were unconcerned about mass or premium mass play slowing or margins fading andalso had this to say about VIP:
Nomura analyst (bozo with the Visitation spend chart Shuli loves to quote)
"And then, Grant, as it pertains to VIP, it's kind of a dangerous question [ yeah, okay "dangerous" -- what a putz]. Is your sense that there's any stability in this, in your customer base yet?
Grant R. Bowie - President
Well, it's transitioning. I don't think it's an issue of customer bias, I just think we're going through a realignment more than anything else. And that's been going on for some time and it's being well discussed and well reported. The operators are still seeing customer flows. Yes, it's down on previous experience, but they're starting to reconsolidate in there. The feedback we're getting at this time, it can be a little more positive as they readjust to the new conditions."
As I wrote last week, one day soon even these dopey sellside analysts are going to figure out that still 80% or so of the run rate VIP is still happening in Macau... and even MGM's China ebitda was up 12% YOY for the Q.
Next, MGM execs said they aren't doing any pricing promos and other than saying the new "smoking ban" rules are confusing, yawned about that too.
Abe unexpected round of QE had jolted the Asian markets overnight Russia signing up to source heating fuel for Europe with a concession on the $5B due bill from last year has pumped the European markets... Germany is up ~1.7% this morning.
Gee... who'da thunk maybe the sky is not going to fall on China or Macau?
yoondr and anyone else trying to understand the difference between VIP gaming and mass/premium mass, as well as why most buyside teams ignore the sellside in this industry, ought to read this thread top to bottom.
funny as hell to think dipchitt's rate some of the comments negatively... they wet themselves too. LOL
But the Nomura analyst team should be fired for trying to issue an "earthshaking" revelatory piece with their lame graph Barron's weak sauce blogger wrote about like it mattered, when the reality is that their work is ridiculous -- superficial and wrong. The research director needs to be replaced for letting them publish such goofy work too... and for getting morons such as Shuli Renn and Detar to republish the inanity.
Too stupid to laugh about really... good thing no one managing money looks to these idiots for input.
Meanwhile, LVS, WYNN and now even MGM's results have shown that even with VIP down hard they can still make progress on adj ebitda, even if holds go from fat to thin in YOY comps. MPEL, the least reliant on VIP junkets of them all, results next week will give all of these media and analyst naysayers on the MPEL story something to chortle on for years to come... and here comes Manila and in about 8-9 months, phase 1 of Studio City (contemporaneously with Galaxy's new property to help build excitement and another reason to go to Macau again -- almost a year ahead of Wynn's Palace and MGM Cotai.
MPEL is likely to report the best results of all four companies next week...
About your "confused as heck," seriously now... from the comments of many here, it seems few actually understand the business in even rudimentary terms. Congrats to you for wanted to learn more about what you own.
In as helpful a spirit as I can muster (and gleeful about what the other companies results imply for MPEL's positioning and our returns on the airlines and OTAs in recent weeks as ebola concerns fade to black) all things considered, you should read through MPEL or LVS' 10 and June 10Q filings to learn more about industry terms and the difference in VIP (table roll) gaming revenue, net and mass/premium mass gaming revenue. Pay particular attention to the margin differentials in these very different quantitative differentials and the impact on adj earnings, adj ebitda generation. Building on that knowledge base, then go study the mix between mass/VIP for each of the four gaming companies listed in the United States... then your confusion will be resolved, and you'll understand why the couple of quality analysts and knowledgeable posters here believe MPEL is the best-situated company in Macau given what is happening there with perhaps temporary and perhaps more lasting VIP tour curtailment as well as the reality that Tower 5 will quickly become the "premium mass" place of choice (WYNN's new Palace should also fare well), what Ho meant by "repsoitioning" altira for the high end tour operators,
otp, you'll be in a far better position to understand all of the quality posts shared here by the few willing and capable of doing that amongst all the useless drivel and "little girl" bs .
TRIP and PCLN will also have fabulous results to share next Tuesday...
We own all three -- they should have little trouble running up 15% or so into EOY as the hedges all come off starting tomorrow.
Meanwhile, you have to laugh at the pizzant hedge fund trying to head fake short and PCLN down tonight... same as the idiot shorts do on these stocks every Q it seems. Big moves up tomorrow -- shorts are roadkill as my partner loves to quip on stories like this.
Despite their heavy VIP orientation (vis a vis LVS and MPEL that is), they still put up decent ebitda progress.
Considering that WYNN and MGM have heavier VIP mix than MPEL and LVS, and they along with WYNN didn't have the big fat holds this Q, it likely won;t be long before the buyside pulls remianing hedges and even the lame sellside analysts figure out that macau is a profitable venture despite a 20% clip on VIP vs last year.
If you missed it, have a read through the article this morning saying "experts" are concerned Xi's visit scheduled for December may crimp play by leaving elite wealth players in their foxholes. Other experts think Xi is coming for the 150th turnover anniversary, but also to talk about how great macau is for China's new world order on converting from a production economy to move of a consumer/services based economy. He'll also likely emphasize how wonderful it is to see all of the infrastructure and surrounding development taking off now, and applaud the IR developers who have taken the "destination resort" to heart in their offerings as an intergral part of making Macau a truly great vacation destination for those looking for a proud chinese locale to go to -- one with exciting cultural, resort, dining and entertainment options, and also the pride of the world place to recreate by gaming responsibly.
Hey Xi, no credit needed for your use of this outline for your remarks at the microphone... just make sure there are lots of the dipchit media writers there -- you know, the ones who have been wetting themselves all year.
On that note, China is apparently moving to permit Visa and Mastercard to do business in China... if that progress as is being discussed, it will mark the final slam on all of the monkeys wetting themselves over "unauthorized" UnionPay swipes in the parking lots.
agree with Jim...
