Macau casino operator Melco Crown Entertainment Ltd. (MPEL) Tuesday beat analysts’ expectations for its third-quarter result, swinging to a net profit due to improved operations and a higher win rate at its flagship City of Dreams casino resort. The company’s net income for the three months ended Sept. 30 totaled US$15.8 million on a U.S. Generally Accepted Accounting Principles basis, compared with a net loss of US$39.5 million a year earlier.
The Nasdaq-listed casino operator said its adjusted earnings before interest, taxes, depreciation and amortization, a measure widely used to evaluate the performance of gambling companies, rose to US$136.3 million from US$55.6 million the previous year, topping analysts’ estimates. A handful of analyst forecasts had already taken into account the likely higher than average VIP hold rate at the City of Dreams casino, wrote Sterne, Agee & Leach analyst David Bain in a Tuesday note. “Thus, consensus was ‘artificially’ high, in some ways, and we believe the company still exceeded those numbers.” The win rate for high roller play at City of Dreams was 3.4% versus the 2.85% theoretical average. Melco Crown, co-chaired by Australian billionaire James Packer and Lawrence Ho, the son of Macau gambling tycoon Stanley Ho, said its net revenue for the three months ended Sept. 30 rose 45% to US$727.0 million from US$500.3 million a year earlier. Analysts were bullish on the outlook for the company, whose City of Dreams property on Cotai had in the past struggled to compete with Sands China Ltd.’s (1928.HK) Venetian resort across the street, as it ramped up its entertainment offerings. The company’s House of Dancing Water production, while expensive, is of an excellent standard, according to CLSA. The house expects the show, along with other planned amenities such as a nightclub and Hard Rock Cafe, to help drive traffic at the casino. “The property is on its way to becoming the center of entertainment of Macau, which is what it had set out to do from the beginning,” said Fischer. Ho, also Melco Crown chief executive, said the customer database at City of Dreams, which opened in June 2009, had grown to 450,000 members and that he expected it to hit 500,000 by the end of the year. Ho also said that Melco Crown’s recent management restructuring, including the resignation of its City of Dreams president and subsequent appointment of company-wide co-chief operating officers in July, was already yielding “tangible results.”
The company is still searching for a new chief financial officer after Simon Dewhurst resigned in August. The company will focus on Macau for the next twelve months, said Ho, adding that Melco Crown’s contract to provide the casino license for the Macao Studio City project remains valid. The US$2.4 billion project was scheduled to begin operations last year, but construction has remained at the initial stages for more than three years because of a bitter dispute between the partners that has escalated to Hong Kong courts.
Source: Dow Jones Newswires