Melco Crown (MPEL) Additional Investment in Macau Studio City Seen as Positive
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Up: 11 | Down: 18 | New: 17
Rating Summary:
15 Buy, 10 Hold, 1 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 11 | Down: 18 | New: 17
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In a filing this morning, Melco Crown Entertainment Limited (Nasdaq: MPEL) disclosed it and its partners have agreed to invest an additional $350m total in equity capital in Macau Studio City. An option in the agreement allows MPEL’s partners 6 months to deliver its 40% share of the $350m. If not, MPEL would increase its stake in MSC to 67% from 60% by investing the full $350m amount itself.
“Given our view for an outsized return on MSC and constrictive long-term supply dynamics in Macau overall, we believe the potential for increased ownership in MSC is a positive,” said analyst David Bain of Sterne Agee.
“While no update on MSC’s $1.9b project budget was given, we believe the increased equity capital gives ample cushion should it do so (given the scale of recently announced Cotai projects, we would not be surprised to see MSC’s budget end up slightly higher – i.e. +10% - 15%). The increased equity capital also allows for more negotiating leverage in project debt financing negotiations (i.e. – a lower rate). Finally, the additional equity capital up to the full $350m is manageable from MPEL’s cash on hand and cash flow, inclusive of its Philippines project,” said Bain.
Sterne Agee has a Buy rating on Melco Crown Entertainment and a $23 price target.
For an analyst ratings summary and ratings history on Melco Crown Enter. click here. For more ratings news on Melco Crown Enter. click here.
Shares of Melco Crown Enter. closed at $12.70 yesterday.
“Given our view for an outsized return on MSC and constrictive long-term supply dynamics in Macau overall, we believe the potential for increased ownership in MSC is a positive,” said analyst David Bain of Sterne Agee.
“While no update on MSC’s $1.9b project budget was given, we believe the increased equity capital gives ample cushion should it do so (given the scale of recently announced Cotai projects, we would not be surprised to see MSC’s budget end up slightly higher – i.e. +10% - 15%). The increased equity capital also allows for more negotiating leverage in project debt financing negotiations (i.e. – a lower rate). Finally, the additional equity capital up to the full $350m is manageable from MPEL’s cash on hand and cash flow, inclusive of its Philippines project,” said Bain.
Sterne Agee has a Buy rating on Melco Crown Entertainment and a $23 price target.
For an analyst ratings summary and ratings history on Melco Crown Enter. click here. For more ratings news on Melco Crown Enter. click here.
Shares of Melco Crown Enter. closed at $12.70 yesterday.
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