Stock Alert for Melco Crown Entertainment Ltd. (ADR) (MPEL)
  • Stock Alert for Melco Crown Entertainment Ltd. (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 casino resort facilities. Melco Crown Gaming is one of the six companies licensed, through concessions or sub-concessions, to operate casinos in Macau.  MPEL currently operates Altira Macau (www.altiramacau.com) (formerly Crown Macau), a casino hotel located at Taipa, Macau and City of Dreams (www.cityofdreamsmacau.com), an integrated urban casino resort located in Cotai, Macau. The Company’s business also includes the Mocha Clubs (www.mochaclubs.com), which feature a total of approximately 1,600 gaming machines in eight locations and comprise the largest non-casino based operations of electronic gaming machines in Macau.

    MPEL was incorporated in 2004 and is based in Central, Hong Kong.

    Share Statistics (07-Jan-11) FY

    2008

    FY

    2009

    %

    Chg

    Q3

    2009

    Q3

    2010

    %

    Chg

    Symbol MPEL Revenue, $Mn 1,416.13 1,332.87 -5.9% 500.33 726.98 45.3%
    Current price $7.01 Gross marg. 17.0% 13.2% -22.4% 18.6% 25.5% 37.1%
    52wk Range: $3.30-$7.13 Oper. margin -20.4% 6.4%
    Avg Vol (3m): 5,745,870 Net margin -0.2% -23.1% 11450% -7.9% 2.2% -127.8%
    Market Cap. 3.73B
    Shares Outstanding 531.72M EPS, $ 0.00 -0.21 -0.03 0.01 -133.3%

    Source: Reuters.com, SEC Filings.

    Financial Summary

    For the third quarter of 2010, the Company’s 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, the Company expects its 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, the Company expects its 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.

    MPEL 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: http://www.melco-crown.com


    Financial Strength (07-Jan-2011) Company Industry Sector S&P 500
    Quick Ratio (MRQ) 1.39 3.76 0.59 0.65
    Current Ratio (MRQ) 1.40 4.00 0.77 0.96
    LT Debt to Equity (MRQ) 70.21 21.65 26.29 121.39
    Total Debt to Equity (MRQ) 77.82 24.27 39.96 178.72
    Interest Coverage (TTM) -0.01 0.13 16.21

    Source: Reuters.com, SEC Filings.

    Analyst Consensus

    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 5 2 6 2 0 0
    4 weeks ago 5 2 6 2 0 0
    2 months ago 5 2 6 2 0 0
    3 months ago 4 1 9 1 0 0
    Last year 4 1 4 2 0 0

    The 13 analysts offering 12-month price targets for MPEL have a median target of 7.30, with a high estimate of 9.00 and a low estimate of 3.65. The median estimate represents a 6.26% increase from the last price of 6.87.

    Source: markets.ft.com

    Consensus Estimates Analysis


    # of Estimates Mean High Low 1 Year Ago
    SALES (in millions)
    Quarter Ending Mar-11 1 706.90 706.90 706.90 568.40
    Quarter Ending Jun-11 1 710.40 710.40 710.40 586.70
    Year Ending Dec-11 13 2,875.89 3,825.54 2,376.05 2,427.33
    EARNINGS (per share)
    Quarter Ending Mar-11 1 0.01 0.01 0.01 0.00
    Quarter Ending Jun-11 1 0.01 0.01 0.01 -0.01
    Year Ending Dec-11 14 0.01 0.23 -0.14 -0.02
    LT Growth Rate (%) 1 50.10 50.10 50.10 66.10

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


    Investment Highlights

    MPEL has chosen to focus on the Macau gaming market because it believes Macau will continue to be one of the largest gaming destinations in the world.  In 2009, 2008 and 2007, Macau generated gaming revenue of about $14.9 billion, US$13.6 billion and US$10.4 billion, respectively, according to the Macau Gaming Inspection and Coordination Bureau (DICJ).  In comparison, the Las Vegas Strip generated gaming revenue (excluding sports book and race book) of US$5.5 billion, US$6.0 billion and US$6.7 billion for the comparable periods, respectively, according to figures by the Nevada Gaming Control Board.  Macau takes advantage of its proximity to one of the world’s largest pools of existing and potential gaming patrons and is currently the only market in Greater China, and one of only several in Asia to offer legalized casino gaming.

    MPEL posted record net revenue and record adjusted EBITDA during the third quarter of 2010.  The  Company attributed the results to its continued progress in expanding its mass market gaming volume.  The Company said it was further boosted by its VIP business, along with a favorable rolling chip hold percentage in the third quarter.

    Recent News

    Macau’s gaming revenue jumped 58% year on year to 188.34 billion patacas ($23.51 billion) in 2010, according to data provided by the Macau Gaming Inspection and Coordination Bureau. December figures also jumped to a record high as total casino sales of the six operators increased 67% 18.9 billion patacas ($2.4 billion), as compared with the year-ago period’s 1.3 billion patacas, the data showed.

    For this year and the next, Aaron Fischer, CLSA’s head of Asian gaming research, forecast Macau gambling revenue to grow 20% and 25%, respectively.

    MPEL’s Melco Crown Gaming is one of the six companies licensed, through concessions or sub-concessions, to operate casinos in Macau. The Company competes with gambling giants Las Vegas Sands Corp., Wynn Resorts Ltd. and MGM Mirage, as well as with homegrown companies Galaxy Entertainment Group Ltd. and SJM Holdings Ltd. According to the Macau Daily Times report, MPEL has about 14.5% of market share, securing the fourth position. SJM Holdings kept its lead last month, with a market share of 30%.

    Source: http://www.melco-crown.com

    Technical Analysis

    Source: http://stockcharts.com

    Comparative Analysis

    Company Name Ticker Price per Mrkt. Cap. P/E P/S
    Jan07-2011 symbol Share, $ $ Mn 2010 2011 2010 2011
    Las Vegas Sands Corp. LVS 49.89 34.16B 49.89 29.35 4.97 3.96
    MGM Resorts International MGM 16.35 7.89B n/a n/a 1.31 1.27
    Wynn Resorts Ltd. WYNN 118.73 14.72B 69.03 48.86 3.68 3.39
    Resorts and Casinos Median 21.09 n/a 1.24 n/a
    Melco Crown Entertainment Ltd. MPEL 7.01 3.73B n/a 233.67 1.47 1.33

    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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