Thanks for the great update Dave!
Studio City site looks clean organized and coming along well -- at least 8 cranes on site, windows going in and close to capping near term. Excellent! WYNN's new resort behind COD coming along well too. Great to see the rail between the back of COD and Steve's "Palace" going in... both should be great for COD foot traffic.
MGM's property and LVS' Parisan look to be stalled as to construction... glad Ho is brilliant at playing by the rules and with friends when it comes to plans and permit approvals/construction programs. LVS and MGM stalls look awful on site.
OTP, Murren gave everyone a heads up that MGM's new development in Cotai was at "stall speed" while WYNN, MPEL and Galaxy properties are all cranking along... that "catalyst" must be Moron Stankey's idea of MGM being the most compelling to buy. LOL
As an aside, the bloomberg article on macau is close to comedy... if it was written in May, before the big table games numbers for Vegas in May and june and then the BIG falloff in July, or if the author had done a little work to see how tiny the dollars are playing in Australia through the end of June as macau went into the 20-30% VIP fade mode, it would have been relevant. Good to see the stocks moving up hard into the teeth of all the analysts dropping their outlooks to dour, and all the weak sauce media doing their typical butch "reporting."
Re "some went to Australia"... I was joking if not obvious... in four (4) years after opening they tripled revenue a WHOPPING $370m for the year ended June (incl the macau gift)??? BFD... MPEL did $5B last year, most of that at one property (COD) while taking tables out of the other (Altira).
Australia is not quite ready to knock the lights out of macau... COD manila will likely do more revenue in the FIRST full year (2015).
p.s. For those who missed the memo, after Vegas had 30%+ table GR growth yoy for May and june, it collapsed back to 7% in Vegas in july... and slots are running negative YOY as well in vegas -- so much for the heralded "Vegas resurgence", huh?
Bloomberg piece I mentioned earlier (from a month ago)
goog a sentence of these quotes to see the entire Bloomberg article too, but the gist is that Chinese players with family or other business interests there may come to play or vacation there as the golf courses are nice, some are near beaches, etc... but it is a "Distant Market" for the Chinese and other Asians as the article expounds.
The most interesting part is about how VIP were enticed to go there (for 2Q anyway) -- seems the author doesn't understand the business were understood by the author it seems -- the net hold on baccarat was 1.47%, revealing they must be paying whopping commissions to the tour operators bringing VIP there. That is pretty enticing, huh? And how about that paragraph on "free rooms"?
Revenue at Echo’s international VIP rebate business, which lures overseas gamblers prepared to bet large sums with the promise of free hotel rooms, food, drink and transport, more than tripled in the four years through June to A$397 million ($370 million), the company said Aug. 13."
Imagine that, they paid about double the tour operator commissions and got people to fly tours there while the April/May/June crackdown took full brunt on Macau VIP play? So some went to Vegas, and some went went to Aussieland.
As for Crown's stock going up, the big delta for them is MPEL dividends! See this:
"Crown, Australia’s largest casino company, rose the most in almost a year in Sydney trading on Aug. 14 after the company posted a 53 percent jump in second-half VIP revenue [from little to some]. The stock climbed 1.8 percent... while Echo gained 0.6 percent to A$3.20. [Remember, Packer's Crown has al;ready failed twice in Vegas and is now on try #3.]
“The challenge remains to get the players to Australia,” chief executive Rowen Craigie said on an investor call.
That is an understatement!
EVEN IF macau VIP ends up down 25% YOY for 2014, it will still be some $20B or so of GGR for Macau... but that level is a butch haircut for MGM and WYNN, hurting MPEL and LVS' programs far less.
MPEL's VIP will likely be down more than that 25% in Macau as per their business plan... and one day soon the stock will begin discounting this more intelligently than seen on the screen these days.
As noted on matrix's thread about Manila opening soon, we don;t think Australia poses much if any of a sustained threat to either Macau or Manila prospects. official data on GGR in Australia is sketchy and premised on estimates, which make sense given the new integrated resorts there are new and not much of a cluster to work together with...
