Thursday, February 17, 2011

Melco Crown Entertainment Ltd. (MPEL): Q4 Earnings Preview

Melco Crown Entertainment Ltd. (NASDAQ: MPEL) is scheduled to release its fourth-quarter earnings before the opening bell on Tuesday, February 22, 2011. Analysts, on average, expect the company to report earnings of 4 cents a share on revenue of $752.58 million. In the year ago period, the company reported a loss of 17 cents per share on revenue of $400.22 million.

Melco Crown is one of six licensed Macau casino operators. It competes with U.S.-based rivals Las Vegas Sands Corp.’s Sands China Ltd., Wynn Resorts Ltd.’s Wynn Macau Ltd., MGM Resorts International’s joint venture with Pansy Ho, as well as Asia- based Stanley Ho’s SJM Holdings Ltd. and Galaxy Entertainment Group Ltd.

In the preceding third quarter, the Hong-Kong, China based company's net income was $5.78 million or $0.03 per ADS compared to a loss of $39.49 million or$0.08 per ADS last year. On an adjusted basis, net income was $0.05 per ADS compared to a loss of $0.05 per ADS in the previous year's third quarter. Adjusted results exclude pre-opening costs and property and other charges. Revenue rose 45% to $726.98 million from $500.33 million. Analysts, on average, expected the company to report a loss of $0.01 per ADS on revenue of $672.90 million.

One hundred percent of Melco Crown's revenue is derived from Macau. The Company currently operates Altira Macau, a casino hotel located at Taipa, Macau and City of Dreams, an integrated urban casino resort located in Cotai, Macau. The Company's business also includes the Mocha Clubs, which feature a total of approximately 1,600 gaming machines in eight locations and comprise the largest non-casino based operations of electronic gaming machines in Macau.

Macau, the world’s biggest gambling hub, is the only Chinese city in which casinos are legal. Macau surpassed the Las Vegas Strip as the world’s biggest gambling hub in 2006, after the government allowed the entry of overseas casino operators. Macau's gambling revenue in December surged 66% from a year earlier, capping a year in which the territory's revenue from casino gambling soared 58%, well above forecasts made by analysts and officials earlier in 2010. Gambling revenue in December totaled MOP18.88 billion (US$2.36 billion), up sharply from MOP11.35 billion a year earlier, according to data from Macau's Gaming Inspection and Coordination Bureau.

Melco Crown makes higher profit margins from mass-market gamblers than high rollers brought in by junket operators. Macau casinos pay junket agencies a capped 1.25 percent of the total betting chips purchased by the so-called VIP gamblers they bring in, or a percentage of revenue.

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