Credit rating agency Moody’s Investors Service does not expect a significant boost in the financial position of Asian casino operator Melco Crown Entertainment Ltd in the short term.
“Material improvements in its… financial profile appear unlikely in the near term,” stated Kaven Tsang, a Moody’s vice president and senior credit officer, in a release issued on Friday.
For full year 2015, Melco Crown reported net income of US$105.7 million compared to US$608.3 million in the previous year. Melco Crown announced earlier this month the payment of a special dividend amounting to US$350 million.
Moody’s on Friday revised the outlook for MCE Finance Ltd’s Ba3 corporate family and senior unsecured bond ratings to stable from positive.
MCE Finance is a subsidiary of Melco Crown. The latter firm is jointly owned by Australia-based gaming operator Crown Resorts Ltd (rated Baa2 stable by Moody’s) and Hong Kong-listed Melco International Development Ltd (unrated by Moody’s).
According to Moody’s, the corporate family rating of MCE Finance reflects Melco Crown group’s established operations through Melco Crown (Macau) Ltd — which is the key operating entity that holds the gaming concession in Macau — and its two major casino properties in the city, Altira Macau and City of Dreams (pictured).
“The revision of the outlook for MCE Finance’s ratings to stable from positive reflects our view that the potential for the company’s ratings to be upgraded over the next 12 to 18 months is limited, given the ongoing weak operating environment in Macau’s gaming market,” said Mr Tsang.
Macau’s casino industry has been posting monthly year-on-year declines since June 2014. Based on unofficial month-to-date returns, some investment analysts have suggested that February could be the first month of casino GGR growth in year-on-year terms for the Macau market since May 2014. Several analysts have said they expect the pattern of monthly year-on-year decline to resume in March.
Moody’s noted in its Friday release that Melco Crown’s 60 percent-owned Studio City project, in Cotai, commenced operations last October. The rating agency stated that the gaming operator’s “financial profile over the next 12 months will therefore reflect Studio City’s ramping up of its operations.”
The rating agency estimated that Melco Crown’s adjusted debt/EBITDA (earnings before interest, taxation, depreciation and amortisation) ratio rose to around 7.0 times in 2015. “Increased debt and operating expenses — including pre-opening expenses — from the Studio City project” contributed to the ratio rise, it stated.
Moody’s expects Melco Crown’s adjusted debt/EBITDA “will stay at around 4.0 times-5.0 times over the next one-two years, as Studio City ramps up gradually its operations in an environment of weak demand, and with the additional supply of two new casinos in the same Cotai area in 2016.”
Macau market rival Wynn Macau Ltd in November announced it was delaying the opening of its US$4.1-billion Wynn Palace resort on Cotai by three months, to June 25, 2016.
Sands China Ltd’s chairman and chief executive Sheldon Adelson said in January that the firm was targeting a September opening for the under construction Parisian Macao on Cotai, and potentially a partial opening in the summer “if the opportunity arises”. Last week, company president and chief operating officer Wilfred Wong Ying Wai admitted that the project’s half-size replica of the Eiffel Tower might open before September, as part of a promotional push to draw tourists.
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”So far the Macau government has never failed us. And I think we have always been rewarded appropriately for the amount of investment”
Lawrence Ho Yau Lung
Chairman and chief executive of Melco Resorts and Entertainment