Melco Crown Profit Falls 56 Percent on Project Financing Costs
Melco Crown Entertainment Ltd., (MPEL) the casino venture between a son of casino mogul Stanley Ho and Australian billionaire James Packer, reported a 56 percent drop in first-quarter profit on financing costs related to its new Macau project.
Net income fell to $53.8 million from $122.1 million a year earlier for the three months ended March, according to a filing today. Adjusted Ebitda, or earnings before interest, taxes, depreciation and amortization, rose to $273.5 million from $242.5 million.
Melco Crown is building the new Studio City casino resort on Macau’s Cotai strip, the city’s equivalent of the Las Vegas strip, to compete with bigger rivals including Sands China Ltd. (1928) and Galaxy Entertainment Group Ltd. (27) who have been adding new attractions to woo gamblers.
Net interest expense almost doubled to $41.4 million in the quarter. Net revenue increased about 11 percent to $1.14 billion.
City of Dreams, the company’s casino resort on Cotai, runs an entertainment show that features motorcycle stunts. The increase in hotel supply and an improved rail connection are also drawing more mainland Chinese visitors. Ho’s son Lawrence is chief executive officer of Melco Crown.
Melco is expanding both at home and overseas. In the Philippines, the company 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.
The country’s annual revenue from gaming may rise to $10 billion in 2017 from more than $2 billion last year once the Manila casino complex is operating fully, Philippine Amusement & Gaming Corp. Chairman Cristino Naguiat said on Jan. 15.
Melco’s Studio City casino resort is estimated to cost more than $2 billion to construct and it’s scheduled to open in middle of 2015.
Casino revenue in Macau, the only place in China where casino gambling is legal, is expected to rise to $44.5 billion this year from $38 billion last year, according to Deutsche Bank AG estimates.
Melco Crown closed 0.8 percent lower at HK$64 at the close of Hong Kong trading. The stock has climbed 49 percent this year, outperforming benchmark Hang Seng Index’s 2.6 percent gain.
To contact the reporter on this story: Zijing Wu in Hong Kong at firstname.lastname@example.org