Melco Crown Entertainment posted net revenues of $1.15 billion in a strong third quarter earnings report released Thursday morning, a 21.6 percent year-over-year increase that beat Wall Street estimates by 5.5 percent.
The company also reported earnings per share of $0.13 – topping a $0.07 consensus estimate, adjusted EBITDA of $244 million – 10 percent above Wall Street projections. In particular, Studio City – the $2 billion property that opened on the Cotai Strip in October 2015 – was a resounding success, reporting $53 million in EBITDA against estimates of $30-$35 million.
“Studio City, which opened in October 2015, delivered a sequential increase of over 24% in mass table gross gaming revenues and over 110% in adjusted property EBITDA, leveraging its unique non-gaming offerings to attract an increasingly Cotai-based mass market customer who are seeking a diverse and multi-faceted entertainment proposition,” said Lawrence Ho, Melco Crown’s chairman and chief executive.
The positive results were received with warm applause by analysts and observers, many of whom have grown accustomed to bad news out of Macau.
“(Melco Crown) stock has been extremely strong over the past 2 months – but we think these results are good enough for the stock to move higher today. Importantly, we estimate MPEL took about 80 bps of mass table share in the quarter as Studio City ramped on new marketing initiatives,” wrote Cameron McKnight, senior analyst with Wells Fargo Securities, in a client note.
Melco’s property in the Philippines – City of Dreams Manila – also registered a strong performance, providing a complementary stream of diversified earnings to its flagship operations in Macau.
“City of Dreams Manila delivered improvements in all gaming segments which, together with our company-wide focus on managing reinvestment costs and other operating expenses, resulted in an increase in adjusted property EBITDA of approximately 85% on a year-over-year basis,” said Ho, who expressed optimism that the archipelago nation’s economy and gaming market will continue to expand.
However, results at Melco’s other Macau properties were down across the board despite the territory’s gaming market finally breaking its two year losing streak in August.
Revenue at City of Dreams Macau was down 6.7 percent from the prior year quarter to $621 million and adjusted EBITDA was down 11 percent to $170.4 million. The company attributed the drop to a 7.9 percent decline in mass market table game revenue and slower mass and slot growth than the market.
“We believe (City of Dreams) faces risk from any traction Wynn Palace gains as it begins to market more heavily towards COD’s core customer base,” wrote Grant Govertsen of Union Gaming Securities.
Altira Macau saw a net revenue drop of 8.2 percent to $128.8 million, though the property registered a slight increase in adjusted EBITDA to $14 million. As with City of Dreams, declining mass market table game play was a key driver, declining 21.8 year-over-year to $122.6 million.
Ho insinuated that the strong third quarter results were indicative of a broader Macau uptick, he stopped short of proclaiming a recovery.
“As trends stabilize in Macau, Melco Crown Entertainment is positioned to benefit from Macau’s evolution into a mass-focused, multi-day stay destination,” he said. “Our company continues to demonstrate its ongoing commitment to lead Macau in its transformation to the integrated resort model and away from the traditional gaming model through the development of diversified, mass-focused integrated resorts that deliver world-class entertainment and other non-gaming amenities which cater to a broad spectrum of customers.”
The company also announced a dividend of $0.0126, slightly down from its previous dividend of $0.0189.
