Outlook brightens for Packer venture
Sydney Morning Herald
Thursday February 4, 2010
FEARS that earnings at James Packer's Macau joint venture would be hit by changes to the agents it uses to bring high-rolling gamblers to its casinos have been realised with fourth-quarter earnings at rock bottom.Melco Crown Entertainment has posted earnings of $US2.7 million ($3 million), down from $US22.4 million in the same period last year.Analysts had predicted the fall, triggered by changes to the way the Nasdaq-listed company deals with its agents, known in the industry as junket operators, from the "super junket" system to dealing directly with individual agents. This meant fewer gamblers passed through the doors of its two casinos. Earnings were also hit by a winning streak by gamblers.Given the low expectations, industry watchers were pleased with encouraging outlook for the next quarter.The company said earnings had improved significantly at its Altira and City of Dreams casinos, with total company earnings of more than $US40 million last month.At all 34 casinos in Macau revenues have experienced double-digit growth not seen since the global financial crisis took hold.The recovery in earnings was particularly pleasing at Altira, where players had been winning far more often than they usually do.In industry jargon the win rate of the casino is called the hold rate.It was about 2.2 per cent in the past quarter, well below the average of 2.85 per cent.Melco Crown's share of the $4 billion market has also improved from 12 per cent to 16 per cent last month.Its chief executive, Lawrence Ho, said the past quarter had been tough. He used a conference call to reject a report by an analyst at the US broking firm Sterne Agee that said Harrah's Entertainment was "acutely interested" in buying Australian-listed Crown's 32 per cent stake in Melco Crown Entertainment, a stake worth almost $US600 million."From our perspective it's total nonsense," Mr Ho said. "Both James [Packer] and myself and the management have really come this far, and we see a lot of potential growth, and the business is ramping up very, very nicely. It's really nonsense, all the rumours that we've heard."However, in a later note to clients, the analyst David Bain stood by his report. "Harrah's remains actively interested in Crown's stake but the same sources state there has not been a hard offer from Harrah's at this junction."In the past quarter the average daily revenue from each of Altira's 235 gambling tables fell 26 per cent, from $US13,412 each per day a year ago to $US9970.At the larger City of Dreams casino the average daily revenue from each of the 445 tables was just $US7276. There was no comparable figure from last year because it has only been open for nine months.
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