Stock Alert for Melco Crown Entertainment Ltd. (MPEL)
  • Stock Alert for Melco Crown Entertainment Ltd. (ADR) (MPEL)
  • Stock Alert for Melco Crown Entertainment Ltd. (MPEL)
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    Stock Alert for Melco Crown Entertainment Ltd. (MPEL)

    Melco Crown Entertainment Limited (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 (02-Nov-10) FY

    2008

    FY

    2009

    %

    Chg

    Q2

    2009

    Q2

    2010

    %

    Chg

    Symbol MPEL Revenue, $Mn 1,42B 1,33B -5.9% 215.8M 573.6M 165.8%
    Current price $6.63 Gross marg. 17.0% 13.2% 22.4% 1.5% 20.8% 1,287%
    52wk Range: $3.26-$7.13 Oper. margin -20.4% -1.8%
    Avg Vol (3m): 5,275,960 Net margin -0.2% -23.1% 11.5K% -66.7% -5.2% -92.2%
    Market Cap. 3.52B
    Shares Outstanding 531.72M EPS, $ 0.00 -0.21 n/a -0.10 -0.02 -80%

    Source: Reuters.com, SEC Filings.

    Financial Summary

    For the third quarter of 2010, net revenue was US$727.0 million, representing an increase of approximately 45% from US$500.3 million reported in the quarter ended September 30, 2009. Adjusted EBITDA was US$136.3 million for the third quarter of 2010, as compared to Adjusted EBITDA of US$55.6 million in the third quarter of 2009. The year-over-year improvement in net revenue and Adjusted EBITDA resulted primarily from a broad-based improvement in operating performance at City of Dreams.

    On a U.S. GAAP basis, MPEL recorded net income for the third quarter of 2010 of US$15.8 million, or US$0.03 per ADS, compared with a net loss of US$39.5 million, or a loss of US$0.08 per ADS, in the third quarter of 2009. The improvement in bottom line results was driven by a significant year-over-year improvement in the operating performance at City of Dreams, partially offset by increased depreciation and amortization expense associated with the opening of the Grand Hyatt and The House of Dancing Water at City of Dreams and higher net interest expense related to the refinancing of approximately US$600 million of bank debt through the issuance of a high yield bond in May 2010.

    City of Dreams 3Q Results

    For the quarter ended September 30, 2010, net revenue at City of Dreams was US$504.0 million compared to US$287.7 million in the third quarter of 2009. City of Dreams generated Adjusted EBITDA of US$114.9 million in the third quarter of 2010 compared to US$46.6 million in the third quarter of 2009. The year-over-year improvements in both net revenue and Adjusted EBITDA were driven by increased rolling chip volume, an improved mass market win rate, and higher mass market table games drop in the third quarter of 2010, as compared with the same measures in the third quarter of 2009.

    Rolling chip volume totaled US$14.4 billion for the third quarter of 2010, up 59% from US$9.0 billion in the third quarter of 2009, and the rolling chip hold percentage was 3.4% in the third quarter of 2010 versus 3.3% in the third quarter of 2009. The expected rolling chip hold percentage range is 2.7%-3.0%.

    Mass market (non rolling chip) table games drop increased 35% to US$523.7 million compared with US$389.6 million in the third quarter of 2009. The mass market win rate was 21.3% in the quarter under review and increased from 15.3% in the same period last year. At City of Dreams, we expect our mass market table games hold percentage to range from 20%-22%.

    Slot handle for the quarter ended September 30, 2010, was US$437.3 million, up 54% from US$284.5 million generated in the quarter ended September 30, 2009.

    Total non-gaming revenue at City of Dreams in the third quarter of 2010 was US$31.7 million, up from US$18.0 million in the third quarter of 2009. Occupancy per available room in the third quarter of 2010 was 77% versus 92% in the third quarter of 2009. The average daily rate (ADR) in the third quarter of 2010 was US$158 per occupied room, which compares with US$166 in the third quarter of 2009.

    Altira Macau 3Q Results

    For the quarter ended September 30, 2010, net revenue at Altira Macau was US$186.8 million versus US$182.6 million in the quarter ended September 30, 2009. Altira Macau generated Adjusted EBITDA of US$28.8 million in the third quarter of 2010 compared with Adjusted EBITDA of US$13.9 million in the third quarter of 2009.

    Rolling chip volume totaled US$9.5 billion in the third quarter of 2010 versus US$9.8 billion in the third quarter of 2009. In the third quarter of 2010, the rolling chip hold percentage was 2.7%, which is essentially unchanged from that in the comparable quarter last year. The rolling chip hold percentage in both periods was at the low end of the 2.7%-3.0% expected range.

