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 2, 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-30-10) | FY
2007 |
FY
2008 |
%
Chg |
Q4 2008 | Q4 2009 | %
Chg |
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| Symbol | MPEL | Revenue, $Mn | 358.6M | 1.42B | 296.0% | 253.5M | 400.2M | 57.9% |
| Current price | $3.86 | 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): | 6,313,660 | Net margin | -49.6% | -0.1% | 99.8% | -7.5% | -22.4% | 198.7% |
| Market Cap. | 3.86B | |||||||
| Shares Outst. | 533.8M | EPS, $ | -0.44 | -0.01 | 97.7% | -0.04 | -0.17 | 325.0% |
Source: Reuters.com, SEC Filings.
Financial Summary
MPEL recently reported its unaudited financial results for the second quarter ended June 30, 2010.
For the second quarter of 2010, net revenue was US$573.6 million, representing an increase of approximately 166% from US$215.8 million for the comparable period ended June 30, 2009. Adjusted EBITDA was US$73.4 million for the second quarter of 2010, as compared with an Adjusted EBITDA loss of US$23.8 million in the second quarter of 2009. The year-over-year improvements in net revenue and Adjusted EBITDA resulted primarily from the opening of City of Dreams in June 2009, providing only a limited contribution to the prior year comparable.
The combined rolling chip table games hold percentage (calculated before discounts and commissions) across City of Dreams and Altira Macau in the second quarter of 2010 was 2.7%. On a theoretical adjusted basis, using the mid-point in MPELs expected rolling chip hold percentage range of 2.7% to 3.0%, sequential quarterly Adjusted EBITDA improved by 11% from US$80 million in the first quarter of this year, to US$89 million in the second quarter of this year. The combined mass market (or non rolling chip) table games hold percentage in the second quarter of 2010 improved further to 21.5%.
On a U.S. GAAP basis, MPEL recorded a net loss for the second quarter of 2010 of US$30.1 million, or a loss of US$0.06 per ADS, compared with a net loss of US$144.0 million, or a loss of US$0.30 per ADS, in the second quarter of 2009. The reduction in the net loss resulted from a significant year-over-year improvement in the operating performance of Altira Macau and from having a full quarter of earnings contribution from City of Dreams, partially offset by increased depreciation and amortization expenses and lower capitalized interest expenses following the opening of City of Dreams, together with certain non-recurring expenses related to the refinancing of approximately US$600 million of bank debt through the issuance of a high yield bond completed in the current reporting quarter. The second quarter 2009 net loss was also negatively affected by non-recurring costs associated with the opening of City of Dreams.
City of Dreams 2Q Results
For the quarter ended June 30, 2010, net revenue at City of Dreams was US$309.3 million and Adjusted EBITDA was US$42.9 million. Net revenue at City of Dreams in the second quarter of 2009 was US$26.8 million and the Adjusted EBITDA loss was US$12.2 million. The improvements in both net revenue and Adjusted EBITDA were driven by an improved rolling chip hold percentage in the second quarter of 2010 versus that in 2009, as well as a full quarter of operations this year.
Rolling chip volume totaled US$12.2 billion for the second quarter of 2010, up from US$1.9 billion in the second quarter of 2009. Mass market (non rolling chip) table games drop totaled US$483.7 million versus US$100 million in the second quarter of 2009. Slot handle for the quarter ended June 30, 2010, was US$458.1 million, up from US$80.9 million for the quarter ended June 30, 2009.
Total non-gaming revenue at City of Dreams in the second quarter of 2010 was US$32.1 million, up from US$4.8 million in the second quarter of 2009. Occupancy per available room in the second quarter of 2010 was 81% versus 78% in the second quarter of 2009. The average daily rate (ADR) in the second quarter of 2010 was US$152 per occupied room, which compares with US$176 in the second quarter of 2009.
Altira Macau 2Q Results
For the quarter ended June 30, 2010, net revenue at Altira Macau was US$230.6 million versus US$159.2 million in the quarter ended June 30, 2009. Altira Macau generated Adjusted EBITDA of US$36.7 million in the second quarter of 2010 compared with an Adjusted EBITDA loss of US$6.4 million in the second quarter of 2009.
Rolling chip volume totaled US$9.5 billion in the second quarter of 2010 versus US$9.7 billion in the second quarter of 2009. In the mass market (non rolling chip) table games segment, drop totaled US$76.5 million in the second quarter of 2010, up from US$73.6 million generated in the comparable period in 2009.
