By Kate O’Keeffe
Of DOW JONES NEWSWIRES
HONG KONG (Dow Jones)–Macau casino operator Melco Crown Entertainment Ltd. (MPEL) Thursday swung to profit while chief executive Lawrence Ho dismissed concerns the company could suffer from the launch of a competitor’s mega resort across the street.
Melco Crown, co-chaired by the son of Macau gambling tycoon Stanley Ho and Australian billionaire James Packer, said it made a net income of $7.2 million in the first quarter versus a year-earlier loss of $12.5 million, driven by improvements in both its gambling and non-gambling operations.
The company wants to become Macau’s entertainment hub with the addition of attractions such as The House of Dancing Water production and Cubic nightclub, which analysts have said could help drive traffic at Melco Crown’s flagship City of Dreams property.
Net revenue in the quarter ended March 31 climbed 42% to $806.6 million, versus the 43% overall gambling revenue growth in Macau over the period. Gambling revenue in the Chinese territory is on track to generate five times that of the Las Vegas Strip in 2011.
Lawrence Ho brushed off worries the company’s City of Dreams casino resort in Macau’s Cotai area would take a hit following the Sunday opening of competitor Galaxy Entertainment Group Ltd.’s (0027.HK) nearly $2 billion property in the neighborhood.
“We believe that the Galaxy opening is great for Macau and it’s even better for Cotai,” said Ho, echoing comments from Cotai neighbor Sands China Ltd. (1928.HK) that the new launch will help shift the center of gravity to Cotai from the Macau peninsula, where the majority of the territory’s casinos are located.
Ho said he’s seen traffic hold steady or even increase at City of Dreams since the launch of the rival property and noted that the two casino resorts along with the Las Vegas Sands Corp. (LVS) unit’s Venetian Macao have arranged joint shuttle buses around the three Cotai properties.
The chief executive added that he believes the Galaxy property and City of Dreams target different customer segments. “When you look at City of Dreams it’s much more contemporary and probably more on the sophisticated side,” he said. “The Galaxy property looks great but it certainly looks like a property that was built to compete with the Grand Lisboa,” the flagship of his father’s SJM Holdings Ltd. (0880.HK), which is more focused on the Chinese mass market.
Ho said the company was still talking to the stakeholders in the stalled Macao Studio City project, for which Melco Crown has the rights to operate the casino business on a revenue sharing basis, and that it was hopefully making progress. The $2.4 billion project was scheduled to begin operations in 2009, but construction has remained at the initial stages for years because of a bitter dispute between the partners that has escalated to Hong Kong courts. Following Melco Crown’s recent CNY2.3 billion bond issuance, which it said would be partially used to fund potential future expansion, analysts have speculated the company could try to put the funds toward potential interest in Macao Studio City.
Ho said the company was still contemplating what to do with the remaining 1.5 million square feet of land it has next to City of Dreams but suggested it probably wouldn’t build an apartment-hotel there. “It’s probably unlikely that the government will approve apartment hotels … they’ve been looking at it the past five years,” he said. Sands China has for years been trying to sell its Four Seasons apartment hotel, which Chairman Sheldon Adelson has said is worth $1.4 billion. So far, the government hasn’t allowed casino operators to use their land for residential projects.
Melco Crown is approximately one-third owned by Hong Kong-listed Melco International Development Ltd. (0200.HK) and accounts for about 90% of the latter’s net asset value.
