NEW YORK (TheStreet) -- Shares of Melco Crown Entertainment (MPEL) are down by 6.22% to $13.41 on heavy volume in early afternoon trading on Tuesday, as some stocks related to China's Macau gambling hub take a hit today.
Macau related stocks are tumbling as one of the gambling district's biggest junkets, Neptune Group, said it may lower operations in Macau if VIP gamers continue to avoid the region, Reuters reports.
Melco Crown Entertainment is a Hong Kong-based developer, owner and operator of casino gaming and entertainment resorts in Asia.
VIP gamers began avoiding the Macau gaming tables last year when China's government began an anticorruption crackdown in the only region in China where gambling is legal.
Junkets such as Neptune facilitate loans to VIP gamers, Reuters said. Until last year, VIP gamblers accounted for 70% of Macau's monthly gaming revenues.
On Friday, the junkets said annual earnings had declined to a five year low.
"While we do not believe Neptune is leaving the Macau scene we do believe that more junket closures are likely and that liquidity could increasingly become a concern that could drive further downside to the VIP story," Union Gaming Securities analyst Grant Govertsen told Reuters.
Separately, TheStreet Ratings team rates MELCO CROWN ENTMT LTD as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
We rate MELCO CROWN ENTMT LTD (MPEL) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures and reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, feeble growth in the company's earnings per share and deteriorating net income.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The debt-to-equity ratio is somewhat low, currently at 0.99, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with this, the company maintains a quick ratio of 2.64, which clearly demonstrates the ability to cover short-term cash needs.
- MPEL, with its decline in revenue, underperformed when compared the industry average of 3.8%. Since the same quarter one year prior, revenues fell by 23.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- MELCO CROWN ENTMT LTD has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, MELCO CROWN ENTMT LTD reported lower earnings of $1.10 versus $1.15 in the prior year. For the next year, the market is expecting a contraction of 50.9% in earnings ($0.54 versus $1.10).
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Hotels, Restaurants & Leisure industry. The net income has significantly decreased by 83.1% when compared to the same quarter one year ago, falling from $143.64 million to $24.25 million.
- You can view the full analysis from the report here: MPEL