Stock Alert for Melco Crown Entertainment Ltd. (MPEL)
Melco Crown Entertainment Ltd. (MPEL) is a developer, owner and, through its subsidiary Melco Crown Gaming, operator of casino gaming and entertainment resort facilities focused on the Macau market. Melco Crown Gaming is one of six companies licensed, through concessions or sub-concessions, to operate casinos in Macau. The Company owns and operates City of Dreams, Altira Macau, Mocha Clubs and Taipa Square Casino. Its other projects include City of Dreams Phase II, Macau Studio City Project and Macau Peninsula Site.
The Company was formerly known as Melco PBL Entertainment (Macau) Ltd. and changed its name to Melco Crown Entertainment Ltd. in May 2008. Melco Crown Entertainment Ltd. was incorporated in 2004 and is based in Central, Hong Kong.
| Share Statistics (Jul-2-10) | FY2007 | FY2008 | % Chg | Q4 2008 | Q4 2009 | % Chg | ||
| Symbol | MPEL | Revenue, $Mn | 358.6M | 1.42B | 296.0% | 253.5M | 400.2M | 57.9% |
| Current price | $3.70 | Gross marg. | 15.1% | 17.0% | 12.6% | 19.4% | 10.7% | 44.8% |
| 52wk Range: | $8.45-3.26 | Oper. margin | -54.6% | 0.1% | 100.2% | -6.6% | -18.4% | 178.8% |
| Avg Vol (3m): | 8,184,030 | Net margin | -49.6% | -0.1% | 99.8% | -7.5% | -22.4% | 198.7% |
| Market Cap. | 1.97B | |||||||
| Shares Outst. | 533.8M | EPS, $ | -0.44 | -0.01 | 97.7% | -0.04 | -0.17 | 325.0% |
Source: Reuters.com, SEC Filings.
Financial Summary
For the first quarter of 2010, net revenue was US$567.6 million, representing an increase of approximately 162% from US$216.5 million for the comparable period ended March 31, 2009. The increase in net revenue resulted primarily from the opening of City of Dreams in June 2009.
Adjusted EBITDA was US$86.9 million for the first quarter of 2010, as compared with Adjusted EBITDA of US$21.3 million in the first quarter of 2009. The year-over-year increase in Adjusted EBITDA in the first quarter of 2010 was attributable to the opening of City of Dreams, combined with various expense management initiatives across the Company’s three operating units.
The combined rolling chip table games hold percentage (calculated before discounts and commissions) across City of Dreams and Altira Macau in the first quarter of 2010 was 2.9%, within the expected rolling chip hold percentage range of 2.7% to 3.0%.
The Company-wide mass market table games hold percentage (non rolling chip) in the first quarter of 2010 was 19.7%, which is above the previous target hold percentage range of 16.0% to 18.0%, but consistent with the mass market hold percentage at mass market focused properties, such as City of Dreams. Going forward, MPEL targets 18% to 20% for its Company-wide mass market table games hold percentage.
On a U.S. GAAP basis, MPEL recorded a net loss for the first quarter of 2010 of US$12.5 million, or a loss of US$0.02 per ADS, compared to a loss of US$35.3 million, or a loss of US$0.08 per ADS, in the first quarter of 2009. The year-over-year decrease in the net loss resulted from the earnings contribution from City of Dreams, partially offset by increased depreciation and amortization expenses and lower capitalized interest following the opening of City of Dreams.
City of Dreams 1Q Results
For the quarter ended March 31, 2010, net revenue at City of Dreams was US$336.3 million and Adjusted EBITDA was US$70.9 million.
Rolling chip volume totaled US$9.8 billion for the first quarter of 2010 and mass market table games drop (non rolling chip) totaled US$479.4 million. Slot handle was US$441.0 million.
On a sequential basis from the fourth quarter of 2009, rolling chip volume increased 5%, mass market table drop increased 13%, and slot handle increased 18% in the first quarter of 2010.
Total non-gaming revenue at City of Dreams in the first quarter of 2010 was US$29.4 million. Occupancy per available room in the first quarter of 2010 was 75% and the average daily rate (ADR) was US$152 per occupied room.
Altira Macau 1Q Results
For the quarter ended March 31, 2010, net revenue at Altira Macau was US$197.2 million versus US$183.6 million in the quarter ended March 31, 2009. Altira Macau generated Adjusted EBITDA of US$21.8 million in the first quarter of 2010 compared with Adjusted EBITDA of US$20.2 million in the first quarter of 2009.
Rolling chip volume totaled US$9.9 billion in the first quarter of 2010, up from US$9.1 billion in the first quarter of 2009. In the mass market table games segment, drop (non rolling chip) totaled US$71.1 million in the first quarter of 2010, down from US$76.0 million generated in the comparable period in 2009.
Total non-gaming revenue at Altira Macau in the first quarter of 2010 was US$7.4 million, down from US$7.8 million in the first quarter of 2009. Occupancy per available room in the first quarter of 2010 was 92% and the ADR was US$166 per occupied room. This compares with occupancy and ADR of 89% and US$234, respectively, in the first quarter of 2009.
