Morgan Stanley expects Melco Crown Entertainment (MPEL), Wynn Macau and Galaxy Entertainment Group to beat consensus expectations for the fourth quarter of 2010 EBITDA (earnings before interest, taxes, depreciation and amortisation). The investment bank expects Melco Crown to beat consensus expectations by 31 percent, with Wynn Macau and Galaxy also following this trend, beating the consensus by 28 percent and 37 percent, respectively. “However, recent price appreciation (12 percent and 18 percent for Wynn Macau and Galaxy) in the last two weeks has probably priced in part of this upside,” Morgan Stanley wrote in a research note dated from yesterday. “We now expect MPEL to outperform the others, as it is one of the cheapest gaming stocks, with better-than-expected fourth quarter 2010 EBITDA.” The investment bank adds that the next leg of stock upside for the Macau gaming sector could be driven by the first half of 2011 growth being stronger than consensus expectations of 15-20 percent, which may be too conservative. Morgan Stanley notes that the risk of the People’s Bank of China rate hikes and a liquidity crunch from the mainland could be detrimental to VIP business, but it expects near-term growth to be sustainable. Macau-related stocks outperformed the Hang Seng Index by 118 percent in 2010, driven by 58 percent gaming revenue growth last year.
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