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Another quarter, another miss. However, January was very strong for the market and MPEL gained share. Catalysts are lined up for February as well. Here is our transcript:




“I am encouraged by our initial results so far this year, and I am confident that 2010 will be a strong year for us.”

- Lawrence Ho

Highlights from the Earnings Release

  • "In the fourth quarter, we successfully transitioned Altira Macau into a more traditional business model where we engage gaming promoters direct and not through an aggregator. This structural shift was precipitated by the introduction of the commission cap legislation in Macau on December 1, and although this legislation is a clear positive for us and the Macau gaming market, it also resulted in a temporary disruption in rolling chip volumes at Altira Macau during the reporting quarter."
  • “I am pleased to report that gaming volume has bounced back in January at Altira Macau to approximately 30 billion MOP for the month which, combined with reduced junket commission rates, is driving much improved profitability at Altira Macau. Additionally, our efforts to accelerate growth in our mass market business at City of Dreams have gained traction over the past two months. Bolstered by a moderate benefit from high rolling chip hold percentage in the past four weeks, our market share in gross gaming revenue terms has improved and our total EBITDA in January 2010 is estimated to be in excess of US$40 million."


  • Market share rebounded in Jan to 16%
  • Managing Altira in new commission environment and growing the Mass market business have been the two main areas of focus this quarter
  • Altira situation: Once the commission caps came in place, it was no longer possible to overpay for AMA. This served as a catalyst to sign direct agreements with all 12 junkets that formerly operated under the AMA umbrella.  Generated $10MM of EBITDA in Jan
  • City of Dreams hold reached almost 18% this quarter.  Generated over $30MM of EBITDA in Jan
  • Full complement of rooms at Hyatt weren't available until end of 09
  • Reconfigured the casino floor at CoD which has yielded benefits 
  • First phase marketing campaign was centered around awareness and the second phase is centered around conversion.  Will convert the second floor to have more entertainment options (Club/etc)
  • 2.85% hold would have meant $58MM of EBITDA
  • First covenant test is at the 9/30/2010. They intend to refinance the bank facility sometime in the 1H2010 ahead of the test date (which they acknowledge will be an issue given the weak current quarter)
  • Will not consider equity now
  • 1Q2010: D&A: $75MM, Net Interest expense: $20MM, Pre-opening expense: $5MM related solo to the Dragone production which will open in 6 months


  • Doesn't think that there will be any restrictive policies implemented by the government
  • Hold at Altira was normal and hold at CoD was a little high (by $5MM if you use theo) in Jan
  • Hyatt is now fully open. House of Dancing Water show, Kids Zone (chinese NY), nightclub (Q3), retail (will double from current)... will be the "destination of entertainment in Macau" by 3Q09. 
  • Regarding apartments, they will monitor what their neighbors are doing
  • Oct-Nov was flat for Mass volumes at CoD, and saw a 14% uplift in Dec bringing drop to $150MM. Saw another step up (11%) in Jan to $170MM in Mass drop, and hold has been improving as well. Running at MOP45MM drop per day at CoD
  • Combination of relay of computer floor, new marketing campaign, and full opening of Hyatt
  • Paying junkets at Altira 1.25% or rev share of 44%. They have 17 junkets in total - always had 5 junkets operating outside of Altira
  • Experience of refinancing debt: looking for a tranched facility with 5-8 year term to be completed by 2Q2010
  • Working capital for junkets at Altira?
    • They extended WC support to the junkets that were previously supported by AMA, they extended HK$525MM.  Now have market receiveables of $300MM.  Less chip liability its really $120MM ($20MM with direct, rest is their exposure to junkets).  1.25x monthly commissions at CoD and 1.5x at Altira which they believe is at the low end of WC provided to junkets in Macau
  • What % of commissions are fixed at 1.25% (% of rolling) vs. 44% share (% of revenues)?
    • 70% is as a % of RC (1.25% fixed) and 30% is revenue share and roughly 30% of the total business there is what they consider "direct" (which I suppose is in house junkets not true direct VIP)
  • Shareholder loan repayable mid 2010, would that be extended
    • Yes they will continue to roll it
  • Singapore exposure - direct & non-direct play from SE Asia
    • Think that impact will be minimal- especially from Mass & Chinese VIP. Only impact is "SE Asia" direct play- which shouldn't be material
  • CoD has about 20% of its VIP business done "direct"
    • I came up with a similar number (unlike last quarter where we differed on the calculation)
  • Comment on Harrah's rumors
    • "Total nonsense"
  • RC hold by property?
    • Was about identically low at both properties
  • Who lost substantial market share in Jan?
    • I guess its can only be WYNN or MGM bc we heard that Galaxy had very good growth (through the 3rd week of Jan)
  • Thoughts on costs of new R/C?
    • Current cost is $20MM/ Quarter (including the hedging cost). New facility will have bank debt and a high yield component. Goal is to keep the interest cost flat, given how low the current rates are
  • What happens to the cost base at CoD once the show opens? any cost cutting plans to offset that?
    • Will add about $100k/day of costs but they will be offset by ticket sales (think it will be a wash) but that the property will generate incremental visitation
  • Is this the new marketing campaign that they will have going forward?
    • Moved from a strategic position to tactical position focused on gaming growth.  Towards the last Q of 2010 they will likely adjust the marketing to include entertainment positioning in addition to continued gaming focus
  • Roll at CoD in Jan: 28BN  and 30BN at Altira
  • Why the big cash reduction sequentially?
    • Construction payables reductions ($120MM) and WC (CoD also experienced an increase WC as it grows $20MM or so from Q3 to Q4)
  • Altira - 80% at 1.25% and rest is rev share (has been stable for a long time)
  • Grand towers - 90% occupancy of which 90% is VIP.  Hard Rock - 97% occupancy of which 50% is Mass casino driven rest is retail. Hyatt: still ramping but in Jan 70% occupancy where about 50% are absorbed by casino programs, rest is retail
  • CoD database projectory has doubled to roughly 200,000
  • China's credit tightening measures and how it impacts them?
    • Will likely affect Chinese property market, and have a delayed impact on consumer demand. However, its unclear that it will impact them
  • Is there a reason why they hold low?
    • Atlira has held LTD at 2.7%
    • CoD has held at 2.8%
    • Some of the hold differences between properties can be due to accounting difference
    • There is nothing structurally wrong with their properties
  • CoD 2nd floor reconfiguration?
    • Can't announce them yet.  Several venues will be funded by their various entertainment partners (club style and extension of hardrock cafe)
  • Commission cap changes are not a catalyst for rapid share shifts between properties
  • AMA transition is done so whatever you see in Dec 31 balance sheet wise won't really change in March