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The new CoD show may or not be a success but MPEL’s turnaround has been impressive. However, the catalysts we’ve been waiting for are already on the table and this one may take a breather.

The MPEL thesis was two pronged:  strong market share gains punctuated by a strong bottom line quarter – finally.  MPEL certainly delivered.  Street estimates still need to go up.  To be fair, although we knew hold percentage would be high, it did come in above what we were looking for, so some of this upside may not be sustainable.  We may want to keep a trade a trade.  Here are some takeaways from the quarter:

CoD net revenues were $7MM above our estimate while EBITDA was $9.6MM better

  • We know that the company said that direct play was 20% but we think it was actually a little north of 13% with the addition of 3 more junket rooms in the quarter.
  • VIP gross table win was $7MM above our estimate
    • RC was actually $600MM less than our estimate, but hold was 20bps higher as a result – which also helped margins even more since 50% of their junkets are paid on a fixed % of RC
    • At a normal 2.85%, net revenues would have been about $76MM lower and EBITDA would have been about $83MM (about $32MM lower than reported results)
  • Mass win was $1.5MM higher than our estimate, with drop $22MM lower but hold rate 1.3% better
  • Slot win was $5MM light
  • Non-gaming revenues net of promotions were $2MM below our estimate
  • Fixed costs were $5MM below our estimate and were essentially flat to last Q at $55MM.

Altira net revenues came in $10MM below our estimate although EBITDA came in $8MM above

  • RC was $100MM better than we modeled, which we attribute to a small increase in direct play which is also why the reported hold of 2.7% was 10bps below our estimate.
  • VIP gross win was $7MM below our estimate
  • Mass win was $500k better than we estimated
  • Non gaming revenues, net of promotional expenses were $2MM above our estimate
  • The real story seems to be lower junket commissions and controlled fixed costs.  All-in, junket commissions were $9.5MM below our estimate while fixed expenses look to be only $15MM

Other stuff:

  • Mocha Slots was $0.7MM ahead on revenue and $0.6MM ahead on EBITDA
  • D&A was $3MM below our estimate
  • Pre-opening expense was $5MM higher but it looks like they took it all in the Q vs. over the next 2 Qs
  • Interest expense was $8MM higher