Mocha Clubs 1Q Results
Net revenue from Mocha Clubs totaled US$26.7 million in the first quarter of 2010, up from US$24.7 million in the first quarter of 2009.
Mocha Clubs generated US$6.5 million of Adjusted EBITDA in the first quarter of 2010, which compares with US$6.8 million in the first quarter of 2009.
The number of gaming machines in operation at the Mocha Clubs averaged approximately 1,564 in the first quarter of 2010, an increase from an average of approximately 1,273 in the first quarter of 2009. The net win per gaming machine per day was US$187 in this period, as compared with US$211 in the same period in 2009.
Other Factors Affecting Earnings
Total non-operating expenses for the first quarter of 2010 were US$18.8 million, which included US$15.5 million in net interest expense and other finance costs of US$3.4 million. Capitalized interest during the first quarter of 2010 totaled US$3.7 million.
Depreciation and amortization costs of US$76.1 million were booked in the first quarter of 2010, of which US$14.3 million was related to the amortization of gaming sub-concession and US$4.9 million was related to the amortization of land use rights.
Financial Position and Capital Expenditure
Cash and cash equivalents as of March 31, 2010, totaled US$380.0 million, including US$127.1 million of restricted cash. Total senior secured debt at the end of the first quarter of 2010 was US$1.68 billion. Total debt to shareholders’ equity as of March 31, 2010, was 72%.
Capital expenditures for the first quarter of 2010 were US$36.3 million, primarily attributable to City of Dreams.
| Financial Strength (Jul-2-2010) | Company | Industry | Sector | S&P 500 |
| Quick Ratio (MRQ) | 1.35 | 5.17 | 0.57 | 0.81 |
| Current Ratio (MRQ) | 1.36 | 5.30 | 0.70 | 0.97 |
| Long-Term Debt to Equity(MRQ) | 68.37 | 15.63 | 20.77 | 132.70 |
| Total Debt to Equity (MRQ) | 71.93 | 16.98 | 34.54 | 197.98 |
Source: Reuters.com, SEC Filings.
Analyst Consensus
| Buy | Outperform | Hold | Underperform | Sell | No Opinion |
This is the consensus forecast amongst 11 polled investment analysts. Against the Melco Crown Entertainment Ltd company.
| Analyst Detail | Buy | Outperform | Hold | Underperform | Sell | No Opinion |
| Latest | 3 | 1 | 4 | 3 | 0 | 0 |
| 4 weeks ago | 3 | 1 | 4 | 3 | 0 | 0 |
| 2 months ago | 3 | 1 | 4 | 3 | 0 | 0 |
| 3 months ago | 3 | 2 | 4 | 2 | 0 | 0 |
| Last year | 4 | 0 | 4 | 2 | 0 | 0 |
The 10 analysts offering 12-month price targets for MPEL have a median target of 5.30, with a high estimate of 7.50 and a low estimate of 3.04. The median estimate represents a 43.24% increase from the last price of 3.70.
Source: www.ft.com
Consensus Estimates Analysis
| # of Estimates | Mean | High | Low | 1 Year Ago | |
| SALES (in millions) | |||||
| Quarter Ending Sep-10 | 2 | 586.15 | 592.90 | 579.40 | – |
| Quarter Ending Dec-10 | 2 | 582.00 | 602.20 | 561.80 | – |
| Year Ending Dec-10 | 9 | 2,417.66 | 2,972.40 | 1,697.00 | 2,492.66 |
| Year Ending Dec-11 | 9 | 2,547.76 | 3,493.86 | 1,930.00 | 2,647.48 |
| EARNINGS (per share) | |||||
| Quarter Ending Sep-10 | 2 | -0.04 | -0.02 | -0.05 | 0.03 |
| Quarter Ending Dec-10 | 2 | -0.04 | -0.02 | -0.06 | 0.02 |
| Year Ending Dec-10 | 11 | -0.08 | 0.04 | -0.18 | 0.18 |
| Year Ending Dec-11 | 11 | -0.04 | 0.36 | -0.28 | 0.42 |
| LT Growth Rate (%) | 1 | -236.73 | -236.73 | -236.73 | 66.10 |
Source: http://www.reuters.com/finance/stocks/financialHighlights?symbol=MPEL.O
Investment Highlights
The Casino Stocks Index has slid by -10% over the last month, trailing the S&P 500 fractionally during that period. A pair of Macau players MPEL and MGM Mirage have pulled back more sharply than the Casino Index as a whole during this period, while rivals Wynn Resorts and Las Vegas Sands have fared somewhat better.
MPEL recently announced that City of Dreams will launch the world’s largest water-based show ‘The House of Dancing Water’ with a Grand Opening on September 16, 2010, and with ticketed shows commencing from the following day, September 17, 2010. Envisioned by Lawrence Ho, co-chairman and CEO of MPEL, and created and directed by Franco Dragone, the water-based show promises to be the most extraordinary show of its type ever staged anywhere in the world, reinforcing City of Dreams’ position as one of Asia’s premier leisure and entertainment destinations. Housed in a unique state-of-the-art theater, ‘The House of Dancing Water’ is the entertainment centerpiece of City of Dreams.
