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Another Macau company reports a disappointing quarter. Stock buyback announcement a positive but not enough.


  • 2Q Luck-adjusted property EBITDA:  $345m 
    • CoD:  +$20m, brings margins to 31%
    • Altira: +$10m, brings margins to 13-13.5%
  • Expanded market share in mass segments in 2Q
  • Started large development (luxury precinct) on CoD; will be ready in 2016
  • MSC:  will open in mid-2015; will top off the hotel in September
  • CoD Manila:  will open later in 2014
  • Approved $500m stock repurchase program and will be able to pay out special dividends
  • 2Q EBITDA margin:  26.4%
  • CoD:  Unfavorable revenue mix btw revenue and rc sharing programs. 
  • EBITDA margin impacted by $10m due to wage increases
  • Additional labor expense in $10m in 3Q and 4Q 2014
  • Draw down studio city term loan in July
  • 3Q guidance:  D&A: $95-100m; corp expense: $30m; consolidated net interest expense: $35m ($10m CoD Manila, $24m cap interest)

Q & A

  • 2Q CoD:  low hold and negative VIP mix.  Utility/maintenance fees of $5m that was not capitalized.
  • Mass slowdown:  mass has held up relatively well; but perfect storm coming - harder comps
  • Feel better about August - early August compared with early July, there is definitely an uptick - Hedgeye notes that August is a seasonally stronger month than July
  • Blames July performance on World Cup
  • No issues on filling up their rooms
  • Premium mass:  healthy business
  • Volumes:  not overly promotional but operate in highly competitive environment.  
  • $500m stock buyback:  similar to how US companies have operated this type of program
  • Investigation: Taiwan branch indicted for banking/foreign related offenses. Will defend vigorously.
  • MSC:  have received construction permits.  Do not need any other construction permits.  Firing at full speed.
  • MSC tables:  will get fair share, may find out table count 9 months ahead of opening; can accomodate 500 tables