Melco Crown Entertainment Ltd

Las Vegas Sands (LVS) earns revenue through casinos, hotels, food and beverages, and convention or retail operations. The company’s main revenue driver is casino revenue. It’s generated from slot machines and table games. Casino revenue represents ~79% of the total revenues.

Casinos’ popularity is growing. This suggests that people like to gamble occasionally. Unfortunately, they don’t always win. For most of the people, the real fun is playing the game—not necessarily winning.

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.

Share prices for most of the gambling stocks declined significantly over the last three months. MGM Resorts (MGM) declined 14.9%.

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

The money laundering process takes place in three phases—Placement, Layering, and Integration. Casino regulators make sure that gaming is conducted honestly. They approve the game rules.

Adjusted property EBITDA shouldn’t be regarded as an alternative to looking at income from operations, which indicates operating performance. Nor is it an alternative to looking at cash flow from operations, which measures liquidity.

Casino gaming is a business that’s spread across the world. Major casino destinations include Las Vegas, Macau, and Singapore. There are regional venues across all the continents.

Two analysts rated the stock as neutral or hold, and six assigned a buy or overweight rating to the stock. The company’s consensus rating is buy. And its consensus mean price target is ~$71.

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

Liquidity ratios determine a company’s ability to meet its short-term obligations. A company’s liquidity position can be measured by using the current ratio or the quick ratio.

OTPP added a new position in Alibaba Group Holding (BABA) during the third quarter that ended in September. The position accounted for 0.09% of the fund’s total portfolio.

MGM derives 34% of its revenues, respectively, from Macau. Since MGM has comparatively less exposure to Macau, its share price hasn’t been volatile.

Las Vegas Sands paid a recurring quarterly dividend of $401.2 million, or $0.50 per common share during Q3 2014, up 42.9% year-over-year.

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.

RevPAR is the most important of all the performance metrics used in the hotel industry. It captures both room rates and occupancy levels, giving information about how well a company fills its rooms, and how much it’s able to charge.

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

MGM Resorts (MGM) is a global hospitality and entertainment company. MGM develops, builds, and operates destination resorts. MGM was founded in 1986.

Capital expenditure is obtained to buy fixed assets or add to the value of an existing fixed asset. MGM’s senior credit facility limits the its capital expenditures to $500 million per fiscal year.

Recently, Yahoo shares went higher after third quarter earnings and revenue beat analyst estimates. Third quarter profit rose to $6.77 billion.

Nordic American Offshore (NAO) is an international offshore supply vessel company that was incorporated in Bermuda. NAO was spun off from Nordic American Tanker (NAT) in November last year.

Elliot added 8,231,946 shares to its Riverbed Technology (RVBD) stake in the fourth quarter. Network equipment maker Riverbed accounts for a 6.04% position in Elliot’s portfolio.

Growth in visitors from mainland China remained at 13% in August 2014 on a year-over-year (or YoY) basis. Macau’s monthly visitors surged over three million in August 2014.

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

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.

Last month, Qualcomm announced 4Q14 and fiscal 2014 earnings that missed estimates. Its revenue for 4Q14 was $6.69 billion, missing analysts’ expectations by $330 million.

Caesars Entertainment reported a Q2 loss of $466.4 million, or $3.24 a share, as compared to last year’s Q2 loss of $212.2 million, or $1.69 a share.

Melco’s net revenue for the second quarter of 2014 was $1.19 billion, down approximately 7% year-over-year.

Melco Crown Entertainment is a venture between Australian billionaire James Packer and Lawrence Ho. Melco owns and develops casino gaming and entertainment resort facilities in Macau.

Caesars Entertainment has 51 casinos in 13 U.S. states and five countries. 38 are in the U.S. and primarily consist of land-based and riverboat casinos.

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.

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

Japan is thinking about opening its market to casinos in the near future. Legalizing casinos in Japan is a long-term catalyst for the casino industry. Las Vegas Sands (LVS) has a huge potential for growth in Japan. The growth in Japan could be as big as the growth in Macao.

Macau’s gaming slowdown may continue into 2015. It’s due to a lack of new resorts. Macau’s casino gambling revenue is expected to keep declining until mid-2015.

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.

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’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.

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

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

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.

Boston Scientific Corporation is a worldwide developer, manufacturer, and marketer of medical devices that are used in a broad range of interventional medical specialties

Chimera Investment invests in residential mortgage loans, residential mortgage-backed securities, real estate-related securities and various other asset classes. Chimera declared a fourth-quarter 2014 cash dividend of $0.09 per common share.

Wynn Resorts (WYNN) is currently constructing Wynn Palace, a fully integrated resort in the Cotai area of Macau.

Wynn Resorts’ strength in meeting its short-term obligations has improved. The increase was mainly attributable to a decrease in accounts payable and gaming taxes payable and an increase in cash and cash equivalents during the nine months ended September 30, 2014.

OTPP added a new position in AVAL during the third quarter that ended in September. The position accounted for 0.11% of the fund’s total portfolio.

OTPP added a new position in United Technologies Corp. (UTX) during the third quarter that ended in September. The position accounted for 0.13% of the fund’s total portfolio.

OTPP added a new position in XPO Logistics Inc. (XPO) during the third quarter that ended in September. The position accounted for 0.46% of the fund’s total portfolio.

OTPP added a new position in The Priceline Group Inc. (PCLN) during the third quarter that ended in September. The position accounted for 0.50% of the fund’s total portfolio.

OTPP is an independent organization. It invests in pension fund assets. It administers the pensions for 307,000 active and retired teachers in Ontario.

Wynn Resorts (WYNN) is a leading developer, owner, and operator of destination casino resorts.

Wynn Resorts’ (WYNN) VIP table gaming’s drop in 3Q14 was 17.4% lower than the same quarter in 2013. The Macau VIP gaming revenues have been negatively impacted by the ongoing anti-corruption campaign in China.

Mass market table wins increased due to a shift of gaming tables from the VIP to the mass market.

Orbitz net revenue rose 10% year-over-year to $248.1 million in 2Q14 as a result of higher hotel, vacation package, car, and air transaction volume.

RCAP, which has a ~$1.24 billion market cap, is an investment firm that focuses on the retail investor.

In 3Q14, BJ’s total revenues increased 9.7% to $206.5 million and net income rose 77.7% to $6.5 million.

Altisource Portfolio Solutions and its subsidiaries are a premier marketplace and transaction solutions provider for the real estate, mortgage, and consumer debt industries.

Altisource Asset Management’s primary business is to provide asset management and certain corporate governance services to institutional investors.

As of the end of 2Q14, Luxor Capital’s U.S. long portfolio was worth $5 billion, slightly down from $5.07 billion in 1Q14.

MPEL’s room expenses comprise ~1% of its direct costs, mainly representing the costs in operating its hotel facilities at Altira Macau and City of Dreams.

MPEL derives ~94% of revenues from casino operations. Its casino business gross margin is 50% for the trailing 12-month period ending September 30, 2014.

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

Melco Crown Entertainment has two casino-based operations—City of Dreams and Altira Macau—and noncasino-based operations at its Mocha Clubs.

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

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 […]

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.

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.

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.

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

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).

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 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%.

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.

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.

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

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.

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

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.

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.

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.

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.