Melco Crown Entertainment Ltd

With over 9,000 hotel rooms, Sands China (LVS) has the largest share of the total hotel inventory in the Macao region, at 60%.

Analysts seem to be favoring MGM Resorts (MGM) stock over the other major casinos. Of the 17 analysts tracking the stock, 16 of them recommend a “buy.”

A weakness in the Chinese economy could adversely affect the spending capacity of the Chinese people, which could lead to fewer visitors at Macao.

Macao’s casinos are trying to change Macao from a gaming-only destination to more of a Las Vegas–like destination.

Macao’s annual inflation as measured by the composite consumer price index rose 1.03% YoY (year-over-year) in July 2017.

In 2000, the unemployment rate in Macao peaked at 7.0%. Since then, tremendous growth in the gaming industry has helped reduce unemployment.

For July 2017, visitor arrivals increased 4.4% YoY to 2.9 million visitors. However, on a month-over-month basis, visitor arrivals increased 22.7%.

Macao’s gross gaming revenue growth in the past four months has many analysts believing that the growth is driven by the shift to the mass market.

For the first quarter of 2017, VIP gross gaming revenues rose 16.8% YoY (year-over-year) to MOP 35.6 billion.

According to the Gaming Inspection and Coordination Bureau, Macao’s gross gaming revenues have risen 29.2% YoY to MOP 23.0 billion ($2.9 billion).

Stocks of major Macao casinos have been on the rise since September 2016 when casino revenues started rebounding.

Macao’s unemployment rate was as high as 7% in 2000. Growth in the tourism and gaming industry helped to curb the high rate.

Macao’s casinos reported their seventh consecutive month of revenue growth in February 2017. Casinos’ February revenues rose 18% year-over-year (or YoY) to ~$2.9 billion.

Macao casino stocks continued to gain value in March 2017. In the month, Wynn Resorts (WYNN) was the biggest gainer with a 19.9% rise.

As of January 3, 2016, the Macao casino industry valuation stands at 12.6x. This valuation is lower than the industry average valuation of 12.05x since February 2008.

Macao casinos’ $28 billion investment in integrated resorts is set to change the city’s gaming business.

As VIP business continues to remain sluggish, casinos are increasingly turning their attention towards the mass market.

The annual inflation in Macao fell to 1.5% in November 2016.

For September 2016 through November 2016, the unemployment rate stood at 1.9%.

For November 2016, visitor arrivals remained unchanged as compared to November 2015 and fell 3.4% month-over-month to 2.6 million visitors.

After rising for four consecutive months from August to November, Macao casino stocks posted losses in December.

Macao casinos’ $28-billion investment in integrated resorts will change the city’s gaming. Capacity additions should increase the number of slot tables too.

As VIP business remains sluggish, casinos are increasingly turning their attention to woo mass market.

Wynn Resorts opened its $4.1 billion Wynn Palace on August 22, 2016, and this may have directly contributed to Macao’s casino industry recovery in August.

The annual inflation in Macao fell to ~2.1% in July 2016. Inflation has, in fact, been on a declining trend in the region since February 2016.

Macao’s unemployment rate reached 7% in 2000. Growth in tourism and gaming helped curb high rates, bringing the average down to ~3.9% from 1996 to May 2016.

After 26 consecutive months of declining revenues, Macao gaming revenues have finally shown a small spurt of growth.

Macao, the largest gaming hub in the world, has seen big growth in the past decade but has also seen declines since China imposed restrictions in 2014.

As of December 10, 2015, the Macao casino industry’s valuation stands at 12.9x. This is close to the industry average valuation of 12.5x in April 2008.

Casino operators that have opened resorts on the Cotai Strip are gaining market share at the expense of those who haven’t.

Macao casinos’ gaming revenues remained flat at -0.1% in February 2016. February marked the 21st consecutive month of falling revenues.

Prudential (PUK), UBS Group (UBS), Nissan Motor (NSANY), Credicorp (BAP), and Melco Crown Entertainment (MPEL) are among the AB International Growth Fund’s 71 holdings.

MALAX aims to invest in sector leaders, stocks that “can maintain, or achieve in the future, a dominant position within their respective market.”

As of December 10, 2015, the Macao casino industry’s valuation stands at 11.10x.

With over 9,000 hotel rooms, Sands China (LVS) has the largest share at 60% of Macao’s total hotel inventory.

Macao has seen extraordinary growth in the past decade and a half. It has also seen a similar fall ever since the Chinese government imposed anti-corruption restrictions in 2014.

