NEW YORK (TheStreet) -- Shares of Melco Crown Entertainment (MPEL) were falling 4.4% to $20.02 Monday following a note from analyst firm Sterne Agee that suggests gaming revenue in Macau is falling in June so far.
In a note to investors, Sterne Agee CRT analyst David Bain said, "According to our channel checks, Macau table-only gross gaming revenue ("GGR") is MOP3.3 billion (USD$410m) from June 1 to June 7." The June run rate suggests that GGR will fall 46% year over year in June to MOP14.6 billion ($1.8 billion).
"Our June GGR growth forecast range of between -33% and -38% YoY remains unchanged," Bain wrote. "Given abnormal market share and other checks, we believe hold negatively impacted early June results. Still, results are disappointing especially given a two week proximity to the opening of Galaxy's Phase 2."
The analyst note helped bring down shares of casinos with a presence in Macau such as Melco.
About 1.7 million shares of Melco were traded by 11:26 a.m. Monday, compared to the company's average trading volume of about 3.7 million shares a day.
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 reasonable valuation levels and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- MPEL's debt-to-equity ratio of 0.96 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Despite the fact that MPEL's debt-to-equity ratio is mixed in its results, the company's quick ratio of 2.31 is high and demonstrates strong liquidity.
- MPEL, with its decline in revenue, underperformed when compared the industry average of 7.5%. Since the same quarter one year prior, revenues fell by 22.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. In comparison to the other companies in the Hotels, Restaurants & Leisure industry and the overall market, MELCO CROWN ENTMT LTD's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- The gross profit margin for MELCO CROWN ENTMT LTD is currently lower than what is desirable, coming in at 29.32%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 5.75% trails that of the industry average.
- You can view the full analysis from the report here: MPEL Ratings Report