Brokerage Wells Fargo Securities Inc has increased by 1 percent its 2017 estimate for casino operator Melco Crown Entertainment Ltd’s Macau earnings before interest, taxation, depreciation and amortisation (EBITDA).
It now thinks such Macau earnings will amount to just short of US$1.04 billion this year.
Analysts Cameron McKnight and Robert Shore stated that their adjustment followed better-than-market-estimates fourth-quarter and full-year earnings announced by Melco Crown last week.
Melco Crown reported net income of US$43.3 million for the fourth quarter of 2016. That compared to a net loss of US$12.3 million in the same period of 2015, beating forecasts of investment analysts.
Melco Crown runs a casino called City of Dreams Manila in the Philippines, as well as operating a City of Dreams venue, Altira Macau and the majority-owned Studio City in Macau.
“We estimate Melco Crown took about 50 basis points of mass-market share in the fourth quarter,” said the Wells Fargo analysts.
“Our new 2017 earnings-per-share estimate is US$0.35 (up from US$0.29) and we are introducing our 2018 estimate of US$0.49,” wrote Mr McKnight and Mr Shore in a Monday note.
“We are maintaining our [share] valuation range of US$16 to US$18. We remain neutral on Melco Crown and on Macau generally,” they added.
Chelsey Tam, an analyst at investment research firm Morningstar Inc, said in a note last week that on the back of Melco Crown’s latest earnings, the institution was maintaining its “fair value” estimate for the company at US$17 per share.
In a separate Wells Fargo note on Monday, the brokerage said it forecast the MGM Macau casino hotel of Macau operator MGM China Holdings Ltd – in downtown Macau – would generate US$586-million in 2017 property EBITDA.
“Our estimate [for 2017] is based on 10-percent Macau market growth in the fourth quarter [of 2016] and MGM [China] gaining 100 basis points of market share from [via] MGM Cotai,” said Mr McKnight and his colleague.
They were referring latterly to the expected second-half 2017 launch of MGM China’s second Macau property, a 1,600-room resort on Cotai. The latter is the city’s new hub for mass-market focused, large-scale gaming venues.
MGM China’s property-level EBITDA for its current single venue – MGM Macau – was US$137.5 million in the fourth quarter of 2016, up 5.0 percent year on-year, according to results announced last week by its parent MGM Resorts International.
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"VIP growth [in Macau] is roaring back on the heels of last year’s economic stimulus – but we think this could stall once the effect of the stimulus and the Chinese housing bubble wears off – as it did in 2013-14"
Cameron McKnight and Robert Shore
Analysts at Wells Fargo Securities