Stock Alert for Melco Crown Entertainment Ltd. (ADR) (MPEL)
  • Stock Alert for Melco Crown Entertainment Ltd. (MPEL)
  • Stock Alert for Melco Crown Entertainment Ltd. (MPEL)
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    Stock Alert for Melco Crown Entertainment Ltd. (ADR)(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 (01-Apr-11) FY2009 FY2010 % Chg Q42009 Q42010 % Chg
    Symbol MPEL Revenue, $Mn 1,332.87 2,641.98 98.2% 400.22 773.75 93.3%
    Current price $8.01 Gross marg. 13.2% 23.6% 78.8% 10.7% 24.5% 129.0%
    52wk Range: $3.42-$8.02 Oper. margin 3.4% 6.1%
    Avg Vol (3m): 6,073,790 Net margin -23.1% -0.4% -98.3% -22.4% 2.1% 109.4%
    Market Cap. 4.26B
    Shares Outstanding 532.08M EPS, $ -0.21 -0.01 -95.2% -0.06 0.01 -116.7%

    Source: Reuters.com, SEC Filings.

    Investment Highlights

    MPEL reached a new 52-week high of $8.02 on Friday, before settling to close at $8.01. That closing price was up 5.39% from the previous session’s close.  Approximately 14.94 million shares have traded hands during the session, versus the 10-day average volume of 5 million.  MPEL is trading above its 50-day moving average of $7.23 and its 200-day moving average of $6.46.  Market capitalization currently stands at $4.26 billion and it has 532.08 million outstanding shares.

    Macau casino stocks were boosted Friday following news of strong gambling revenue growth in the booming Chinese casino enclave.  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. (NYSE: LVS), Wynn Resorts Ltd. (Nasdaq: WYNN) and MGM Mirage (NYSE: MGM), as well as with homegrown companies Galaxy Entertainment Group Ltd. and SJM Holdings Ltd. The Macau government said revenue among the enclave’s casinos increased 48% in March to 20.1 billion patacas ($2.51 billion).

    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 $6.87 billion. In 2007, Macau’s gaming revenues reached $10.4 billion, a 46.6% increase over the previous year.

    MPEL on Friday announced that it appointed Geoffrey Davis as its new chief financial officer. “His knowledge of the Company and extensive familiarity with the Macau gaming industry is of tremendous value to our senior management team,” MPEL co-chairman and CEO Lawrence Ho commented in a press release.  “I am confident we are placing the CFO role in good hands with Geoff.”

    Visit MPEL at http://www.melco-crown.com/eng/main.php

    Financial Summary

    MPEL reported net revenue of $773.7 million for the fourth quarter of 2010, representing an increase of approximately 93% from $400.2 million reported in the quarter ended December 31, 2009. Adjusted EBITDA was $133.8 million for the fourth quarter of 2010, as compared to Adjusted EBITDA of $2.7 million in the fourth quarter of 2009. The year-over-year improvement in net revenue and Adjusted EBITDA resulted primarily from significantly improved operating performance at City of Dreams and Altira Macau.

    On a U.S. GAAP basis, MPEL recorded net income for the fourth quarter of 2010 of $16.3 million, or $0.03 per ADS, compared with a net loss of $89.7 million, or a loss of $0.17 per ADS, in the fourth quarter of 2009. The improvement in bottom-line results was driven by the year-over-year improvement in the operating performance at City of Dreams and Altira Macau, partially offset by increased depreciation and amortization expense primarily associated with the opening of The House of Dancing Water at City of Dreams and higher net interest expense related to the refinancing of approximately $600 million of bank debt through the issuance of a high yield bond in May 2010.

    City of Dreams 4Q Results

    For the quarter ended December 31, 2010, net revenue at City of Dreams was $488.7 million compared to $237.6 million in the fourth quarter of 2009. City of Dreams generated Adjusted EBITDA of $97.7 million in the fourth quarter of 2010 compared to $22.2 million in the fourth quarter of 2009. The year-over-year improvements in both net revenue and Adjusted EBITDA were driven by increased gaming volume and win rates in the fourth quarter of 2010, as compared with the same measures in the fourth quarter of 2009.

