Bad timing could hurt Packer empire
In a note issued in Hong Kong last week, Moody’s Investor Service was guarded about the potential of Melco Crown Entertainment Ltd.’s Studio City resort, now under construction on the Cotai Strip in Macau. The note mentioned the parent company as well as its subsidiaries MCE Finance Ltd., Melco Crown Ltd., and Studio City Finance Ltd.
According to GGRAsia, Moody’s warned investors about “the weaker operating environment” in the Chinese gaming hub, which has taken a financial hit in the wake of a crackdown on corruption by the Chinese government.
The upheaval in Macau “will make it more challenging for Studio City Finance to ramp up its Studio City project, which is scheduled to open in mid-2015, and to realize its revenue growth and deleveraging plan in the next one to two years,” Moody’s said.
“Declining gaming revenue will weaken the companies’ revenue and EBITDA generation, which in turn diminishes their debt-servicing capacity,” said Kaven Tsang, a Moody’s vice president and senior analyst. “Nevertheless, MCE Finance’s established operations and strong financial profile will buffer it from a slowing market.” The firm is also expanding its City of Dreams casino resort in Cotai.
At the same time, Melco Crown has asked to have its shares delisted from the Hong Kong Stock Exchange “for reasons of cost and utility,” reported the Wall Street Journal.
“We intend to retain the primary listing of ADSs (American depository shares) on the Nasdaq following the proposed delisting,” the firm said in a filing. The firm’s Hong Kong stocks posted a price drop of 35 percent during 2014, ending the year at HKD65.75 (US$8.48).
Studio City is due to open in mid-2015.
Melco Crown’s James Packer, who is co-chairman of the company along with Lawrence Ho, could regret his decision to expand if the slowdown in Macau continues, reported the Sydney Morning Herald. His companies, Crown and Melco Crown, have committed to about $9 billion worth of casino developments around the world?at home in Australia, in Las Vegas, and in the Philippines?in the next five years. But much of that expansion hinges on strong revenues in Macau.
