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January 4, 2011 | 5 Pages

Leisure & Entertainment Company Report

Melco Crown Entertainment Ltd.


RAISING ESTIMATES; MAINTAIN BUY; CITY OF (NNM: MPEL)
DREAMS TO UNDERGO MORE IMPROVEMENTS - RATING: BUY
SEVERAL HITTING IN THE CURRENT QUARTER; RAISING David Bain
TARGET PRICE (949) 721-6651
dbain@sterneagee.com

n We are raising 4Q10 EBITDA to $115.9 million from $105.2


Fiscal Year Ends Dec
million to better coincide with our 4Q10 MPEL channel
checked market share in Macau and Macau gross gaming
Rating: Buy
revenue market numbers along with other checks. Our checks
indicate that while hold at one of MPEL’s properties was Price: Last $6.63
somewhat weak in early December, it normalized on a full Price Target: $9.00
month basis. As indicated in our industry report out yesterday 52-wk Range: $3.38-$6.86
(“Macau Record Set…”), we raised our CY11 and CY12 Macau Market Capitalization (M): $3,549.0
market statistics and are therefore also raising our CY11 and Shares Outstanding (M): 535.3
CY12 EBITDA estimates for MPEL to $496.2 million and
$526.9 million from $461.2 million and $490.6 million,
respectively.
n In early 1Q11, MPEL is adding 18 VIP tables to its flagship
City of Dreams (COD) property in Cotai, which we believe will
equate to an additional at least 4% in casino
segmented/departmental EBITDA (prior to SG&A expense) at
the property. Additionally, the Hard Rock Café and Poker
lounge should open in late 1Q11 at COD, and Cubic should
open by 2Q11. Cubic will be the only DJ oriented night-club
within a Macau casino resort. With the addition of the Hard
Rock Café, poker lounge and Cubic, we expect an increase in Earnings Summary
higher-end mass play on the currently less utilized second floor FYE Dec 2010E 2011E 2012E
casino at COD. We believe COD’s House of Dancing Water EBITDA
show is currently at break-even levels, though a driver of (M): $412.5 $496.2 $526.9
incremental traffic. While we do not model for such, we expect
EPS & P/E Summary
the show to eventually hit profitability on a stand-alone basis as 2010 2011 2012
ticket sales should include an increasing percentage of mass (i.e., EPS: 2010E Prior 2011E Prior 2012E Prior
“paying”) patrons in CY11 versus the show’s opening months. Q1 -$0.02 -- $0.01 -$0.02 $0.02 -$0.00
n With approved land available to add either another bank of hotel Q2 -$0.05 -- $0.01 -$0.00 $0.03 $0.01
rooms or, should Government policy dictate ahead of such time, Q3 $0.05 -- $0.02 $0.01 $0.03 $0.03
Coop sales adjacent to its COD property, we believe the Q4 -$0.00 -$0.02 $0.02 -$0.01 $0.04 $0.01
Company is well positioned to capitalize on Macau growth, Full Year -$0.02 -$0.05 $0.06 -$0.02 $0.12 $0.05
especially as additional critical mass hits Cotai, where it derives P/E Ratio: na -- na -- na --
approximately 75% of its property EBITDA. Currently MPEL,
a pure-play on Macau growth, is trading at just over 9x our
CY12 EV/EBITDA estimates. Our new target price of $9
(versus $8.50) is based on 12x its CY12 operating forecast, less
a multiple of corporate, less net debt, divided by shares out.

Source: Factset

Important Disclosures regarding Price Target Risks, Valuation Methodology, Regulation Analyst Certification,
Investment Banking, Ratings Definitions, and potential conflicts of interest begin on Page I of the Appendix Section.
800 Shades Creek Parkway Suite 700 Birmingham, AL 35209 205-949-3500
Sterne, Agee & Leach Inc. is Member NYSE, FINRA, SIPC
MELCO CROWN ENTERTAINMENT LTD. (NNM: MPEL) January 4, 2011

