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Melco Crown Profit Rises Sixfold on City of Dreams

Melco Crown Entertainment Ltd. (MPEL), a venture between Australian billionaire James Packer and a son of gambling tycoon Stanley Ho, said profit increased more than sixfold as revenue jumped at its City of Dreams casino. The stock rose in Hong Kong trading.

Fourth-quarter net income rose to $107.5 million, or 20 cents an American depositary receipt, from $16.3 million, or 3 cents, a year earlier, the Hong Kong-based company said in a statement yesterday. That beat the $47.8 million average of three analyst estimates compiled by Bloomberg.

Melco Crown joins Sands China Ltd. (1928), a unit of billionaire Sheldon Adelson’s Las Vegas company, in reporting higher quarterly earnings fueled by arrivals from mainland China to Macau. The number of visitors to Macau, the world’s largest casino center, rose 12 percent to 28 million last year, with 53 percent from the mainland, according to government data.

“The results were stronger than we expected and the increase in traffic has resulted in a much bigger turnover,” said Lantis Li, an analyst at Capital Securities.

Fourth-quarter revenue rose 30 percent to $1.01 billion, Melco Crown said. Revenue at its City of Dreams casino rose 42 percent. Melco Crown rose as much as 2.8 percent to HK$31.50, in Hong Kong, heading for a record high. The benchmark Hang Seng Index dipped 1.1 percent as of 2:46 p.m. local time.

New Project

The company aims to submit a plan as soon as this quarter to get regulatory approval for a resort, the Studio City, on the Cotai Strip in Macau , Chief Executive Officer Lawrence Ho said in a conference call after the earnings.

The planned resort is expected to have a gross floor area of 465,000 square meters, according to the company’s website.

Melco will look at debt financing for the project and doesn’t see the need to issue shares for funding, Ho said on the conference call. Melco Crown faces competition from Sands China, which plans to start a new casino, Sands Cotai Central, in April.

“Studio City is a distant project and we’d like to see more clarity, but I’m not too concerned about market share erosion,” Li of Capital Securities said.

Funding Options

The casino operator hired seven banks to arrange a loan of about $1.25 billion to fund its Studio City resort project in Macau, people familiar with the matter have said. Total debt on Dec. 31 was $2.3 billion, up from $1.5 billion a year ago.

Melco Crown, whose ADRs trade on the Nasdaq Stock Market, listed in Hong Kong on Dec. 7 without raising fresh capital. The second listing provides financial flexibility for the company, which is open-minded about selling new shares to raise funds as it expands in Asia, Ho said that day.

The company’s ADRs, each representing three shares, fell 0.8 percent to $11.82 at the close of New York trading on Feb. 9. The ADRs have advanced 23 percent this year, whereas the Hong Kong stock soared 28 percent so far.

Casino Hub

Macau is the only place in China where casinos are legal. Casino gambling revenue in the city jumped 42 percent last year to 268 billion patacas ($34 billion), government data show.

Ho said in the call that the company hasn’t seen a significant slowdown in Macau. Co-Chief Operating Officer Ted Chan called a fourth-quarter drop in volume “transitional.”

Ho and Packer’s Crown Ltd. (CWN) opened Melco’s second Macau casino, City of Dreams, on the Cotai Strip in mid-2009.

Melco Crown is one of six licensed casino operators in the Chinese special administrative region. It competes with Las Vegas Sands Corp. (LVS)’s Sands China Ltd., Wynn Resorts Ltd. (WYNN)’s Wynn Macau Ltd., Galaxy Entertainment Group Ltd. (27), Stanley Ho’s SJM Holdings Ltd. (880), and MGM Resorts International (MGM)’s MGM China Holdings Ltd (2282)., a joint venture with Pansy Ho, daughter of Stanley Ho.

To contact the reporter on this story: Vinicy Chan in Hong Kong at vchan91@bloomberg.net

To contact the editor responsible for this story: Stephanie Wong at swong139@bloomberg.net

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