Great comments on COD manila...
And really confirming comments from the JPM analyst team wrt Macau VIP:
"Triggered by four consecutive months of decline in gaming revenue since June, prices of casino gaming stocks in Hong Kong have dropped by 37 percent on average from their respective year-to-date peaks, according to the brokerage.
The downturn however “is not structural”, said J.P. Morgan.
It added: “Taking a step back, we note consensus earnings estimates for six operators came down by US$1.2 billion from the peak (down 11 percent), during which time the sector lost US$70 billion in market cap (down 37 percent). In other words, we believe it was more the uncertainty and fears on the outlook, rather than the magnitude of slowdown itself, which caused a correction.”
The brokerage sees a recovery in Macau’s gaming industry starting in the second quarter of 2015. “Macau … will likely enjoy the best ‘profitable’ growth from secularly rising Chinese mass, and we forecast the combined EBITDA [earnings before interest, taxation, depreciation and amortisation] of [the] six operators to double by 2018"
This is the most legit recap of what happened to Macau VIP and why -- and where things are going -- than we have seen since May from any sell side firm other than Bain. As conviction/visibility improves, long before the ebitda double is historical, the stocks will begin forward discounting of that progress on a corresponding vector.
thanks... good post and quality insights as usual
As you know, the "measures taken by the Macau government to limit the number of gaming tables in September 2011" are not mandates or even law/legislated rules, they are "guidelines" local officials have used to muscle their objectives of spurring "diversified" offerings, and, as seen here, to promote economic development and jobs wherever they see fit.
It is also a simple truism that the "tables limits" guidelines have never been enforced and likely never will be... but for all of the noise on diversifying Macau's economy, Beijing and Macau govt officials all understand that gaming is the lifeblood of Macau and the surrounding economic development... impairing the "Golden Goose" that GR represents in any way would be incredibly shortsighted, especially since the land bank in cotai is now entirely committed.
Fair point to be sure... to recast what I wrote, the starting point is that even at Steve's "nadir" of VIP, still some 75% of peak VIP GR is being wagered.
Who is still playing? Let's call that "an open question", but we know those who have either taken themselves out or are sitting in prison or "State detention houses" (e.g., big wigs Zhou and Chen recently in the news) are going to any of Beijing's or Shanghai's ultra lux "private clubs" these days, nor are they making any under the table -- or over the table -- "deals", nor are they gaming in Macau (or anywhere else). Dare other guys who are the next Xi headline targets playing? Doubtful...
The questions of just how many "legit business people" [with elite wealth and a propensity to recreate with gaming in Macau] and how long does the chill effect last remain, and the unanswerable part about what will it mean to future VIP GR and premium mass and mass remain for now. Thinking through the macau piece, what if VIP is cut in half from the 75% level, and what if forward growth of mass GR is more directly functional to rooms desired by those coming to macau? The heady growth curve overall may be gone in those circumstances -- and only a small handful of companies will be the beneficiaries. Shel and more importantly Steve seems close to sanguine for now -- but in this new world order MPEL to the fore "shaping the future of Asian gaming"...
Is it president Xi or premier Li coming? We have seen several references to Xi (corruption crusader), but none to Li coming for the Portugese turnover celebration...
As for the lingering impact on conspicuous spending in the form of junket players, it may be that the crimp is longer lasting and more severe than anyone has contemplated to date... yet still we have better than 75% of last year's VIP GR happening, right in the teeth of the worst of it. One can begin to surmise that corrupt officials and their developer pals building bridges and highways and govt buildings are not playing anymore (the guilty parties not yet hurling themselves off of tall building and those that have met that end?) as well as anyone who is afraid their past dealings can be construed as out of bounds by Xi's review standards everyone in the gray zone now understands? For all of these guys and anyone else who has been part of Xi's targeted "private club shady dealmaker" crowd just laying low these days, they may never be back.
It seems likely, however, that those playing on junkets that have continued to come will continue to come when everyone else dares to come out of their foxholes... meanwhile, all the direct credit guys who have access to money/financing apart from the mainland continue to play with conviction as seen in WYNN's and LVS' numbers now on file.
Meanwhile, we know MPEL's VIP is less of their mix than any of these other companies, incl LVS... and it is let's say highly likely that MPEL continues to get more than its own share of repeat customers... that reality is in the market share numbers -- more clearly through Sep and Oct to date than ever before.
All considered, we were pleased to see WYNN come in as strong asthey did. MPEL s/b materially better YOY on mass/ebitda/adj ebitda etc... and Steve can tout paradise as "diversified IR" -- but other than the big lake, it will pale vs COD and especially Studio City on that score.
you've said that a few times now on this board... You really ought to read the IBD article I am referring to. After that, go back and read my comments again so you have an idea of what I was talking about here.
As for casinos all over the place, including the Indian reservations, there have been casinos in all but 5 or 6 States for years now, and certainly that proliferation has eroded the one time gambling mecca that the Strip represented here in the U.S.... but that has absolutely nothing to do with Steve Wynn and MGM and LVS flying in China's VIP players in May and June when tables games soared to better than 30% YOY growth in Vegas (was THAT because of the casinos popping up everywhere?) and, contemporaneously, all the idiotic analysts (i.e., excl Bain and a couple others who do add value) began touting "Vegas resurgence" in unison. We and then a few others here and at the mic who actually understand the business, including Steve Wynn, made it confirmed that private jet flyins from China (vs macau) was the driver for what we called likely to be temporary blip. Table games faded to just 7%YOY in July for Vegas, and then dropped to DOWN 12% for August.
Again, see the IBD article as Detar is leading the pack of the clueless.