Melco Crown Quarterly Profit Surges Sixfold on City of Dreams
February 10, 2012, 7:37 PM ESTBy Vinicy Chan
Feb. 10 (Bloomberg) -- Melco Crown Entertainment Ltd., a venture between Australian billionaire James Packer and a son of gambling tycoon Stanley Ho, said profit increased more than sixfold as revenue at its City of Dreams casino rose 42 percent.
Fourth-quarter net income rose to $107.5 million, or 20 cents an American depositary receipt, from $16.3 million, or 3 cents, a year earlier, the Hong Kong-based company said in a statement yesterday. That beat the $47.8 million average of three analyst estimates compiled by Bloomberg.
Melco Crown joins Sands China Ltd., a unit of billionaire Sheldon Adelson’s Las Vegas company, in reporting higher quarterly earnings fueled by arrivals from mainland China to Macau. The number of visitors to Macau, the world’s largest casino center, rose 12 percent to 28 million last year, with 53 percent from the mainland, according to government data.
“We have continued to execute on our premium strategy, both in the rolling chip and mass market gaming segments,” Chief Executive Officer Lawrence Ho said in the statement. “Our premium mass market focus at City of Dreams represents one of our key competitive advantages, giving us an ability to capture and leverage a loyal and more profitable customer base.”
Fourth-quarter revenue rose 30 percent to $1.01 billion, Melco Crown said.
The company will focus on debt financing for its planned Studio City resort in Macau, and doesn’t envisage the need to issue shares to pay for the project, Ho said in a conference call after the earnings. He said he’s confident Melco Crown can stick to its development schedule.
The casino operator hired seven banks to arrange a loan of about $1.25 billion to fund its Studio City resort project in Macau, people familiar with the matter have said. Total debt on Dec. 31 was $2.3 billion, up from $1.5 billion a year ago.
Funding Options
Melco Crown, whose ADRs trade on the Nasdaq Stock Market, listed in Hong Kong on Dec. 7 without raising fresh capital. The second listing provides financial flexibility for the company, which is open-minded about selling new shares to raise funds as it expand in Asia, Ho said that day.
The company’s ADRs, each representing three shares, fell 0.5 percent to $11.85 at 1:41 p.m. New York time on Feb. 9. In Hong Kong, the stock gained 1.8 percent to close at HK$30.65 yesterday, before the earnings report. The shares have advanced 25 percent this year.
Macau is the only place in China where casinos are legal. Casino gambling revenue in the city jumped 42 percent last year to 268 billion patacas ($34 billion), government data show.
Ho said in the call that the company hasn’t seen a significant slowdown in Macau. Co-Chief Operating Officer Ted Chan called the fourth-quarter drop in volume “transitional.”
Ho and Packer’s Crown Ltd. opened Melco’s second Macau casino, City of Dreams, on the Cotai Strip in mid-2009.
Melco Crown is one of six licensed casino operators in the Chinese special administrative region. It competes with Las Vegas Sands Corp.’s Sands China Ltd., Wynn Resorts Ltd.’s Wynn Macau Ltd., Galaxy Entertainment Group Ltd., Stanley Ho’s SJM Holdings Ltd., and MGM Resorts International’s MGM China Holdings Ltd., a joint venture with Pansy Ho, daughter of Stanley Ho.
--With assistance from Mohammed Hadi in Hong Kong. Editors: Lena Lee, Joshua Fellman
To contact the reporter on this story: Vinicy Chan in Hong Kong at vchan91@bloomberg.net
To contact the editor responsible for this story: Stephanie Wong at swong139@bloomberg.net
