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...
Summer light ends this week guys... perhaps just in time for everyone coming back to work to figure out how to get the HF returns ofless than 2% ytd up to 10% at least such that pm and their staff might actually have some incentives to show when CY14 is done... shades of last year for anyone reading our comments with MPEL dipping from $26 back to $21 in July 2013.
Now when you look around at ideas such as adj ebitda growing double digits without footprint expansion while VIP was collapsing on the many reasons for that in macau, and then realize MPEL is on track to double adj ebitda f30m or so.... can you think of any stocks savvy pm might be soon pulling box hedges off on? LOL Not much fun scraping along the bottom teeth first while we wait, but we continue to add shares when they go on fire sale like this. Courtesy the sector news, adding more to TRIP, PCLN, EXPE and the three airlines played hard since 2012 as well.
I see the mytek/idiotpumper/blacknite multiple alias putz everyone has on ignore here and on HLF and probably everywhere else the gump posts like a 5th grader learning swear words for the first time and that he's made 42m on aapl and so on and on is trying to dis you...
Real readers here value your thoughts and anyone who has been around a while here knows you have long been a quality poster/contributor here... so put the F idiot on ignore and you'll have a cleaner board.
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.
Recall we said EXPE was stupid cheap at $48 12 months ago and that TRIP was dumb selloff down to $sub 80 again (esp on the prior CC before guidance -- LOL) and now we have a quick head fake stall on consumer discretionary over the last few days... We said time to reload AAPL at $389, too, remember? LOL MPEL (our only stuggle this year but still own the core at $17 and the trading sleeve now at sub $31) is about to do a multiyear dazzle as well.
As for pcln? It was $1100 only a couple of months ago... and we said the gifting done by shorts and arbs on the OPEN deal down around $1180 was easy money too... see my threads on "chart" and "time to own this large (again)" for a quick look back.
PCLN is kicking #$%$ despite weak EU, bs middle east/Ukraine noise, etc., and it has a couple hundred bucks run higher coming... all those with weak knees should be out before that... those who want to ride to horse higher should consider adding while the stock is still cheap relative to sandbagged guided growth.
PT $1400 the week of 4Q earnings report.
What a joy.. hope the shorts are having fun on this, expe, pcln, the airlines, and our other key allocations this year.
MPEL is the only one in the group not smoking shorts (YET) since March... shorts will soon be torched on that too. LOL
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.