Melco Crown Entertainment Ltd. Quarterly Income Statement


(millions, except per share data) DEC Mar 10 Jun 10 Sep 10 Dec 10 DEC Mar 11 Jun 11 Sep 11 Dec 11 DEC Mar 12 Jun 12 Sep 12 Dec 12 DEC
FY09 Q1:10 Q2:10 Q3:10 Q4:10E FY10E Q1:11E Q2:11E Q3:11E Q4:11E FY11E Q1:12E Q2:12E Q3:12E Q4:12E FY12E
Property Net Revenue
City of Dreams 552.1 336.3 309.3 504.0 463.5 1,613.1 465.4 467.8 472.7 488.7 1,894.7 487.3 489.0 493.7 510.4 1,980.4
Altira Macau (Formerly Crown Macau)
658.1 197.2 230.6 186.8 206.0 820.6 208.7 208.7 205.7 211.3 834.5 210.7 214.5 209.4 215.2 849.8
Mocha Clubs 97.9 26.7 26.9 27.8 27.3 108.7 26.8 27.8 28.9 28.2 111.6 27.6 28.6 29.7 29.0 114.9
Peninsula Project 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Other Revenue 25.8 7.4 6.8 8.4 6.0 28.6 6.0 6.0 6.0 6.0 24.0 6.0 6.0 6.0 6.0 24.0
TOTAL NET REVENUES 1,332.8 567.6 573.6 727.0 702.9 2,571.1 706.9 710.4 713.3 734.2 2,864.7 731.5 738.1 738.9 760.6 2,969.1
% Seq. -6% 42% 1% 27% -3% 93% 1% 0% 0% 3% 11% 0% 1% 0% 3% 4%
% YoY -6% 162% 166% 45% 76% 93% 25% 24% -2% 4% 11% 3% 4% 4% 4% 4%
Property EBITDA
City of dreams 38.5 70.9 42.9 114.9 98.2 326.9 102.5 103.1 105.1 108.5 419.3 109.1 110.3 111.5 115.1 446.1
Altira Macau (Crown Macau) 13.7 21.8 36.7 28.8 26.5 113.8 26.9 26.9 27.6 28.3 109.8 28.2 28.7 28.1 28.8 113.8
Mocha Clubs 25.4 6.5 7.1 7.6 6.6 27.9 6.5 6.8 7.0 6.8 27.1 6.7 7.0 7.2 7.0 27.9
Peninsula project 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Total Property EBITDA 77.7 99.2 86.7 151.3 131.4 468.6 136.0 136.8 139.7 143.7 556.2 144.0 146.0 146.8 151.0 587.8
% YoY -59% 268% -794% 210% 812% 503% 37% -58% 8% 9% 19% 6% -7% -5% 5% 6%
Corporate expense 39.9 12.3 13.3 15.0 15.5 56.1 15.2 14.7 14.3 15.9 60.0 15.7 14.8 14.4 16.0 60.9
% of net revs. 3% 2% 2% 2% 2% 2% 2% 2% 2% 2% 2% 2% 2% 2% 2% 2%
Total adjusted EBITDA 37.7 86.9 73.4 136.3 115.9 412.5 120.8 122.1 125.4 127.9 496.2 128.3 131.2 132.4 135.0 526.9
% YoY 76% 308% -408% 262% 4243% 993% 39% -66% 8% -10% 20% 6% -7% -6% -6% 6%
Depreciation and amortization 217.5 76.1 76.0 78.1 84.0 314.2 84.0 84.0 84.0 84.0 336.0 84.0 84.0 84.0 84.0 336.0
% of net revs. 16% 13% 13% 11% 12% 12% 12% 12% 12% 11% 12% 11% 11% 11% 11% 11%
Pre-opening costs 92.1 4.1 2.9 9.2 0.0 16.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
% of net revs. 7% 1% 1% 1% 0% 1% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
Stock-based compensation 11.4 1.1 1.4 2.4 3.0 7.9 3.0 3.0 3.0 3.0 12.0 3.0 3.0 3.0 3.0 12.0
% of net revs. 1% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
Porperty charges and other 7.0 (0.5) 0.5 0.1 0.0 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
% of net revs. 1% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
EBIT (290.3) 6.2 (7.4) 46.5 28.9 74.2 33.8 35.1 38.4 40.9 148.2 41.3 44.2 45.4 48.0 178.9
% margin nm 1% -1% 6% 4% 3% 5% 5% 5% 6% 5% 6% 6% 6% 6% 6%
Interest and other income (expense) (36.5) (18.8) (22.7) (30.8) (29.0) (100.8) (29.3) (29.3) (29.3) (29.3) (121.2) (29.3) (29.3) (29.3) (29.3) (117.2)
INCOME BEFORE TAXES (326.8) (12.6) (30.1) 15.7 (0.1) (27.1) 4.5 5.8 9.1 11.5 30.9 12.0 14.9 16.1 18.7 61.7
Income taxes 0.4 (0.2) 0.0 (0.1) 0.0 (0.2) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Adjusted Net Income (326.4) (8.9) (26.7) 25.1 (0.1) (10.6) 4.5 5.8 9.1 11.5 30.9 12.0 14.9 16.1 18.7 61.7
Adjusted EPS (0.67) (0.02) (0.05) 0.05 (0.00) (0.02) 0.01 0.01 0.02 0.02 0.06 0.02 0.03 0.03 0.04 0.12
Diluted Shares Outstanding 487.8 531.7 531.8 535.3 535.3 533.5 535.3 535.3 535.3 535.3 535.3 535.3 535.3 535.3 535.3 535.3
Source: Company reports and Sterne Agee estimates

