Melco PBL Entertainment (MPEL – Nasdaq)
Dear Bottarelli Research Member,
This week’s pick will get us positioned to ride the non-stop upside potential of commodities. I personally feel that copper, silver, molybdenum, and water are commodities that’ll continue decreasing in supply and increasing in value, so it’s critical that we use this supply/demand imbalance to profit by playing the best commodity-based, small-cap stocks on the market. We currently have some dynamite small-cap commodity holdings in our portfolio right now, and now I want to add even more.
In today’s alert, I’d like to focus on one commodity that is not being made anymore – and that commodity is land. But I’m not talking about land here in the U.S. Rather, I’m talking about land in one of the fastest-growing sections of the world. I’ll be sharing with you one small company that not only acquired this desirable land well ahead of everyone else, but they also acquired the land for pennies on the dollar. And now they’re in position to develop this valuable land, leveraging their position even further.
You probably know that my background is in building, so when I discover a company that’s in a position like this, I get really exited. To my eye, the tremendous upside potential is instantly clear. You see, this week’s pick is a small, undiscovered company that owns and develops hotels, convention centers, and casinos in the fastest-growing gambling operation in the world: Macau, China.
In fact, as you read this, this $14 stock is teaming up with some of the biggest casino operators in the U.S. to build one of the largest electronic gaming floors in Macau. And since this company just started trading earlier this year, it’s still unknown to the general investing public. I’ve been quietly monitoring this one for over three months now, and I believe it’s time to strike.
The company is Melco PBL Entertainment (MPEL – NASDAQ) and let’s enter a position under $14.00 per share. My technical indictors signal that we could revisit the highs of the year. In fact, I don’t normally do this, but check out this chart below:
If you look closely, you’ll notice the powerful crossover that I meticulously scan for each and every day. See how the 18-SMA (blue line) is just about to cross over the 40-SMA (pink line)? This typically leads to a strong crossover move, followed by an upside pop, so the time to enter MPEL is now. After all, when I look at the tremendous upside runs in companies like Las Vegas Sands (LVS – NYSE), Wynn Resorts (WYNN – NASDAQ) and MGM Mirage (MGM – NYSE), I see a very bright future. So let’s profit right alongside the Macau gambling windfall by investing in MPEL today!
And now let me give you some updates before turning things over to Bryan…
Upstream Biosciences (UPBS.OB): I know that this stock has been the weakest player in our entire small-cap portfolio, but after speaking with the company, they’ve mentioned a series of news events that’ll soon be hitting the wire, so I’d like to give this one a little more time. If their new technology pans out, this could be one of those moon shots that we all love. Let’s not actively buy any more shares here – but simply hold our current position and see if the stock can gain some much-needed upside momentum.
Boots & Coots International Well Control (WEL – AMEX): I continue to find it hard to believe that with the amount of cash WEL has been raking in, the stock price has failed to put together any strong upside. As I mentioned two weeks ago, earnings are coming out soon, and I’m hoping this will be the trigger that pushes shares higher. If not, then it might be time to cut bait and move on.
JA Solar Holdings (JASO – NASDAQ): We all know this puppy has been amazing, so I ran some new chart scans accounting for current prices and learned that $35.00 could be a strong secondary entry point. If anyone did not enter JASO when we originally recommended it for $23.54 on June 11th, I’d consider nibbling away if shares drop anywhere between $30 and $35.
AND NOW THE BEST NEWS OF THE WEEK…
Basin Water (BWTR – NASDAQ): On Wednesday, BWTR announced that they’ve been selected to provide a nitrate removal treatment system for the City of Pomona in Los Angeles County, California. This is a HUGE contract for BWTR, and it could be the trigger that entices a rush of additional water treatment contracts across America! This news shot Basin Water up to an intra-day high of $13.20, good for a one-week gain of 34.96%! If you’d like to take some of your profits off the table here, I certainly won’t blame you. After all, if you invested $10,000 in BWTR on Monday, you would have had pure profits of $3,496 in your hands intra-week. That’s enough to pay for your entire 12-month membership to Bottarelli Research Small Cap, plus have an extra $1,746 left over! So let’s take gains on half of our position this upcoming week if the stock hits a 30% return – and then let the second half of the position ride. Congrats on a great one-week trade!
