It's been a strong year of growth for Macau pure play Melco Crown (Nasdaq: MPEL). The company has gone from being an inconsistent performer in the world's biggest gaming market to the best performing stock in Macau, posting much more consistent margin numbers.
Much of the company's success is centered around the Cotai Strip, where the company's City of Dreams has grown into one of the most profitable resorts in Macau. The resort is adjacent to Las Vegas Sands' (NYSE: LVS) Venetian Macau and the new Sands Cotai Central, next to new potential developments by Wynn and MGM Resorts (NYSE: MGM). After taking well over a year to round into form, the resort has shown consistent performance for three straight quarters now. But like its neighbors in Macau, growth appears to be slowing.
City of Dreams reported a revenue increase of 42% in the fourth quarter to $695.9 million and adjusted EBITDA growth of 91% to $186.6 million. Like Las Vegas Sands and Wynn Resorts (Nasdaq: WYNN) last week, quarter-over-quarter growth was much lower for the company's properties.
City of Dreams grew EBITDA 9.4% quarter-over-quarter, but Altira -- the company's other resort -- saw a 32.6% decline in EBITDA to $53.2 million. For the company as a whole, EBITDA fell 3.6% from the third to fourth quarter. It appears that rumored market share losses indeed affected results.
Falling behind or catching up?
A look at Melco Crown's results shows a split personality in the company's resorts. City of Dreams outperformed Wynn Macau, Sands Macau, and The Venetian Macau in year-over-year EBITDA growth and trailed only The Venetian Macau by a small margin in quarter-over-quarter growth. But Altira performed the worst of any resort from these companies in a quarter-over-quarter comparison.
In a sense, the company is both falling behind and leading the way in Macau.
Value in hard times
The results from Altira are concerning, but the reason why gaming investors may want to take another look at Melco Crown is value. The company is trading at 9.1 times enterprise value/EBITDA, lower than the 10 times for Wynn Resorts and 12.6 times for Las Vegas Sands. Then consider that EBITDA will likely double at City of Dreams in the first quarter versus last year, and the value should only get stronger. Even if Cotai Central is as profitable as The Venetian Macau, Las Vegas Sands won't be able to match Melco Crown's value.
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