Melco Crown Entertainment is the latest Macau casino outfit to post earnings that reflect the slowdown in the Chinese VIP gambling market. The joint venture of Lawrence Ho’s Melco International Development Ltd. and James Packer’s Crown Ltd. saw net income fall 7.4% to (US) $104.9m in Q3 2012, with net revenue down 4.3% to $1.01b and adjusted earnings down 5.8% to $226.4m. For the first nine months of 2012, Melco Crown’s net revenue rose to $2.976b from $2.822b over the same period last year, while net income has risen to $309.2m from $187.1m.
Broken down by individual properties, Melco Crown’s City of Dreams saw net revenue rise nearly 9% year-on-year to $747.4m. Adjusted earnings rose 20% to $204m on the strength of a 30% boost in mass market gross gaming revenue. Rolling chip volume was off 4% to $19.5b, while win rate rose 0.1 points to 3.2%, above the expected win range of 2.7%-3.0%. Mass-market table games drop grew 22% to $889.8m and hold percentage rose 1.9 points to 27.4%, in the middle of the 25%-30% expected range. Slot machine handle leaped 54% to $816.3m. Non-gaming revenue rose 15% to $63.6m, with room occupancy rates rising from 93% to 95%.
At Melco Crown’s other property, Altira Macau, net revenue fell 35% to $215.7m due to drops in both rolling chip volume (from $13.2b to $11b) and win rate (from 3.2% to 2.6%). The past year has also seen Melco Crown transfer gaming tables from Altira to City of Dreams to get around Macau’s table cap. But here again, mass market table games drop rose 3% to $153.8m while hold percentage was down 0.1 points to 15.7%, within the expected range of 15% to 17%. Net revenue at the Mocha Clubs gaming machine parlors was up 13% to $35.5m, thanks to a 25% increase in the number of machines in operation to 2,000. However, daily net win per machine fell 9% to $188.
Melco Crown recently secured the bulk of the financing to construct its third Macau property, Studio City, which is set to open in mid-2015. On a post-earnings call with analysts, Ho said both phases of Melco Crown’s joint venture in Manila with Belle Corp would now not open until H1 2014. Turning back to Macau, Ho said the VIP market had been negatively impacted by the imminent leadership change in the Chinese government. Despite there being “very little uncertainty” surrounding the Chinese situation – at least, in comparison with the hyperbolic US elections – Ho said VIP customers “were kind of just waiting for it to happen before really coming out in full force.” Ho went on to say that Macau “continues to be a place where supply drives demand, I think if anything right now with better infrastructure, to bring people into Macau and more hotel rooms, it would be a much bigger market than it is.”