MPEL 1Q13 REPORT CARD

In an effort to evaluate performance and as a follow up to our YouTube, we compare how the quarter measured up to previous management commentary and guidance

 

 

OVERALL 

  • BETTER:  We were ahead of consensus and MPEL still managed to beat our numbers by 2%.  Continued mix shift toward mass helped margins.

 

TABLE YIELD

  • BETTER:  Group-wide RC volumes have grown +18%, significantly outperforming the market and highlighting MPEL's success with its ongoing table optimization strategy whereby they focus on maximizing group-wide EBITDA by yielding up each individual table.
  • PREVIOUSLY: “Our table yields at the City of Dreams continue to outperform all other major properties in Macau while at the same time our table yields in the rolling chip segment at both Altira Macau and City of the Dreams continue to improve. Our table optimization initiative is ongoing, as we proactively look for ways to maximize the performance of our most scarce and valuable resource."

STUDIO CITY

  • SAME:  Remains on time and on budget.  Capex 1Q was US$40MM.  Construction cost guidance of US$2.04 billion is unchanged. (2013: $800MM-$1BN).  Most of the piling work is substantially completed.  In the few months, the structure will come out of the ground.  There are 800-1,000 workers on the structure.
  • PREVIOUSLY:  "Studio City remains on track to open around mid-2015. With regards to Studio City, we've been in heavy-duty construction mode since summer. We have done, I think, 95% of the piling work, and we are ready to move on to the basement very soon. We have about 500 workers on site, and so far the main contractor has been doing a good job."

COD MARGIN 

  • BETTER: CoD margins were 29.5% this quarter despite a low hold rate. MPEL believes that as mix continues to shift towards mass they have room to continue to grow margins.
  • PREVIOUSLY: “So I think we are looking at somewhere at this very moment at 20% to 27% in terms of CoD margin, and we're looking at some improvement from this level onward."

COD PHASE 3

  • SAME:  Is optimistic on breaking ground before the end of 2013
  • PREVIOUSLY: “We were optimistic that obviously Phase 3 is still subject to our official Board approval, but I think we are very advanced in terms of the designs and schematic designs. We are waiting – as you know, Phase 3 used to be apartment hotels. So we are waiting for that piece of land to be re-gazetted, and the moment it's re-gazetted we're almost ready to go. So we are optimistic that it could get started at the end of this year."

CHINA OUTLOOK

  • SAME: Lawrence is more optimistic on market growth in Macau than at the outside of the year, although the did not quantify it
  • PREVIOUSLY: “So we're very optimistic. I think with the new administration will – is ramping up at this stage, and I think, give them a few more months they will be in full swing. At the same time, if you look at most of the China production index, they have all turned quite positive over the last little while. So our view is that the market this year should definitely grow stronger than last year. And I think we always predicted a 10%, 15% or more growth. So I think there would probably be more upside than downside."

PHILIPPINES RESORT

  • SAME:  Will open in mid-2014.  No change in ROIC minimum expectation of 20%. MPEL is optimistic proposed tax changes will get favorably resolved
  • PREVIOUSLY:  "For the Philippines, we anticipate spending approximately $450 million to $475 million this year into that project."

DIVIDEND

  • SAME:  Committed to returning shareholder capital through a buyback or issuing a dividend in the future.
  • PREVIOUSLY:  "We would want to see dividend definitely sooner rather than later. We will continue to monitor that. I think if 2013 plays out to the way we've been able to play out and given the development nature is as smooth as we hope it will be, I definitely think we can commit to the dividend policy early."

MPEL 1Q13 REPORT CARD - g