BUSINESS

Melco Crown Q4 profit soars; Tabcorp H1 in the black; Tote Tasmania staff on edge

TAGs: Australia, city of dreams, Melco Crown Entertainment, Tabcorp, Tote Tasmania

melco-crown-tabcorp-profitsProfit at Melco Crown Entertainment rose over 600% in Q4 2011, driven by a 42% revenue bump at its City of Dreams casino in Macau (you know, that House of Dancing Water place). The joint venture of Lawrence (son of Stanley) Ho and Aussie billionaire James Packer recorded net income of $107.5m in the three months ending Dec. 31, compared to just $16.3m the previous year’s Q4. Revenues were up 30% to $1.01b and the profit figure was more than double the average of analysts’ estimates. Melco Crown shares rose almost 3% on the news.

Speaking via conference call, CEO Ho told analysts that his company has “continued to execute on our premium strategy, both in the rolling chip and mass market gaming segments. 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. When it comes to the discretionary spending and consumer sector we really haven’t seen any significant slowdown in Macau. Our hypothesis for a 15-20% [rise] in gross gaming overall for the market this year is based on an 8% GDP growth.”

Ho said the company will continue its quest to raise the billions needed to get its Studio City project up and running in Macau. Ho was confident that no new shares would need to be issued to raise the funds, nor would the timetable for development be affected. Packer’s one-third stake in Melco Crown is expected to give an extra oomph to Crown Limited’s H1 results later this month. Deutsche Bank analysts told Bloomberg they expect Crown to report a 32% rise in profit.

Aussie wagering outfit Tabcorp released its H1 results, sporting a 14.1% rise in profit to AU $189.3m. Revenues were $1.57b, a rise of 2.8% once you factor in Tabcorp spinning off its Echo Entertainment casino business last year. Tacorp’s fixed odds betting turnover was up 39.5% to $152m. Tote gambling in Victoria was off 5.5% to $325m, while New South Wales’ tote total was down 7.2% to $384.3m. Revenue from the new automated horse racing game Trackside was up 95% to $41.8m. Gaming revenues were $569m, but Tabcorp’s poker machine duopoly in Victoria is slated to end in August. The company hopes its new Tabcorp Gaming Solutions (a service provider that manages gaming machines) will contribute $50m to annual earnings.

As for those negative Tote numbers, Tabcorp CEO David Attenborough told The Age not to worry. “Don’t expect the tote pools to disappear. They are well over 50% of our business and will continue to be well over 50% of our business.” That said, Attenborough expects Tote numbers to continue to drop for the next couple years, as punters embrace live betting, a sector Attenborough described as “underdeveloped in Australia.”

Meanwhile, staff over at TOTE Tasmania are sweating it out, wondering if they’ll still have jobs when the $100m sale to Tatts Group is finalized in March. The Mercury obtained an internal company memo in which staff complained about the lack of info as to if/when the knacker’s blade might fall. A Tatts Group spokesman said he sympathized with their plight and that the company was “working towards a position where we can provide TOTE staff with some certainty within the coming weeks.” Premier Lara Giddings claims Tatts told her they intend “to maintain the call centre and will continue to operate, support and enhance the existing retail network.”

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