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Melco (MPEL) Could Be a Double -Barron's
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In this weekend's edition of Barron's, one article highlighted Melco PBL Entertainment (Nasdaq: MPEL) and gave numerous reasons why the stock could be a double in several years. Shares of MPEL are up about 6% to $14.20 on the positive Barron's article.
Barron's, citing several research analysts in the article, believes MPEL has found a few unique ways to grab the attention of gamblers in Macau, despite being in a less popular area of Macau. To begin, Barron's mentions MPEL's recent deal with A-Max, a company that represents 10 junket operators that are paid commissions to bring VIP's into casinos. According to Barron's, in order to obtain VIP status, these high-rollers must spend at least $128,000 per visit.
Next, Barron's believes MPEL's mega casino, City of Dreams, which is expected to open in 2009, will be a major catalyst as it will focus more interest from around the world on Macau, often considered the Chinese version of Las Vegas.
Thirdly, MPEL has recently felt a jump in momentum as the Chinese government has announced that it will not issue any more gaming licenses or grant new land permits related to gambling, which will help existing players maintain value. An analyst at UBS said, "Macau gaming's barriers to entry have gone from being high to insurmountable overnight."
Finally, Barron's notes that MPEL's Chairman and CEO, Lawrence Ho, is actively trying to diversify the company's holdings: he has become interested in ski resorts and is expanding MPEL's gaming presence into South Korea and the Philippines.
Considering each of the above factors, MPEL's market share in Macua has risen from just 1% to about 18% since its IPO late in 2006.
Melco PBL Entertainment (Macau) Limited engages in the development, ownership, and operation of casino gaming and entertainment resort facilities in Macau. [BCS]
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