Ongoing construction work around the perimeter of Macau’s Studio City casino resort is negatively affecting the property’s ability to ramp up its business, says U.S.-based brokerage Sterne Agee CRT.
Studio City, majority-owned by Melco Crown Entertainment Ltd, started operations in Macau’s Cotai district on October 27. It is next door to the under-construction Sands China property Parisian Macao, which is due to open in the third quarter of 2016.
The Studio City site is also next to a section of the under-construction Macau light rail transit system. The Taipa portion of the system – including a loop serving Cotai – is likely to be operational only by 2019, according to the latest government estimates.
“Construction disruption adjacent to Melco Crown’s new Macau Studio City continues, elongating Studio City’s initial ramp up,” analyst David Bain wrote in a Monday note.
He added: “While we continue to believe Studio City is the best located casino resort in Macau longer-term [neighbouring the Lotus Bridge connecting Cotai with mainland China], ongoing construction on both sides of the property combined with a relatively flattish (+2 percent quarter-on-quarter) sequential revenue environment likely stalls a significant near-term property ramp.”
Market wide in Macau, casino gross gaming revenue stood at MOP56.2 billion (US$7.0 billion) in the first quarter of 2016, compared to MOP54.8 billion in the previous three months.
In the note, Sterne Agee CRT significantly reduced its estimates for Studio City’s first quarter 2016 property EBITDA (earnings before interest, taxation, depreciation and amortisation) to US$22.6 million from US$40.2 million.
Studio City became the first major casino resort in Macau to open without any junket tables for VIP play. For the period between October 27 and December 31, 2015, net revenue at the property was US$123.2 million, with adjusted EBITDA of US$12.6 million.
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