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MPEL should beat the Street slightly, and 2010 numbers look like they need to go higher

MPEL is reporting next Wednesday before the market open, and they should report a solid quarter. We think MPEL will beat the street's estimate of $91MM of EBITDA by $4MM. This should be the first quarter where neither property has 'hold' issues, so there should be a good read through on what normal operating costs and business leverage look like. If CoD can keep ramping and if Altira stabilizes, then MPEL should handily beat Street numbers and will likely prove to be the cheapest way to play Macau out of all the US listed companies.

For those of you that like the details on our assumptions, please see below.

City of Dreams

  • Net revenue of $347MM 
  • EBITDA of $68MM 
  • RC volume of $10.4BN and 2.9% hold 
  • Mass win of $103MM 
  • Slot win of $24MM
  • Net casino revenues of $335MM, $30MM of non-gaming revenues and $18MM of promotional expenses
  • Variable expenses (primarily taxes & junket commissions that aren’t recorded in net revenues) of $213MM, $11MM of non-gaming related costs, and $55MM of fixed costs (fixed costs were $53MM last quarter)

Altira

  • Net revenue of $198MM 
  • EBITDA of $20MM 
  • RC volume of $9.8BN and 2.8% hold 
  • Mass win of $13MM 
  • Net casino revenues of $200MM, $9MM of non-gaming revenues and $10MM of promotional expenses
  • Variable expenses (primarily taxes & junket commissions that aren’t recorded in net revenues) of $153MM, $3MM of non-gaming related costs, and $23MM of fixed costs

Mocha Slots

  • Net revenue of $27MM 
  • EBITDA loss of $7MM

Other

  • Net interest expense of $19MM (compared to guidance of $20MM)
  • D&A of $75MM, including amortization of the gaming concession and land use rights (in line with guidance)
  • Pre-opening expenses of $5MM

4Q09 YouTUBE

  • “Going forward into 2010, I believe our business is in its best shape yet. We are on a solid positive trajectory with significantly improved mass market trends at City of Dreams and a return to strong rolling chip levels under a more profitable commission environment at Altira.”
  • "I’m confident that 2010 will be a great year for us particular given the positive economic outlook in China, the strong political support from both the Macau SAR and the central government and also the geographic advantage that Macau enjoys."
  • “Rolling chip levels have since rebounded and in January, Altira Macau generated 30 billion of turnover exceeding the average monthly load of 25 billion during 2009. Altira Macau earned over US$10 million dollar of EBITDA in the month of January 2010, our best monthly performance of this property since October 2008.”
  • “Now on to City of Dreams, mass market table drop was essentially flat between October and the seasonally weaker November last year. Drop volume improved by 14% sequentially into December breaking a US $150 million for the first time. The performance of our mass market business steps up again in January of this year. Mass table drop increased 11% sequentially from December to over 170 million for the month and mass table revenue increased 20% sequentially to approximately US $31 million. This is translated into improved profitability at City of Dreams. We generated over US$30 million in EBITDA in January of this year.”
  • “We expect to see continued improvement as occupancy at Grand Hyatt approaches to 90% plus levels, which we consistently achieve at Crown and Hard Rock.”
  • “If we normalize fourth quarter EBITDA using 2.85%, the midpoint of the commonly expected VIP home range, we would have reported US$56 million of adjusted EBITDA.”
  • “Guidance on non-operating line items for the first quarter of 2010. Depreciation and amortization cost is expected to be approximately US$75m. Net interest expense in the first quarter is expected to be approximately US$20m. Pre-opening expense will be approximately US$5 million, related entirely to the ongoing pre-production of our House of Dancing Water Theater show which will open to the public in about six months from now.”
  • “City of Dreams has got about 20% of its business being done direct.”