Melco Crown profits more than double as casinos outpace Macau market

melco-crown-lawrence-hoAsian casino operator Melco Crown Entertainment Ltd. (MCE) turned in a boffo Q2 earnings report on Wednesday, with profit more than doubling to $181m from $82.3m in the same period a year earlier. The joint venture of Hong Kong’s Melco International Development and Australia’s Crown Ltd. saw revenue up 38% to $1.295b and earnings up 62% to $330.1m on significant increases in both the mass market and VIP gaming sectors. Over the first six months of 2013, MCE’s revenue is up nearly 25% to $2.44b, earnings are up a third to $603.6m while profit has risen to $234.8m from $204.4m. The company is sitting on $3b in cash and equivalents versus $2.7b in total debt.

Business was brisk at City of Dreams, MCE’s flagship property in Macau, with revenue rising to $967m from $684m last year, while earnings rose 63% to $300.2m. Rolling chip volume rose 30% to $24.8b while win rate slipped 0.1 points to 3%. Mass market table drop rose 35% to $1.1b while hold rose 3.8 points to 32.8%. Slot handle rose 64% to $1.2b. Non-gaming revenue rose to $62.2m from $56m as room occupancy jumped to 97% from 90%.

Over at Altira Macau, revenue spiked to $278.8m from $208.5m a year ago, while earnings rose to $41.4m from $26m. Rolling chip volume jumped to $11.8b from $10.2b, while win rate rose 0.3 points to 3%. Mass market table drop rose 24% to $172.1m, but hold fell 2.2 points to 15.5%. Altira’s non-gaming revenue rose to $9.2m from $8.1m.

The Mocha Clubs slot parlors saw revenue rise 6% to $37.2m, while earnings rose 7% to $9.8m. The number of electronic gaming machines in use fell by 100 to 2k in Q2, although the net win per machine rose 14% to $207.

On a post-earnings call with analysts, CEO Lawrence Ho (pictured above) touted the fact that MCE’s properties had significantly outpaced the overall Macau market, with VIP table volume up approximately 25% compared to the market’s 10% and mass market table yields 20% higher than MCE’s closest competitor. Ho believes the good times are here to stay, thanks to the transformation of the Chinese economy into “more of a consumption-led, tourism-focused” model. Ho believes Macau “will always be a supply constrained market” and with ongoing improvements to infrastructure in China, the next two or three years could represent “pretty much the next wave of the golden age of Macau.”

As for MCE’s under construction Studio City project on Cotai, Ho said work was progressing according to schedule and that Macau’s government has been “very supportive” in terms of MCE’s foreign labor quota approval. For this, Ho credited City of Dreams having been “the only project that kept building in Macau” during the 2009/09 economic slowdown, which “effectively kept the entire construction labor force employed,” and Ho suggested MCE was “being rewarded for that.”

Ho was “very enthusiastic” about Macau’s “proactive” plans to begin renegotiating casino license renewals in 2015, saying it would be “very beneficial” for Macau’s six casino firms to “know what the ultimate renewal policy is.” Ho did express concern that Macau regulators might add a hefty renewal fee onto what is already “far and away the highest” taxation rate (40%) of any major casino gaming jurisdiction.

As for MCE’s in-development casino in Manila’s Entertainment City, Ho said the Belle Grande project was “moving forward as anticipated” and on target for a mid-2014 opening. Ho had no further updates on proposed changes in Philippine tax rates, beyond the fact that all four Entertainment City licensees “have had a lot of discussions” with the Philippine Amusement and Gaming Corporation (PAGCOR), whom Ho thinks is “sympathetic” to the casino firms’ concerns.

Elsewhere in Asia, Ho said MCE had been lobbying Japan’s legislators “for probably close to eight to nine years” on establishing a casino, while doing the same in Taiwan for “probably four years.” Ho said he was “very respectful and understand the long process that the respective governments need to take,” but MCE would nonetheless “be ready whenever [these governments are] ready.”