GGRAsia – Melco Crown special dividend, amends quarterly policy

Melco Crown special dividend, amends quarterly policy

Jan 13, 2017 Newsdesk Latest News, Macau, Top of the deck

Asian casino operator Melco Crown Entertainment Ltd is to pay a special dividend of approximately US$650 million. It has also amended its policy on quarterly dividends.

Payment of the special dividend will be on or about February 10, to shareholders whose names appear on the register at the close of business on January 23, the company said in a filing to Nasdaq on Thursday.

The special dividend is equivalent to US$0.4404 per share and US$1.3212 per American depositary share (ADS), the firm said.

Lawrence Ho Yau Lung, Melco Crown’s chairman and chief executive, was quoted saying in the announcement: “We currently have a significant level of free cash and more than US$1.2-billion available credit lines. Melco Crown Entertainment also continues to generate very significant operating cash flow. Given these factors, we believe that we can return a meaningful amount of capital to investors now, and in the future, while still retaining significant flexibility to pursue value-accretive opportunities.”

The firm also stated in the filing it had amended its quarterly dividend policy – from one based on approximately 30 percent of consolidated net income attributable to the company – to one targeting a quarterly cash dividend payment of US$0.03 per ordinary share; i.e., equivalent to US$0.09 per ADS, where each ADS represents three ordinary Melco Crown shares.

The casino operator said the change would provide “a larger, stable and more predictable ordinary dividend payout to shareholders”.

“There has been a lot going on at Melco Crown over the last two months, including the sell-down of Crown’s stake in Melco Crown to 5.7 percent, recent changes to management and the amend/extend of Studio City debt structure,” stated a note on Thursday from analyst Christopher Jones of the Buckingham Research Group Inc.

He was referring to sell-downs in Melco Crown by the firm’s long-standing investment partner, Australian casino operator Crown Resorts Ltd; a series of high-profile departures and arrivals in senior management; and to financing on Melco Crown’s 60-percent owned Macau resort Studio City on Cotai, a property that opened in October 2015.

“After all of this, Melco Crown is rewarding its shareholders with a US$0.4404 special dividend per share (approximately US$1.3212 dividend per ADS), which represents [individually] a 7.9 percent yield,” wrote Mr Jones.

Quarterly policy

The new quarterly dividend system “will take effect beginning with any dividends declared by our board for the fourth quarter of 2016 and continue until amended or otherwise determined by our board,” added Thursday’s filing from Melco Crown.

“The announcement of a special dividend is a positive development as the company returns excess cash to shareholders and signals continued optimism about future cash flow generation of its assets,” said a Thursday note from brokerage Sanford C. Bernstein Ltd.

Sanford Bernstein’s analysts Vitaly Umansky, Zhen Gong and Yang Xie also noted Melco Crown had in February last year provided a special dividend of US$0.6438 per ADS and also completed a US$800-million share repurchase from Australia’s Crown Resorts in spring 2016.

“The implied dividend for 2017 of US$0.36 is more than double our 2017 estimate (US$0.17 per ADS),” said the Sanford Bernstein team.

“While the new dividend will not make Melco Crown a high dividend payer (i.e., Sands China), the dividend further aligns the yield on Melco Crown with the broader market. Further, we would expect Melco Crown to continue to grow their annual dividend in line with growth in the underlying business,” added the brokerage.

In a separate filing on Thursday, Melco Crown also announced the appointment of John Crawford as an independent non-executive director. Mr Crawford will become a member of, respectively, the audit and risk committee; the compensation committee; and the nominating and corporate governance committee, the company said.

The company additionally said James MacKenzie had resigned as an independent non-executive director with effect from February 1. He has been in post since 2008. Mr MacKenzie currently serves as the chairman of Melco Crown’s audit and risk committee. With effect from February 1, Alec Yiu Wa Tsui, chairman of Melco Crown’s nominating and corporate governance committee, will also assume the role of chairman of the audit and risk committee, said the firm.

Robert Mactier, another independent non-executive director since 2006, and serving as a member of the compensation committee and nominating and corporate governance committee, has also tendered his resignation with immediate effect, said Melco Crown on Thursday. The firm added that both departing directors wished to reduce their workload and devote time to other interests.