GGRAsia – Melco Crown’s net income falls 83 pct in 2Q

Melco Crown’s net income falls 83 pct in 2Q

Aug 07, 2015 Newsdesk Latest News, Macau, Philippines, Top of the deck

Asian casino developer and operator Melco Crown Entertainment Ltd saw net income for the second quarter of 2015 fall 83 percent year-on-year.

On a U.S. generally accepted accounting principles (GAAP) basis, such net income for the second quarter of 2015 was US$24.3 million, or US$0.05 per American depository share (ADS), compared to US$143.6 million, or US$0.26 per ADS, in the second quarter of 2014.

Lawrence Ho Yau Lung, co-chairman and chief executive of Melco Crown, said in a statement accompanying the results, that the firm had “delivered a solid operating and financial performance in the second quarter of 2015 in what continues to be a challenging environment for Macau.”

Melco Crown – which in its second quarter results statement said it had maintained total cash and bank balances of US$3.0 billion as of June 30 – announced a quarterly dividend of US$0.0134 per ADS.

The company – which announced on Wednesday it would open its 60-percent-owned Macau casino resort Studio City on October 27 – said in its earnings statement to Nasdaq on Thursday that its total debt at the end of the second quarter was US$4.0 billion.

Group wide, net revenue for the second quarter was US$916.8 million, representing a decrease of approximately 24 percent from the nearly US$1.20 billion for the comparable period in 2014. The firm said the decline in net revenue was “primarily attributable to lower rolling chip revenues and mass market table games revenues in Macau, partially offset by the net revenue generated by City of Dreams Manila, which started operations in December 2014”.

For the quarter ended June 30, net revenue at City of Dreams was US$654.2 million compared to US$967.5 million in the second quarter of 2014. City of Dreams generated adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) of US$179.0 million in the second quarter of 2015, representing a decrease of 38 percent compared to US$290.2 million in the comparable period of 2014.

For the second quarter of 2015, net revenue at City of Dreams Manila was US$75.0 million. City of Dreams Manila generated adjusted EBITDA of US$12.6 million in the second quarter of 2015.

Analysts’ views

“The shining star in the quarter was City of Dreams Manila, with EBITDA of US$12.6 million versus US$10 million Street consensus,” said Christopher Jones of Union Gaming Research LCC in a note on Thursday.

He added: “Management noted the property is only now starting to ramp, with rolling volumes up some 2.5 times higher in July than in June, benefiting from the ramp up of VIP operations at the property. We look for better performance later in the year.”

Vitaly Umansky and his colleagues Simon Zhang and Bo Wen of brokerage Sanford C. Bernstein Ltd in Hong Kong, noted, regarding Melco Crown’s group wide results for the quarter: “…after adjusting for low hold experienced in both VIP and premium mass, hold-adjusted EBITDA of US$198 million just narrowly missed our estimate of US$203 million. Importantly, July has shown marked improvement.”

Cameron McKnight, of Wells Fargo Securities LLC, said in his commentary that the tone of the firm’s earnings call was “positive” and mentioned market “stabilisation and cost management”.

He did note however that there was no update on the number of gaming tables likely to be allocated by the Macau government to Studio City.

“Management noted concern around receiving fewer tables than the 400 tables it planned,” said the analyst.

Melco Crown’s chief executive Mr Ho said that during the quarter, the firm had maintained its “company-wide cost control focus, including continuous strong discipline on marketing costs, player reinvestment and payroll costs,” although he added the company remained “fully committed” to the long term development of it employees.

“Management also announced US$50 million of annualised cost saving opportunities going into the second half (mostly relating to staff costs, marketing, central costs),” wrote Anthony Wong of UBS Securities Asia Ltd and his colleague Robin Farley of UBS AG.