The Las Vegas Sands is focusing on controlling costs in the already weak Macao region. It generated better cash flows as it focused on the higher margin mass and non-gaming segments.

The weakness in the Macao market continues as the region sees gaming revenues decline for the 16th consecutive month as of September 2015.

Wynn Resorts’ (WYNN) third quarter numbers missed most Wall Street analysts’ estimates. The company’s revenues for the third quarter fell to $996.3 million.

Wynn Resorts’ VIP segment’s turnover fell by a 51% to $12.2 billion, from $25 billion in 3Q15. Mass market revenues fell by 13.7% to $1,197 million.

The third quarter earnings call from Wynn Resorts disappointed investors. The company’s already weak stock fell by more than 7% in after-hours trading.

The peers are way ahead of Wynn Resorts based on the price-to-sales ratio. The ETFs outperformed Wynn Resorts based on the price movement and PE ratio.

As of October 12, 2015, Las Vegas Sands’ (LVS) valuation multiple stands at 11.7x. This is lower than its average forward EV-to-EBITDA multiple of 16.14x.

Las Vegas Sands is expected to continue reporting grim earnings in 3Q15.
Analysts expect LVS to post a year-over-year decline in earnings per share and revenue, driven by weakness in business.

The gaming industry has been heavily dependent on Macao, and the Chinese economy’s troubles don’t seem to be going away soon. Companies are finding new destinations in Japan and Korea to develop the next Macao.

Las Vegas Sands (LVS) stock remained relatively flat or slightly lower in July and August. But the steepest fall came in September, dragging the stock down about 18% in a short time span.

Las Vegas Sands (LVS) had a difficult second quarter, missing both top line and bottom line estimates. The top line fell 19.4%, while operating income fell 28.3%.

Macao’s shift from VIP gaming to the mass gaming market and non-gaming revenue is expected to benefit Macao in the long run.

In May 2015, Galaxy Entertainment doubled its capacity with its two new projects: Galaxy Phase 2 and Studio City.

The Macao strip has seen a slump in the number of visitor arrivals since the Chinese government’s strict crackdown on corruption.

After witnessing a decade of exceptional growth in revenues, the Macao casino industry is going through its worst fall with July marking 14 straight months of declining gaming revenues.

Macao casino revenues have been falling ever since the Chinese government imposed stricter regulations in June 2014.

A major percentage of visitors at the Macao casinos are from China. In May 2015, the visitors from China contributed to about 66% of the total arrivals.

The gaming market in Macao has seen a steep fall in the past year due to a fall in the number of VIP or high-net value visitors in the city.

Macao’s gaming revenue per visitor was at 999.6 Macanese pataca in May 2015—a rise of 6% from 942.4 in April 2015. This came after a huge fall in April 2015.

The casino industry in Macao witnessed its 13th straight month of falling revenue in June 2015. For June, the revenue fell by about 36% YoY to $2.17 billion.

The Fidelity China Region Fund Class C (FHKCX) stands out as the clear winner in risk-adjusted performance. It continues to dominate its peers with a Sharpe ratio of 3.3.

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Bridgewater Associates started a position in Wynn Resorts (WYNN) during the fourth quarter of 2014.

When inflation decreases, consumers have greater purchasing power and a higher spending capacity. This is a positive sign for casino resort companies.

Macau’s average gaming revenue per visitor is ~$1,200–$1800, roughly 8–10 times higher than the Las Vegas Strip’s average gaming revenue per visitor.

Macau’s restriction on using China UnionPay debit cards at casinos to curb illegal money flow could be a factor in February’s drop in gambling revenues.

MGM’s share price hasn’t been impacted much by the anti-corruption campaign in China. The campaign took a toll in 3Q14. Its business has ~33% exposure in Macau.

MGM derives one-third of its revenue from China. It witnessed a significant decline in revenue and earnings due to a lack of VIP participation.

Hotel revenue at MGM’s wholly owned domestic resorts for the three months ending December 31, 2014, increased 6% YoY.

For 4Q14, the net revenue was $2,386 million—down by 5.1% on a year-over-year, or YoY, basis. On a quarter-over-quarter basis, net revenue fell 4%.

MGM Resorts (MGM) was founded in 1986. It’s based in Nevada. It’s one of the leading global hospitality and entertainment companies.

Wynn Resorts’ (WYNN) share price plummeted 6.1% immediately after its 4Q14 results. However, the share price should gain momentum once new resorts are open.

Melco Crown Entertainment’s mass market table games segment is still the major driver in Macau. In 2014, Macau’s visitation increased by 7.5% YoY.

