In preparation for MPEL's F3Q 2012 earnings release Wednesday, we’ve put together the recent pertinent forward looking company commentary.



Melco Crown Entertainment Announces Signing of Commitment Letter for Its Senior Secured Credit Facilities for the Development of Studio City (10/19)

  • US$1.4 billion senior secured credit facilities (with both Hong Kong dollar and U.S. dollar tranches) which is expected to consist of: (i) a US$1.3 billion equivalent delayed draw term loan facility and (ii) a US$100 million equivalent revolving credit facility, both of which will mature 5 years from the signing of definitive legal documentation.
  • MSC remains on track to open mid-2015





  • "Our rolling chip segment continues to be impacted by our table optimization strategy. This strategy has resulted in further tables being shifted from Altira to City of Dreams, as well as the movement of some tables from VIP to mass during the second quarter of 2012. While somewhat disruptive as it is happening, this initiative should set us up favorably going forward."
  • "The market-wide mass market table game segment continues to demonstrate strong year-over-year growth, expanding over 33% during the second quarter of 2012. This once again reinforces our mass market focus strategy, particularly at the higher end of the market, which we believe will provide a more stable, loyal, and profitable customer base for the foreseeable future."
  • "Total depreciation and amortization expense is expected to be approximately US$90 million to US$95 million, corporate expense is expected to come in at US$18 million to US$20 million, and net interest expense is expected to be approximately US$23 million to US$25 million."
  • [Studio City] "So again, we're very confident to have gaming as part of this exciting, integrated resort. And I would like reemphasize that after the land grant stage, whether it's us or any of our competitors, we are going down the same route in terms of applying for gaming or gaming tables."
  • [Mass hold rate] "We said 25% to 30%, and we're quite confident in COD will be very, very high end of that range going forward because of our enhancement of the efficiency on the floor during the last few quarters."
  • [5th tower at CoD] "We are short of rooms at City of Dreams, and tower five has always been in the plan. And given our strength in mass and also the fact that we do need more rooms going forward; we're at 90% plus occupancy every single day of the year not just on weekends. We have completed all of our conceptual designs for that tower. And I can assure you, when it's built, it's going to be the ultimate art piece in Macau....again, it's subject to the government processes because this started as a apartment hotel in the early days, so we do need to have the land re-gazetted. But as soon as that is done, we would like to begin construction of that as early as next year."
  • [International opportunities] "We have continued to do a lot of research and field work and lobbying work in both Taiwan and Japan. We are very encouraged by the passing of the referendum in Matsu. So we're studying. We're waiting for the next move from the central Taiwanese government, and at the same time, we are looking at those places with keen interest."
  • "I think on the new supply in the second quarter in Cotai, we do experience some of our lower-end customers moving across the Cotai area. But the good news is, starting from third quarter July, we see a lot of these customers coming back, and we have a fantastic July rebound in that sense."
  • "We see some more promotional activities in Macau. And I think the mid to lower end of the market is more sensitive to the promotional activities, i.e., we see some of the changes when the other properties are doing these promotional activities. So I think we are still maintaining our premium position in COD, and we are very positive on the long-term development of that particular segment."
  • "We've really spent our time and effort into improving the product of our VIP, knowing that there's been disruption. Inevitably when you renovate a VIP room, you will disrupt the business there. We have to close off sections of it. And I think that's why, on top of the general market trends, you are seeing some slowdown in terms of some of our VIP business."
  • "On the cost side, I think we maintain a very, very lean operation teams in Altira there for the last, almost last two to three years' time. So I guess it's more about the productivity of the tables that we are working on Altira. Recently, I think the productivity level at the moment is actually improved to almost the highest time in the last."
  • [Altira] "So with the current run rate, I think we will see some continuous improvement in the EBITDA generated by this property going forward."
  • "More aggressive approach to comping rooms, in other words, expanding our casino block within our hotels. And that's what's resulting in a higher promotional allowance."

Game Day

This note was originally published November 06, 2012 at 08:43 in Early Look

“The Democracy will cease to exist when you take away from those who are willing to work and give to those who are not.”

-Thomas Jefferson


Game day is here.  In what will likely go down as the most expensive campaign season in history, it has all come down to today.  For partisans on both sides, the quote above from Thomas Jefferson is what this election has been about: should the government do less or more? Based on the current national polls, it is not clear either side really won that argument.


As I wrote yesterday in a note, the consensus view of the expert pollster is that President Obama has this election won.  He currently leads, albeit very slightly, in the national polls and he has a slightly higher edge in the swing state polls which should give him the Electoral College votes he needs to win.  This is all reflected in the probability markets as websites like Intrade have Obama at an almost 68% probability of winning.


Now, if I were content in believing the national polls, I could probably stop the note here and get on to something more interesting, like telling you that you should dial into our call with Neil Barofsky, the former Inspector General of TARP,  tomorrow morning (if you don’t have the dial-in information ping  The key pushback on the story the polls are telling us is that almost all economic models suggest that President Obama should not get re-elected.  These models, like polls, also have a very strong track record predicting Presidential election results.


In addition, the polls generally appear to show a much higher sample of Democrats by ID than would be expected in a race this close.  This doesn’t mean the polls are wrong, of course, it may well mean there is a reason more people are indentifying as Democrats than ever before.  Currently, it is a margin of +7 for Democrats in the recent national polls that I reviewed.  It could also be a systemic error, which may give Romney the ultimate edge.


Regardless, by tomorrow we will know who is right and wrong in terms or predicting the outcome of the election.  We will also know who is going to be the President for the next four years.  Or will we? This year more than other, there is also a strong case for an outcome that is undecided on Election Day. 