Page 2
MELCO CROWN ENTERTAINMENT LTD. (NNM: MPEL) January 4, 2011

APPENDIX SECTION
Company Description: Melco Crown Entertainment Limited was formerly known as Melco Pbl Entertainment Ltd. The Group's
principal activities are to develop, own and operate casino gaming and entertainment facilities in Macau. The Group operates the
gaming and hospitality business. The Group through its subsidiary MPBL Gaming operates six Mocha Clubs featuring a total of
approximately 1,000 gaming machines, or slot machines.

IMPORTANT DISCLOSURES:
Price Target Risks & Related Risk Factors:
Risks to our investment thesis and the achievement of the price target include, but are not limited to, a company's failure to achieve
Sterne, Agee & Leach, Inc., earnings and revenue estimates; unforeseen macroeconomic and/or industry events that adversely affect
demand for a company's products or services; product obsolescence; changes in investor sentiment regarding the specific company or
industry; intense and rapidly changing competitive pressures; the continuing development of industry standards; the company's ability
to recruit and retain competent personnel; adverse market conditions, and negative regulatory and licensing environments. For a
complete discussion of the risk factors that could affect the market price of a company's shares, refer to the most recent Form 10-Q or
10-K that a company has filed with the Securities Exchange Commission.

Valuation Methodology:
Methodology for assigning ratings and target prices includes qualitative and quantitative factors including an assessment of industry
size, structure, business trends and overall attractiveness; management effectiveness; competition; visibility; financial condition; and
expected total return, among other factors. These factors are subject to change depending on overall economic conditions or industry
or company-specific occurrences. Sterne, Agee & Leach, Inc., analysts in the Leisure and Entertainment Sector base valuations on a
combination of forward looking price to earnings multiples, price to revenue multiples, and enterprise-value-to-EBITDA ratios.
EBITDA is defined as earnings before interest, taxes, depreciation, and amortization, and is used to gauge the viability of a company
to service debt. Sterne, Agee & Leach, Inc. believes this accurately reflects the strong absolute value of earnings, the strong earnings
growth rate, the inherent profitability, and adjusted balance sheet factors.

Regulation Analyst Certification:


I, David Bain, (949) 721-6651, hereby certify the views expressed in this research report accurately reflect my personal views about
the subject security(ies) or issuer(s). I further certify that no part of my compensation was, is, or will be, directly or indirectly, related
to the specific recommendations or views expressed by me in this report.

Sterne, Agee & Leach, Inc. Disclosure Legend as of January 4, 2011:

Company Disclosure(s) – See Below


Melco Crown Entertainment Ltd. (MPEL - NNM): 1

1. Sterne, Agee & Leach, Inc. makes a market in the shares of the subject company.
2. Sterne, Agee & Leach, Inc. has, over the past 12 months, managed or co-managed a public securities offering or
provided other investment banking services for the subject company.
3. Sterne, Agee & Leach, Inc. has various security accounts open for the subject company.
4. Sterne, Agee & Leach, Inc. provides administration for 401(k) plans for the subject company.
5. Sterne Agee Financial Services, Inc. has clearing agreements with the subject company.
6. The Sterne Agee analyst who has active coverage on this company owns a position in the subject company.
7. Sterne, Agee & Leach, Inc. or its affiliates beneficially own 1% or more of any class of common equity securities of the
subject company.

