GGRAsia – Melco Crown cuts 1Q dividend as net revenue dips 22 pct

Melco Crown cuts 1Q dividend as net revenue dips 22 pct

May 08, 2015 Newsdesk Latest News, Macau, Philippines, Top of the deck

Casino operator Melco Crown Entertainment Ltd declared a first quarter dividend per American depositary share (ADS) 74 percent lower than in the prior-year period.

The firm, with operations in Macau and the Philippines, reported a 22 percent decline in net revenue in its unaudited first quarter results for the period to March 31, Melco Crown announced on Thursday.

The quarterly dividend of approximately US$0.0336 per ADS – less any applicable fees and charges – will be paid on or about June 5.

For the first quarter of 2014, the company declared a dividend of US$0.1293 per ADS, or HKD0.3341 per ordinary share.

On a U.S. GAAP basis, net income attributable to Melco Crown for the first quarter of 2015 was US$60.6 million, or US$0.11 per ADS, compared with net income of US$239.5 million, or US$0.44 per ADS, in the first quarter of 2014.

Matthew Ryan and Olivia Bible of JP Morgan Asia Pacific Equity Research based in Sydney noted following the results and dividend announcement: “Dividend payout ratio of 30 percent [was] maintained. Management commented on the [earnings] call that it prefers to stay conservative on dividends given the tough revenue environment and current capex [capital expenditure] requirements.”

Melco Crown said its first quarter 2015 fall in group net revenue – to approximately US$1.05 billion, from nearly US$1.36 billion in the year prior period – was mainly due to lower group-wide rolling chip revenues and mass market table games revenues.

It also cited those factors in the 35 percent decline seen during the period in adjusted property EBITDA (earnings before interest, taxation, depreciation and amortisation).

Melco Crown also reported a net loss of US$36.8 million attributable to non-controlling interests during the first quarter of 2015 related to Studio City, the company’s majority-owned US$3.2-billion project in Cotai, Macau, due to open later this year, and City of Dreams Manila, a US$1-billion-plus resort in the Philippines that a local Melco Crown unit manages. The property opened on December 14 last year.

In the earnings statement, the firm also announced a range of what it called “community support and investment” measures aimed at improving opportunities for its Macau employees.

Lawrence Ho Yau Lung, co-chairman and chief executive of Melco Crown, said in a statement accompanying the earnings release commenting on the quarter’s business performance: “We are…firmly committed to maintaining a strict discipline on player reinvestment and operating costs, as demonstrated by our Macau property EBITDA margins which remained flat sequentially despite declining revenues.”

Analyst reaction

Union Gaming Research LLC analysts Christopher Jones and John DeCree in the U.S., and Grant Govertsen in Macau, said in a note following results: “In the quarter, Melco Crown maintained its margin in Macau sequentially from 4Q14, evidencing cost control and continued rationalism in player reinvestment and promotional expenses despite weaker demand across the market.”

UBS AG analysts Anthony Wong and Robin Farley noted that City of Dreams Manila has had a “decent start”.

“City of Dreams Manila reported minimal EBITDA at US$3 million, in line with our expectations of US$3 million to US$4 million, but the underlying business was stronger than expected,” they wrote.

The UBS team added that Macau-based junket operator Suncity Group Ltd “is due to launch its grand opening this weekend” at City of Dreams Manila.

However the note said UBS had some doubts as to whether Studio City on Cotai would open in the third quarter as management has previously guided.

“The tone is that Q3 does not sound like a firm target with delays possible. We currently assume a mid-Q4 opening,” stated the UBS analysts.

They added: “Management also see no clarity on table allocations with Galaxy’s May 27 opening [Galaxy Macau Phase 2 on Cotai] still pending a tables decision from the government. We note that Studio City is the only major project that cannot have tables easily shifted from existing properties, given its ownership structure.”

Wells Fargo Securities LLC analysts Cameron McKnight, Rich Cummings and Tiffany Lee noted: “While Melco Crown noted its table yields remain best in class, our checks indicate that there is a lot of table capacity across the entire Macau market.”