Fitch Ratings Inc forecasts Australia-based casino operator Crown Resorts Ltd is to enjoy lower dividends from Melco Crown Entertainment Ltd over the next two years compared to fiscal 2015.
“Melco Crown’s dividends to Crown Resorts declined by 44 percent to AUD52.58 million [US$38.25 million] in fiscal year 2015,” the credit ratings agency stated in a note last week.
Fitch expects Melco Crown’s dividends to Crown Resorts to “further decline in fiscal year 2016 and fiscal year 2017 as it is still not clear when Macau’s gaming industry will revive.”
The ratings firm noted Crown Resorts has a 34.3-percent stake in Asian-based casino operator Melco Crown. The financial results of the latter company have been affected by the ongoing slump in market wide casino revenue in Macau. The city’s casino sector has, up to November 30, seen 18th straight months of gross gaming revenue retreat measured year-on-year.
Melco Crown operates three casinos in Macau and one in the Philippines. The firm opened on October 27 the US$3.2-billion Studio City gaming resort (pictured) in Macau, a property 60-percent owned by Melco Crown.
In August Crown Resorts said its net profit for financial year ending June 30 was down 41 percent due to a slump in earnings from its Macau interests.
Rating stable at ‘BBB’
In its note last week, Fitch affirmed Crown Resorts’ long-term foreign-currency issuer default rating and senior unsecured rating at ‘BBB’ – considered investment level.
The rating outlook is stable, the credit ratings agency stated.
Crown Resorts’ ratings “reflect its strong market position in the Melbourne and Perth markets, driven by its position as the sole casino licence holder in the two Australian states [where] it currently operates – Victoria and Western Australia, the robust performance of its Australian assets, and its stable financial profile,” Fitch said.
The credit ratings agency noted however that Crown Resorts faced some credit profile risks related with capital raising for its pipeline of new projects: Crown Sydney; Crown Towers Perth; an extension at Crown Melbourne; and plans for investment in a Las Vegas resort.
“However [financial] leverage is expected to remain within Fitch’s guidelines in the lead up to project completions,” the credit ratings agency added.
Fitch noted that, when completed, the new projects would “diversify earnings and [the firm’s] portfolio of assets, and position Crown Resorts as a global gaming company with significant scale and diversity.”
Crown Resorts’ debt-to-earnings ratio has recently been under scrutiny from some investment analysts.
Crown Resorts’ largest shareholder, James Packer, announced last week he was stepping down as a director of the company. The announcement came only four months after he resigned as chairman and occurred shortly after reports that Mr Packer – via his private company, Consolidated Press Holdings Pty Ltd – had been talking with private equity investors and pension funds about a possible bid to take private some or all of Crown Resorts’ assets.
“Both Crown Resorts and its majority shareholder, Consolidated Press Holdings have publicly stated that there is no current proposal for Consolidated Press Holdings to privatise Crown Resorts,” Fitch stated in its note. The credit ratings agency said it would “monitor the situation, and [would] treat any proposal for a bid for Crown Resorts as event risk.”
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”According to Macau law, the security personnel of casinos and the management staff do not have the law enforcement power that the police have”
Wong Sio Chak
Macau’s Secretary for Security