Sterne Agee & Leach, Inc. expects to receive or intends to seek compensation for investment banking services from the subject
company in the next three months. Sterne, Agee & Leach, Inc.’s research analysts receive compensation that is based upon various
factors, including Sterne, Agee & Leach, Inc.’s total revenues, a portion of which is generated by investment banking activities.

Definition of Investment Ratings:


BUY: We expect this stock to outperform the industry over the next 12 months.
NEUTRAL: We expect this stock to perform in line with the industry over the next 12 months.
SELL: We expect this stock to underperform the industry over the next 12 months.
RESTRICTED: Restricted list requirements preclude comment.

Appendix Section, Page I


MELCO CROWN ENTERTAINMENT LTD. (NNM: MPEL) January 4, 2011

Ratings Distribution:
Of the securities rated by Sterne, Agee & Leach, Inc., as of December 31, 2010, 41.7% had a BUY rating, 57.3% had a NEUTRAL
rating, 1.0% had a SELL rating, and 0% was RESTRICTED. Within those ratings categories, 2.04% of the securities rated BUY,
1.94% rated NEUTRAL, 0% rated SELL, and 0% rated RESTRICTED received investment banking services from Sterne, Agee &
Leach, Inc., within the 12 months preceding December 31, 2010.
ADDITIONAL INFORMATION AVAILABLE UPON REQUEST: Contact Robert Hoehn at 1-212-338-4731.
Other Disclosures:
Opinions expressed are our present opinions only. This material is based upon information that we consider reliable, but we do not
represent that it is accurate or complete, and it should not be relied upon as such. Sterne, Agee & Leach, Inc., its affiliates, or one or
more of its officers, employees, or consultants may, at times, have long or short or options positions in the securities mentioned herein
and may act as principal or agent to buy or sell such securities.

Copyright © 2011 Sterne, Agee & Leach, Inc. All Rights Reserved.

Sterne, Agee & Leach, Inc. disclosure price charts are updated within the first fifteen days of each new calendar quarter per FINRA
regulations. Price charts for companies initiated upon in the current quarter, and rating and target price changes occurring in the
current quarter, will not be displayed until the following quarter.

Price Chart(s):

To receive price charts or other disclosures on the companies mentioned in this report, please contact Sterne, Agee & Leach, Inc. toll-
free at (800) 240-1438 or (205) 949-3689.

Appendix Section, Page II


STERNE, AGEE & LEACH, INC.
Founded in 1901, Sterne Agee has been providing investors like you with high-quality investment opportunities for
over a century. During the early years, our founders prominently established themselves in the financial securities
industry in the southeastern United States. Today, we have expanded to serve all regions of the country. Sterne,
Agee is headquartered in Birmingham, Alabama with offices in 22 states. Sterne Agee is one of the largest independent firms in the
country. Sterne, Agee & Leach, Inc. is a division of Sterne Agee Group, Inc., which also includes The Trust Company of Sterne, Agee
& Leach, Inc.; Sterne Agee Asset Management, Inc.; Sterne Agee Clearing, Inc.; and Sterne Agee Financial Services, Inc.—
www.sterneagee.com
EQUITY CAPITAL MARKETS
Ryan Medo Managing Dir., Eq. Cap. Mkts. (205) 949-3623 David Lee Director, Equity Products (205) 949-3689
Robert Lake Vice President (205) 949-3624 Yan Chao Associate (205) 949-3622

INSTITUTIONAL SALES INSTITUTIONAL TRADING


Steve Pokorny Head of Institutional Sales (214) 702-4020 JT Cacciabaudo Head of Trading (212) 763-8288

EQUITY RESEARCH
Robert Hoehn Director of Research (212) 338-4731

CONSUMER FINANCIAL SERVICES (CONT.)