    In the mass market (non rolling chip) table games segment, drop totaled US$97.0 million in the third quarter of 2010, up 72% from US$56.4 million generated in the comparable period in 2009. The mass market win rate was 17.6% in the third quarter of 2010 compared with 18.6% in the third quarter of last year. At Altira Macau, we expect our mass market table games hold percentage to range from 15%-17%.

    Total non-gaming revenue at Altira Macau in the third quarter of 2010 was US$7.1 million, down from US$7.9 million in the third quarter of 2009. Occupancy per available room in the third quarter of 2010 was 95% and the ADR was US$161 per occupied room. This compares with occupancy and ADR of 93% and US$215, respectively, in the third quarter of 2009.

    Mocha Clubs 3Q Results

    Net revenue from Mocha Clubs totaled US$27.8 million in the third quarter of 2010, up from US$24.4 million in the third quarter of 2009.

    Mocha Clubs generated US$7.6 million of Adjusted EBITDA in the third quarter of 2010, which compares with US$6.3 million in the third quarter of 2009.

    The number of gaming machines in operation at the Mocha Clubs averaged approximately 1,600 in the third quarter of 2010, unchanged from that in the third quarter of 2009. The net win per gaming machine per day was US$189 in the quarter ended September 30, 2010, as compared with US$168 in the same period in 2009.

    Other Factors Affecting Earnings

    Total non-operating expense for the third quarter of 2010 was US$30.1 million, which included US$28.3 million in net interest expense and other finance costs of US$3.8 million. Capitalized interest during the third quarter of 2010 totaled US$3.6 million.

    Depreciation and amortization costs of US$58.9 million were recorded in the third 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. The year-over-year increase in depreciation and amortization costs is primarily related to the opening of the Grand Hyatt in September 2009 and the opening of The House of Dancing Water in the third quarter of 2010.

    Financial Position and Capital Expenditure

    Cash and cash equivalents as of September 30, 2010 totaled US$659.9 million, including US$164.6 million of restricted cash. Total debt at the end of the third quarter of 2010 was US$1.9 billion, and total net debt to shareholders’ equity as of September 30, 2010 was 51%.

    Capital expenditures for the third quarter of 2010 were US$20.9 million, primarily attributable to City of Dreams.

    Nine Month Results

    For the nine months ended September 30, 2010, MPEL reported net revenue of US$1.9 billion versus US$932.7 million in the nine months ended September 30, 2009. Adjusted EBITDA for the first nine months of 2010 was US$296.6 million, as compared with Adjusted EBITDA of US$53.1 million in the first nine months of 2009.

    The year-over-year improvement in net revenue and Adjusted EBITDA were primarily attributable to significantly improved operating results at both City of Dreams and Altira Macau, as well as from the opening of City of Dreams in June of 2009 and its contribution to results for the entire nine months of 2010.

    The Company reported a net loss of US$26.8 million for the first nine months of 2010 compared to a net loss of US$218.8 million for the first nine months of 2009. The net loss per ADS for the nine month period ending September 30, 2010 ,was US$0.05 compared to a net loss per ADS of US$0.46 for the same period in 2009.

    Source: Melco Crown Entertainment Ltd.

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    Financial Strength (Nov-2-2010) Company Industry Sector S&P 500
    Quick Ratio (MRQ) 1.53 2.98 0.56 0.73
    Current Ratio (MRQ) 1.54 3.13 0.72 0.87
    LT Debt to Equity (MRQ) 73.27 10.68 19.77 108.17
    Total Debt to Equity (MRQ) 78.55 12.88 33.68 156.19
    Interest Coverage (TTM) 0.02 0.36 19.37

    Source: Reuters.com, SEC Filings.

    Analyst Consensus

    uy Outperform Hold Underperform Sell No Opinion

    This is the consensus forecast among 15 polled investment analysts. Against the Melco Crown Entertainment Limited company.

    Analyst Detail Buy Outperform Hold Underperform Sell No Opinion
    Latest 4 2 8 1 0 0
    4 weeks ago 4 1 9 1 0 0
    2 months ago 3 2 5 3 0 0
    3 months ago 3 1 6 3 0 0
    Last year 5 0 4 2 0 0

    The 13 analysts offering 12-month price targets for MPEL have a median target of 5.90, with a high estimate of 8.00 and a low estimate of 3.65. The median estimate represents a -9.50% decrease from the last price of 6.52.