Total non-gaming revenue at Altira Macau in the second quarter of 2010 was US$7.2 million, down from US$8.3 million in the second quarter of 2009. Occupancy per available room in the second quarter of 2010 was 93% and the ADR was US$166 per occupied room. This compares with occupancy and ADR of 90% and US$232, respectively, in the second quarter of 2009.
Mocha Clubs 2Q Results
Net revenue from Mocha Clubs totaled US$26.9 million in the second quarter of 2010, up from US$23.8 million in the second quarter of 2009.
Mocha Clubs generated US$7.1 million of Adjusted EBITDA in the second quarter of 2010, which compares with US$6.1 million in the second quarter of 2009.
The number of gaming machines in operation at the Mocha Clubs averaged approximately 1,570 in the second quarter of 2010, an increase from an average of approximately 1,440 in the second quarter of 2009. The net win per gaming machine per day was US$184 in this period, as compared with US$178 in the same period in 2009.
Other Factors Affecting Earnings
Total non-operating expenses for the second quarter of 2010 were US$22.7 million, which included US$21.3 million in net interest expense and costs associated with debt modification of US$3.2 million. Capitalized interest during the second quarter of 2010 totaled US$4.5 million.
Depreciation and amortization costs of US$76.0 million were booked in the second quarter of 2010, of which US$14.3 million was related to the amortization of our 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 June 30, 2010, totaled US$489.5 million, including US$194.3 million of restricted cash. Total senior debt at the end of the second quarter of 2010 was US$1.831 billion. Total net debt to shareholders’ equity as of June 30, 2010 was 59%.
Capital expenditures for the second quarter of 2010 were US$28.1 million, primarily attributable to City of Dreams.
Six Month Results
For the six months ended June 30, 2010, MPEL reported net revenue of US$1.141 billion versus US$432.3 million in the six months ended June 30, 2009. The year-over-year increase in net revenue was driven by the opening of City of Dreams in June of 2009.
Adjusted EBITDA for the first six months of 2010 was US$160.3 million, as compared with an Adjusted EBITDA loss of US$2.5 million in the first six months of 2009. The year-over-year improvements in net revenue and Adjusted EBITDA were primarily attributable to the opening of City of Dreams in June 2009 along with a significant improvement in the operating performance of Altira Macau.
Melco Crown Entertainment reported a net loss of US$42.6 million for the first six months of 2010, compared to a net loss of US$179.3 million for the first six months of 2009. The net loss per ADS for the six month period ending June 30, 2010 was US$0.08 compared to a net loss per ADS of US$0.39 for the same period in 2009.
| Financial Strength (Jul-30-2010) | Company | Industry | Sector | S&P 500 |
| Quick Ratio (MRQ) | 1.53 | 5.27 | 0.60 | 0.72 |
| Current Ratio (MRQ) | 1.54 | 5.41 | 0.74 | 0.86 |
| Long-Term Debt to Equity(MRQ) | 73.27 | 11.58 | 21.90 | 112.21 |
| Total Debt to Equity (MRQ) | 78.55 | 12.78 | 36.31 | 176.42 |
Source: Reuters.com, SEC Filings.
Analyst Consensus
This is the consensus forecast among 11 polled investment analysts. Against the Melco Crown Entertainment Ltd company.
| Analyst Detail | Buy | Outperform | Hold | Underperform | Sell | No Opinion |
| Latest | 2 | 1 | 5 | 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 | 1 | 4 | 3 | 0 | 0 |
| Last year | 5 | 0 | 4 | 3 | 0 | 0 |
The 10 analysts offering 12-month price targets for MPEL have a median target of 4.60, with a high estimate of 7.50 and a low estimate of 3.04. The median estimate represents a 22.02% increase from the last price of 3.77.
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 | 497.10 |
| Quarter Ending Dec-10 | 2 | 582.00 | 602.20 | 561.80 | 474.40 |
| Year Ending Dec-10 | 9 | 2,364.51 | 2,935.30 | 1,697.00 | 2,325.47 |
| Year Ending Dec-11 | 9 | 2,464.11 | 2,861.05 | 1,930.00 | 2,442.48 |
| 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 | 0.03 |
| Year Ending Dec-10 | 11 | -0.11 | -0.03 | -0.18 | 0.13 |
| Year Ending Dec-11 | 11 | -0.07 | 0.04 | -0.28 | 0.28 |
| LT Growth Rate (%) | 1 | -196.49 | -196.49 | -196.49 | 66.10 |
Source: http://www.reuters.com/finance/stocks/financialHighlights?symbol=MPEL.O
Investment Highlights
MPEL recently announced that City of Dreams will launch the world’s largest water-based show ‘The House of Dancing Water’ on September 16, 2010, and with ticketed shows commencing from the following day, September 17, 2010.