The Bloomberg article I mentioned is one of a few noting the aussie market is a yawn. Here is another one from last Fall from IBT, a retail mag -- see last parag
"Global Gambling: Macau Booms, Singapore Slows, Japan In Anticipation"
The Chinese gambling haven of Macau is booming as VIPs spend cash more heavily and rapidly, while Singaporean gamblers slow down and Japanese politicians back groundbreaking casinos... In Macau, record revenues in August and March earlier this year could help the city achieve revenue growth of 17 percent for 2013, or $44 billion for the year overall. Fresh infrastructure, like a new intercity railway completed in December 2012, or the new Chimelong casino due in late 2013, will attract more visitors from China, who represent the vast majority of Macau’s gamblers.
Macau’s success this year and revenue growth forecast of 17 percent compares favorably to Las Vegas’ projected revenue growth of 2 percent for this year as well as 2014, according to Citi analysts.
Although big spenders... drove the revenue gains, more ordinary gamblers could also boost margins for Macau casino operators. “There could be further upside to our revised [mass] estimates if mass GGR beats our estimates..."
Still... casinos in Japan are several years away from breaking ground, with openings likely to happen around 2020.
The report also covers gambling markets in Australia, the United States, the Philippines, and Cambodia. Revenue growth prospects for Australian and U.S. casinos remain very sluggish.
Bain discussed this in his roundtable notes from last week and hat's off to him... it will be a great result if Bain is correct that Xi may go to Macau later this year to allay concerns that Macau has anything to do with the problem... to date, clearly the campaign has next to nothing to do with Macau governance.
fwiw, "The Economist" has also published several magazine and online stories related to Xi's campaign to rout out corruption in china's govt and contracting work.
at least Shuli and Detar and all the other pseudo journalists have stopped talking about UnionPay card fraud, smoking bans, and the other 13 noise elements... and great to see the stocks up on the additional towel tossing of analysts this week.
If you missed the article last week, goog the title and see excerpts below. As we've long noted here, the graft is not about Macau gaming, but those involved in any kind of fraud are being prosecuted and obviously laying low now. So the chilling effect on China's innocent wealthy has crimped Macau GGR, but for how much longer?
"...a growing list of Chinese officials who have committed suicide in recent months, a trend that some researchers suspect may be linked to an anticorruption campaign begun last year by [Xi] the toughest in decades. About 30 officials have killed themselves so far this year, sometimes as investigators closed in, according to anticorruption researchers and local news reports.
Given China’s widespread corruption, many officials may have similar concerns. Mr. Xi has said he will pursue his campaign against “tigers and flies,” or high- and low-level corrupt officials, “to the end.”
About 32 senior officials a week were investigated or punished across China in the first half of this year, Wang Xiaoling, the head of the anticorruption agency in the southern city of Guangzhou, said in August, according to a report in the Yangcheng Evening News. The total may be in the thousands, and the campaign shows no signs of slowing.
Punishment often means long prison terms and, perhaps worse, public shame in a culture where officials have traditionally enjoyed exalted status and where loss of face is a potentially unbearable fate.
...The attitude is still leniency to those who confess, severity to those who resist” ... Torture is not uncommon, former officials and rights activists say, though most suspects confess before that occurs. ...Fear of punishment and disgrace may be only part of the reason for the high rate. Under Chinese criminal law, the death of a suspect ends the legal investigation... in some cases officials are killing themselves to protect their wives, children and parents, hoping their families will survive and not lose their wealth."
Great post as usual...
Good to see the stock go green despite latest dip S Moron Stankey "research" and dopey Barron’s and IBD articles to go with it.
We think Bain has done a fabulous job capturing the gist of what is happening in china/macau... and love the "witch hunt" metaphor (didn;t read the piece until after writing about the "phantom witch hunt as regards macau" this morning...
