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Why the fight over Stanley’s inheritance could work for MPEL.

There are a lot of near-term positive catalysts for MPEL.  A not so obvious one concerns the dissolution of the Stanley Ho empire.  Many in Macau believe that loyalty to the old man for years of close relationships have kept many junkets operating at the SJM properties, despite lower commissions.  With the recent announcement that Ho has bequeathed control and assets to the families of his 2nd and 3rd wives, the junkets may feel free from the loyalty chains. 

Clearly, the migration of junkets would hurt SJM but who would benefit?  With Ho members firmly in charge of MPEL (Lawrence) and MGM (Pansy) along with the highest junket commission rates and most aggressive commission advancement policies, it’s a fairly safe bet as to where a lot of this business would go.  This is a very fluid situation so stay tuned.

So what are the other catalysts?  A second blowout quarter in a row from the gang that couldn’t shoot straight for one.  See our 1/11/11 note, “MPEL: AN ENCORE PERFORMANCE” for the details.  Our EBITDA estimate is 20% above the Street for Q4.  The good times should continue as January is off to a gangbusters start and Q1 estimates look too low.  Finally, Galaxy should announce that the April opening of Galaxy Macau will be pushed back to June.  Cotai cannibalization on MPEL’s City of Dreams (CoD) has been a worry for investors.  An additional two months of CoD operating without the additional competition should allow for another beat in Q2.