Frank Waddell

Avoid the 'Group Think' on Melco-Crown

The company 'reported' a net loss on their income statement this most recent quarter because of a function of GAAP accounting. I'd suggest to look beyond the bottom line "Net Income" figure and see what the company is earning on its invested tangible capital. The company's first casino is actually very, very profitable. The Crown Macau is on track to earn a return on invested capital of 60% (You can refer to the most recent conference call transcript for an explanation and verification from the company's CFO, or you can analyze the income statement relative to tangible capital). That is actually quite amazingly profitable for a casino. Analyst estimates have come down, yet in spite of this most analysts rate the company a buy and explain why so in their reports.

As for a $10,000 accounting inflation...I am not sure what you are referring to. Regardless, $10,000 is an immaterial amount.

I appreciate your criticisms, however I lean to the bullish side because I am just that, Bullish on the company.

Avoid the 'Group Think' on Melco-Crown

The company 'reported' a net loss on their income statement this most recent quarter because of a function of GAAP accounting. I'd suggest to look beyond the bottom line "Net Income" figure and see what the company is earning on its invested tangible capital. The company's first casino is actually very, very profitable. The Crown Macau is on track to earn a return on invested capital of 60% (You can refer to the most recent conference call transcript for an explanation and verification from the company's CFO, or you can analyze the income statement relative to tangible capital). That is actually quite amazingly profitable for a casino. Analyst estimates have come down, yet in spite of this most analysts rate the company a buy and explain why so in their reports.

As for a $10,000 accounting inflation...I am not sure what you are referring to. Regardless, $10,000 is an immaterial amount.

I appreciate your criticisms, however I lean to the bullish side because I am just that, Bullish on the company.

Melco PBL Entertainment: The Crown of Macau

Earnings announcements are a funny thing in the current invesment climate. Seems the market is currently rewarding write-downs and other mishaps and discounting companies with improving fundamentals and positive earnings surprises relative to street estimates.

I think many retail investors have the feeling that the Macau story has been "played out", and has led to overvaluations in their multiples. This may be the case with a few of the gaming operators that may have taken on a bit more leverage than they can handle.

Over time the "good" money should come into this company's ownership structure as they begin to see the whole picture and future pipeline. Seems there are currently a lot of speculators trying to catch a huge earnings surprise and providing a lot of short-term volitility.

I plan to do a follow-up on Melco-PBL, specifically refrencing its valuation and a comparables valuation.