Nov
13

Las Vegas Sands (LVS) Expansion Continues With The Parisian Macau

Las Vegas Sands (LVS) Seeking $1.5 billion loan to support Macau growth

Despite opening the massive Sands Cotai Central resort  in Macau just last year, Las Vegas Sands (LVS) is already looking ahead to their next mega-casino/resort, The Parisian Macau. Scheduled to open in 2015, The Parisian Macau will add over 3,000 hotel rooms and suites to the Cotai Strip and will feature an Eiffel Tower replica and shopping mall in addition to a massive casino floor. Las Vegas Sands has pegged The Parisian’s development costs at $2.7 billion, and it has been reported that they have been seeking a $1.5 billion loan to help fund the project. Also requiring capital is the St. Regis phase of the Sands Cotai Central Resort, expected to cost $450 million. Management of LVS has been prudent in managing their balance sheet, returning capital to shareholders while taking advantage of the availability of cheap capital and borrowing when needed to fund growth. The Parisian will add to Las Vegas Sands’ already industry leading presence in Macau, joining The Venetian Macao, Sands Macao, Sands Cotai Central, and The Plaza Macao.

In a note to clients Monday, Wells Fargo analyst Cameron McKnight estimated gambling revenue growth in Macau of  19%- 21% this month based on data collected the first week and a half. A strong November would set Las Vegas Sands, Wynn Resorts (WYNN), Melco Crown Entertainment (MPEL), and MGM Resorts (MGM) up for another very good quarter on the heels of an October that generated historic amounts of revenue, up 32% year-over-year. I am very bullish on Macau and expect the amazing growth rates out of the region to continue for the foreseeable future as infrastructure and transportation to Macau improves and the Chinese middle class continues to emerge. I currently view both LVS and MPEL as strong buys and the best positioned of the casino operators in Asia.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I have no business relationship with any company whose stock is mentioned in this article.

Nov
12

Yahoo (YHOO) Stock Continues Strength, Over $34

YHOO 3

Yahoo (YHOO) Shares Remain Strong

In what is seemingly becoming a daily column, we take a look at Yahoo’s (YHOO) price action once again. After breaking out of a wedge pattern yesterday, YHOO stock gapped up once again today taking out the key $34 level as we had expected. Despite a down day for the markets, Yahoo displayed strength all day and remained above $34. I believe this price will now provide support to the downside, and looking at YHOO’s chart now, there is little overhead resistance to be found. This stock is firing on all cylinders at the moment from a technical analysis perspective.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I have no business relationship with any company whose stock is mentioned in this article.

Nov
11

Yahoo (YHOO) Breaks Out, Little Resistance Above $34

YHOO Breaks Out of Wedge

Yahoo (YHOO) Gaps Up, Out of Falling Wedge

Yesterday we highlighted a chart of Yahoo (YHOO), showing a close on Friday just above the falling wedge pattern they have been trading within the past month. I was looking for a confirmation of that break out today and Yahoo followed through, gapping up on the open and finishing the day well above Friday’s close. Looking at the chart now, YHOO faces slight resistance at $34 and has a good deal of upside from a technical perspective once taking out that barrier. Another strong day tomorrow will take shares of YHOO above $34 and on their way to our $38 target price.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I have no business relationship with any company whose stock is mentioned in this article.

Nov
11

Madison Square Garden (MSG) Optimal Entry Level

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When to Buy Madison Square Garden (MSG)?

Madison Square Garden (MSG) is one of our top picks at the moment based on our belief that the sum of their parts is worth far more than the market is currently valuing the company. Taking a glance at their chart, they appear to be near an optimal entry level for the long term. Over the past 9 months, MSG shares have failed to trade meaningfully below $55, only closing beneath that number by a few cents on two occasions. Despite a very positive earnings report, the completion of the Madison Square Garden arena renovation project, and the opening of the NBA & NHL seasons in the past few weeks, MSG is trading at a 3% discount from our first recommendation to buy them. Currently at $55.75, Madison Square Garden is very near the ideal time to enter a position from a technical perspective.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I have no business relationship with any company whose stock is mentioned in this article.

Nov
10

Is Yahoo (YHOO) About to Break Out of Their Channel?

YHOO 11/10/2013

Yahoo (YHOO) Looks to Break Out This Week

Since highlighting Yahoo (YHOO) last month, shares are flat, after trading between $32- $34 on relatively low volume the past few weeks. When drawing trend lines on their chart, we can see that Yahoo closed above the channel on Friday. A follow through on that action tomorrow could signal a potential break out and good entry point for YHOO. Should shares fail to remain above $33 tomorrow, we could see $32 again this week, and would look to enter a position there. I believe YHOO is currently undervalued by nearly 20% based on the value of their Alibaba stake, Yahoo Japan stake, and core business operations.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I have no business relationship with any company whose stock is mentioned in this article.

