MPEL beats and provides a positive Q1 outlook. The reasons they missed our Street high estimate are not exactly negative.
You wouldn’t know it by the stock price but this should’ve been a good day for MPEL’s stock. They beat the Street for the second straight quarter (a big deal for the gang that couldn’t shoot straight since the IPO). More importantly, Q1 is trending above Street estimates and direct play appears to be growing as a percent of VIP which should be good for margins. Numbers look like they are going higher, again. Unfortunately, the stock market, and particularly gaming stocks, are not cooperating.
MPEL reported net of $774MM and Adjusted EBITDA of $134MM. Net revenues were in-line with our estimate while Adjusted EBITDA was 6% light - but still above consensus. The $9MM EBITDA underperformance vs. our estimate can be attributed to higher corporate expense and higher direct play (vs. our estimate) at CoD. Corporate expense was $3MM higher than our estimate due to a higher bonus accrual; the run rate should be lower. We overestimated the VIP win percentage which appeared higher per our monthly data but in reality wasn’t because direct play was higher. Going forward, higher direct play should help margins as player rebates are on average 30bps lower than junket commission rates.
City of Dreams
CoD net revenues of $489MM and adjusted EBITDA of $98MM were 3% and 12% below our estimates, respectively. Net casino revenues were $27MM below our estimate, primarily due to VIP revenues
- Direct play at CoD was 19% in 4Q210 vs. our estimate of 15% (3Q10 was 13%) resulting in RC volume that was 5% higher than our estimate, or a 66% YoY increase.
- VIP net revenues were $447MM, $13MM lower than we estimated
- The combination of lower reported net revenues and higher RC volumes resulted in us overestimating hold percentage by 20bps, resulted in a net revenue miss of $20MM vs. our original projection and an EBITDA impact of roughly $3.5MM
- Mass revenue of $126MM was $1MM below our estimate. Table volume was a bit light of our estimate while hold was better
- Slot win of $30MM was 6MM below our estimate due to lower slot handle and lower win percentage
Net non-gaming revenues were $12MM above our estimate, driven by House of Dancing Water, better RevPAR and lower promotional expenses. We believe that fixed expenses increased to $69MM at CoD compared to our estimate of $60MM and $55MM in 3Q2010.
- The company says this is because of the incremental cost of the HODW show – but you would think this would be accounted for in non-gaming expenses.
- However, the above statement doesn’t jive with the show being breakeven on its own- in which event you would have margins decrease in net non-gaming revenues, not an increase – so we assume that a lot of the costs did get captured in our fixed expense estimate. Looks like the show added about $8MM of incremental fixed expenses
Altira net revenues of $245MM and adjusted EBITDA of $46MM were 1% and 17% above our estimates, respectively.
- Gross VIP revenues were $8MM better than our estimate driven by hold that was 10bps above our estimate. Direct VIP was negligible.
- Mass table win was $3MM lower than our estimate due to weaker than estimated hold. Drop increased 98% YoY.
- We estimate that fixed costs were $18MM compared to our estimate of $21MM and our prior quarter estimate of $15MM
- Mocha slots revenues were $2MM above our estimate while EBITDA was $1MM better