FOUR IN A ROW FOR MPEL?

An earnings beat is expected but we’re way above the Street.  

 

 

MPEL should beat even the recently rising consensus EBITDA estimates by a nice margin.  MPEL has been on a recent tear but could continue to run into the print as estimates keep going higher.  Of course, all bets are off once the numbers are out, since there was high hold once again.   

 

We estimate high hold contributed approximately $25MM to the quarter’s EBITDA.  Analysts with sell or neutral ratings will surely use the high hold to downplay the quarter’s results.  Overall, we are projecting $239MM of EBITDA for Q1, which is 14% above consensus of $210MM.  Some of the estimates comprising consensus no doubt have factored in the high hold but our estimate is still above consensus on a hold adjusted basis - $214MM vs. $210MM.

 

While most investors have been focused on the potential slowdown in the Macau VIP market, we would point out that MPEL’s Mass business has continued its momentum with over 60% YoY growth in Q1 and as well as for FY11.  MPEL remains the cheapest concessionaire with operations on Cotai Strip and a big project in the pipeline, trading below 9x 2013 estimates.

 

 

1Q Detail

 

We estimate that City of Dreams will report $715MM of net revenues and $194MM in EBITDA

  • Our net casino win projection is $691MM
    • VIP net win of $405MM
      • Assuming 15.5% direct play we estimate $19.1BN of RC volume (a 2% YoY increase) and a hold rate of 3.02%
      • Using CoD’s historical hold rate of 2.86%, EBITDA would be $12MM lower and net revenues would be $31MM lower
    • $249MM of mass win, up 71% YoY
    • $37MM of slot win
  • $24MM of net non-gaming revenue
    • $22MM of room revenue
    • $13MM of F&B revenue
    • $18MM of retail, entertainment and other revenue
    • $29MMM of promotional allowances or 55% of gross non-gaming revenue
  • $411MM of variable operating expenses
    • $337MM of taxes
    • $62MM of gaming promoter commissions in addition to the rebate rate of 90bps (we assume an all-in commission rate of 1.22% or 40.5% on a rev share basis)
  • $24MM of non-gaming expenses
  • $86MM of fixed operating expenses compared to $85MM in 4Q

We project $260MM of net revenues and $53MM in EBITDA for Altira

  • We estimate net casino win $253MM
    • VIP net win of $227MM
      • $10.75BN of RC volume (a 15% YoY decrease) and a hold rate of 3.07%
      • Using Altira’s historical hold rate of 2.80%, we estimate that EBITDA would be $13MM lower and that net revenues would be $29MM lower
    • $26MM of mass win, up 33% YoY
  • $7MM of net non-gaming revenue
  • $173MM of variable operating expenses
    • $139MM of taxes
    • $30MM of gaming promoter commissions in addition to the rebate rate of 96bps (we assume an all-in commission rate of 1.24% or 40.3% on a rev share basis
  • $3MM of non-gaming expenses
  • $31MM of fixed operating expenses, in-line with 4Q

Other stuff:

  • Mocha slots revenue and EBITDA of $36MM and $11MM, respectively
  • D&A: $95MM (guidance of $90-95MM)
  • Interest expense: $27MM (guidance of $25-30MM)
  • Corporate expense: $19MM (guidance of $18-20MM)

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