Monday, January 29, 2007

Annotation - Melco PBL

Venturing away from some of the larger and well known gaming stocks, I would like to introduce a recent IPO to the mark – Melco PBL Entertainment. After all the discussion about the prominent potential and current success of the Chinese gaming island of Macau, can one gaming company actually have problems focusing their company on just this marvel. The company under question is Melco PBL. The company went public on December 19, 2006. In Abbi Adest article “This Week's IPOs: Dayton Superior Corp, Claymont Steel, Fuwei Film, Melco PBL Entertainment, Oculus Sciences - SeekingAlphahe highlights several IPO’s that were going to hit the market during the week of Dec 18th 2006. The following blurb underlines the company and the services it provides along with some other relevant information.

Business Overview (from prospectus)

We are a developer, owner and operator of casino gaming and entertainment resort facilities focused exclusively on the rapidly expanding Macau market. Our subsidiary Melco PBL Gaming (Macau) Limited, or MPBL Gaming, is one of six companies authorized by the Macau government to operate casinos in Macau. We have two current casino gaming and entertainment projects under development: the Crown Macau Hotel Casino targeted to open in the second quarter of 2007 and the City of Dreams integrated casino complex, phase one of which is targeted to open in late 2008. MPBL Gaming currently operates six Mocha Clubs featuring a total of approximately 1,000 gaming machines, or slot machines. We have also entered into a conditional agreement to acquire a third development site that is located on the shoreline of the Macau peninsula. We are a 50/50 joint venture between Melco International Development Limited, or Melco, and Publishing and Broadcasting Limited, or PBL. We are the exclusive vehicle of Melco and PBL to carry on casino, gaming machine and casino hotel operations in Macau.

Many investors are looking at this stock as a great investment due to the huge potential gaming outlook for the Chinese island of Macau, which I have discussed in earlier blog posts. Though there is huge potential for success in this area, one gaming analysts advises people to be careful with this gaming company for several reasons. Jeff Chen, a writer for, mentions there is a huge risk/reward option for this stock. In his article “Will Melco Hit the Jackpot in Macau,” he lists out his reasons for investors to be skeptical when purchasing shares of these stocks. In brief, he mentions that the company is very leveraged so if revenue does not come quickly and soon then there will be a decrease in earnings or possibly huge amounts of debt to pay off. Secondly, Melco does not have the lease for their land in Macau in their grasp, but are in negotiations for a plot. Thirdly, the transportation from areas in China to Macau is expensive and inaccessible to the mass market, compared to Vegas where people can drive. So, Chen feels that the market may get over saturated and Melco might be the loser to bigger gaming companies. Lastly, he mentions that Macau’s weather and location could be the potential for a natural disaster, which would ruin Melco. Since Melco PBL is fully dedicated in Macau, Chen states that a hurricane or disaster would be devastating for this company, therefore, crashing the stock and wiping out out all current shareholders.

For more information about Melco PBL see - An In-Depth Look at Melco PBL Entertainment's IPO


Anonymous said...

Las Vegas is in the middle of a desert, and the drive is LOOONG. Most people fly in. Also, only 25% of visitors to Vegas are from Southern California (which is where you would drive from). Many of these did not drive in.

In contrast Macau is just within 5 hours flight time of one half of the worlds population, including rich Japanese, HK people, and Chinese East Coast City people. It is 55 minutes by ferry ride from HK and Macau airport is already top rated and expanding.

Macau had huge revenues -- just beat Las Vegas -- and that is with fewer visitors and fewer casinos.

Las Vegas has a huge physical threat too, which is that it may run out of water -- but that does not stop profits.

San Francisco is constantly under threat of natural disaster, but that did not stop the area from become one of the wealthiest places on earth (silicon valley, of course).

Okay, I understand New Orleans, but Macau IS NOT BELOW SEA LEVEL!!!

Anonymous said...

PPL have been going to Macau for years by hydrofoils, helicopters, and commercial airlines/private jets. This travel method has not slowed down the gaming public.

With the all the new casinos opened after Standley Ho's monopoly ended has actually increased gaming revenue and visitations beyond everyone's expectations. The new and planned casino resorts will create mass market gaming & resorts for Macau.
Macau is in the early stages of dynamic growth.

What a joke about natural disaster, yeah, we could be hit by meteriod or our sun could go super nova some day, what a chicken little, sounds like a shortie comment, yup LVS & WYNN stock priced in for this possible disaster, NOT.

Gives all these foolish theories why the stock has not apprciated, it's currently a trading stock until some big news event wakes it up or gets closer to the first casino hotel grand opening on April 27, 2007.

Anonymous said...

Well Said

Anonymous said...

I wanted to book a trip to Hong Kong and asked my travel agent if they had a Low Cost Carrier that served the area.

Well, seems they don't..but in the last year several LCCs have opened shop in Macau, China.

I booked my trip, arrived in Macau and took the ferry over to Hong Kong and saved 80% of what it would of cost otherwise.

hoops said...

well what i am mentioning about natural disasters is in the case of Melco PBL not WYNN or LVS. Since these companies could withstand a natural disaster but the likely hood of Melco PBL withstanding one is slim. Though it may not be very likely for a disaster to strike, it is possbile, and is a risk when being an investor for Melco.

Anonymous said...

MelcoPBL is at an all time low...after the Crown Macau opens I don't see the stock below $20.

It all comes down to Location, Location, Location...and what better location for gaming than Macau?