On February 25, 2014, MPEL’s board declared a special dividend of $0.1147 per share. The dividends were paid to shareholders on April 16, 2014.

Rolling chip volume refers to the amount of non-negotiable chips wagered and lost by the rolling chip market segment. It’s largely represented by VIP players.

For the full year ending December 31, 2014, Melco Crown Entertainment reported net revenue of $4.8 billion—down 5.9% YoY.

Established in 2004, Melco Crown Entertainment (MPEL) owns, develops, and operates casino gaming and entertainment resort facilities. It’s focused on Asia.

Today, a number of US-based casino companies have operations in foreign markets—like Macau. Also, they’re developing new properties in Macau.

WYNN’s hotel occupancy increased at Macau and Las Vegas in 4Q14. Macau had 98.6% and Las Vegas had 82.1% compared to 96.7% and 80.8%, respectively, in 4Q13.

WYNN’s adjusted property EBITDA fell a whopping 29.3% year-over-year to $352 million, the biggest year-over-year fall since the second quarter of 2009.

WYNN’s VIP table games drop in 4Q14 was $20.7 billion, 39.9% lower than 4Q13. Drop is cash and net markers issued and deposited in a gaming table drop box.

Wynn Resorts (WYNN) operates Wynn Macau and Wynn Las Vegas, with casino hotel resorts in Macau, China, and Las Vegas, Nevada.

Las Vegas Sands’ adjusted property EBITDA at Marina Bay Sands in Singapore doubled, reaching a property record of $518.5 million, up ~100% year-over-year.

Las Vegas Sands (LVS) has a huge potential for future growth in Japan, which could be as big as Macao. It also may expand to South Korea and Vietnam.

Las Vegas Sands’ (LVS) share price plunged immediately after its 4Q14 earnings announcement last week, but it gained 3.1% as of February 3.

Three Wall Street analysts have rated Las Vegas Sands (LVS) stock neutral or hold, and eight have assigned the stock a buy or overweight rating.

Las Vegas Sands has a greater forward dividend yield than the S&P 500’s (SPY). As of January 27, LVS’s 2015 forward dividend yield was 4.6%. SPY’s was 2.1%.

Sands China Ltd. (or SCL), a subsidiary of LVS, dominates the hotel market in Macao with 9,277 hotel rooms, or 38% of Macao’s four- and five-star hotels.

Las Vegas Sands will burn huge cash in 2015 to fund development of The Parisian Macao in 2015 and 2016 and the St. Regis property at Sands Cotai Central.

Las Vegas Sands’ revenues for 4Q14 were $3,416 million, down 6.6% year-over-year, mainly due to a 15.9% year-over-year decrease in the Macao operations.

An overview of Las Vegas Sands (LVS) shows that the company currently owns 70.1% of Sands China Ltd., which operates LVS’s four Macao properties.

Macau’s annual inflation rate was recorded at 6.05% in December 2014. Macau’s inflation rate was 5.59% for December 2014.

China’s disposable income per capita remained almost flat at 6,800 Chinese yen on a YoY basis for the three months ending in December 2014.

In 2006, Macau overtook the Las Vegas Strip as the world’s largest gaming market.

Members of management owning shares of their company shows confidence in the firm’s direction and outlook.

Morgan Stanley upgraded MPEL shares to an overweight rating in a research note issued to investors on January 5, 2015, with a revised target price of $28.

Price performance Let’s explore the five-year share price performance of Melco Crown Entertainment (MPEL) relative to its peers, as well as the broader market that includes SPDR S&P 500 ETF (SPY). Share prices of gambling stocks collapsed heavily over the last three to six months. This drop largely resulted from the Chinese government’s crackdown on corrupt officials, which negatively […]

Due to the growth of mass market gaming in recent quarters, Macau could become a supply-driven market.

Melco Crown Entertainment’s City of Dreams fifth tower is in progress and is anticipated to open in the first half of 2017.

Net income attributable to Melco Crown Entertainment for 3Q14 was $132.2 million, as compared to net income of $179.4 million in 3Q13.

Gaming promoters generate most of Melco Crown Entertainment’s rolling chip play amounts, contributing a major portion of MPEL’s casino revenue.

MPEL’s current ratio increased to 3.0 from 2.5. This improvement reflects its much stronger ability to meet its short-term obligations.

Melco Crown Entertainment’s ROIC has been lower than its weighted average cost of capital for most of the last three years.

As of September 30, 2014, Melco Crown Entertainment’s debt-to-equity ratio stood at 0.9. This ratio is the least among its peer companies.