Melco Crown Entertainment rode an improving gaming climate in Macau and strong mass table play to a US$1.2 billion net revenue haul and net income of $43 million for the 2016 fourth quarter, the company reported Thursday morning.
The revenue figure was a 13 percent year-over-year jump and topped the consensus estimate by $30 million. Operating income checked in at $116 million – up from just $17.8 million the prior year, and adjusted property EBITDA grew 29 percent to $304 million. Adjusted for non-recurring costs, the company reported earnings per share of $0.13 against a $0.02 loss for the fourth quarter of 2015.
The East Asia casino giant attributed the year-on-year boost to a fully-operational Studio City, the $2 billion property that opened in October 2015 on the Cotai Strip, and improved performance at City of Dreams Manila.
“We delivered a strong set of results in the fourth quarter of 2016, highlighted by record mass table gross gaming revenues in Macau and a 29% year-on-year increase in group-wide adjusted property EBITDA,” said Lawrence Ho, Melco Crown’s chairman and chief executive officer.
“Our flagship property in Macau, City of Dreams, generated adjusted property EBITDA of approximately US$190 million, an increase of over 10% compared to the prior quarter, despite an increase in supply in Macau, highlighting the property’s ongoing position as “a leader in the premium gaming segments in Macau,” he said.
Ho emphasized that Studio City’s mass table game revenues grew 10 percent from the fourth quarter of 2015 despite some surrounding infrastructure and accessibility issues and that the property is well-situated to capitalize on that particular market segment. “Studio City’s core focus remains on its mass market offerings which are ideally aligned to the demand landscape in Macau.”
Melco Crown’s results offer another indicator that Macau’s economy continues to improve, evidenced by six consecutive months of year-on-year improvement in gross gaming revenues. “We believe that Macau’s long term success relies on its ability to cater to the rapidly evolving demands of leisure and entertainment seekers from around the region, most notably from Mainland China,” said Ho.
“We are seeing a broad recovery and we’re excited for that,” he added, pointing out that the significant increase in hotel supply coupled with increases in occupancy rates are “very bullish signals moving forward.”
Additionally, Ho predicted that the Macau gaming market would see a mid-high single digit growth rate for 2017. He also said that the crackdown on corruption and extravagant lifestyles coming from the Chinese government – largely responsible for Macau’s two-year sojourn – is subsiding and that there is significant consolidation among junket operators.
“All in all it’s a good story for macau both on the mass and VIP side,” said Ho. “VIP has surprised in terms of its recovery. Ultimately, the future of Macau is going to be pinned on the growth of the mass market.”
Ho also brushed off concerns surrounding a new restrictions on smoking in Macau casinos, although they are less stringent than originally feared. “City of Dreams isn’t the only property in Macau where smoking takes place,” he said, noting that the restrictions would not put him at a competitive disadvantage.
Melco Crown also announced a revamp to its dividend program and that it would be more aggressive in returning capital to shareholders. The standard quarterly dividend will increase to $0.09 per share, and the company announced a special $650 million payout last month.
