Melco Int’l 2017 profit tumbles despite revenue surge

TAGs: Lawrence Ho, melco international development, melco resorts & entertainment

melco-international-2017-profitCasino operator Melco International Development Ltd has showered over $5m in new shares on chairman/CEO Lawrence Ho for helping to steer the company to a record performance in 2017.

The Hong Kong-listed Melco turned in its 2017 financial report card last week, reporting revenue up 70% year-on-year to HK$41.2b (US$5.25b), while adjusted earnings shot up 80% to HK$9.8b. However, profits tumbled from HK$10.4b in 2016 to just HK$474m last year.

The profit tumble can be explained by the HK$10.4b one-off gain Melco enjoyed in 2016 via the dissolution of Melco Crown Entertainment, its former joint venture with Australian casino operator Crown Resorts. With Crown’s shares having been purchased and cancelled, Melco is now majority owner of that venture’s successor, Melco Resorts and Entertainment (MRE), which operates casinos in Macau and Manila.

MRE provides the overwhelming majority of Melco’s revenue, and a detailed breakdown of its 2017 performance was released earlier this year. But Melco boss Ho nonetheless expressed relief that MRE’s operations in Macau had overcome “several years of … headwinds,” leaving Melco “a stronger, more focused and better positioned company.”

The year also saw Melco divest its 40.65% stake in the MelcoLot Ltd lottery technology firm via a sale to online lottery operator Melco also upped its stake in Entertainment Gaming Asia, which leases electronic gaming machines to Philippine land-based operators but is also developing a social gaming platform.

Melco holds a majority stake in City of Dreams Mediterranean, the in-development integrated resort project in Cyprus, the first phase of which is scheduled to open in 2021. The Cyprus license allows Melco to operate temporary gaming facilities while the main resort is under construction, and Melco’s report reiterated its plan to open the first of these temporary venues this year.

Ho assured investors that he was “conscious of our exposure to stricter capital controls in mainland China and ongoing structural changes in the consumption of outbound Chinese tourists in all markets and particularly Macau.” Ho added that the firm would do its best to “closely manage against these risks.”

As a reward for Ho’s fine work, and to incentivize him to keep it up, Melco’s board approved a grant of restricted shares representing 0.036% of MRE’s issued share capital. The shares, which will be issued in two tranches – one last week and the second in March 2021 – are worth a total US$5.13m as of last weeks’ closing price.


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