Fun to point out that while we pared our PT back to $40 in July, Bain then dropped from $57 to 54, and only now has he, finally, "thrown in the towel." LOL To be clear, my comment is ironically intended -- we don't think of Bain's just lowered PT of $50 as throwing in the towel. LOL His forward one year "look back" (and wish one had bought a bunch more) comments are terrific.
drjack, grftt, matrix (when he's not upset), toast, crnjms, bentley and several other longtimers here often share quality perspective... Then we have the multialias tarts. When you put the putzes on ignore, you see it renders a board with about 4 entries per page. Still mystifying to see their bosses (pissant Asian hedge funds?) think it is worth maying idiots to post their recurrent comments with blazing ignorance and stupidity all day long. LOL
As for what else we share in this quasi public forum? Click on my alias to see our involvement is limited but of late we've gotten back to long the airlines (round 25 or so since 2009), PCLN TRIP EXPE SBUX and a host of others. We recently covered ZQK (short round 5 or so at $8) at current levels (we think that will go to bkr/debt restructuring as a dead company) and blew out TPX (at $60 up from $38 last year on round trip 10 or so t3yrs), and we are close to taking off AAPL we have owned since the big reload at $389. Hard to sell it out just now as we are ATMing it by writing call premium for now. As many fret over the "overvalued market", we think there are many great stocks to get long at current levels... MPEL is now our largest position (core at $17 and a big trade slug at just below $30). We've also traded many sleeves of MPEL since the first run up to $16 as you likely recall... it has been a great story and we love the risk reward right here just as Bain wrote last night.
On that aussie gaming part, not sure who "they" are other than Shuli Renn's article. We have seen no objective confirmation of any meaningful gaming, VIP or otherwise in Australia or malaysia for that matter (see recent Bloomberg story on that "new venue" no one wants to fly to) and, even if there is some in the couple of new "Integrated Resorts" the developers fancy they have way down there, we doubt it will last for more than a first visit. Good for the property owners that they have some nice beaches, spas and swimming pools... and GFL to Packer and Crown in Vegas and over the next handful of years as he tries to replicate MPEL's (Ho's) success with new venues for Crown in australia... at least he'll have the MPEL dividends to fund his working capital needs given that Crown alone generates weak cash flow relative to capital. LOL
As an aside, the last time I saw the Manila job listings on the MPEL website they had more than 600 positions... as of yesterday that was down to about 220 (without checking it again).
So clearly they have made strides toward getting things ready to launch...
On VIP in Manila, I also agree with you that VIP will be a huge part of the rollout with players from korea and japan figuring prominently... and, based on the incentive flexibility/differentials they can and will offer tour operators, along with the Chinese VIP apparently still maintaining a "low profile" in Macau until the pol "corruption" noise (phantom witch hunt as regards Macau) ends. As also noted earlier, Chinese whales are also likely favorable on the idea of avoiding an additional 10 hour flight EACH WAY to get to Vegas until China pols settle down... a reality seen in the HUGE drop in Vegas' table play in July... so much for the "Vegas recovery" all this brilliant analyst group was talking about after seeing the may and June table numbers temporarily above 30% YOY as Steve and Murren flew them in to avoid Macau for an as yet undetermined period of time.
As you know, from 2012 through January 2014, the analysts were consistently too conservative estimating anything involving gaming revenues, earnings and ebitda from the macau-centric companies and scurried around after each Q to raise their estimates. Since then, none of the 4 US companies' CEOs saw the big drop in VIP play coming, and now, "suddenly", the group think has gone from all will be well later in 2014 and in 2015 and longer to where, Henny Penny and all of her friends are afraid the sky really is falling now and Macau VIP will remain hammered as far as they can see.
That is almost the exactly the sentiment this "illustrious" group had back in mid summer 2013...right before the group and especially MPEL ripped the lungs out of the naysayers. Because it is instructive, I'll repeat that valuation can and one day will turn on a dime as it did back in July 2013 and again in June of this year when this stock jumped 20% from $31 to $37 in less than 10 days.
You noted last March or so that it would be good if the analysts and street thought of macau GGR growth as more of a 10% growth market and that such would be good for the stocks, even that now seems optimistic though, and it will be interesting to see what the CEOs have to say next month as they release the Sep Q and forward look updates. Ho's last comment was for more like mass growth rate of about half the ytd mid 30%s growth for macau overall from mid 2014 forward (incl 8 new properties under constr in macau coming on line), and that VIP overall would likely remain subdued for the near term, but that looking ahead to 2015, he anticipates that Macau will see a return to the former 15% cagr or so overall.
