MPEL 2Q 2014 EARNINGS PREP

Consensus estimates, management guidance and commentary, and questions for management in preparation for the earnings release/call tomorrow.

Q2 2014 CONSENSUS ESTIMATES

  • Total revenues:  $1.284 billion
  • Adjusted EBITDA:  $346 million
  • EPS:  $0.38/share

QUESTIONS FOR MANAGEMENT

  1. Update on CoD Manila timing. Why the long delay and increased capex?
  2. We're hearing that MSC may open in late 2015 or even early 2016. What's the construction schedule there?
  3. Outlook on 2H 2014 VIP business
  4. CoD margins are in record territory.  How much more cost savings is there?
  5. What was the board decision on a share repurchase program?
  6. Any competitive pressures (margins) in the Mass business? The flow through has been disappointing with the other Macau operators.
  7. Mass looks like it's decelerating at fast rate?  What is your outlook?
  8. Was July an anomaly for Mass growth?  up "only" 17% for the market.
  9. Update on the timeline on the Manila project.  Outlook on the competitive landscape.
  10. Update on the October smoking ban - will it be October or potentially later? will premium mass be excluded?

RECENT MANAGEMENT COMMENTARY

City of Dreams

  • Have shifted a meaningful number of tables to the mass market floor at City of Dreams in 1Q
  • (Temporary disruption) Continue to make numerous enhancements to amenities at City of Dreams, including extremely well received premium slot area, which opened before May golden week, as well as other upgrades to gaming core layout and F&B offerings.  

Mass Share

  • Confident they will continue to take market share in the mass market segment in Macau.

Development pipeline

  • City of Dreams Manila is due to open later this year (mid-2014); don't want to open a property that MPEL is not ready to. Studio City is to open in mid 2015 and 5th CoD tower is due to open in early 2017.
  • MSC:  Government will decide on table allocation much closer to opening date

Share repurchase

  • Are discussing that at the board.

HK-Zhuhai-Macau Bridge

  • All the supporting structure is already out of the water and right now it's on schedule for some time at the end of 2016.

Capex

  • From a CapEx perspective in 2Q, MPEL looking to spend $375 million, in third and fourth quarters about $475 million.
    • For Studio City about $120 million in second quarter, $250 million in the third quarter, $350 million in fourth and for the fifth hotel tower about $40 million to $45 million per quarter for the second, third and fourth quarter.

Non-operating guidance

  • D&A: $95-$100m
  • Corp expense: $24-26m 
  • Consolidated net interest expense: $31-33m, which includes finance lease interest of $10 million and interest on Philippine notes of $6 million relating to City of Dreams Manila and approximately $17 million of interest expense associated with Studio City, net of approximately $19 million capitalized interest relating primarily to Studio City and City of Dreams Manila.