JAT Capital Reduces Stake in Melco Crown Entertainment

JAT Capital and Melco Crown Entertainment

In 4Q14, JAT Capital decreased its position in Melco Crown Entertainment (MPEL) by selling 4.9 million shares. The position represented 1.18% of the fund’s fourth-quarter holdings.

Overview of Melco Crown Entertainment

MPEL develops, owns, and operates casino and other entertainment facilities in Asia. The company runs two casino resorts in China: City of Dreams and Altira Macau. Melco also operates Mocha Clubs, non-casino-based gaming resorts in Macau.

City of Dreams targets high-end customers and rolling chip players from regional markets across Asia. As of June 30, 2014, City of Dreams featured the following amenities:

  • ~500 gaming tables
  • ~1,400 gaming machines
  • ~1,400 hotel rooms and suites
  • ~30 restaurants and bars
  • 70 retail outlets
  • various non-gaming entertainment options

Altira Macau is a casino and hotel that mainly caters to Asian rolling chip customers. As of June 30, 2014, Altira Macau had about 120 gaming tables, 230 hotel rooms, and various non-gaming entertainment amenities.

As of June 30, 2014, there were eight Mocha Club locations in Macau. Combined, they had 1,266 gaming machines—9.8% of the total machine installations in the market, according to the Gaming Inspection and Coordination Bureau (or DICJ).

MPEL’s main competitors include Las Vegas Sands Corporation (LVS), Wynn Resorts (WYNN), Galaxy Entertainment Group, SJM Holdings, and MGM Resorts International (MGM).

MPEL makes up 4.74% of the Global X China Consumer ETF (CHIQ).

JAT Capital Reduces Stake in Melco Crown Entertainment

Entry into the Philippines

In February 2015, MPEL held the official grand opening of its integrated casino resort, City of Dreams Manila. The resort offers about 380 gaming tables, 1,700 slot machines, and 1,700 electronic table games. MPEL expects City of Dreams Manila to diversify the company’s exposure to the rapidly developing Asian gaming and entertainment industry. The resort’s ~15.3-acre site at the gateway of the Entertainment City complex is close to metro Manila’s international airport and central business district.

Revenue decline

In the fourth quarter of 2014, MPEL’s revenues slid by close to 20% on a year-over-year basis to $1.1 billion. This was due to lower rolling chip revenues among all casinos and an overall drop in mass-market table game revenues.

Net income decreased to $92.9 million in 4Q14 from $223.2 million in 4Q13. The revenue decline and a less-than-proportionate decrease in operating expenses led to this drop.

In the next part of this series, we’ll discuss JAT Capital’s position change in Tesla Motors (TSLA).