Meanwhile, hopefully the overarching din on vip is gonging with the China pols and they are thinking through the tax rev/employment aspects.
Re manila, Monday they said development was on final and they would open 4Q and see website update now, but no grand opening date set yet.
great comments Dave... look forward to any trip notes you might have
re Altira, VIP was down $100m yoy last Q... Ho talked about "repositioning" to cater to their large/impact VIP operators it so hopefully they make some progress on that aspect quickly. As you know, MPEL essentially let this business go ytd, seeing their VIP win drop at about twice the decay of Macau overall as they continue to focus on top level mass. Perhaps this Q will see them restore a bit of Altira's place in historical share of macau VIP.
I did not suggest that the "corruption crackdown" was to limit how "rich businessmen spend their [recreational] money." in fact, I emphasized that there is no "corruption" of substance flagged in Macau [other posts have amply discussed the govt clamp down on the 14 UnionPay card swipe operators on unauthorized machines operated out of car trunks after Shuli wrote at several articles hyping that UnionPay fraud was mutli-billions in macau -- LOL].
What I did frame was that the impact of the pol posturing on "corruption" is to cause China's elite wealthy to maintain a low profile with respect to gaming in Macau.
Your comments on the $20k/100k are interesting though... if you have any fact based premise for them, you should call Shuli Ren and Jim Detar (who parrots Shuli's every article half a day later LOL) with those objectively sourced inputs so she can write her first worthwhile piece on Macau.
re my comment: "fwiw, we are adding to MPEL and think WYNN is trading buy again down here."
Just blew out the small WYNN trade (4k shares) up just shy of $4/share since this morning not so much on the broad market reversal but the MA casino approval news that just hit the wire for WYNN... that won't even move the needle when done and ramping to mediocre ROIC for that property in 3 years, but it was sufficient to jolt the moronic shorts running on the Moron Stanley "news" from this morning into covering at $180. Hey, given the macau malaise ( not so much about ebitda, just VIP GGR "news" and corruption blithering), we'll take the easy pizza money. LOL
Contrast that with MPEL's Manila currently discounting nothing for 2014 and same for it and Studio City in 2015 based on relative ebitda multiples... some might imagine Packer and Ho intend to generate ROIC of more than none on those properties, d'ya think? Say at least half that seen in Macau once Manila is up the ramp? That is our baseline spreadsheet, with a significantly better outcome a year later (and before consider that MPEL plans expansion/Phase 2 development at both Manila and Studio City in the future.
Moron Stanley's comments are plain stupid and wrong; he and the research director editing his crud should be replaced. Your comments are lame too. No one "saw" the stupidity being exhibited by China's new leadership as they "crackdown" on corruption for political purposes having nothing whatsoever to do with macau except for how China's new elite wealthy like to do for expensive recreation. When I say no one, I mean no one -- not the leadership, not the company CEOs as late as May, not a single one of the "illustrious" analyst group following this sector, and no one on our staff or any other hedge fund of size or we would have all carried bigger hedges on our low basis core positions many of us are in for what is going to unfold over the next 3 years for MPEL and WYNN in particular.
As for "punishment", you must be new here and not have a street background... stocks go up and down and you play leveraged long, no leverage, hedged to reduced net longs with box offsets or pairs and or writing short dated calls for those who want to chase their own tails... anyone who bought to hold any of the gaming or any other high beta stocks over the last 9 months without the flexibility of hedging when indicated and or averaging down or having it be only with speculative capital should have someone else managing their money for them. Yet no one is "trapped" -- most guys posting here have owned the stock since well below $20 going back to early 2013 or prior. Our core position is at $17; our trading sleeve is now below $30. We like the risk reward down here; the eventual turnaround will be as fast as the 10 day rally from $31 to $37 in mid-June 2013... put that in your bong and smoke it.
