Melco Crown VIP gains sign that China crackdown has “subsided”


melco-crown-studio-city-macauCasino operator Melco Crown Entertainment (MCE) posted a 13% revenue gain in the final quarter of 2016, adding to the momentum behind the overall Macau market’s recovery.

MCE reported revenue of $1.192b in the three months ending December 31, up 13% from Q4 2015. Operating income totaled $116m versus a loss of $17.8m the year before – a period weighed down by opening costs of MCE’s Studio City resort in Macau – while net income totaled $43.3m versus a loss of $12.3m.

Studio City’s performance to date had been underwhelming but MCE CEO Lawrence Ho credited the property with goosing Q4’s numbers. Studio City’s net revenue nearly doubled year-on-year to $246m –the property was only open for two-thirds of Q4 2015 – and its mass market revenue was up 10% from Q3 2016.

Studio City began life as a purely mass-focused venue, but its sluggish start prompted MCE to add a VIP component that got underway in November. VIP turnover hit $1.3b in Q4 but win was spectacularly unlucky at 1.4%, less than half the theoretical 2.85% rate.

Things were less positive overall at MCE”s former flagship Macau property, City of Dreams, which reported flat revenue and a 2% earnings drop. The decline was primarily the result of a 10% fall in VIP turnover and VIP win falling to 2.6%. However, Ho said the Q4 VIP numbers showed “strong improvements” from Q3.

And both Studio City and City of Dreams reported significant non-gaming revenue gains, with the former up 41% to $53.3m while the latter gained 17% to $79.2m. In 2015, Ho famously declared that Macau’s non-gaming amenities “will never make any money.”

The Altira Macau casino reported revenue falling 27% to $103.3m due to declines everywhere except slot machine handle. The Mocha Clubs slots business saw revenue fall nearly 10% to $29m as both handle and win rate declined.

In the Philippines, City of Dreams Manila had another solid showing, with revenue jumping nearly 79% while adjusted earnings rose more than twofold to $50.2m. The gains came primarily from VIP activity, which reported turnover rising three-fifths to $2.1b while win rate soared to 3.5% from just 2.1% in Q4 2015.

For 2016 as a whole, MCE’s revenue gained 12.5% to $4.5b, adjusted earnings rose 17% to $1.08b and net income rose two-thirds to $176m.

Ho’s Melco International Development announced Thursday that it had completed its announced acquisition of an additional 13.4% of MCE from joint venture partner Crown Resorts, giving Melco a 51.3% stake in the company.

On the analyst call, Ho said Studio City’s VIP action to date had outperformed expectations, particularly on a table-yield basis. Macau’s long-suffering VIP market showed signs of life in Q4 and Ho said that over the last few months the “anti-corruption and anti-extravagant crackdown in China has subsided.”

Ho went on to say that “people who really did nothing wrong over these years” no longer “have a fear of coming to Macau” or “the fear from avoiding the aspirational lifestyle in China.”

Ho also suggested that the consolidation among Macau’s junket operators means that the remaining operators “all have much better financial base to build upon” and are therefore “becoming more aggressive in terms of liquidity.”