MPEL: NOT QUITE THE CITY OF NIGHTMARES

I'm not making the case that City of Dreams is off to a rip-roaring start.  Mass visitation has been disappointing and up until this past weekend, the VIP hold percentage was actually negative.  However, with the maturation of the Macau market and Beijing pulling the Mass visitation strings, new properties need time to ramp. 

The good news is that there are signals that the property may indeed already be ramping.  The big VIP push was not initiated until this past Friday and indications are that the property held very well.  On the Mass side, CoD only began advertising in China mid-month.  Thanks to a Signal No. 3 Typhoon that hit the area this past weekend, visitation was probably not at the level expected.

On the cost front, margins may ramp faster than expected.  Labor costs look as though they may come in lower than expected, partly due to a higher percentage of part-time employees.  Any positive commentary in this regard will be a positive catalyst.

MPEL management will issue a detailed press release on Thursday pre-market.  Considering the very negative sentiment surrounding the name and City of Dreams, any signs of a ramp discussed in the release will likely be taken favorably.

A month of data is not significant; it is still early.  Structurally, we see no issues and believe that our $180 million EBITDA estimate for 2010 is reasonable.  While $180 million is not very good next to a $2.1 billion price tag, whisper expectations are lower. 

Here are some observations from our Macau trip last week that may be discussed by management in their 7/2/09 press release.

  • Negative VIP hold % (-0.5% to -0.7%) due to 5-6 players plagued the property, not widespread through the casino - not sustainable
  • Margins should be better than expected - probably due to part-time staffing and lower wages - 75% of what they expected
  • Hard Rock doing 60% more per position than CoD casino
  • Rolling Chip (VIP) launch was Friday night (6/26)
  • The go ahead for advertising in China was given on 6/24 - only 13% of customers are from mainland, needs to be 30%
  • Have not gotten the mid-Mass business yet - advertising in China will help
  • Signing 2,000 Mass customers into City Club database daily - faster pace than the Venetian after 3 weeks
  • Former Venetian marketing people running the database
  • Generally positive commentary from competition

6 Charts: The French Election, Nasdaq All-Time Highs & An Earnings Scorecard

We've been telling investors for some time that global growth is picking up, get long stocks.

read more

Another French Revolution?

"Don't be complacent," writes Hedgeye Managing Director Neil Howe. "Tectonic shifts are underway in France. Is there the prospect of the new Sixth Republic? C'est vraiment possible."

read more

Cartoon of the Day: The Trend is Your Friend

"All of the key trending macro data suggests the U.S. economy is accelerating," Hedgeye CEO Keith McCullough says.

read more

A Sneak Peek At Hedgeye's 2017 GDP Estimates

Here's an inside look at our GDP estimates versus Wall Street consensus.

read more

Cartoon of the Day: Green Thumb

So far, 64 of 498 companies in the S&P 500 have reported aggregate sales and earnings growth of 6.1% and 16.8% respectively.

read more

Europe's Battles Against Apple, Google, Innovation & Jobs

"“I am very concerned the E.U. maintains a battle against the American giants while doing everything possible to sustain so-called national champions," writes economist Daniel Lacalle. "Attacking innovation doesn’t create jobs.”

read more

An Open Letter to Pandora Management...

"Please stop leaking information to the press," writes Hedgeye Internet & Media analyst Hesham Shaaban. "You are getting in your own way, and blowing up your shareholders in the process."

read more

A 'Toxic Cocktail' Brewing for A Best Idea Short

The first quarter earnings pre-announcement today is not the end of the story for Mednax (MD). Rising labor costs and slowing volume is a toxic cocktail...

read more

Energy Stocks: Time to Buy? Here's What You Need to Know

If you're heavily-invested in Energy stocks it's been a heck of a year. Energy is the worst-performing sector in the S&P 500 year-to-date and value investors are now hunting for bargains in the oil patch. Before you buy, here's what you need to know.

read more

McCullough: ‘My 1-Minute Summary of My Institutional Meetings in NYC Yesterday’

What are even some of the smartest investors in the world missing right now?

read more

Cartoon of the Day: Political Portfolio Positioning

Leave your politics out of your portfolio.

read more

Jim Rickards Answers the Hedgeye 21

Bestselling author Jim Rickards says if he could be any animal he’d be a T-Rex. He also loves bonds and hates equities. Check out all of his answers to the Hedgeye 21.

read more