GGRAsia – Morpheus restart flagged as Melco Resorts 2Q profit up

Morpheus restart flagged as Melco Resorts 2Q profit up

Jul 28, 2017 Newsdesk Latest News, Macau, Philippines, Top of the deck

Second-quarter unaudited net profit at Asian casino developer and operator Melco Resorts and Entertainment Ltd rose 18.5 percent year-on-year, to US$36.5 million.

The group – reporting its first quarterly results since its partnership with Australian casino firm Crown Resorts Ltd came to an end in May – declared a quarterly dividend of US$0.03 per share (equivalent to US$0.09 per American depository share). The dividend will be paid on or about August 23.

A net loss of US$8.0 million attributable to non-controlling interests during the second quarter of 2017 was related to Studio City – in which Melco Resorts has only a majority stake – and to City of Dreams Manila, in the Philippine capital, where the firm is the property operator.

On an earnings call with analysts following the results announcement, Melco Resorts’ chairman and chief executive Lawrence Ho Yau Lung revealed that work on Morpheus – the US$1-billion fifth hotel tower being built at casino resort City of Dreams Macau – was likely to restart today (Friday).

The Macau government had ordered a suspension of work on the site following a fatal accident on July 14.

Mr Ho stated the firm hoped “to resume construction tomorrow” (Friday) thanks to its “world class” project team, and despite the “very unfortunate accident”.

A neighbouring new Cotai project of the firm’s market rival SJM Holdings Ltd is currently in its sixth week of shutdown, following the death of a worker on June 18.

Melco Resorts’ chairman said the timetable for opening Morpheus had been unaffected by the suspension, and the group hoped to open the new hotel – which he said would have space to accommodate up to 50 gaming tables – in the “first quarter or second quarter next year”. The new accommodation was designed to cater for the firm’s “best in-house customers”, said Mr Ho, clarifying that this was so-called premium mass players – customers that bet in high multiples, but in cash rather than via the credit-funded play of traditional VIPs .

The executive added on the conference call that securing a casino licence in Japan is Melco Resorts’ “key development objective”.

Higher revenue

Group-wide in the second quarter, net revenue was nearly US$1.30 billion, representing an approximately 21 percent increase from the US$1.07 billion for the comparable period in 2016.

The firm said the increase in net revenue was primarily attributable to improved group-wide rolling chip revenues.

On a U.S. generally accepted accounting principles (GAAP) basis, operating income for the second quarter of 2017 was US$127.4 million, up 76 percent compared with operating income of US$72.4 million in the second quarter of 2016.

Adjusted property earnings before interest, taxation, depreciation and amortisation (EBITDA) for the three months to June 30 was US$329.5 million, representing a 34-percent increase from the prior-year period. The firm said the improvement was mainly due to better performance group-wide in rolling chip segment.

“While VIP was a focus of discussion, the company reaffirmed that success will come from mass [segment] … However, the two consecutive quarters of subpar mass performance in Macau is a concern,” said brokerage Sanford C. Bernstein Ltd analysts Vitaly Umansky, Zhen Gong and Yang Xie in a Friday note.

According to the brokerage, Melco Resorts’ VIP gross gaming revenue (GGR) in Macau totalled US$641 million in the April to June period, up 56 percent year-on-year, while mass-segment GGR – including slots – was US$624 million, an increase of 4 percent from the prior-year period.

Second-quarter net revenue at City of Dreams Macau was US$644.6 million compared to US$629.9 million in the second quarter 2016. The Cotai venue generated adjusted EBITDA of US$175.3 million in the three months to June 30, down 1.4 percent from the prior-year period.

Rolling chip volume at the resort totalled US$12.2 billion for the second quarter of 2017, versus US$9.9 billion a year earlier. The rolling chip win rate was 2.9 percent in the reporting period, versus 3.0 percent in second quarter 2016. The firm quotes its expected rolling chip win rate range as 2.7 percent to 3.0 percent.

Mass-market table games drop at City of Dreams Macau increased to US$1.07 billion, compared to nearly US$1.03 billion in the prior-year quarter. Mass-market table games hold percentage in the three months to June 30 was 32.4 percent, compared to 35.7 percent a year earlier.

The resort’s gaming machine handle for the second quarter was US$937.9 million, compared with just over US$1.0 billion in the prior-year period. The gaming machine win rate was 4.0 percent in the second quarter 2017, versus 3.2 percent in second quarter 2016.

Total second-quarter non-gaming revenue at City of Dreams was US$74.6 million, compared with US$62.8 million a year earlier.

Quarterly net revenue at Altira Macau, the group’s gaming property in the Taipa district of Macau, was US$107.6 million compared to US$98.7 million in the second quarter, 2016.

Altira Macau generated adjusted EBITDA of US$5.1 million in the second quarter this year, compared to US$1.7 million in the prior-year period. The year-on-year improvement in adjusted EBITDA was primarily a result of higher rolling chip revenues, partially offset by lower mass-market table games revenues.

Studio City

For the quarter ended June 30, Studio City’s net revenue was US$332.1 million compared to US$183.8 million in the prior-year period.

Studio City generated second-quarter adjusted EBITDA of US$80.7 million compared to US$24.6 million in the prior-year period. The year-on-year improvement was “primarily a result of commencement of rolling chip operations in November 2016 and better performance in the mass market table games segment,” said the firm. Rolling chip volume totalled US$4.7 billion for second quarter 2017. The rolling chip win rate was 3.3 percent.

Mass-market table games drop increased to US$661.4 million compared with US$592.2 million in the prior-year quarter. The mass-market table games hold percentage was 26.8 percent in the second quarter, compared to 22.8 percent a year earlier.

Gaming machine handle for the second quarter was US$502.9 million, compared with US$485.3 million in the second quarter, 2016. The gaming machine win rate was 3.7 percent versus 3.6 percent in the prior-year period.

Total non-gaming revenue at Studio City in the second quarter of 2017 was US$48.6 million, compared with US$51.1 million in the second quarter of 2016.

Mr Ho said on the conference call that – notwithstanding the improvements in quarterly performance judged year-on-year – the property had been “significantly hampered by access issues,” including work on the nearby light rail system that had turned what should have been a “30-second walk” to Studio City – for customers from the nearby Lotus Bridge crossing point from Zhuhai – into an “unpleasant and hazardous” journey.

City of Dreams Manila

Quarterly net revenue at City of Dreams Manila was US$176.2 million, up 46.6 percent compared to US$120.2 million in the prior-year period.

City of Dreams Manila generated adjusted EBITDA of US$62.8 million in the second quarter of 2017 compared to US$36.5 million in the comparable period of 2016. The year-on-year improvement was “primarily a result of increased casino revenues,” said the group.

Management said on the conference call that the deadly June 2 attack at a rival property, Resorts World Manila, had only had a short-term impact on the Manila casino market.

Rolling chip volume at City of Dreams Manila totalled US$3.2 billion in the second quarter, versus US$1.7 billion in the prior-year period.

Mass-market table games drop increased to US$169.8 million for the second quarter of 2017, compared with US$134.3 million in the second quarter, 2016. The mass-market table games hold percentage was 28.5 percent in the second quarter, compared to 29.9 percent a year earlier.

Gaming machine handle was US$759.0 million, compared with US$515.4 million in the prior-year period. The gaming machine win rate was 5.9 percent in the second quarter of 2017 versus 5.8 percent in second quarter, 2016.

Total non-gaming revenue at City of Dreams Manila in the latest reporting period was US$28.1 million, compared with US$26.2 million in the second quarter of 2016.