Melco Isn't the Best Macau Play
NEW YORK (
) --
Melco Crown Entertainment
(MPEL)
handily topped third-quarter expectations, reporting a surprise profit. But there are better ways to play the Macau gaming market.
During the quarter, the Macau-based casino operator earned 3 cents a share, compared with analysts estimates of a loss of a penny. Revenue jumped 45.4% to $727 million, better than consensus estimates of $672.9 million.
Shares are being led higher given the solid results out of Melco's City of Dreams property. Revenue at the casino ballooned 75% to $504 million from $287.7 million in the third-quarter last year.
City of Dreams generated a profit of $114.9 million, compared with $46.6 million in the year prior.
While third-quarter headline earnings were much better than expected, about $35 million of those earnings relate to table hold percentage, something J.P. Morgan analyst Joseph Greff says is unsustainable. Factoring this in, results were not as strong as they initially appeared.
Looking at it this way, there are better growth prospects and upside in some of the other casino stocks.
Las Vegas Sands
(LVS) - Get Report
, for one, is viewed as the most attractive Asian gaming growth equity by J.P. Morgan analyst Joseph Greff.
Last week, the company reported blow-out third-quarter results, receiving a boost from its Sands China and Singapore operations. The company's Sands China unit saw revenue climb 28% to $1.08 billion and adjusted EBITDA gained 43% due to record results at its at its Four Seasons Hotel Macao and Plaza Casino.
Wynn Resorts
(WYNN) - Get Report
, which is scheduled to report its third-quarter results after-market, is another more stable way to play Macau, says Wells Fargo analyst Carlo Santarelli.
Melco's earnings report comes after
the Macau government reported gaming revenue in October hit a record high
, climbing 50% to $2.4 billion.
While shares of Melco were up as much as 9% immediately after the report, the stock gave back some of these gains, up 3% to $6.72 in midday trading.
--Written by Jeanine Poggi in New York.
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