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Yes hold was high but Mass continued it's upward trend

"These results highlight our continued success in developing our mass market business, particularly at the premium end, where we have further strengthened our diversified range of products, services and amenities to address Macau's fastest growing gaming segment."

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


  • Opened 3 new junket rooms at CoD recently, which should benefit their RC volumes in 2Q
  • Opened their new premium mass/gaming segment CoD earlier this month
  • Ted Chan has assumed the role of COO
  • MSC: continue to work with the government to bring this project to reality. Think that they can restart construction at the end of Q2
  • Believe that their Mass hold rate will be in the 25-30% range going forward due to some changes that they have put in place at CoD
  • Hold adjusted EBITDA would have been $210MM
    • Hold adjusted EBITDA margin of 22% 
  • 2Q guidance:
    • D&A: $90-95MM
    • Corporate expense: $18-20MM
    • Net interest: $23-25MM


  • MSC budget of $1.9BN is still their target budget.  They are still bidding out the project with several construction companies and have not gotten any push back so far.
  • They are looking at improving the VIP segment of their slot offering and that has benefited their slot win.  There are a lot of synergies between the premium mass business and high limit slot area.  Their recently opened premium gaming area includes a new high limit slots room.
  • They are still looking at building a sky walk between CoD and Venetian.  They are in discussions with Sands China.
  • With the table cap they have been on a table optimization program for the last 4 quarters. They have moved some of the junket VIP tables from Altira to CoD. They moved about 15-20 tables from Altira. 
  • SCC impact/ effect: Currently, they just have a limited offering but even so they have seen a lift in traffic and visitation to the Cotai Strip and CoD.  Think that once the property is fully open it will be even better for the Strip in driving visitation.
  • New premium mass space at Grand Hyatt
    • See great depth in the market which allows them to continue to focus on the high end Mass segment. They have allocated more rooms in the Grand Hyatt to the premium Mass segment and that is helping them on the Mass hold rate as well. There is also more potential to allocate more rooms to this segment
  • MSC: they remain very respectful of the government approval process. Their approval process is a little different. They will only make an announcement when they get permission to restart construction.  They still expect a 36 month construction timeline once they commence construction. 
  • MSC financing: still have no plans to raise equity
  • MSC theme: taking the movie concept to the next level. In due course when they restart construction they will announce their plans.
  • They do have the capacity to consider additional projects in or outside of Macau. However, outside of Macau, timing on any new projects is not imminent. They are focused on MSC.  
  • Regarding the Philippines - they are more interested in the larger and more stable jurisdictions.  Phillipines is definitely up and coming.  Their main focus is getting MSC off the ground. They are a "very focused group."
  • It looks like there will be at least 3 projects that are targeting openings in Cotai in mid-2015-2016.  How will they compete for tables and labor?
    • The government will likely want to stagger the openings of these projects to avoid all these projects opening at the same time 
    • They have a head start on the competition since they have already completed the piling work
    • When there is a need for additional labor, the government will allow more foreign workers to come in
    • There is a clear communication that from now until 2022, an additional 2,000 tables will open.  The table additions don't necessarily have to be equally spread across each year.
  • On the VIP segment, they are no longer competing along credit and commission lines but rather on quality. On the mass side, there are some changes in the market, but they do not see a significant impact since they are focused on the higher end mass segment. 
  • Bad debt / receiveables: the provision is flat to where it's been trending and they had a decrease in receivables sequentially. Not seeing any collections or credit issues in their business.
  • Why did VIP volumes decrease YoY at Altira and a slow down in CoD volume?
    • There has been additional supply in Cotai 
    • Also in April they have been renovating their space as well which impacted them at CoD
  • Why not add another tower at CoD?
    • They are looking at doing that and have made certain submissions to the government
    • They do want to make sure that MSC gets off the ground first, but don't need to wait for MSC to be complete to start on the tower
  • What permits do they need for MSC to proceed?
    • CoD had been re-gazetted 4 times; each time there were changes to the design. So, yes MSC will need to get re-gazetted since the land was originally granted 11 years ago. 
  • How will the 3 new junkets impact the mix of Mass/ VIP at CoD?
    • Added 23 new tables for these 3 operators - so 10% more VIP tables were allocated to VIP at CoD
    • Still have 229 tables on the Mass side
  • What exactly is driving the higher hold ratio in Mass at CoD?
    • Higher average bet
    • Better service level and room comp alignment 
    • Increased customers in that segment
    • More aggressive pricing in that segment at those tables
  • 30% margins are not out of reach for them in CoD, however, they aren't sure about the timeline of that happening. However, as they continue to shift more towards Mass, they should be able to achieve better margins.
  • How is the strata title conversation with the government? 
    • They have given up that conversation with the government given the controversy surrounding the issue of condos on Cotai.  3 years ago, they decided that the second tower at CoD would just be hotel rooms.
  • 23 VIP tables across 3 rooms - how much rolling volume should that bring in?
    • Can't disclose performance but the junkets that they brought in were some of the biggest operators in Macau.  The junkets are doing roughly 30% higher productivity than what they were doing at Altira
  • How much table and slot capacity and hotel rooms are MSC looking to add on?
    • The government will approve the additional tables when the cap is unfrozen in March 2013
    • 1,600 hotel rooms in MSC in PH1
  • New hotel tower at CoD?
    • They are finalizing the number of rooms/budget now so they aren't ready to guide on that yet


  • Net revenue of $1,027MM and Adjusted EBITDA of $243MM, which was slightly ahead of our estimate and 13% of consensus
  • Hold at CoD was high across VIP (3%) and Mass (28.8%) and VIP hold at Altira was also high at 3.1%. If we just adjust for high VIP hold, we estimate that EBITDA would have been $26MM lower. If we factor in high Mass hold we estimate that the total benefit was closer to $41MM. 
    • Altira's historical hold rate is 2.8% excluding 1Q. Using the historical hold rate, net revenue and EBITDA would have been $33MM and $15MM lower
    • CoD's historical hold rate is 2.86% excluding 1Q. Using the historical hold rate, net revenue and EBITDA would have been $27MM and $11MM lower
    • CoD's Mass hold in 2011 was 24.4% and the last 2 quarters has trending in the 25-26% range.  If we use 26% hold rate as normal, then net revenue and EBITDA would have been another $25MM and $15MM lower, respectively
  • "The 100% year-over-year increase in Adjusted EBITDA in the first quarter of 2012 was attributable to an improved group-wide rolling chip win rate, as well as substantial growth in the mass market table games segment, particularly at City of Dreams which, combined with a strict company-wide cost control culture, drove operating leverage and profitability."
  • "We continue to optimize our current portfolio of assets, with a strong focus on improving table yields across City of Dreams and Altira Macau and leveraging our hotel and other non-gaming amenities to drive company-wide operating performance, while at the same time maintaining our strict control over our cost structure."
  • "Our strong performance in the mass market table games segment... resulted in us capturing meaningful market share in this increasingly important and profitable gaming segment. The importance of this gaming segment is clearly evident in the improvements in profitability and operating cash flow during the quarter, where we achieved year-over-year EBITDA growth of 100%, on revenue growth of 27%, highlighting significant operating leverage and improved margins."
  • "We believe Studio City will further enhance the experiences available for visitors to Macau with its expected range of unique entertainment offerings and interactive attractions. We continue to work with the Macau Government to bring this project to realization, moving forward with the remaining approvals required to restart construction on this exciting project."