Casino services firm Macau Legend Development Ltd on Wednesday reported a loss of HKD68.4 million (US$8.8 million) in the first six months of 2015. That compares with a profit of HKD226.4 million in the prior year period.
“The loss was mainly due to: decrease in overall gross gaming revenue; an increase in overall operating expenses of the group, particularly staff costs; and an increase in overall depreciation related to the opening of new property [the Harbourview Hotel at Macau Fisherman’s Wharf, which opened in February] and amortisation charges related to New Legend,” a new self-run VIP operation of the group, the Hong Kong-listed firm said in a press release.
Macau Legend runs two casinos in Macau: Babylon Casino at Macau Fisherman’s Wharf; and Pharaoh’s Palace Casino at the Landmark Macau, both on Macau peninsula.
The group reported overall revenue for the first half of 2015 decreased by 23.9 percent year-on-year to HKD698.2 million. Gaming revenue went down by 31.3 percent to HKD449.9 million.
Its new self-run VIP operation contributed approximately HKD62.2 million of gaming revenue. The high roller operation received shareholder approval in July 2014 and makes use of a variable-interest-entity (VIE) agreement with VIP gaming promoter New Legend VIP Club Ltd. Macau Legend said in its first half filing that its new VIP operation allows the group to “indirectly participate in the gaming promotion business and have a greater control over the management and marketing of the VIP rooms operated by New Legend in the casinos located in its properties, as well as enhance its market footprint and receive a higher percentage of gross gaming revenue generated by the gaming tables in these VIP rooms.”
Macau Legend added in the filing that, although it was granted 35 additional live gaming tables by the Macau government in October last year, these had not yet been put into operation. The company provided no details on why the tables were not being used.
The firm’s table allocation comes via a local unit of SJM Holdings Ltd, which supplies the gaming licence for Macau Legend to operate its existing casino properties.
Excluding those 35 new-to-market tables, the overall number of gaming tables in operation at the firm’s two casinos remained unchanged (150 units) at June 30 compared with one year before. But the company shifted 16 tables to mass gaming, meaning that segment was using 91 tables as of June 30. Of Macau Legend’s 59 VIP tables, 10 were temporarily not in operation, the filing added.
The firm stated that its was also revamping its casino management system, with the support of casino equipment supplier Bally Technologies Inc, a subsidiary of Scientific Games Corp. “The first phase of the casino management system has been installed and put into operation in Babylon Casino since February,” Macau Legend said. “Implementation will be in phases to correspond to the expected expansion of gaming capacities of the group,” it added.
Adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) for the first six months of 2015 were HKD128.4 million, representing a decrease 70.4 percent when compared to the prior year period.
Macau Legend management decided not to pay an interim dividend for the six months ended June 30.
“The first half of 2015 [saw] gross gaming revenue on a downward trend across Macau. As part of the industry, it was unavoidable that the total gross gaming revenue of the group would… be affected,” Macau Legend co-chairman and chief executive David Chow Kam Fai said in a statement included in the press release.
He added: “We are expecting growth to return with the government reviving favourable policies to support the industry, but… revival to previously high growth momentum is not expected at this stage. We are, therefore, taking steps to manage our operating and capital costs in Macau and to explore opportunities to grow outside Macau.”
Macau Legend in July announced a deal with the government of Cape Verde to develop a casino resort in the Western African country. The HKD2.15 billion project is expected to be completed in three years.
“We consider this investment in Cape Verde a great opportunity,” Mr Chow said in Wednesday’s statement.
Macau Legend added it is currently upgrading the exterior lighting and promotional signage of the Landmark Macau. The work is to be completed in the second half of this year.
It said additionally that the redevelopment works of the Macau Fisherman’s Wharf complex are continuing. But the firm is facing some public opposition to its plans to increase the projected height – from 60 metres (197 feet) to 90 metres – of one of two new hotels due to be constructed at Fisherman’s Wharf. The company is still waiting for government approval to start construction, but management has previously warned that the approval delays are likely to impact the initial target of opening the second of the two new hotels in the fourth quarter of 2017.
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”We do not believe that reopening the advance notice nomination deadline [for board directors] is appropriate or justified”
Daniel Boone Wayson
Chairman of the Wynn Resorts board of directors