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The only story that matters is that MPEL is on track to blow out the Q2 and the sell side needs to get decidedly more positive.

The bears are spewing such stories as:  Galaxy is going to crush CoD, the Gov’t doesn’t want Studio City, MPEL is flooding the junkets with credit.  The reality is that none of these are likely true.  What is probably true is that MPEL is on track to produce $180-190 million in Q2 EBITDA, just “slightly” above the Street at $135 million.  We’re looking forward to seeing these analysts justify their Neutral ratings, $550 million 2011 EBITDA estimates, and $11 price targets in the face of another terrific quarter.

So why the bear stories?  I guess some analysts need to grasp on to something to justify why they missed the big move in the stock.  Unfortunately for them, they may miss the next big move up.  Yes, the stock has done well but estimates keep going higher.  But they’re still not high enough, not for Q2, 2011, or 2012 - so we haven’t seen a significant amount of multiple expansion.  At 10x 2012 EBITDA of $700 million, the stock remains heavily discounted.

We’ve learned a lot while (still) here in Macau.  So let’s address the bear stories:

  1. Macau Studio City (MSC) – a government official made the comment that MPEL has to stick to its 2008 plans for the site and people assume there is some sort of conflict.  The fact is that the government asked MPEL to take over the project and MPEL intends to keep the major tenets of the original plan intact.  In fact, the guys we would consider “in the know” including competitors, think that a) MSC is the best site on Cotai and b) MSC will open before Wynn Cotai.
  2. CoD and junket credit – this is actually old news.  We believe CoD pumped some liquidity into the junkets ahead of Galaxy opening.  So did other casinos.  Big deal.  There hasn’t been anything recently.
  3. Galaxy impact on CoD – CoD lost 3-5% visitation after the Galaxy opening but spend per visitor went up substantially.  Visitation has come back and spend per visitor remains high.  Oh and by the way, oft ignored Altira is performing well above estimates and is meaningful to MPEL.