And talk about ridiculous, IBD just hit the wires with a parroting of Shuli Ren's dumber than dumb comments. Incredible that barron's actually pays her to write such drivel.
this is great Dave... last night Morons Stanley shared their impressions of how things look in macau with one's head up one's #$%$, but now we'll get your impressions --- someone who actually knows the place and the business. I also hope you'll be able to discern wether the Studio city cap is underway -- if not already, any day now!
On room rates, using Vegas as a proxy, WYNN has always gotten high end clientele to pay up, and certainly MGM gets premium rack rates on Bellagio/Mandaly vs MGM's less expensive options because those who can afford to pay up for the nicer facilities and rooms/suites do so and or get comp'd out on the rooms (and meals and drinks and shows and single malts and ...) because their visits are very profitable for the houses. We think that WYNN will do just fine on their own in Cotai, but that MPEL will continue to attract the cream of the crop players as well... elite mass and premium mass clientele as it were.
The difference between that and those looking for cheaper rooms is already highly visible in the differential between MPEL's COD ADRs and those seen in the LVS venues...
A quick comment on the $40-45 you mentioned: we thought the stock was ahead of itself at $43 in mid Jan and sold out the trading chunk and box hedged half the core (owned at $17), taking off the hedge at the 50d ema at $38 or so then... Now we have all the temporary pol bs quelling the tours, but that likely will end soon. Additionally, Manila is going to open any day now as per their updated webpage for COD Manila, and Studio city is roaring ahead to the finish line. The current discount accorded these shares is ridiculous and yet terrific for those with spec capital to join on the bid side with MPEL's buyback activity down here.
Have fun and look forward to your visit notes if you have time to share them after a night at the table.
The COD manila Website is now updated:
"A New Era of Entertainment
City of Dreams Manila is unlike anything you have experienced before. Envision a world of exhilarating gaming spaces, world-class dining experiences, plush accommodations, and awesome play. Find your own place in this integrated urban resort. A new era of entertainment is about to begin in Manila."
Looks like the Japanese, Korean, and also the "low profile" Chinese whales will soon have a place to play away from the glare of China's political stare down noise -- without flying another 10 hours into and then another 10 hours back from Vegas for the weekend...then again, Vegas play faded in July after that much ballyhooed "Vegas GGR Recovery" lasted all of two months (May and June) while Steve flew in his China and "Latin" VIP players.
Meanwhile, MPEL is likely poaching more shares down here (if they liked it at $27 they should love it down another buck). We'd love to see them spend the entire $500m first tranche before year end, just in time to renew the authority and re-up the second chunk they will likely follow with... perhaps just ahead of the central planners ending the pol motivated "crruption crackdown" which has essentially nothing to do with macau business practices.
fwiw, we are adding to MPEL and think WYNN is trading buy again down here.
Multiple alias #$%$ suggests we sold out our core position... he can't read. Newbs who care might enjoy the facts here and can read this thread in chronological order, noting that I wrote the first thread in response to these idiots' bosses chasing the stock past $43 (where we bailed on the trading allocation and hedged out half the core (we own at $17) back to $38 before loading what is now our largest ever trading sleeve w ave at just below $30 courtesy these dopes shorting it down here for the likes of us, Pimco, MPEL's buback, and the cadre of investment professional adding to their holdings last Q between $31 and $37. And yes, we still own the core at $17. LOL
From my comments to bentley below:
"it is obvious to us that the easy money in MPEL and the group has already been made... 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."
With that background, see my post dated Jul15 on this thread. Day follows night, but to the upside on the next big move...
MPEL's filing required by the large share repurchase trade last week documents that the buyback program discussed under "3." above is finally underway with vim and verve. So now we can move this from "wrong on" on up to the list of items we've been "right on" this year; whether the MPEL naysayers understand what is happening with MPEL near term and as the catalysts unfold doubling adj ebitda over the next couple of years (EVEN IF MACAU VIP AND GGR GROWTH DOES NOT BEGIN THIS MONTH OR NEXT -- LOL) matters not.