Throughout its history, Macau has been a popular tourist destination for Hong Kong locals and residents of Mainland China. Macau has enjoyed an unprecedented economic boom following the decision by the Macau government in 2002 to deregulate its 40-year-old gaming industry.
The decision to deregulate the gaming industry in Macau has attracted substantial investment commitments from world-renowned developers of casino and entertainment resorts. Each operator is tasked with developing quality leisure and entertainment attractions together with the latest casino facilities, ensuring Macau’s reputation as a top travel destination.
Relatively easy access from major capital cities in Asia has facilitated this vision. Located in China’s Pearl River Delta region, Macau is an hour away by a 24-hour ferry service from Hong Kong’s nearly seven million inhabitants and just fifteen minutes away by helicopter. In addition, China, Taiwan, Japan, South Korea, Thailand, Malaysia, Singapore, Indonesia and the Philippines, with a combined population of almost two billion, lie within a 2,500-mile radius of Macau, making it the center for gaming in the Asia Pacific region.
Visitor arrivals to Macau surpassed 20 million in 2006, a year-on-year increase of nearly 18% and went beyond 2.6 million in December 2007, representing a year-on-year increase of 21.1%.
According to information from the Macau government, more than half of these arrivals were from Mainland China as a result of China’s recent liberalization of its travel visa and currency conversion policies in combination with its sustained strength in economic growth.
With all of these positive factors in play, according to a 2007 South China Morning Post report, Macau overtook the Las Vegas Strip as the largest gaming market in the world in 2006 when its gaming revenues surged 23% year-on-year to US$6.87 billion. In 2007, Macau’s gaming revenues reached US$10.4 billion, a 46.6% increase over the previous year.
Management Restructuring
MPEL recently announced the resignation of Greg Hawkins, president of City of Dreams, after approximately five years in Macau.
In conjunction with the forthcoming departure of Hawkins, the Company has undertaken a comprehensive review of its operating management structure. As a result, MPEL is also announcing the implementation, effective next month, of a new operating management structure organized along functional as opposed to dedicated property responsibilities, to be led by newly created co-chief operating officer positions.
Ted Chan, currently the president of Altira Macau, has been promoted to co-COO of Gaming, overseeing gaming activities across the entire organization. Chan has been a pioneer in the transformation of the gaming industry in Macau in recent years and is uniquely qualified for this position. He has broad experience across the various customer segments in Macau, reaching back to 2004 when he was the CEO of Mocha Clubs. He is currently recognized as one of the leading experts in the VIP customer segment in Macau.
Nick Naples has joined MPEL and has been named co-COO, Operations. He will be responsible for all non-gaming operating activities across the entire company. Naples has deep experience in luxury hotel and gaming operations and has worked in Macau for the last four years. Naples most recently held the position of consulting executive vice president at Sands China Ltd. and was previously the COO at Macau Studio City. His prior experience includes positions with Harrah’s Entertainment, Four Seasons, Ritz-Carlton and Hyatt.
Source: http://www.melco-crown.com/eng/main.php
Technical Analysis
Source: http://stockcharts.com
MPEL has been relatively stable recently. This is evidenced by the width of its Bollinger Bands, which are tighter than normal. Additionally, MPEL is trading within its Bollinger Bands. This is a normal condition and suggests that the stock is neither overbought nor oversold relative to the recent price action.
MPEL’s MACD is currently indicating a weak bullish signal. Although the MACD is trending above the signal line, the indicator is still below zero, which suggests that the underlying moving averages are bearish.
Comparative Analysis
| Company Name | Ticker | Price per | Mrkt. Cap. | P/E | P/S | ||
| Jul-30-2010 | symbol | Share, $ | $ Mn | 2010 | 2011 | 2010 | 2011 |
| MGM Resorts International | MGM | 11.12 | 4.91B | n/a | n/a | 0.81 | n/a |
| Ameristar Casinos Inc. | ASCA | 15.78 | 913.25M | n/a | n/a | 0.71 | n/a |
| Pinnacle Entertainment Inc. | PNK | 10.95 | 662.89M | n/a | n/a | 0.65 | n/a |
| Casino & Gaming Median | 2.16B | 14.30 | n/a | 0.72 | n/a | ||
| Melco Crown Entertainment Ltd. | MPEL | 3.86 | 2.05B | n/a | n/a | 1.70 | n/a |
Source: Thomson Financial
Insider Trading Activity
| NET SHARES PURCHASE ACTIVITY
Inside Purchases – Last 6 Months |
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| 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
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