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Melco Crown Entertainment Ltd (ADR) (MPEL) Is Not Just A Play On Macau

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The Philippines is looking to be the next hot spot for gamblers. Melco Crown Entertainment Ltd (ADR) (NASDAQ:MPEL) is one of only four gaming companies with a license to operate in the Philippines. The company has a joint venture to develop a 967-room, 242-table gaming resort that will be completed in 2014 called the Belle Grande Manila Bay. The best part about this venture is that a $337 million stock sale will fund much of Melco Crown’s contribution.

Melco Crown Entertainment Ltd (ADR) (NASDAQ:MPEL)

Asia growth

Melco Crown remains well-positioned in Asia. Unlike Las Vegas Sands Corp. (NYSE:LVS), Wynn Resorts, Limited (NASDAQ:WYNN), or MGM Resorts International (NYSE:MGM), Melco Crown is a pure-play on the fast-growing Asian market. Melco Crown Entertainment Ltd (ADR) (NASDAQ:MPEL) is not exposed to the much-weaker Las Vegas market. Even Steve Wynn has publicly said that his company is now a Chinese company and no longer a Las Vegas company. The operations in Macau and Asia are the profit centers for these companies and offset the weaknesses in the U.S. market.

In Macau, Melco Crown operates two casinos and is building a third on the Cotai Strip near the Lotus Bridge. Its City of Dreams on the Cotai Strip was the best-performing resort in Macau in the last quarter. The two main mega-resorts on the Cotai Strip are Melco’s City of Dreams and the Venetian Macau, owned by Las Vegas Sands. Melco Crown Entertainment Ltd (ADR) (NASDAQ:MPEL)’s other property is the Altira Macau, located on the northern side of Macau’s Taipa Island.

Besides the upcoming opening of the casino in Manila, Melco Crown Entertainment Ltd (ADR) (NASDAQ:MPEL) is also building a new resort on the Cotai Strip called Studio City. Studio City will be unlike anything currently in the Macau market. The new resort will have a cinematic theme. It will also have one of only three casino stops on the Macau Light Rail system.

Fundamentals

In looking at the fundamentals of Melco Crown, the stock looks very attractive, even after rising almost 85% in the past year. The company has a current market cap of $12.74 billion. On the balance sheet, there’s only $2.96 billion in debt, and there’s $1.41 billion in cash to offset that. Considering that the company is slated to open two new casinos within the next three years, the balance sheet is not too leveraged. With existing operations and two new casinos in development, by 2016 revenue could double to $8 billion. The growth for Melco Crown is phenomenal and the stock remains attractive relative to the potential.

Competitors

Melco Crown Las Vegas Sands MGM Wynn
Market Cap $12.74 billion $47.38 billion $7.31 billion $13.82 billion
Revenue $4.20 billion $11.67 billion $8.87 billion $5.22 billion
Y/Y Rev Growth 0.12 0.20 0.03 0.05
EBITDA $916.27 million $3.53 billion $1.82 billion $1.52 billion
Net Income $348.89 million $1.60 billion -$1.54 billion $564.43 million
Operating Margin 0.13 0.22 0.10 0.22
P/E 36.83 29.79 N/A 24.67
PEG Ratio 1.00 1.50 N/A 1.90

In comparing these different gaming stocks, we see that Melco Crown has the second-best quarterly revenue growth after Las Vegas Sands. Melco Crown Entertainment Ltd (ADR) (NASDAQ:MPEL) has the third-best operating margin among the group. Even thou Melco Crown has the highest P/E among the group, it has the lowest PEG ratio. This is likely due to the company’s growth potential with its two upcoming new casinos.

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