Melco Crown is the most undervalued Macau gaming stock, set against its growth potential and positioning on Cotai, according to Bernstein Research.
Bernstein analyst Vitaly Umansky said in a note that the company has an intense focus on premium mass, which the research house believes is a key segment in the Macau market. “MPEL's Studio City, which is slated to open on October 27, will expand its footprint in Base Mass and non-gaming and concentrate positioning on Cotai, the future of Macau. We forecast MPEL's 2015E-2018E EBITDA CAGR of 25% to outperform the Macau market's 19% [compound annual growth rate].”
The stock's catalysts include the opening of Studio City, a potential acquisition of the 40 percent joint venture partner in Studio City and ramp up of City of Dreams Manila in a relatively faster growing Philippines gaming market.
“CoD delivers outsized success in Premium Mass largely due to customer acquisition and retention strategies, providing superior service and product offering, and strong Premium Mass host staff. Consequently, MPEL has the highest mass table efficiency (i.e., Win/Unit/Day) amongst all six Macau casino operators.”
“The company's branding of its Premium Mass business and strategic marketing efforts in the segment have allowed MPEL to maintain a market leadership position.”
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