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Melco Crown (MPEL) Tops Q1 Earnings but Lags Revenues

Melco Crown Entertainment Limited MPEL reported first-quarter 2016 earnings per share (EPS) of 7 cents, which outpaced the Zacks Consensus Estimate of 5 cents by 40%.

On the other hand, quarterly net revenue of $1.10 billion missed the Zacks Consensus Estimate of $1.23 billion by 10.6% but jumped 4.7% year over year.

The year-over-year improvement in the top line was primarily driven by contributions from Studio City, which was launched in Oct 2015, as well as City of Dreams Manila, which started rolling chip operations in Feb 2015. These upsides were, however, partially offset by lower rolling chip revenues and mass market table games revenues at City of Dreams and Altira Macau.

Adjusted property EBITDA was $248.8 million for the first quarter of 2016, reflecting a year-over-year decline of 2% primarily due to lower contribution from the group-wide rolling chip segment, partially offset by contribution from Studio City and City of Dreams Manila.

City of Dreams

Net revenue at City of Dreams was $678.6 million, down 15.8% year over year. Adjusted EBITDA was $205.6 million in the first quarter of 2016, representing a 13% year-over-year decrease resulting fromlower rolling chip revenues and mass-market table games revenues.

Rolling chip volumes totaled $9.8 billion in the first quarter, down 27%. The rolling chip win rate was 3%, flat year over year.

Altira Macau

Net revenue at Altira Macau was $108.4 million, down 27%. Altira Macau generated negative adjusted EBITDA of $14.0 million in the first quarter, compared with adjusted EBITDA of $6.8 million in the year-ago quarter. The decline was primarily due to lower rolling chip revenues and higher provision for doubtful debt.

Rolling chip volume was $4.6 billion in the first quarter of 2016, down 38%. The rolling chip win rate was 2.8% in the first quarter of 2016, compared with 2.5% in the first quarter of 2015.

Mocha Clubs

Net revenue from Mocha Clubs stood at $31.8 million, down 8.9% year over year. Adjusted EBITDA of $6.5 million was also down 22%.

StudioCity

StudioCitystarted operations on Oct 27, 2015. For the first quarter, net revenue at Studio City was $178.7 million. Studio City’s adjusted EBITDA was $22.1 million in the first quarter of 2016.

Mass-market table games drop was $547 million, while the mass-market table games hold percentage was 22.8% in the first quarter of 2016. Total non-gaming revenue at Studio City in the quarter was $58.2 million.

City of Dreams Manila

For the first quarter, net revenue at City of Dreams Manila was $95.4 million, up 81% year over year. Adjusted EBITDA was $28.6 million, up substantially from the year-ago quarter thanks to increased casino revenues, including the junket operations which began in mid-2015.

Rolling chip volume totaled $1.5 billion, up substantially from $185.5 million in the year-ago quarter. The rolling chip win rate was 2.8%, compared with the year-ago level of negative 0.8%.

Stocks to Consider

A better ranked stock in the gaming industry is Monarch Casino & Resort Inc. MCRI, with a Zacks Rank #2 (Buy). In the broader consumer discretionary, investor may consider Carnival Corp. CCL and Six Flags Entertainment Corp. SIX, both carrying the same Zacks Rank as Monarch Casino & Resort.

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