Nov
09

Madison Square Garden (MSG) As Strong a Buy as Ever

Madison Square Garden (MSG) Hidden Asset Value Story Remains, Renovations Complete

In October I published an analysis on Madison Square Garden (MSG) and highlighted the company as a strong buy and one of our top picks. Despite another strong month for the markets, shares of MSG are down 3% since I recommended them, despite releasing some positive news over the past few weeks. First MSG announced that renovations at Madison Square Garden had been completed just in time for the start of the New York Knicks and Rangers seasons. The project had been ongoing for more than 3 years and cost $1 billion. For the first time since spinning-off from Cablevision, Madison Square Garden will have normalized cash flows now that their renovations are finished, opening the door for a potential dividend or share repurchase. Then last week, MSG reported Q1 2014 results that beat analyst expectations. Madison Square Garden earned $0.31 per share, easily topping the $0.22 consensus estimate. They also beat on revenues by $3 million, generating sales of $215 million for the quarter.

While some investors in MSG may have been frustrated by the muted response the aforementioned developments received, this is an asset play, patience is a necessity. We do not anticipate any news out of Madison Square Garden that will offer much of a surprise. Their business is relatively consistent and easy to model, they are not going to shock anyone with growth. Our investment thesis is based on the markets not understanding the true value of MSG’s assets. These assets have been undervalued for years now, and although shares have been gradually appreciating towards fair value they still have a long way to go. In our analysis published last month we concluded a fair enterprise value for Madison Square Garden existed between $7.9- $8.5 billion. We came to this price by valuing MSG Media at $4.4- $5 billion, the Madison Square Garden Arena and its air rights at $2 billion, $1.15 billion for the Knicks and Rangers, and $350 million for their other venues. Madison Square Garden’s current EV is only $4.1 billion. The slight decline in share price since our initial recommendation merely provides a better valuation, the underlying story has not changed at all, MSG is still a strong buy and one of our top picks.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I have no business relationship with any company whose stock is mentioned in this article.

Nov
07

Twitter (TWTR) Soars On First Day of Trading, Leaves at Least $1 Billion on The Table

Twitter’s (TWTR) Market Cap At $24 Billion Following First Day Publicly Traded

After pricing their IPO at $26, shares of Twitter (TWTR) opened at $45.10 and briefly topped $50 before closing the day at $44.90, giving the company a $24 billion market cap. While most have praised Twitter and the handling of their IPO, I believe management really dropped the ball here. As has been widely reported Twitter loses money and has been investing in growth heavily, so they need as much cash as possible. They failed to raise anywhere near the amount of money they should have by significantly under-pricing their IPO at $26, seemingly giving more consideration to Facebook’s (FB) IPO debacle than to their own balance sheet. Had they priced their offering at even $40 per share, 12% less than what the market ended up valuing them at, Twitter would have added an extra $1 billion to the company’s coffers to fuel future growth. Twitter as a product is great, their social video network Vine is also loved by many with over 40 million users less than a year since launching. TWTR has a great deal of potential to monetize these platforms down the road, but management must be much more prudent in handling their finances moving forward or investors will suffer.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I have no business relationship with any company whose stock is mentioned in this article.

Nov
05

City of Dreams Macau Growth Fuels Record Quarter for Melco Crown Entertainment (MPEL)

Melco Crown Entertainment (MPEL) Beats Estimates Once Again as City of Dreams Macau Continues to Dominate the Premium Mass Market

Having seen great quarterly reports from Las Vegas Sands (LVS) and Wynn Resorts (WYNN) come out the past couple weeks, it should come as no surprise that Melco Crown Entertainment (MPEL) once again beat estimates and reported record numbers. During Q3 2013 Melco Crown’s revenues grew 24% year-over-year to $1.25 billion, generating earnings per share of $0.33, a 68% increase. Adjusted EBITDA of $315 million represented a 39% jump from last year’s numbers, as City of Dreams continued to experience rapid growth in the mass market table games segment. Some highlights from their properties…

  • City of Dreams Macau net revenue was $958 million, up from $747 million in Q3 2012.
  • City of Dreams Macau Adjusted EBITDA of $298 million, up 46% from $204 million last year.
  • City of Dreams Macau mass table games revenue grew 73% year-over-year, the primary driver of the improvement in Adjusted EBITDA.
  • Altira Macau revenue was $242 million, up from $216 million.
  • Altira Macau Adjusted EBITDA remained at $30 million, flat from Q3 2012.
  • Mocha Clubs revenues grew 9% to $40 million, Adjusted EBITDA increased 20% to $11 million.

MPEL Update on Progress at Studio City Macau and City of Dreams Manila

Melco Crown’s CEO Lawrence Ho also provided an update on the status of their two major projects, Studio City Macau and City of Dreams Manila…

Studio City remains on budget and on track to open in mid-2015 with clear progress being made on the main superstructure following the successful completion of the foundation and piling work. This cinematically-themed integrated resort located in Cotai represents a powerful and complementary addition to our current portfolio of operating assets in Macau, offering a unique array of entertainment and interactive attractions which will cater to a broad range of customers in Macau and help drive diversification of the Macau economy.

