Hold: Melco Crown Entertainment (MPEL)
Among casino stocks, Hong Kong-based Melco Crown Entertainment (MPEL) is the closest thing to a pure-play on Macau. MPEL stock has gained more than 100% in the past year and appears poised to hit even greater heights in 2014.
Among its premier properties is MPEL’s City of Dreams, an integrated casino resort on the lucrative Cotai Strip that has 450 gaming tables and 1,400 gaming machines. it also is developing the Studio City Project, a cinematically-themed integrated resort also in Cotai. Last month, MPEL’s fourth-quarter earnings beat the Street on the top and bottom lines, reporting profit of 40 cents per share on revenue of $1.4 billion. Analysts had expected an EPS of 38 cents on $1.36 billion in revenue.
But the bears weren’t impressed: MPEL stock has recently endured some turbulence — its beta is a whopping 2.7, indicating it is nearly three times more volatile than the broader market. With MPEL stock down more than 8% since March 5, however, this might prove a good entry point for investors looking for casino stocks that provide exposure to Macau.
MPEL stock has a price-to-earnings-growth (PEG) ratio of only 0.5, indicating that it is extremely undervalued. And the new dividend policy further sweetens the pot for MPEL stock.