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Q was exactly in line but commentary should somewhat allay Union Pay fears.


  • 1Q EBITDA luck-adjusted basis:  $380m
  • Have shifted mass tables to CoD in 1Q
  • CoD premium slot area opened before May Golden Week and better F&B offerings on 2nd floor - was disruptive but am optimistic on these developments
  • CoD Manila due to open later in 2014
  • MSC due to open mid-2015
  • CoD 5th tower:  open early 2017
  • 1Q Property EBITDA:  28.8%
  • 2Q guidance:
    • $95-100m D&A
    • $24-26m Corp expense
    • Consolidated net interest expense $31-33m:  $10m finance interest, $6m (CoD Manila), $17m MSC, net capitialized interest of $19m

Q & A

  • Great start to 2Q - regained share in April, Golden Week May was phenomenal.  Do not see any VIP deceleration given incidents. - Hedgeye would caution that while market share was healthy in April, hold % was high.  RC volume declined 20%+ YoY. Junkets appear to be under performing at the MPEL properties.
  • Macau market very healthy
  • Junket explosion/Unionpay/visa issues:  news stories get too polarized.  Long-term secular story intact
  • Capital allocation plans:  paid dividend but may not do much else given serious capex this year and positive news coming out of Japan 
  • Premium mass:  some disruption in 1Q due to developments.  Committed to table optimization.
  • Competition:  No competition on pricing but more on the side of more offerings or renovations.
  • 80% EBITDA at CoD is non-VIP
  • 75% EBITDA at MPEL is non-VIP
  • MSC:  have 500-550 tables at capacity; govt will work out actual table allocation closer to opening date.  Govt has stressed diversification and non-gaming areas.  Construction progressing well. 
  • Moving tables out of Altira:  will continue to move them if they get higher-yielding tables at CoD
  • UnionPay:  targeted at illegal mobile units... if anything, it would be positive going forward for the gaming industry.
    • Not a Macau phenomenon.  UnionPay is a global brand.
    • Do not see any slowdown from the UnionPay news
  • Manila opening:  middle of the year or 2nd half of year; don't want to open until they're 100% ready; have hired 3,000 people out of the 5,000 people they need.
  • Japan:  looking at a bigger city opportunity
  • Manila:  encouraged by what's going on in that market.  Market is growing.  Local/international visitation both growing.  2nd property to open in Entertainment City/Manila Bay area
    • Leverage customer base in Macau?  Local mgmt team working closely with Macau ops team.  There will be lots of cross-selling.
  • Confident in getting their fair share of tables for MSC
  • Infrastructure projects:  ferry terminal will open later in 2014. 
  • Philippines tax issue:  PAGCOR will have an annoucement soon on income tax issue.  Confident on positive outcome.
  • Altira table breakout:  110 VIP, 30 MASS 
  • CoD table breakout:  194 VIP, 290 MASS
  • Capex guidance: 375m (2Q), 475m (3Q/4Q) 
  • Capex guidance breakout:  MSC 120m (2Q), 250m (3Q), 350m (4Q); CoD Tower (30-40m/Q)
  • VIP
    • VIP liquidity due to junket disappearance incident:  do not have exposure to that junket; no evidence of any deterioration in liquidity
    • Visa shortened from 7 days to 3 days?  Macau govt denies this
      • Higher-end customers stay longer
      • MPEL targeting IVS customers
      • Most of premium mass customers will not be involved