Specifically, in Ohio voters that have requested ballots to vote early, can also go to the polls on Election Day and vote.  In this scenario, the Ohio voters would be given provisional ballots that could not be counted for ten days until it was determined that voter had not voted twice.  In Ohio, a recount is triggered if the vote is within 0.5% and then the recount would have to wait ten days for the provisional ballots to be legitimized.


In the Chart of the Day we take a look at how the market performed in the days following the 2000 tied election.  It wasn’t pretty to say the least.  There was a meaningful drawdown for most of November to the tune of some -8% in the SP500.  As my colleague Keith McCullough noted on CNBC last night, it was a market that felt like hell.  Indecision is never good for equity markets.


Undoubtedly, many of you will be watching the returns very closely this evening.  There are a few things that you want to focus on to get a sense for the eventual outcome of the election.  These are as follows:


1)      Turnout - If turnout is bigger than expected, it likely favors Obama.  If it is lower than expected, it likely favors Romney.  Potential rain in both North Carolina and Florida may help Romney.  In 2008, more than 131 million people voted.  This equated to 62.9% of eligible voters casting ballots, if the turnout percentage looks to be coming in lower it will be an edge for Romney.


2)      Exit polls – There are certain demographics that Romney does much better with, namely whites and males.  If the exit polls show a high turnout among these groups, this will be a positive for Romney.  The inverse is true for Obama.  A high turnout of women and ethnic minorities favors Obama.


3)      Virginia – The polls in Virginia close at 7pm eastern.  The path to Ohio even mattering and an eventual victory for Romney goes through Virginia.  If Romney does not win Virginia, he most certainly will not win the Presidency.


4)      Ohio - As I’ve written before, no Republican nominee has ever won the Presidency without winning Ohio.  While there is a path to the Presidency for Romney without Ohio, it is very unlikely.  The key counties to watch in Ohio are Hamilton (Obama won in 2004, but normally goes Republican), Wood and Ottawa.  The last two are the swing votes within the swing state and have gone with the Presidential winner every year since 1992.  North Carolina closes at 730pm, just like Ohio, and is must win for Romney.


5)      8pm – Three states close at 8pm, including New Hampshire and Florida.  If Romney looks to have won North Carolina, Virginia and Ohio, he will likely have also won Florida, but still needs more Electoral College votes. New Hampshire has four and would put him over the top.


6)      9pm – If Romney is still alive at 9pm, then we are on to 14 states, including crucial battlegrounds Colorado and Wisconsin.  Democrats have won Wisconsin for six straight elections.  If Romney can keep Wisconsin close or flip it, he will likely be the next President.


In closing, I will leave you with a quote from Thoreau:


“All voting is a sort of gaming, like checkers or back gammon, with a slight moral tinge to it, a playing with right and wrong, with moral questions; and betting naturally accompanies it. The character of the voters is not staked. I cast my vote, perchance, as I think right; but I am not vitally concerned that that right should prevail. I am willing to leave it to the majority.”




Our immediate-term risk range for Gold, Oil (Brent), Copper, US Dollar, EUR/USD, UST 10yr Yield, and the SP500 are now $1678-1705, $106.03-110.12, $3.45-3.53, $80.19-80.84, $1.27-1.29, 1.67-1.75%, and 1401-1432, respectively.


Keep your head up, stick on the ice and put your ballot in the box,


Daryl G. Jones

Director of Research


Game Day - Chart of the Day


Game Day - Virtual Portfolio


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The following tables outlines the numbers for the first 4 days of November in Macau.  Our full month projection for YoY GGR growth is +7-14%.  Given the small number of days, we don’t really have any useful commentary but wanted to provide you with the details anyway.






What's Next For Gaming Legislation in South Korea?    



Date: Thursday, November 8th 

Time: 8:30am EST  

To gain access, please dial:   (Conference code: 112236#)



Steve Park, Senior Consultant of Gaming Asia-Pacific Company


The Hedgeye Gaming, Lodging and Leisure Team lead by, Todd Jordan will be hosting an Expert Conference Call with Steve Park, Senior Consultant of Gaming Asia-Pacific Company. The call will be held Thursday, November 8th at 8:30am EST and will discuss potential gaming expansion in South Korea.


Key Topics Will Include:    

  • Current state of the gaming industry in S. Korea  
  • Draft legislation for further gaming liberalization
  • Timeline & process 
  • Potential players  
  • Scope of the market


About Steve Park

  • Partner and senior consultant at Gaming Asia-Pacific, a firm providing business and regulatory consulting for international clients wishing to enter the South Korean and Japanese markets
  • Serves as a consultant to the Korea Tourism Organization Advisory Board, advises the integrated resorts committee on political and media affairs
  • Provides advice and assistance to the New Frontier Party to develop the government partys legislative agenda and strategies
  • Previously as a policy advisor in the National Assembly, Park served in the Public Administration & Security Committee reviewing tourism projects by all 16 regional governments   
  • Also served as a campaign consultant and reporter in the U.S for the Republican Party and the Washington Times

OIL: Correlation And Election Risk

We’ve said it before and we’ll say it again: a Romney win is bullish for the US dollar. Dollar up, commodities down; that puts pressure on crude oil and will drive it lower accordingly. The inverse correlation between the US dollar and Brent crude oil has strengthened to -0.82 over the last 15 days versus +0.27 over the last 60 days. On the long-term scale of things, the relationship has legs. It all comes down to who takes the White House at the end of today.


OIL: Correlation And Election Risk  - OILUSD

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