Blame it on Macau
Financial returns for Melco Crown Entertainment Ltd. are likely to be flat over the next 12 to 18 months, according to Moody’s Investors Service, in a report cited by GGRAsia.
Melco Crown posted net income of US$105.7 million for 2015, compared to US$608.3 million in the previous year; a key factor is the ongoing slump in Macau, which may soon mark its second full year of recession.
The Sydney Morning Herald recently reported that the jurisdiction has shed $130 billion in value since the slump began in mid-2014. The recession has eased considerably in the past few months; some investment analysts predict February could be the first month of GGR growth in year-on-year terms since the decline began. But that bump may not continue in March.
“The revision of the outlook for MCE Finance’s ratings to stable from positive reflects our view that the potential for the company’s ratings to be upgraded (in the near term) is limited, given the ongoing weak operating environment in Macau’s gaming market,” said a report from Moody’s analyst Kaven Tsang.
Melco Crown owns 60 percent of the Hollywood-themed Studio City project on Macau’s Cotai Strip, which opened last October. At the time, Melco Chairman Lawrence Ho joked that the $3.2 billion resort, conceived when the market was still flush, opened during “the worst year in gaming.”
Moody’s says the gaming operator’s “financial profile over the next 12 months will therefore reflect Studio City’s ramping up of its operations.” The agency predicts Melco Crown’s adjusted debt/EBITDA “will stay at around 4.0 times-5.0 times over the next one-two years, as Studio City ramps up gradually its operations in an environment of weak demand, and with the additional supply of two new casinos in the same Cotai area in 2016.”
