Melco Crown Profit Misses Estimate on Lower Win Rate

Melco Crown Entertainment Ltd., (MPEL) the Macau casino venture between Australian billionaire James Packer and entrepreneur Lawrence Ho, posted third-quarter earnings that missed estimate on a lower win rate from high-stakes gamblers.

Adjusted Ebitda, or earnings before interest, taxes, depreciation and amortization, rose 39 percent to $315.2 million, Melco Crown said in a statement to Hong Kong’s stock exchange, less than the $328 million average estimate from four analysts compiled by Bloomberg, Net income climbed to $179.4 million from $104.9 million a year earlier, the company said.

“Adjusted EBITDA was driven by significant growth in the mass market table games segment at City of Dreams, as well as improved group-wide rolling chip volume and a committed approach to controlling costs, partially offset by a lower rolling chip win rate,” Melco said in the statement.

VIPs, or high-stake gamblers, account for about two-thirds of the casino revenue that flows into Macau.

Melco Crown is building its Studio City casino resort on Macau’s Cotai strip, the city’s answer to the Las Vegas Strip. The Hong Kong-based company is taking on larger competitors, including Sands China Ltd. (1928) and Galaxy Entertainment Group Ltd. (27), which have been adding new attractions on Cotai to profit from the faster-growing mass gambling segment.

City of Dreams, Melco Crown’s flagship casino in the world’s largest gambling hub, attracts mainland visitors with popular shows such as “The House of Dancing Water” which features motorcycle stunts and the cabaret-style “Taboo” show.

Melco Crown climbed 1.8 percent to close at HK$88.15 in Hong Kong trading, before the earnings announcement. The stock has more than doubled this year, beating the city’s benchmark Hang Seng Index’s 1.7 percent gain.

Mass-Market, Slots

City of Dreams’ mass-market table-game revenue increased 36 percent to $1.21 billion while slot-machine handle gained 52 percent to $1.24 billion. VIP rolling-chip volume gained 17 percent to $22.8 billion. Rolling chip win rate fell to 3 percent from 3.2 percent a year earlier.

The company is expanding both at home and overseas as it sees capacity constraints in Macau, including land and labor shortages. In the Philippines, Melco is partnering with Belle Corp. (BEL) to develop and operate a casino resort in Manila which is expected to cost $1 billion. Belle holds one of four casino licenses in the Southeast Asian nation.

Lawrence Ho, a son of casino mogul Stanley Ho, is investing in two Russian casino resorts through his other two companies, Melco International Development Ltd. (200) and Summit Ascent Holdings Ltd. (102)

Casino revenue in Macau, the only place in China where casino gambling is legal, jumped 32 percent to a record 36.5 billion patacas ($4.6 billion) in October, boosted by mainland Chinese visitors who spent their weeklong National Day holidays in Macau.

Gambling revenue in the former Portuguese enclave grew 18 percent to 297.1 billion patacas in the first 10 months of this year, close to the $38 billion revenue it raked in last year.

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

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