We recently announced City of Dreams Manila as the brand of our integrated casino resort in the Philippines which, together with an ultra-luxurious Crown Towers branded hotel, demonstrates our commitment and confidence in this exciting leisure and entertainment market. We believe our experience in developing and operating integrated resorts in Asia, our unique competitive position in the VIP segments and experience in delivering world-class entertainment, together with our strong local partner, means we are in a unique position to capitalize on the economic growth in the Philippines and the region, and support the Philippine Government’s leisure and tourism objectives.

City of Dreams Manila is Melco Crown Entertainment’s first foray outside of Macau, representing the next step in our mission of becoming the leading gaming and entertainment company in the region. We continue to investigate opportunities in other key Asian markets where they meet our strict approach to the deployment of capital, including Japan.

The mention of Japan is noteworthy as many believe a casino bill will be passed during the next legislative session, as a means of housing and providing more entertainment to tourists in anticipation of the 2020 Summer Olympics in Tokyo. Prime Minister Shinzo Abe is a supporter of the casino bill, expected to generate $10 billion a year in economic benefits, and his high approval ratings significantly increase the likelihood of the it being passed. Many analysts see Japan becoming the second biggest gaming market in the world should the bill go through, surpassed by only Macau. Melco Crown stated in September that they would invest more than $5 billion in Japan casino resorts if granted permission to do so. The opening of Studio City Macau and City of Dreams Manila will drive huge growth for Melco Crown alone, but the possibility of  a Japan property should be viewed as a huge potential catalyst for shares. Melco Crown Entertainment has a bright future and we expect them to continue to outperform as Macau continues to thrive. Their strong quarterly results support our prior recommendation of MPEL, and they remain one of our top picks.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I have no business relationship with any company whose stock is mentioned in this article.

Nov
01

Macau Gambling Revenues Reach Record High In October

Gambling Revenues In Macau Grow 32% During October

After seeing very strong 3rd quarter  results from Las Vegas Sands (LVS) and Wynn Resorts (WYNN), it appears the momentum in Macau is still picking up steam. During October, gambling revenues in the region totaled $4.6 billion, the highest monthly total in history. During the Chinese Golden Week holiday, historically one of the most profitable weeks of the year in Macau, visitors from mainland China increased by 10.7% year-over-year. This jump can be attributed to the continued rise of the “mass-market” segment, composed of China’s growing middle class. These visitors are coming in higher numbers and spending more money than ever, a huge positive for the industry as it reduces the casino operator’s reliance on the more volatile VIP market, made up of super wealthy “whale” gamblers. Melco Crown Entertainment (MPEL) stands to be a big beneficiary of this trend as their City of Dreams Macau property is the dominant player is the mass-market sector. Hotels were near full capacity for the Golden Week despite the cheapest five-star room on the Cotai Strip priced at $737 per night. With such a strong start to the 4th Quarter in Macau, LVS, MPEL, WYNN and MGM are well positioned to outperform expectations for Q4 2013.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I have no business relationship with any company whose stock is mentioned in this article.

Oct
31

MGM Resorts (MGM) Fails To Turn A Profit Despite Improving Operations

MGM Resorts (MGM) Tops Revenue Estimates, Misses on Earnings

While growth in the Macau gaming market propelled Las Vegas Sands (LVS) and Wynn Resorts (WYNN) results past analyst expectations, MGM Resorts (MGM) failed to keep that trend intact when the reported Q3 numbers before today’s opening bell. Revenues grew 9% year-over-year to $2.46 billion, topping expectations of $2.4 billion. Earning came up short though as MGM lost $0.07 on the quarter, missing the street’s consensus by $0.04, despite seeing  Adjusted Property EBITDA for the quarter grow 24% to $546 million.

MGM’s Macau operations continued to perform well as expected, nearly doubling their operating income to $114 million. The MGM Macau alone generated more revenue for the company than The Bellagio, MGM Grand, and Mandalay Bay combined. Their Las Vegas operations did show signs of improvement however, with revenues and operating income up slightly year-over-year on improved occupancy and average daily rates.

MGM’s Debt Burden Limits Their Potential

The real handcuff for MGM Resorts comes in the form of massive amounts of debt on their balance sheet. Despite vastly improved operations the past few years, MGM’s debt burden amassed during the economic downturn has left the company with exorbitant interest expenses. For the 3rd quarter the company’s operating income of $247 million just barely exceeded the $210 million in interest expenses for the period. With a market cap of $9.2 billion and a total debt load of over $13 billion, this is not a problem that will go away anytime soon. Despite being extremely bullish on the Macau casino industry, MGM is the one domestically traded operator in the sector worth avoiding. With significantly more exposure to Las Vegas than their peers, limited growth prospects until 2016 when they open their Macau Cotai property, and a huge debt issue that will weigh on earnings for years and years to come, MGM looks destined to be the worst in class of the major casino operators for the foreseeable future. Melco Crown (MPEL), Las Vegas Sands, and Wynn Resorts all present a better investment opportunity than MGM does.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I have no business relationship with any company whose stock is mentioned in this article.

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