It's a good time to be a gaming company in Asia, and the last of the Macau operators to report results has finally given us closure to a great quarter. So far we've seen a lot of growth at Las Vegas Sands
This morning, the smallest competitor by market cap, Melco Crown
Altira, the company's casino in Taipa, is starting to pull its own weight after revenue rose 84.7%, to $245.1 million. Adjusted EBITDA at the property also jumped to $46.4 million from a loss of $14 million last year.
But as gaming investors know, the real action is on the Cotai Strip. Melco operates the glitzy City of Dreams across from Las Vegas Sands Venetian Macau, and this is where Melco will ultimately be judged. Results were a little deflating; property EBITDA fell to $97.7 million from $114.9 million in the third quarter. Compared with the Venetian Macau, where EBITDA rose 11.4% quarter over quarter, City of Dreams is headed in the wrong direction.
There is also the matter of EBITDA margins, which have been a concern since Melco Crown opened its properties in Macau. This quarter, City of Dreams had an EBITDA margin of 20% compared with the Venetian Macau at 35.6% and Wynn Resorts' Macau operations at 32.5%. This disparity is both a problem and an opportunity for Melco Crown going forward. It has demonstrated a history of being a less efficient operator than its competitors, but EBITDA margins have improved lately, and if they can get anywhere near competitors' in the future, it will be a big boost for Melco Crown.
The results for Melco are good but not great, considering the company didn't even meet earnings expectations. Investors looking at Melco Crown have upside given possible margin expansion and the company's relatively low valuation compared with competitors. Melco Crown's trailing enterprise value/EBITDA multiple is just 11.6 compared with 18.2 for Las Vegas Sands and 16.0 for Wynn Resorts. I'm not terribly excited about the fourth-quarter results, but I still think there is lots of upside for Melco Crown. Let me know what you think in the comments section below.
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