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Melco Crown’s Huge Capital Expenditures

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Capital expenditures

Melco Crown Entertainment’s (MPEL) capital expenditures are mainly associated with enhancements to its existing integrated resorts and for the development of its ongoing projects.

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Interim capex

MPEL’s total capital expenditure payments for the six months ending June 30, 2014, were $412.9 million, compared to $167.2 million paid in the six months ending June 30, 2013. Melco Crown’s increased capex primarily resulted from the development of Studio City and various projects at City of Dreams, including the fifth hotel tower. We’ll look more closely at these projects in part 12 of this series. MPEL’s capital expenditures for 3Q14 were $466.2 million.

Melco Crown Entertainment’s peers in the casino space are Las Vegas Sands (LVS), Wynn Resorts (WYNN), and MGM Resorts (MGM). These companies incurred capital expenditures of $793 million, $707 million, and $617 million, respectively, for the nine-month period ending September 30, 2014.

ETFs like the Consumer Discretionary Select Sector SPDR Fund (XLY) and the VanEck Vectors Gaming ETF (BJK) provide overall exposure to the hotel and leisure industry.

Annual capex

Melco Crown Entertainment’s total capital expenditures for the years ending December 31, 2013, 2012, and 2011 were $912.4 million, $284.0 million, and $785.6 million, respectively. Of these, $800.7 million, $116.2 million, and $713.3 million, respectively, related to the company’s development and construction projects, while the remainder primarily related to other enhancements to its properties.

The above chart shows that MPEL’s capital expenditures for the year ending December 31, 2013, increased significantly from that of the previous year. The development of Studio City and City of Dreams Manila provided the majority of this increase.

However, Melco Crown Entertainment’s capital expenditures for the year ending December 31, 2012, decreased sharply from the prior year. This was due to the acquisition of Studio City, which was completed during the year ending December 31, 2011.

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