Takeaway: Even on our Street low estimates, MPEL's valuation remains cheap. However, catalysts remain negative and estimates are going lower

A slight miss from our estimates on an apples to apples hold adjusted basis






  • Luck-adjusted EBITDA margin: 28.1%
  • Challenging VIP environment and higher labor costs
  • CoD:  mass table yields significantly above peers
  • Highly competitive market in Macau
  • 5th CoD tower:  well under way
  • CoD Manila:  plan on opening doors in December.  Grand opening: CNY 2015
  • Studio City:  on track to open mid-2015.  Have received all necessary permits and approvals to complete project.  Will double room inventory and gaming floor for MPEL.
  • Repurchased ~$100m of stock for 3Q
  • Property EBITDA 3Q:  27.5% (27.4% in 3Q 2013, 26.4% in 2Q 2014)
  • 3Q luck-adjusted EBITDA : $325m
  • 2.69% low hold impacted EBITDA by $20m
  • Mass accounts for 85% of groupwide EBITDA
  • 4Q non-operating guidance:  D&A ($95-100m), corp expense ($30m), consolidated interest expense ($40m) of which $11m (CoD Manila), net of $27m of cap interest

Q & A

  • October mass decline:  downturn in market has affected premium mass segment.  More uncertainties in the market.  
  • Anti-corruption drive having an impact on premium segment
  • Reclassification of premium mass to VIP:  In 2H of October, converted premium mass tables into VIP. If no reclassification, mass revenues would have been slightly up YoY rather than down 11%
    • All cash business. No direct rebates.
  • If Japan fall away, it will meaningfully change capital allocation/dividend policies.
  • One competitor is becoming more promotional using their large room base (LVS)
  • Saw more promotions in premium mass segment.  Is concerned about this.
  • Chinese President visit in December:  in the long-term will benefit Macau; could bring a gift bag:  24-hr border crossing, etc.
  • Altira:  Suncity just started operations in mid-Sept.  Just ramping up.  
  • Altira strategy:  want to bring large junkets to property
  • 100% occupancy:  have turned away about 40% of potential customers
  • CoD Manila:  want to be extra safe
  • Mass market margins:  flat QoQ
  • Studio City:  usually when they do mass labor recruitment, it is 5-6 months before opening the property.  Waiting to see when Galaxy does their mass labor recruitment
  • Henquin Island:  have not really looked at this opportunity
  • CoD Manila:  more VIP demand than available supply.  Anti-corruption doesn't just relate to Macau; it includes Philippines and Las Vegas.
  • Mass/table breakout (end of Sept 30):  Altira (95 VIP, 30 MASS), COD (185 VIP, 310 MASS)
  • MPEL Premium mass outperformance:  quality of product and consumer service; high hold % also matters
  • 2nd wave of Cotai openings will have relative competitive advantages
  • Smoking ban:  smokers play longer hours when they can smoking.  Sees some negative impact from smoking ban.  Added smoking rooms on mass floors (in CoD and Altira).
  • Premium mass business at CoD: 50-60%
  • Difference btw premium mass margin and grind mass margins is de minimis.
  • DICJ controversy with MPEL's decision on allowing smoking on mass:  MPEL believes it is completely compliant with law
  • MSC:  hurdle rate of 20% cash-on-cash return even with downturn in market
  • Dividend policy:  30% of NI (no changes at this time)
  • Altira:  productivity per table substantially lower than CoD levels; productivity will be better in coming quarters
  • MSC:  no change to budget.  Number of tables:  don't know

VIDEO | Hedgeye’s Brian McGough Explains Why $KATE Is a Winner

Hedgeye’s Retail Team added KATE to our Best Ideas List as a long in early October. Sector Head Brian McGough hosted an institutional conference call yesterday ahead of earnings, detailing his bullish thesis and highlighting why KATE’s growth story is widely misunderstood. In the excerpt below, McGough outlines his 3 key points.

For access to the video in its entirety, contact


Daily Trading Ranges, Refreshed [Unlocked]

This is a complimentary look at our proprietary buy and sell levels on major markets, commodities and currencies sent to subscribers every weekday morning by CEO Keith McCullough. It was originally published November 06, 2014 at 07:40. Click here to learn more and subscribe.

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Attention Students...

Get The Macro Show and the Early Look now for only $29.95/month – a savings of 57% – with the Hedgeye Student Discount! In addition to those daily macro insights, you'll receive exclusive content tailor-made to augment what you learn in the classroom. Must be a current college or university student to qualify.

TODAY 1pm EST FLASH CALL - Top Russia Insider to Discuss Developments Inside Putin’s Russia

TODAY 1pm EST FLASH CALL - Top Russia Insider to Discuss Developments Inside Putin’s Russia - HE M putin


In light of the continuing crash of its currency and stock market, we are receiving considerable customer interest on the question: “What’s going on with Russia?”


As a result, Hedgeye’s Macro Team is hosting a special “Behind the Curtain” conference call TODAY, November 6th at 1:00pm EST with Michael McFaul, one of the world’s foremost experts on Russia and Vladimir Putin. Until earlier this year, McFaul was the U.S. Ambassador to Russia and held closed-door meetings with Putin and his top lieutenants before finally stepping down out of concern for his family and his own safety.


Mr. McFaul has been called, “the leading scholar of his generation, maybe THE leading scholar, on post-Communist Russia.” He was President Obama’s chief advisor on Russia through his first term and was a main policy architect of “Reset” in U.S. - Russian relations.


