Melco Crown Profit Gain From Premium Mass-Market Gamblers

May 9 (Bloomberg) -- Melco Crown Entertainment Ltd. beat analyst estimates for first-quarter profit as the Macau casino venture of billionaires James Packer and Lawrence Ho attracted more “premium-mass” gamblers to its resorts.

Profit rose 31 percent to $387.5 million, Hong Kong-based Melco Crown said in a statement yesterday. That compares with the median estimate of $359 million by seven analysts surveyed by Bloomberg News. The figures reflect adjusted property earnings before interest, taxes, depreciation and amortization.

Melco Crown and rivals such as Wynn Macau Ltd. and MGM China Holdings Ltd. have been courting high-stakes “premium-mass” players who pay up front for chips and generate higher average margins than VIP customers, or high-rollers, brought in by middlemen. A government crackdown on the use of handheld China UnionPay Co. card-swiping devices to provide premium-mass players with cash for buying chips has yet to affect business, Ho told analysts on a conference call yesterday.

“We haven’t seen any negative impacts with regards to business,” Ho said, answering a question about the card-swiper crackdown.

Mass Appeal

To help lure premium-mass gamblers amid rising competition, Melco’s largest casino, City of Dreams, offers shows such as “The House of Dancing Water” featuring motorcycle stunts and the cabaret-style “Taboo.”

First-quarter net income at Melco Crown rose to $239.5 million from $53.8 million in the same period last year, as revenue climbed 19 percent to $1.4 billion.

The casino operator gained 2 percent to HK$84.50 as of 9:32 a.m. in Hong Kong trading. The shares fell 7 percent yesterday, before the earnings announcement.

Rivals including MGM China and Wynn Macau also gained today after plunging yesterday amid concern that a crackdown on illegal money transfers will pare gaming demand. Macau police said they made 12 arrests involving debit-card fraud in February and March this year, according to e-mailed comments yesterday.

Card Crackdown

China is cracking down on the use of hand-held card-swipers within casino resorts amid concerns that tens of billions of yuan in illicit funds are being taken out of the mainland and into Macau, the South China Morning Post reported yesterday, citing people in the gaming and security business it didn’t identify.

Macau is the only place in China where casino gambling is legal. Casino revenue in the former Portuguese colony rose 20 percent to 102.2 billion patacas ($12.8 billion) in the first three months of this year.

VIP bettors account for about two-thirds of the casino revenue that flows into Macau. They typically place large bets using credit and are brought in by junket operators who earn commissions from casinos.

VIP Revenue

VIP rolling chip revenue dropped to $10.1 billion from $11.8 billion a year earlier at Altira, Melco Crown’s more VIP-focused casino resort. At City of Dreams, the figure climbed 3 percent to $24.6 billion.

City of Dreams’ mass-market table-game revenue rose 25 percent to $1.3 billion and slot-machine handles gained 45 percent to $1.49 billion.

Melco Crown is building its third Macau resort, a $2.9 billion Hollywood-themed Studio City on Cotai, Macau’s answer to the Las Vegas Strip, to capture rising demand for gaming entertainment. It will begin hiring 8,000 workers by end of this year, about six months ahead of Studio City’s scheduled opening in mid-2015, Ho, the company’s co-chairman, said in an interview last month.

Overseas Expansion

Melco Crown is expanding overseas in the face of land and labor constraints in the former Portuguese colony. The company partnered with Belle Corp., which holds one of four casino licenses in the Philippines, to develop a resort in Manila.

Lawrence Ho, 37, the son of casino mogul Stanley Ho, is also investing in two Russian casino resorts through his companies Melco International Development Ltd. and Summit Ascent Holdings Ltd.

Melco Crown’s other co-chairman, Packer, 46, is Australia’s second-richest person, with a net worth of $6.5 billion, according to the Bloomberg Billionaires Index.

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

To contact the editors responsible for this story: Stephanie Wong at swong139@bloomberg.net Dave McCombs, Garry Smith