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Melco Crown Fails to Impress in Fast-Growing Macau

Melco Crown Entertainment (NASDAQ: MPEL  ) has been one of the hottest stocks in gaming over the past three years, but that run could come to an end as operational leverage slows and new resorts have to live up to expectations. First-quarter numbers at Melco Crown showed continued growth in Macau, but VIP didn't grow significantly and mass-market play was only up 25%. 

That may look impressive, but it compares to 81% growth in the mass market for Las Vegas Sands' (NYSE: LVS  ) Venetian Macau and 74% growth at Sands Cotai Central. 

There are also questions facing expansions like Studio City, which still isn't guaranteed table games, a factor that could make the resort unprofitable. Fool contributor Travis Hoium sat down to go over the good and bad for Melco Crown in the video below. 

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  • Report this Comment On May 14, 2014, at 6:04 PM, berg80 wrote:

    Gee, that's a lot of concerns you have there, Travis. First lets look at MPEL's valuation. Consensus EBITDA growth for MPEL in 2014/15/16 is 30%/27%/43% while the stock sports the lowest forward EV/EBITDA multiples by a wide margin compared to its peers. With respect to table allocation at MSC Macau, the Macau authorities have not awarded tables to any concessionaire as yet, so why focus your concern on MPEL? Rest assured they'll get a minimum of 400 tables. Furthermore, MSC is widely considered to be the best located ICR on the strip given its proximity to infrastructure improvements, and will be the first casino to open in 2015. Looking backwards, MPEL produced a 31% YoY EBITDA gain in Q1 with COD growing mass at 44% despite construction in the mass gaming area. Perhaps you didn't realize their lower VIP numbers are attributable to a significant reduction in VIP tables that were shifted to higher margin mass tables. Helping to make MPEL the recognized leader in premium mass gaming with the highest table yield in the biz. Oh, and did I mention those consensus numbers, for the most part, include zero contribution from COD Manila opening this fall?

    Feel better now?

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DocumentId: 2957591, ~/Articles/ArticleHandler.aspx, 8/31/2015 11:22:35 AM

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Travis Hoium

Travis Hoium has been writing for since July 2010 and covers the solar industry, renewable energy, and gaming stocks among other things.

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