A high-profile figure during his time in Moscow, McFaul was harassed and accused of orchestrating a coup. Perhaps in light of his considerable work and reputation as an expert on anti-dictator movements and revolutions, Putin reportedly stared at McFaul across a meeting table and remarked, “We know that your Embassy is working with the opposition to undermine me.” 


*The New York Times recently ran an intriguing article, “Former U.S. Envoy to Moscow Says Russians Are Still Spying on Himon McFaul detailing how Russia is still spying on him.


McFaul will provide 30 minutes of prepared remarks, followed by open Q&A moderated by Hedgeye’s analyst Matt Hedrick.




  • What are the roots of ‘Putinism’ and where is the country economically heading?
  • How do weaker energy prices influence the Kremlin’s strategy (economic, political, and social)?
  • How is the East-West battle over Ukraine resolved?
  • What are the impacts of sanctions on Russia and the West and how might they evolve?
  • Can Russia successfully pivot to the East?



  • Toll Free Number:  
  • Direct Dial Number:  
  • Conference Code: 441871#

Ping for more information.





McFaul is the former U.S. Ambassador to Russia (from January 2012 to February 2014). Prior to this, McFaul worked three years for the U.S. National Security Council as Special Assistant to the President and Senior Director of Russian and Eurasian Affairs.  


He holds a BA in international relations and Slavic Languages and an MA in Slavic and East European Studies from Stanford University in 1986. He spent time in the Soviet Union as a student in the 1980s. He was later awarded a prestigious Rhodes scholarship to Oxford where he completed his Ph.D. in International Relations in 1991.


Born and raised in Montana, McFaul is fluent in Russian, and is currently a professor of Political Science at Stanford University and a fellow at the Hoover Institution.


He is the author and co-author of numerous books, including:  Revolution in Orange: The Origins of Ukraine's Democratic Breakthrough (2006); Between Dictatorship and Democracy: Russian Postcommunist Political Reform (2004); After the Collapse of Communism: Comparative Lessons of Transitions (2004); and Russia's Unfinished Revolution: Political Change from Gorbachev to Putin (2001), among many others. 

CHART OF THE DAY: How Good Is Employment, Really?


CHART OF THE DAY: How Good Is Employment, Really? - ISM

Believing Anything

“Never believe anything, until it has officially been denied.”

-Claud Cockburn


For those of you who didn’t know that Cockburn was a British journalist and proponent of communism, now you know. His aforementioned quote was cited by Jim Rickards at the beginning of an excellent chapter titled “Prophesy” in The Death of Money.


BREAKING: “Bundesbank investigating whether it can block sovereign QE”


Pardon? I know. I know. What is up with the London Telegraph dropping that anti-money-printing (QE) bomb on my laptop while I was sitting pretty at the epicenter of inequality’s Social #Bubble (San Francisco) after the US stock market close last night? 

Believing Anything - campfire cartoon 10.31.2014


Back to the Global Macro Grind


Now I’m sure that Europe’s un-elected-central-planner-in-Chief (Draghi) will officially deny anything that remotely resembles that headline being true at today’s ECB (European Central Bank) meeting… but that’s the point.


What if the Germans have legal grounds to tell the Italian jobber to #PoundSand?


Pardon my hockey-talk, but believing anything that you hear about what the Japanese, European, and American central planning agencies can do to stock markets these days is a very dangerous premise.


What happens if:


  1. People (as in market expectations) don’t believe Policies To Inflate asset prices work anymore? (hint: #deflation)
  2. Or, maybe more importantly, that they aren’t allowed to legally execute on them anyway?


Bueller? Or is it “spoos and chartreuse” while Ed is saying that every time the “surveys” get growth wrong “QE will get the perma bulls paid” anyway?


Admittedly, as global growth slows (again), it’s getting harder and harder to keep track of what it is, precisely, that has consensus right bulled up about chasing the all-time #bubble high in the SP500.


As Rickards appropriately summarizes in the same chapter, “when it comes to betting on a sure thing, greed trumps common sense.” (The Death of Money, page 25).


In other news…


Utilities (XLU), +2.3% on the day to +22.3% YTD, led the US stock market’s no-volume charge to all-time highs yesterday. I know. Everyone nailed that and Energy (XLE) being -3.1% YTD too.




  1. Japan’s economic implosion finally ended the 3-day central planning rip, with the Nikkei closing -0.9%
  2. European Equities are doing nothing while they await the 2nd coming of the 3rd and 4th coming of Draghi
  3. US Equity futures are down, well, because maybe they won’t go up on the jobs report tomorrow


As for me… after spending most of the week in California, I am back in the saddle in Connecticut wondering what changed, fundamentally, since the Russell 2000 was -10% lower (120 points) less than a month ago…


Other than mostly every growth and inflation metric in our model being slower today than it was then, I guess the answer is that those who are permanently predisposed to be long of US stocks will believe almost anything, other than common sense.


Our immediate-term Global Macro Risk Ranges are now:


UST 10yr Yield 2.24-2.38%


RUT 1110-1181

Nikkei 141

Yen 109.68-116.12

WTI Oil 76.12-80.29

Natural Gas 3.88-4.27


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


Believing Anything - ISM

Hedgeye Statistics

The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.

  • LONG SIGNALS 80.43%
  • SHORT SIGNALS 78.34%