    Rolling chip volume totaled $15.4 billion for the fourth quarter of 2010, up 65% from $9.3 billion in the fourth quarter of 2009, and the rolling chip hold percentage was 2.9% in the fourth quarter of 2010 versus 2.4% in the fourth 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 $572.5 million compared with $423.3 million in the fourth quarter of 2009. The mass-market win rate was 22.0% in the quarter under review and increased from 17.2% 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 December 31, 2010, was $513.5 million, up 38% from $372.8 million generated in the quarter ended December 31, 2009.

    Total non-gaming revenue at City of Dreams in the fourth quarter of 2010 was $47.6 million, up from $22.8 million in the fourth quarter of 2009. Occupancy per available room in the fourth quarter of 2010 was 87% versus 79% in the fourth quarter of 2009. The average daily rate (ADR) in the fourth quarter of 2010 was $166 per occupied room, which compares with $152 in the fourth quarter of 2009.

    Altira Macau 4Q Results

    For the quarter ended December 31, 2010, net revenue at Altira Macau was $245.1 million versus $132.7 million in the quarter ended December 31, 2009. Altira Macau generated Adjusted EBITDA of $46.4 million in the fourth quarter of 2010 compared with an Adjusted EBITDA loss of $14.0 million in the fourth quarter of 2009. A year-over-year increase in gaming volume and a return to a normal rolling chip hold percentage drove the improvements in net revenue and Adjusted EBITDA.

    Rolling chip volume totaled $11.4 billion in the fourth quarter of 2010 versus $8.9 billion in the fourth quarter of 2009. In the fourth quarter of 2010, the rolling chip hold percentage was 2.9%, as compared to 2.3% for the same period a year ago. The expected rolling chip hold percentage range is 2.7%-3.0%.

    In the mass-market (non rolling chip) table games segment, drop totaled $132.5 million in the fourth quarter of 2010, up 98% from $67.0 million generated in the comparable period in 2009. The mass-market win rate was 14.7% in the fourth quarter of 2010 compared with 18.8% in the fourth quarter of last year. At Altira Macau, the Company expects its mass-market table games hold percentage to range from 15.0%-17.0%.

    Total non-gaming revenue at Altira Macau in the fourth quarter of 2010 was $7.6 million, down slightly from $7.7 million in the fourth quarter of 2009. Occupancy per available room in the fourth quarter of 2010 was 97% and the ADR was $170 per occupied room. This compares with occupancy and ADR of 94% and $196, respectively, in the fourth quarter of 2009.

    Mocha Clubs 4Q Results

    Net revenue from Mocha Clubs totaled $30.6 million in the fourth quarter of 2010, up from $25.0 million in the fourth quarter of 2009. Mocha Clubs generated $8.6 million of Adjusted EBITDA in the fourth quarter of 2010, which compares with $6.2 million in the fourth quarter of 2009.

    The number of gaming machines in operation at the Mocha Clubs averaged approximately 1,600 in the fourth quarters of 2010 and 2009. The net win per gaming machine per day was $208 in the quarter ended December 31, 2010, as compared with $174 in the same period in 2009.

    Other Factors Affecting Earnings

    Total non-operating expense for the fourth quarter of 2010 was $29.9 million, which included $27.9 million in net interest expense and other finance costs of $4.1 million. There was no capitalized interest during the fourth quarter of 2010.

    Depreciation and amortization costs of $82.9 million were recorded in the fourth quarter of 2010, of which $14.3 million was related to the amortization of our gaming sub-concession and $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 House of Dancing Water in the third quarter of 2010.

