Melco Crown (MLCO 11.48%) continues to benefit from the construction that Galaxy and Las Vegas Sands (LVS 8.89%) have done around its resort, taking share in the fast-growing mass market in Macau. Cotai is taking significant market share from the Macau Peninsula, so while MGM Resorts (MGM 7.27%) and Wynn Resorts (WYNN 8.85%) struggle to grow at all, Melco and Las Vegas Sands are seeing robust growth.
During the second quarter, those trends helped Melco Crown grow revenue 38%, to $1.295 billion, and improve EBITDA 62%, to $330.1 million. With two resorts scheduled to open in the next two years, the company is in prime position to keep up that growth as well.
When you compare Melco's flagship City of Dreams with the other two resorts on Cotai that have been open multiple years, the comparison is very favorable. Revenue and EBITDA grew more quickly than The Venetian Macau and Four Seasons Macau, two Las Vegas Sands properties.
|
Revenue Growth Y/Y |
EBITDA Growth Y/Y | |
|---|---|---|
|
City of Dreams |
$967.0 million 41.3% |
$300.2 million +62.9% |
|
The Venetian Macau |
$894.7 million +37.8% |
$360.9 million +57.5% |
|
Four Seasons Macau |
$274.1 million +3% |
$61.8 million -19.3% |
Source: Melco Crown Entertainment
A lot of that increase is due to location in the center of the action on Cotai. As MGM and Wynn complete resorts on the eastern side of Cotai, the company's location will become even more attractive.
More Asian growth on the way
The good news for shareholders is that more growth is on the way. A Philippines resort is under construction and should be done about this time next year. The exact impact on the company's financials is a guess at this point, but projections estimate that revenue at the resort could be up to $1 billion. Time will tell if that's true.
Studio City, on the south end of Cotai, is also under construction, and should be open in 2015. The big question surrounding that resort is table games, which are in short supply given the casinos being built right now. Studio City hasn't been awarded any tables yet, and the government's restrictions on table game growth could mean a delay in significant gaming coming to Studio City.
Melco Crown becoming a value
After the second quarter results, Melco Crown's trailing enterprise value/EBITDA ratio has fallen to 11.7, not a bad value given the growth that's coming. It's also worth noting that the company had a net cash position, something that's extremely rare in gaming.
This has been the best stock in gaming over the past two years and, with momentum and growth on its side, I think the run can continue. The wild card is Studio City, which could be a hit or a disaster depending on the table games outcome.