Apparel Retailing & Toys Life Insurance
Margaret Whitfield SVP, Sr. Analyst (973) 519-1019 John M. Nadel Mng. Dir. (212) 338-4717
Jennifer Milan VP, Sr. Analyst (212) 763-8211 Dennis Zavolock Analyst (212) 338-4748
Jessica Gerberi, CFA Analyst (212) 338-4784
Mortgage Finance & Specialty Finance
Educational Services / Interactive Entertainment Henry J. Coffey, Jr., CFA Mng. Dir. (615) 760-1472
Arvind Bhatia, CFA Mng. Dir. (214) 702-4001 Jason Weaver Analyst (615) 760-1475
Brett Strauser Associate (214) 702-4009
Property/Casualty Insurance
Footwear & Apparel Dan Farrell Mng. Dir. (212) 338-4782
Sam Poser Mng. Dir. (212) 763-8226 Nitin Chhabra Associate (212) 338-4779
Kenneth M. Stumphauzer, CFA Sr. Analyst (212) 763-8287
Jessica Bornn Associate (212) 338-4721 GLOBAL INDUSTRIAL INFRASTRUCTURE (GII)
ACME &Latin America
Leisure & Entertainment Lawrence T. De Maria, CFA Director (212) 338-4704
David Bain Mng. Dir. (949) 721-6651
Ben Elias, CFA SVP, Sr. Analyst (212) 338-4706
Sherry Yin Associate (949) 721-6651
Building, Power & Water Infrastructure
Restaurants Michael J. Coleman, CFA SVP, Sr. Analyst (212) 338-4718
Lynne Collier Mng. Dir. (214) 702-4045
Philip May Analyst (214) 702-4004 Engineering and Construction
Chase Jacobson VP, Sr. Analyst (212) 338-4753
ENERGY
Exploration & Production Industrial Components
Michael J. McAllister Mng. Dir. (212) 338-4783 Samuel H. Eisner VP, Analyst (212) 338-4705
Tim Rezvan, CFA Analyst (212) 338-4736
Multi-Industry
Oilfield Services & Equipment Nicholas P. Heymann Mng. Dir. (212) 338-4703
David S. Havens Mng. Dir. (212) 763-8238 Paul A. Dircks, CFA Analyst (212) 338-4725
Ryan Mueller Associate (212) 338-4732 Jordan Calabrese Associate (212) 338-4729

FINANCIAL SERVICES TECHNOLOGY


Asset Management LED Supply Chain
Jason Weyeneth, CFA SVP, Sr. Analyst (212) 763-8293 Andrew Huang Mng. Dir. (415) 362-6143
Naghmeh Rabii Associate (415) 362-6141
Banks & Thrifts
Adam Barkstrom, CFA Mng. Dir. (800) 906-0577 Semiconductors
Blair Brantley, CFA Analyst (800) 621-8635 Vijay Rakesh Mng. Dir. (312) 525-8431
Matthew Kelley Mng. Dir. (207) 699-5800 Ryan Brookman Associate (312) 525-8430
Mike I. Shafir SVP, Sr. Analyst (212) 763-8239
Matthew Breese Analyst (207) 699-5800 TRANSPORTATION, SERVICES & EQUIPMENT
Edward D. Timmons SVP, Sr. Analyst (800) 203-5332 Jeffrey A. Kauffman Mng. Dir. (212) 338-4765
Ashby W. Price Associate (888) 477-9602 Sal Vitale VP, Analyst (212) 338-4766
Brett Rabatin, CFA SVP, Sr. Analyst (877) 457-8625 Kanchana Pinnapureddy Associate (212) 338-4767
Kenneth James Analyst (615) 760-1474
Peyton Green Mng. Dir. (877) 492-2663 ADMINISTRATION
Zachary Wollam Associate (615) 760-1468 Carlo Francisco Supervisory Analyst (914) 434-3451
Robert Franks Supervisory Analyst (973) 377-5087
Marianne Pence Mgr., Res. Admin. (205) 949-3618
Nathan Mitchell Editor (205) 949-3635
Elizabeth Koch Editor (615) 289-4122
Email Address for Sterne Agee Employees: first initial + last name@sterneagee.com (e.g., jsmith@sterneagee.com)

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