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