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Solid but only in-line quarter. Q4 off to a good start

"Our committed focus on the mass market segments, particularly at the higher end of the market where we have a significant competitive advantage, continues to drive our Company's overall profitability and outperformance in the mass market table games segment. Our premium mass offerings continue to lead the way in Macau, with City of Dreams further extending its number one position in this increasingly important segment, as is evident in the property's leading mass market table yields....Clear progress is being made on the various and wide-ranging infrastructure programs both in Macau and regionally, which continue to support visitation and the mass market segments in general. The Macau market has delivered impressive growth year-to-date across all gaming segments, showing the market's unique position to cater to the expanding Asian middle class and, in particular, the inevitable shift to a consumer-led economy in China."

- Lawrence Ho, CEO of MPEL


  • Mass market segment continues to set new records
  • Continue to lead in mass table yield
  • Visitation to Macau has been robust in the last few months
  • Studio City:  on track to open mid-2015; upon opening, will significantly increase exposure to mass market
  • Tower 5 at CoD:  will open in late 2016/early 2017.  
  • CoD Manila:  365 gaming tables; over 1,680 slots/ETGs
  • Will look at Japan opportunity
  • Groupwide EBITDA:  negatively impacted by win rate (Held higher in revenue share VIPs, held lower in rolling volume VIPs), $10-15MM adverse impact
  • 3Q Hold-Adjusted (2.85% hold rate) EBITDA: $315MM
  • 4Q guidance:  D&A: $95-100MM, corporate expense: $22-24MM, net interest expense: $30-32MM (finance lease interest of $10MM relating to CoD and $10.6MM interest with Studio City--took into account $11MM in capitalized interest related primarily to Studio City

Q & A

  • Luck-adjusted margins at Altira: 13%, CoD: 32% (up 200bps)
  • VIPs moving towards revenue share (2/3-70% of VIPs)
  • Increase in premium mass customers at every property in Macau
  • Dealer labor regulations:  govt will not change existing policy on local hiring as dealers, govt confident there will be enough people.
  • Have done a good job optimizing rooms and tables
  • Macau only has 25k rooms (1/8 of Vegas); need more rooms in the market to keep up with demand
  • Greatest visitation has come from the Lotus Bridge
  • 3Q VIP market share:  3Q rolling chip volume share dropped because of some shifts from VIP to premium mass. However, they saw RC volume share improving in October.
  • Table cap:  Until 2022, there will be 1,800 tables for 5 mega resort projects
  • CoD Manila:  working hard to open around mid-2014
  • Tower 5:  will be focused on premium mass and premium direct VIP business
  • CoD Premium Direct VIP %:  15% (last year) to 20% in 3Q 2013
  • Philippines capex:  $60MM increase in construction budget ($620MM to $680MM)
    • Believes they will grow the Philippines market
  • Discussing a dividend policy: will announce in Q4 2013 or Q1 2014.  Will take into consideration impact from potential Asia opportunities (Japan, Korea, Taiwan).
  • Japan:  closest that Japan has ever gotten in liberalizing the gaming market; have received calls for partnerships
  • VIP market:  gradually picking up relative to 2012; Chinese economy is growing again. Junket liquidity has been stable and getting good funding.
  • CoD visitation trend:  visitation in 3Q increased 8% YoY to 46,000/day.  Did not really impact revenue. 
  • Gaming taxation in Philippines:  PAGCOR has loosened slot caps and table caps.  They are working on the tax issue. Hope for a resolution at end of year or early 2014.
  • Henquin:  may strike agreements with current developers on that island to build more hotels
  • Grand Prix in Macau (2 weekends):  do not see much impact on visitation; length of stay will be key
  • 3 slot parlours closing Nov 26 
  • VIP/Mass breakout: 135/30 (Altira); 205/250 (CoD)
  • Nothing unusual with overhead, debt provisions
  • Minimum bet on mass tables:  premium mass area min bet are increasing because average bet size have gone up
  • Growth in mass business:  not because VIP players dropping down into mass
  • Premium mass customers are much more sophisticated than junket players who just want to gamble/go to clubs