Sincerely,
Mark Blattert,
Over the Last Year…
MGM Mirage (MGM – NYSE) Gained 75%
Wynn Resorts (WYNN – NASDAQ) Doubled
Las Vegas Sands (LVS – NYSE) More Than Doubled
If You Missed Out, Than Melco PBL Entertainment (MPEL – NASDAQ) Offers You a Second Chance to Ride the Macau Gambling Windfall
I’m going to start off with some Macau gambling statistics that you probably already know – and then I’ll lead directly into the one important aspect of this week’s alert that you most likely DO NOT know.
It’s this one statistic that could open up a tremendous investing opportunity for you and me, so let’s dive right in.
Macau is one of China’s most densely populated regions, making it a city with the highest level of population congestion in the world.
Since Macau is China’s only legalized place to gamble, the city attracts 24 to 25 million visitors per year. Gambling revenues from Macau’s casinos, for the first time ever, recently surpassed $6 billion. That means Macau’s gambling revenues are now greater than those of the Las Vegas Strip – making Macau the highest-volume gambling center in the world! And you better believe that casino operators know it.
The Sands Macau, operated by Las Vegas Sands (LVS – NYSE), just opened the largest casino in the world (as measured by total number of table games).
Wynn Resorts (WYNN – NASDAQ) also has a major presence in Macau, and this has been the upside driver of both LVS and WYNN’s stock price appreciation over the last two years.
But you probably know all that, right?
So here’s what you don’t know…
Alongside WYNN and LVS, Melco PBL Entertainment (MPEL – NASDAQ) is the holder of one of only six gaming concessions to own and operate a gambling business in Macau. And as Mark mentioned above, MPEL also owns the valuable Macau land that they’re planning on developing. But since MPEL just went public on December 19th of 2006, not many investors even realize they exist – making MPEL the investment opportunity with the most upside potential of every other “well-known” Macau play. In fact, as I researched the stock, I believe that the few investors who do recognize MPEL are valuing it for what they’re currently operating – and NOT what they plan to have operating in 2008 and beyond.
For example, MPEL has two existing projects:
Their first project is called Mocha Clubs, which feature 1,000 gaming machines in six Macau locations – making them the largest non-casino based operation of electronic gaming machines in Macau. In other words, this isn’t a casino floor – but rather MPEL inserts slot machines in groupings across Macau to capture any customers not on the casino floor.
Their second operation is called Jumbo Kingdom, which features their Jumbo and Tai-Pak floating restaurants in Aberdeen, Hong Kong along with the Chua Lam Gourmet Kitchen in Macau.
Now, I’ll be the first to admit that some clusters of slot machines and a few floating restaurants don’t necessarily ring any bells for a powerful investment opportunity. And in many respects, that’s why shares of MPEL trade under $14.00. But when you consider what they have in the works right now, you’ll see the tremendous potential of this tiny little gem.
You see, Melco PBL Entertainment is currently developing two massive projects that include the Crown Macau (which just opened in late June) and the City of Dreams (the first phase is targeted to open in late 2008). It’s these two projects that’ll provide the upside catalyst that drives MPEL share prices higher. Let me tell you about each project and you’ll see what I mean.
Crown Macau: A whopping 60% of Macau’s $6 billion gaming revenue comes from VIP or high-end players. That’s why Melco PBL Entertainment’s Crown Macau in Taipa is designed specifically with these high-end players in mind.
It’ll be the first 6-star casino hotel in the entire city – and it’ll also be the tallest building on Taipa island. With a total construction area of 106,000 square meters, the casino-hotel has over 200 deluxe VIP guest rooms with VIP suites and presidential villas. And here’s the thing. As you can see from the image below, Macau Island is geographically located closer to mainland China, so the idea for casinos in these areas is to attract a larger volume of people and keep them away from Taipa. But what’s interesting is the location of the Macau International Airport.
