MPEL: LOSING JUNKET STEAM?

After a long steep climb, the MPEL engine may be slowing down.

 

 

We're still positive on Macau so it’s difficult to be negative on MPEL.  However, MPEL’s recent share losses in the Junket segment are a little disconcerting and could continue.  Moreover, MPEL’s Mass share could be at risk as Sands Cotai Central begins its push into Premium Mass next year.  So while not negative, it’s probably safe to say we've pushed MPEL to the bottom half of attractive Macau operators, behind LVS, MGM, and Galaxy.

 

As seen in the following chart, MPEL’s 3 month average Rolling Chip share has fallen almost 200bps from its May high.  We do think it is possible that some of the drop could be conversion of Junket players to Direct VIP and Premium Mass.  Indeed, MPEL’s Mass share has held up well and VIP Revenue share (which includes Direct Play) has dropped 160bps - less than its Junket volume decline.  

 

MPEL: LOSING JUNKET STEAM? - m1

 

However, our research indicates that competitive forces are probably playing a bigger role.  From the next chart, it appears that Galaxy, SJM and Wynn have gained the most share since May.  Galaxy recently moved 12 Junket tables from the Grand Waldo to the much more alluring Galaxy Macau.  We’re pretty sure Galaxy was able to attract at least one new junket.  Galaxy may also be offering a more attractive junket credit package.  We know SJM added a few new junkets this year as did Wynn.

 

MPEL: LOSING JUNKET STEAM? - m3

 

In the future, LVS could be the market share gainer MPEL should fear, not only in Premium Mass but also in VIP.  With conservative COO David Sisk out of the picture, look for more aggression on the Junket side in terms of credit and commission advancement packages.  We already know that Sands Cotai Central will be opening new Premium Mass facilities which should grow the market but also take share from the Cotai Premium Mass leader, MPEL’s City of Dreams.

 

If Macau keeps growing in the mid to high teens rate, all the Macau stocks should do well.  Our view is that after a long and strong run, a few fundamental risks could derail MPEL’s momentum.  Other Macau stocks such as LVS look more protected, and thus attractive, at this point.


Did the US Economy Just “Collapse”? "Worst Personal Spending Since 2009"?

This is a brief note written by Hedgeye U.S. Macro analyst Christian Drake on 4/28 dispelling media reporting that “US GDP collapses to 0.7%, the lowest number in three years with the worst personal spending since 2009.”

read more

7 Tweets Summing Up What You Need to Know About Today's GDP Report

"There's a tremendous opportunity to educate people in our profession on how GDP is stated and projected," Hedgeye CEO Keith McCullough wrote today. Here's everything you need to know about today's GDP report.

read more

Cartoon of the Day: Crash Test Bear

In the past six months, U.S. stock indices are up between +12% and +18%.

read more

GOLD: A Deep Dive on What’s Next with a Top Commodities Strategist

“If you saved in gold over the past 20 to 25 years rather than any currency anywhere in the world, gold has outperformed all these currencies,” says Stefan Wieler, Vice President of Goldmoney in this edition of Real Conversations.

read more

Exact Sciences Up +24% This Week... What's Next? | $EXAS

We remain long Exact Sciences in the Hedgeye Healthcare Position Monitor.

read more

Inside the Atlanta Fed's Flawed GDP Tracker

"The Atlanta Fed’s GDPNowcast model, while useful at amalgamating investor consensus on one singular GDP estimate for any given quarter, is certainly not the end-all-be-all of forecasting U.S. GDP," writes Hedgeye Senior Macro analyst Darius Dale.

read more

Cartoon of the Day: Acrophobia

"Most people who are making a ton of money right now are focused on growth companies seeing accelerations," Hedgeye CEO Keith McCullough wrote in today's Early Look. "That’s what happens in Quad 1."

read more

People's Bank of China Spins China’s Bad-Loan Data

PBoC Deputy Governor Yi says China's non-performing loan problem has “pretty much stabilized." "Yi is spinning. China’s bad-debt problem remains serious," write Benn Steil and Emma Smith, Council on Foreign Relations.

read more

UnderArmour: 'I Am Much More Bearish Than I Was 3 Hours Ago'

“The consumer has a short memory.” Yes, Plank actually said this," writes Hedgeye Retail analyst Brian McGough. "Last time I heard such arrogance was Ron Johnson."

read more

Buffalo Wild Wings: Complacency & Lack of Leadership (by Howard Penney)

"Buffalo Wild Wings has been plagued by complacency and a continued lack of adequate leadership," writes Hedgeye Restaurants analyst Howard Penney.

read more

Todd Jordan on Las Vegas Sands Earnings

"The quarter actually beat lowered expectations. Overall, the mass segment performed well although base mass lagging is a concern," writes Hedgeye Gaming, Lodging & Leisure analyst Todd Jordan on Las Vegas Sands.

read more

An Update on Defense Spending by Lt. Gen Emo Gardner

"Congress' FY17 omnibus appropriation will fully fund the Pentagon's original budget request plus $15B of its $30B supplemental request," writes Hedgeye Potomac Defense Policy analyst Lt. Gen Emerson "Emo" Gardner USMC Ret.

read more