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Strong quarter but the sellside continues to compare the lower of MPEL's actual and "hold adj" EBITDA to the higher of their own nominal and "hold adj" estimate.


"The meaningful ramp up in our mass market operations over the past year, which is evident in the sustained improvements in margins and group-wide profitability, is particularly pleasing...we are well positioned to take advantage of the shift of the gaming epicenter to Cotai, particularly in the mass market segments, driving long term profitability and shareholder value."

-  Mr. Lawrence Ho, Co-Chairman and Chief Executive Officer of Melco Crown Entertainment

CONF CALL NOTES

  • Mass growth and costs control drove their EBITDA this quarter
  • Continue to focus on better yielding their offerings to drive better margins
  • They are optimistic about GGR growth in Macau, in particular, mass market growth
  • Took share in the mass table segment despite new supply in the market
  • $200MM 4Q EBITDA hold adjusted at 2.85%
  • Remained disciplined in junket commissions
  • CoD - hold adjusted EBITDA contribution was 1/3 of total in 4Q11 down from 50% in 4Q10
  • 1Q12 Guidance:
    • D&A: $90-95MM
    • Net interest expense: $25-30MM
    • Corp expense: $18-20MM 

Q&A

  • They have improved their mass productivity per table materially
  • More of their junkets have moved to a revenue share program from a RC program
  • They continue to be optimistic about 2012, which is off to a good start
  • Reduction of tables at Altira/increase at CoD?
    • They may shift some more tables to CoD from Altira
    • They are putting in a program to expand their VIP operations at CoD in the coming months by adding 3 new junkets
  • As a policy, they do not intend to compete on pricing for junkets
  • Hold adjusted margins were 21%
  • Think that Chinese economic growth will continued to be measured.  However, they have seen no slowdown in the consumer discretionary sector.  They project 15-20% GGR growth with GDP growth of 8%.
  • Cash balance and debt situation and funds needed for MSC
    • $1.2BN of cash & equivalents, excluded long term restricted cash
    • They are working through their financing for MSC - bank loans
    • $1.9BN total project cost, equity contribution pro-rata between them and their minority partner
  • Table transition from Altira to CoD?
    • The table productivity at Altira is a little lower than at CoD.  So they are moving more junkets to a revenue share model which attracts more 'larger' and well-capitalized junkets. 
  • Receivables: $307MM; 1/3 related to premium direct and the rest related to junket. The provision for the quarter was $10MM - in-line with the rest of the year
  • What are the milestones for MSC?
    • Their process is a little different. It's really about restarting construction vs. getting brand new approvals
    • Their next announcement would be a restart of construction. They need to 'refresh' several aspects of their initial agreement before they can commence construction.
    • They are not looking to do an equity raise for the project

HIGHLIGHTS FROM THE RELEASE

  • $1,008MM of net revenues and $232MM of Adjusted EBITDA
    • CoD: net revenue of $696MM and $187MM EBITDA 
    • Altira:net revenue of $268MM and $53MM EBITDA 
  • "We have continued to execute on our premium strategy, both in the rolling chip and mass market gaming segments, as well as in our world-class entertainment and other non-gaming amenities. We believe our premium mass market focus at City of Dreams represents one of our key competitive advantages, giving us an ability to capture and leverage a loyal and more profitable customer base."
  • "Our design plans in relation to Studio City are effectively complete and we are undergoing the necessary Government processes to obtain the required approvals to commence construction. At the same time, we are working through our financing plans in relation to this project which will potentially include a bank loan and other debt financing."
  • "We continue to build out our Mocha Clubs network, opening Mocha Macau Tower in September 2011 and Mocha Golden Dragon in January 2012. With 300 gaming machines, the Golden Dragon facility has quickly become one of the best performing clubs in our Mocha portfolio."
  • 4Q Capex: $56MM, of which $14MM was related to design and preliminary costs associated with MSC