MPEL Q32010 PREVIEW

Market share gains drove the recent strong appreciation in the stock but delivering on the bottom line could drive the next leg.

 

 

As we wrote about on September 29th in “MPEL: COULD THEY FINALLY BEAT A QUARTER?”, we think that MPEL, indeed, should beat the quarter - finally.  Despite the recent move up – more due to market share gains – negative sentiment persists on “the guys that can’t shoot straight”.  We think that changes this quarter.  Now that we have our hands on the property level detail of September in Macau, here’s how MPEL can produce a $117MM EBITDA quarter versus the Street at $100MM.

 

3Q2010 Detail:

 

Our EBITDA estimate for City of Dreams (CoD) of $105MM is 21% ahead of the consensus

  • CoD’s table revenue share increased to 10.6% this quarter compared to 7.1% in 2Q2010 and 10.0% in 3Q09.
  • Opened 3 additional junket rooms in July; reallocated tables from Mass
  • We estimate net casino revenues of $485MM and total net revenues of $496MM
    • Assuming 18% of VIP play is direct, we estimate that Rolling Chip (RC) volume increased to $15BN, and at a 3.2% hold, we estimate that gross VIP table win was $480MM
    • We assume a 90bp rebate rate and a 1.33% commission rate (due to a greater percentage of CoD’s business coming from revenue share deals – roughly 40%)
    • Mass table win of $110MM and slot win of $30MM
  • Total variable expenses (taxes, gaming premium, junket commission in excess of rebate, and bad debt) of $313MM
  • Total fixed costs of $60MM compared to $55MM last quarter
  • The opening of the Dragone show added a few million dollars of expenses to the quarter. 
    • The incremental cost of the show is $125/day which will hit expenses in the 4th quarter.  
    • The theatre has 2,000 seats, 8 shows a week and tickets are going for $75-80 (before comps and discounts)

We estimate that Altira will report $21MM of EBITDA compared to consensus of $25MM

  • Altira should report net revenues of $197MM – basically all from the casino
    • RC volume of $9.4BN at a 2.8% hold should produce gross VIP table win of $263MM
    • We assume a rebate rate of 87.5bps and a 1.3% total commission rate
    • Mass table win of $17MM
    • Variable expenses totaling $152MM and fixed costs of $21MM compared to $26.6MM last quarter

We estimate that Mocha slots will report $25MM of revenue and $6MM of EBITDA, in-line with consensus.

 

Other stuff:

  • $15MM of corporate expense
  • $62MM of D&A or $81MM when you include amortization of the gaming subconcession and land use rights
  • $20MM of net interest expense
  • EPS of $0.03

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