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