Stock Alert for Melco Crown Entertainment Ltd. (MPEL)
  • Stock Alert for Melco Crown Entertainment Ltd. (ADR) (MPEL)
  • Stock Alert for Melco Crown Entertainment Ltd. (ADR)(MPEL)
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    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 the 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 (Sept-1-10) FY

    2007

    FY

    2008

    %

    Chg

    Q4 2008 Q4 2009 %

    Chg

    Symbol MPEL Revenue, $Mn 358.6M 1.42B 296.0% 253.5M 400.2M 57.9%
    Current price $4.00 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): 4,385,500 Net margin -49.6% -0.1% 99.8% -7.5% -22.4% 198.7%
    Market Cap. 2.13B
    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 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 ending June 30, 2010, MPEL reported net revenue of US$1.141 billion versus US$432.3 million in the six months ending 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.

    The Company 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 (Sept-1-2010) Company Industry Sector S&P 500
    Quick Ratio (MRQ) 1.53 3.18 0.62 0.75
    Current Ratio (MRQ) 1.54 3.33 0.78 0.90
    Long-Term Debt to Equity(MRQ) 73.27 15.10 21.90 126.64
    Total Debt to Equity (MRQ) 78.55 17.48 37.90 186.16

    Source: Reuters.com, SEC Filings.

    Analyst Consensus

    This is the consensus forecast among 13 polled investment analysts. Against the Melco Crown Entertainment Ltd company.

    Analyst Detail Buy Outperform Hold Underperform Sell No Opinion
    Latest 3 1 6 3 0 0
    4 weeks ago 3 1 6 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 3 3 0 0

    The 12 analysts offering 12-month price targets for MPEL have a median target of 4.60, with a high estimate of 7.00 and a low estimate of 3.04. The median estimate represents a 17.95% increase from the last price of 3.90.

    Source: www.ft.com

    Consensus Estimates Analysis

    # of Estimates Mean High Low 1 Year Ago
    SALES (in millions)
    Quarter Ending Sep-10 2 588.30 592.90 583.70 537.80
    Quarter Ending Dec-10 2 583.05 602.20 563.90 502.00
    Year Ending Dec-10 11 2,381.28 2,935.30 1,697.00 2,343.01
    Year Ending Dec-11 11 2,510.14 2,861.05 1,930.00 2,479.17
    EARNINGS (per share)
    Quarter Ending Sep-10 2 -0.04 -0.02 -0.06 0.01
    Quarter Ending Dec-10 2 -0.04 -0.02 -0.06 0.00
    Year Ending Dec-10 12 -0.11 -0.03 -0.19 0.03
    Year Ending Dec-11 12 -0.06 0.04 -0.13 0.09
    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

    Throughout its history, Macau has been a popular tourist destination for Hong Kong locals and residents of Mainland China, reflecting 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 7 million inhabitants and just 15 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.

    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.

    Recent News

    MPEL recently announced to donate MOP1,000,000 to the Liaison Office of the Central People’s Government in the Macao SAR to support relief effort in Gansu Province after the rain-triggered mudslide hit Zhouqu County on August 8.

    Lending full support to the mudslide relief effort, MPEL presented a check for MOP1,000,000 to Xu Ze, deputy director of the Liaison Office.

    MPEL also recently announced that following a discussion with Simon Dewhurst, he tendered his resignation from his position as EVP and CFO.

    As MPEL transitions from a development company to one focused primarily on maximizing its operational profitability, and as a logical next step in the management reorganization announced last month, the Company’s intention is to identify a CFO who, in addition to having solid financial & operational experience, also possesses skills that are aligned with the current needs of the Company.

    To ensure a seamless transition, Leanne Palmer, currently vice president, Financial Compliance for MPEL, has assumed the role of acting CFO in the interim period, while the Company conducts a global search for a suitable candidate with exceptional caliber to fill the CFO position. Palmer is a chartered accountant with over 16 years of experience and is a specialist on Sarbanes Oxley compliance, corporate governance and internal control.

    Additionally, Geoffrey Davis, CFA, has been promoted to deputy CFO and treasurer on a permanent basis and will be based in Macau. Prior to joining MPEL as senior vice president, Corporate Finance in 2007, he was the lead equity research analyst at Citi Investment Research covering the gaming industry. He had previously been vice president, Corporate Finance for Park Place Entertainment in Las Vegas.

    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 indicating a weak bearish signal. Although the indicator is above the critical level of zero, which implies that the underlying moving averages are bullish, the MACD has crossed below its 9-day moving average or signal line. This suggests that positive momentum has begun to slow.

    Comparative Analysis

    Company Name Ticker Price per Mrkt. Cap. P/E P/S
    Sept1-2010 symbol Share, $ $ Mn 2010 2011 2010 2011
    MGM Resorts International MGM 9.25 4.08B n/a n/a 0.67 n/a
    Ameristar Casinos Inc. ASCA 16.67 966.93M n/a n/a 0.79 n/a
    Pinnacle Entertainment Inc. PNK 10.04 613.06M n/a n/a 0.60 n/a
    Casino & Gaming Median 2.16B 14.30 n/a 0.72 n/a
    Melco Crown Entertainment Ltd. MPEL 4.00 2.13B n/a n/a 1.61 n/a

    Source: Thomson Financial

    Insider Trading Activity

    NET SHARES PURCHASE ACTIVITY

    Inside 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

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