    Source: markets.ft.com

    Consensus Estimates Analysis


    # of Estimates Mean High Low 1 Year Ago
    SALES (in millions)
    Quarter Ending Dec-10 2 635.20 647.20 623.20 601.50
    Quarter Ending Mar-11 1 633.00 633.00 633.00 595.60
    Year Ending Dec-10 11 2,408.56 2,537.81 2,203.72 2,388.44
    Year Ending Dec-11 11 2,603.50 2,834.03 2,207.00 2,552.97
    EARNINGS (per share)
    Quarter Ending Dec-10 2 -0.00 0.02 -0.03 0.01
    Quarter Ending Mar-11 1 -0.03 -0.03 -0.03 0.00
    Year Ending Dec-10 10 -0.09 -0.03 -0.18 0.03
    Year Ending Dec-11 14 -0.02 0.11 -0.17 0.10
    LT Growth Rate (%) 1 69.20 69.20 69.20 66.10

    Source: http://www.reuters.com/finance/stocks/financialHighlights?symbol=MPEL.O


    Investment Highlights

    MPEL surged to a new 52-week high Tuesday following its upbeat third-quarter report. The casino operator’s quarterly earnings of 3 cents a share surprised analysts who expected a loss of a penny. Revenue climbed 45.4% to $727 million, topping analysts’ expectations of $672.9 million. Notably, the casino operator’s City of Dreams generated a profit of $114.9 million, which is 147% higher than the third quarter last year.

    The improved results was only partially offset by increased depreciation and amortization expense associated with the opening of the Grand Hyatt and The House of Dancing Water at City of Dreams and higher net interest expense related to the refinancing of approximately US$600 million of bank debt through the issuance of a high yield bond in May 2010, the Company said.

    “We opened The House of Dancing Water in September and it has been well received by the market and our guests. This is one of several new amenities that we plan to introduce into City of Dreams over the coming months, including Cubic nightclub and Hard Rock Cafe. We believe that these amenities, against a backdrop of solid market growth, will continue to drive improving gaming volumes at City of Dreams,” MPEL co-chairman and CEO Lawrence Ho said in a press release.

    “Though our new operating management structure has only been in place for approximately two months, we are encouraged by its initial impact on our business and are already seeing tangible results from its implementation. The focus of our management team continues to be on maximizing returns on our portfolio of assets in Macau.”

    MPEL also traded near a new 52-week high Monday amid news that Macau’s casino revenue surged by 50% year-over-year in October to a record high of $2.4 billion, boosted in part by China’s Golden Week holiday – a period when many mainland Chinese gamblers flock to the Chinese gambling hotspot.

    Macau, a former Portuguese colony, is the only place in China where casino gambling is legal.  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.

    According to Bloomberg’s survey of 17 economists, “the economy of mainland China, where most of Macau’s visitors come from, will probably grow 10% this year.”

    In a note, Bill Lerner, a Las Vegas-based analyst at Union Gaming Group LLC, said gaming revenues in Macau are up nearly 60 % on a year-to-date basis. “It’s encouraging to see monthly growth of this magnitude,” Lerner said. “We believe the profit story for Macau concessionaires over the next year could be significantly higher than current expectations.”

    Source: http://www.sirius.com

    Technical Analysis

    Source: http://stockcharts.com

    MPEL is trading above its 13 day moving average. This is considered to be the sign of a bullish trend. There is added weight to this indication because the moving average is rising and suggests that there has been buying interest in this stock.

    MPEL is trading above its upper Bollinger Band. Relative to recent price action, the stock is currently overextended and due for either a pause or retracement.

    The MACD for MPEL currently indicates a strong bullish signal for two reasons. First, the MACD is above the signal line, a 9day moving average. Second, the MACD is above 0 which implies that the underlying moving averages are trending higher.

    Comparative Analysis

    Company Name Ticker Price per Mrkt. Cap. P/E P/S
    Nov02-2010 symbol Share, $ $ Mn 2010 2011 2010 2011
    MGM Resorts International MGM 11.15 4.92B n/a n/a 0.82 0.80
    Wynn Resorts Ltd. WYNN 112.57 13.90B 69.92 53.10 3.54 3.30
    Ameristar Casinos Inc. ASCA 17.99 1.04B 26.46 18.94 0.88 0.87
    Las Vegas Sands Corp. LVS 49.04 32.40B 56.37 35.80 4.78 3.91
    Resorts and Casinos Median 49.05 n/a 0.92 n/a
    Melco Crown Entertainment Ltd. MPEL 6.63 3.52B n/a n/a 1.45 1.35

    Source: Thomson Financial

    Insider Trading Activity

    NET SHARES PURCHSE 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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