    Financial Position and Capital Expenditure

    Cash and cash equivalents as of December 31, 2010, totaled $609.2 million, including $167.3 million of restricted cash. Total debt at the end of the fourth quarter of 2010 was $1.84 billion, and total net debt to shareholders’ equity as of December 31, 2010 was 49%.

    Capital expenditures for the fourth quarter of 2010 were $34.2 million, primarily attributable to various projects at City of Dreams and Altira Macau.

    Full Year 2010 Results

    For the twelve months ending December 31, 2010, MPEL reported net revenue of $2.6 billion versus $1.3 billion in the twelve months ending December 31, 2009. Adjusted EBITDA for the twelve months of 2010 was $430.4 million, as compared with Adjusted EBITDA of $55.8 million in the twelve months of 2009.

    Source: http://www.melco-crown.com/eng/main.php


    Financial Strength (01-Apr-2011) Company Industry Sector S&P 500
    Quick Ratio (MRQ) 1.32 5.55 0.48 0.68
    Current Ratio (MRQ) 1.33 5.67 0.62 1.00
    LT Debt to Equity (MRQ) 64.87 18.49 16.34 113.53
    Total Debt to Equity (MRQ) 72.92 21.16 28.75 162.39
    Interest Coverage (TTM) 0.04 0.22 16.93

    Source: Reuters.com, SEC Filings.

    Analyst Consensus

    This is the consensus forecast among 19 polled investment analysts. Against the Melco Crown Entertainment Ltd company.

    Analyst Detail Buy Outperform Hold Underperform Sell No Opinion
    Latest 8 3 7 1 0 0
    4 weeks ago 8 2 7 1 0 0
    2 months ago 7 2 6 1 0 0
    3 months ago 5 2 6 2 0 0
    Last year 3 1 5 2 0 0

    The 16 analysts offering 12-month price targets for MPEL have a median target of 8.48, with a high estimate of 12.20 and a low estimate of 3.65. The median estimate represents a 11.51% increase from the last price of 7.60.

    Source: markets.ft.com

    Consensus Estimates Analysis


    # of Estimates Mean High Low 1 Year Ago
    SALES (in millions)
    Quarter Ending Jun-11 3 728.27 746.70 701.90 569.70
    Quarter Ending Sep-11 3 717.37 738.00 692.90 573.40
    Year Ending Dec-11 18 3,108.49 4,214.28 2,604.00 2,473.97
    Year Ending Dec-12 15 3,402.89 4,339.84 2,704.00 3,020.56
    EARNINGS (per share)
    Quarter Ending Jun-11 2 0.00 0.01 -0.01 -0.03
    Quarter Ending Sep-11 2 -0.00 0.01 -0.02 -0.02
    Year Ending Dec-11 18 0.11 0.23 -0.04 -0.07
    Year Ending Dec-12 16 0.23 0.71 -0.02 -0.00
    LT Growth Rate (%) 1 -311.30 -311.30 -311.30 -239.54

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

    Technical Analysis

    Source: http://stockcharts.com

    MPEL is trading above its 20-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’s recent volatility has been greater than normal. This is evidenced by the increased distance between the upper and lower Bollinger Bands. These bands measure volatility using standard deviation and a large width is due to high volatility.

    The MACD for MPEL currently indicates a strong bullish signal for two reasons. First, the MACD is above the signal line, a 9-day 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
    Apr01-2011 symbol Share, $ $ Mn 2011 2012 2011 2012
    Wynn Resorts Ltd. WYNN 133.01 16.58B 42.09 33.00 3.51 3.23
    Las Vegas Sands Corp. LVS 43.65 31.71B 24.39 19.40 3.62 2.97
    MGM Resorts International MGM 13.26 6.48B n/a n/a 1.05 1.00
    Resorts and Casinos Median n/a n/a n/a n/a
    Melco Crown Entertainment Ltd. (ADR) MPEL 8.01 4.26B 61.62 36.41 1.40 1.29

    Source: Thomson Financial

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