Performed by a cast of approximately 77 international performance artists and approximately 130 production and technical team members from more than 18 countries around the world, the production is staged at the US$250 million ‘Dancing Water Theater,’ designed by the world renowned Pei Partnership. This purpose-built theater contains one of the most impressive commercial pools in the world, holding approximately 3.7 million gallons of water, more than five Olympic-sized swimming pools, and is one of the largest water-based theaters ever built.
Source: http://www.melco-crown.com/eng/index1.html
Technical Analysis
Source: http://stockcharts.com
MPEL is trading below its 13-day moving average. However, this moving average is trending higher which suggests that there has been buying interest in this stock.
MPEL is trading near its lower Bollinger Band. This suggests that the stock price is low relative to its recent price action.
The MACD for MPEL currently indicates a strong bearish signal for two reasons. First, the MACD is below the signal line, a 9-day moving average. Second, the MACD is below the critical level of zero, which implies that the underlying moving averages are trending lower.
Comparative Analysis
| Company Name | Ticker | Price per | Mrkt. Cap. | P/E | P/S | ||
| Jul-2-2010 | symbol | Share, $ | $ Mn | 2010 | 2011 | 2010 | 2011 |
| Ameristar Casinos Inc. | ASCA | 15.00 | 868.11M | n/a | n/a | 0.78 | n/a |
| Pinnacle Entertainment Inc. | PNK | 9.45 | 572.08M | n/a | n/a | 0.61 | n/a |
| MGM Resorts International | MGM | 9.70 | 4.28B | n/a | n/a | 0.88 | n/a |
| Casinos & Gaming Median | 1.90B | n/a | n/a | 0.75 | n/a | ||
| Melco Crown Entertainment Ltd | MPEL | 3.70 | 1.97B | n/a | n/a | 1.69 | n/a |
Source: Thomson Financial
Insider Trading Activity
| NET SHARES PURCHASE ACTIVITYInside Purchases – Last 6 Months | ||
| Shares | Transaction | |
| Purchases | n/a | n/a |
| Sales | n/a | n/a |
| Net Shares Purchased (Sold) | n/a | n/a |
| Total Insider Shares Held | n/a | n/a |
| % Net Shares Purchased (Sold) | n/a | n/a |
| Net Institutional Purchases — Prior Qtr to Latest Qtr | |
| Shares | |
| Net Shares Purchased (Sold) | n/a |
| % Change in Institutional Shares Held | n/a |
Source: Yahoo Finance
DO NOT BASE ANY INVESTMENT DECISION UPON ANY MATERIALS FOUND ON THIS REPORT. We are not registered as a securities broker-dealer or an investment adviser either with the U.S. Securities and Exchange Commission (the “SEC”) or with any state securities regulatory authority. We are neither licensed nor qualified to provide investment advice.
The information contained in our report should be viewed as commercial advertisement and is not intended to be investment advice. The report is not provided to any particular individual with a view toward their individual circumstances. The information contained in our report is not an offer to buy or sell securities. We distribute opinions, comments and information free of charge exclusively to individuals who wish to receive them.
Our newsletter and website have been prepared for informational purposes only and are not intended to be used as a complete source of information on any particular company. An individual should never invest in the securities of any of the companies profiled based solely on information contained in our report. Individuals should assume that all information contained in the report about profiled companies is not trustworthy unless verified by their own independent research.
Any individual who chooses to invest in any securities should do so with caution. Investing in securities is speculative and carries a high degree of risk; you may lose some or all of the money that is invested. Always research your own investments and consult with a registered investment advisor or licensed stock broker before investing.
Information contained in our report will contain “forward looking statements” as defined under Section 27A of the Securities Act of 1933 and Section 21B of the Securities Exchange Act of 1934. Subscribers are cautioned not to place undue reliance upon these forward looking statements. These forward looking statements are subject to a number of known and unknown risks and uncertainties outside of our control that could cause actual operations or results to differ materially from those anticipated. Factors that could affect performance include, but are not limited to, those factors that are discussed in each profiled company’s most recent reports or registration statements filed with the SEC. You should consider these factors in evaluating the forward looking statements included in the report and not place undue reliance upon such statements.
We are committed to providing factual information on the companies that are profiled. However, we do not provide any assurance as to the accuracy or completeness of the information provided, including information regarding a profiled company’s plans or ability to effect any planned or proposed actions. We have no first-hand knowledge of any profiled company’s operations and therefore cannot comment on their capabilities, intent, resources, nor experience and we make no attempt to do so. Statistical information, dollar amounts, and market size data was provided by the subject company and related sources which we believe to be reliable.
To the fullest extent of the law, we will not be liable to any person or entity for the quality, accuracy, completeness, reliability, or timeliness of the information provided in the report, or for any direct, indirect, consequential, incidental, special or punitive damages that may arise out of the use of information we provide to any person or entity (including, but not limited to, lost profits, loss of opportunities, trading losses, and damages that may result from any inaccuracy or incompleteness of this information).
We encourage you to invest carefully and read investment information available at the websites of the SEC at http://www.sec.gov and FINRA at http://www.finra.org.
