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China – Melco Crown pays dividends for the first time

By - 17 February 2014

James Packer’s Crown Resorts has earned a return on its investment in Macau for the first time, after its joint venture partnership, Melco Crown, said it would begin to pay a regular dividend.

After its fourth quarter results for 2013, in which net income doubled to US$223.2m Melco said it had recommended the board approve the payment of its first dividend and an ongoing policy.

Crown owns a 33.6 per cent stake in Melco, alongside Lawrence Ho, the son of casino tsar Stanley Ho.

“As the company has generated significant earnings and cash flow, in order to recognise the support of its shareholders, management has made a recommendation to our board on the payment of a special dividend to its shareholders and the establishment of a new dividend policy,” Melco said.

Net revenue for the fourth quarter of 2013 was US$1,394.6m, representing an increase of approximately 27 per cent from US$1,101.8m for the comparable period in 2012. The increase in net revenue was primarily attributable to substantially improved group-wide revenues across all gaming segments, particularly in the mass market table games segment.

Lawrence Ho, Co-Chairman and Chief Executive Officer of Melco Crown Entertainment, said “I am pleased to announce another record quarter of group-wide EBITDA, primarily driven by the success of the mass business at our flagship property in Macau, City of Dreams, where we continue to leverage the property’s World-class amenities and attractions to entertain the highly discerning and sophisticated premium mass customer, which in turn enables us to maintain our market leading mass table yields.

“Our development pipeline continues to progress as planned. We recently completed a Philippine Peso denominated, approximately US$340m equivalent, five per cent senior note offering at our majority-owned subsidiary, Melco Crown Philippines, which delivers us a fully funded financing package to open City of Dreams Manila later this year. We also announced the addition of the Nobu Hotel and food & beverage concepts at City of Dreams Manila, which provides another exciting addition to the recently announced ultra-luxurious Crown Towers Hotel. These recent announcements highlight our approach at City of Dreams Manila of offering a World-class collection of unique and exciting brands, more of which will be announced in the near future, which are designed to cater to a wide array of local and international customers’ tastes and preferences.”

Studio City, the operator’s new cinematically-themed integrated resort in Cotai, remains on budget and on track to open in mid-2015 while the iconic fifth tower at City of Dreams in Macau is anticipated to open in late 2016 / early 2017, providing an impressive complement to the company’s flagship property’s World-class premium-focused attractions and amenities.

Mr. Ho continued: “Macau continues its strong upward trajectory with market-wide gaming revenues growing at approximately 19 per cent in 2013. Importantly for Melco Crown Entertainment, the highly profitable mass market segment continues to deliver above-market growth, reaffirming our focus on this key segment. The Macau and Mainland Governments remain highly supportive of Macau’s long term growth, as highlighted by the progress on their forward thinking infrastructure and regional development blueprint, including the rapid development of Hengqin Island, improved immigration facilities, the development of the Macau Light Rail system and the Hong Kong – Zhuhai – Macau Bridge.

“As a result of the strong cash flow generation at our core operating assets in Macau, our disciplined approach to ensuring a flexible and efficient capital structure and a development pipeline that is either fully funded or expected to be well supported by cash and cash flow, we announced separately today that management has recommended to the Board a US$191.2 million special dividend together with a new dividend policy, which is subject to the Board’s approval on February 25, 2014 and, in the case of the special dividend, subject to shareholders’ approval. We believe our capital management strategy balances the key objectives of pursuing growth opportunities while returning excess capital to shareholders, thereby maximizing long term shareholder value.”

For the fourth quarter of 2013, net revenue at City of Dreams was $1,095.8m compared to  $772.5m in the fourth quarter of 2012.

The strong year-over-year improvement in fourth quarter Adjusted EBITDA was primarily a result of the 57 per cent year-over-year improvement in mass table games gross gaming revenue, together with an increase in rolling chip volumes and a higher rolling chip win rate.

Mass market table games drop increased 29 per cent to $1,303m whilst slot handle for the fourth quarter of 2013 was US$1,304.2 million, up 26 per cent from US$1,033.1m generated in the quarter ended December 31, 2012.

For the quarter ended December 31, 2013, net revenue at Altira Macau was $247.6m compared to US$281.7m in the fourth quarter of 2012.

Net revenue from Mocha Clubs totalled US$38.8m in the fourth quarter of 2013, up 10 per cent from US$35.3 million in the fourth quarter of 2012.  The number of gaming machines in operation at Mocha Clubs averaged approximately 1,700 in the fourth quarter of 2013, compared to approximately 2,000 in the comparable period in 2012 due to the closure of three clubs.

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