As you see, the airport is directly connected to Taipa, which means that Melco PBL Entertainment could fly in the VIP’s (and their $3 billion gambling appetites) on private jets and take them directly to their 6-star Crown Macau resort. If you listen to any casino operator, they’ll tell you that they’d rather have one high-roller gambling in their casino over 1,000 standard gamblers, and it’s my view that the Crown Macau is in the very best position to capture this lucrative high-end demographic.
The City of Dreams: MPEL’s second major project aims to offer amenities that are currently not available at casinos in Macau – like a 100,000-square-foot shopping mall and a 2,000-seat performance hall. Of course, it’ll also feature a 40,000-square-meter, underwater-themed casino with 450 gaming tables and 3,000 slot machines – making the City of Dreams an alluring and multi-dimensional, integrated resort destination that will stand out prominently in Macau and the Greater China region.
With partners that already include the Hyatt Corporation, Hard Rock International, and Dragone Entertainment (who designed the Celion Deion entertainment pavilion in Las Vegas and and also created the entertainment at Wynn Las Vegas), City of Dreams is expected to be the center piece of Melco PBL Entertainment’s portfolio.
Now, please be aware that we’re entering this play well ahead of the curve. Below, for example, is an artist rendering of what the City of Dreams will look like when completed in 2008. But the second image below shows the actual progress on the project as of today. As you can see, we’re getting in well ahead of the game – but that means we’re truly entering this play ahead of the mainstream investing public. We might need to be a little more patient here, but make no mistake, the rewards could be well worth it.
City of Dreams Artist Rendering Upon Completion:
City of Dreams Current Construction Photo:
While most investors recognize stocks like LVS and WYNN as Macau gambling plays, not 1 in 100 realizes that MPEL could be the next huge winner in this powerful segment. And that’s the big secret. After all, if you can learn anything from the tremendous casino boom in Las Vegas, there’s plenty of money to go around for everyone. And in fact, we’re not the only ones identifying the tremendous investing potential. If you look at MPEL’s recent upgrade and downgrade history, you’ll notice that some of the savviest brokers on Wall Street have just started to initiate coverage on the shares. Take a look:
| Date | Event |
|---|---|
| January 29, 2007: | UBS Initiates Coverage |
| January 30, 2007: | JP Morgan Initiates Coverage |
| March 28, 2007: | Citigroup Upgrades Stock |
| April 3, 2007: | Goldman Sachs Initiates Coverage |
Now here’s the thing: When you have a company that’s heavily involved in cash-intensive real-estate development, you’re not going to see sparkling earnings numbers. So please don’t expect to see that with MPEL. The play here is that MPEL is one of only six companies to own gaming concessions to operate a gaming business in Macau, and they’re by far the most under-the-radar company on this list. Their two major projects (Crown Macau and City of Dreams) will give them an unprecedented footprint on Taipa island, allowing them to capitalize on the high-end and VIP market unlike anyone else in Macau.
When you compare MPEL’s current market capitalization of $5.25 billion to LVS and MGM (which carry market caps of $29.48 billion and $23.22 billion, respectively), you can see that MPEL’s market cap has a lot of room to move. In fact, the City of Dreams project could realistically double MPEL’s market cap, and that would still put it well below the multiple of LVS. So if you recognize MPEL’s potential like I do, then its’ time to enter our newest small-cap pick!
PLAY: Buy shares of Melco PBL Entertainment (MPEL – NASDAQ) at or under $14.00, good for the week.
P.S. REMINDER! In case you forgot, our Bottarelli Research Options service has now hit winners on 31 out of our last 35 trades. If you are not yet a member of our options service, then I’d like to formally invite you to join this elite membership. If you’d like to supplement your profitable small-cap investing with our flagship Bottarelli Research Options service, then I encourage you to review this invitation-only letter below:
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Sincerely,
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