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MPEL missed by even more than we thought but the story was not Q4.  Rather, market share and EBITDA rebounded in January and if the trend continues, 1Q2010 results will handily beat the street.

 

4Q2009 DETAIL

MPEL missed our revenue number by only $6MM or 1.5%, but missed our EBITDA which was roughly 50% below consensus by a mile. The miss was everywhere with the exception of CoD, which is where the potential value of MPEL really lies.  We knew that hold would be bad, in fact, we had correctly estimated hold % at 2.4%.  So what happened this quarter?  While MPEL doesn’t give you the exact breakdown between CoD and Altira, we always try to piece together the numbers given the data.  Below are the details.

City of Dreams

  • CoD revenues were $5MM below our estimate of $243MM but EBITDA at $22MM was spot in line with our expectations
  • Not unlike the Venetian Macau, now that CoD has been open for a few quarters they are realigning their gaming floor to match demand (ie. removing supply).  In Q4, average tables were reduced by 22 and average slot machines were 38 lower than 3Q09
  • RC volume and VIP win was higher than we estimated as a result of higher direct VIP play.  We estimate that direct VIP was 19% of total RC vs. our prior estimate of 12%.  Given the higher profitability of this segment, it is an encouraging trend.
  • Mass win, estimated at $75MM was about $1MM light of our estimate.  We think that hold at CoD was a little better than the 17.5% average hold on Mass
  • Slot handle was $59MM better than our estimate, but this was offset by lower win % of 5.4% vs our estimate of 6% hold. Net net, slot win was $1MM better than we estimated
  • Net casino revenues were $5MM below our estimate, while non-gaming and promotional expenses were in line with our estimates.  The miss on revenues was made up by lower fixed costs and lower expenses on non-gaming revenues.

Altira

  • Altira revenues were $5MM below our estimate of $138MM and EBITDA missed our estimate of -$6MM by $8MM
  • In the quarter, average tables were reduced by 16 vs. 3Q09
  • We suspect that slightly better table results at Altira were more than offset by higher discounts & promotional expenses.  Normally we estimate “discounts & other” at .83% of RC for this property, however, this quarter that ratio ticked up to .96% of RC volume
  • Net casino revenues were $5MM below our estimate, while non-gaming and promotional expenses were in line with our estimates.  The miss on revenues was further exasperated by higher costs – some of which were temporary and associated with the switch away form AMA

2010 THOUGHTS

  • Given the strong January results, and the likelihood of strong February, we raised our EBITDA estimate for 1Q2010 to $95MM on estimated revenues of $583MM
    • CoD:  $330MM of revenue and $60MM of revenues
    • Altira:  $227MM of revenue and $28MM of EBITDA
    • Mocha Slots:  $27MM of revenue and $7MM of EBITDA
  • For FY2010 we are estimating $2.25BN of revenues and $350MM of EBITDA
    • CoD:  $1.3BN of revenue and $268MM of EBITDA
    • Altira:  $825MM of revenue and $85MM of EBITDA
    • Mocha Slots:  $103MM of revenue and $27MM of EBITDA