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Macau's VIP heyday over says Ho

Macau’s gaming bubble has well and truly burst with the heyday over as the VIP sector becomes “permanently and structurally changed,” said Melco Crown CEO Lawrence Ho in an earnings call.

“[C]ertainly the whole VIP sector in our opinion and we’ve been saying this probably for some time now has been permanently and structurally changed. So it will never go back to the hay days where it was bubble like,” Ho said.

The company’s net income in 15Q3 was $33.2 million, or $0.06 per ADS, sharply lower than the $132.2 million, or $0.24 per ADS, posted in the prior-year period.

Adjusted property EBITDA of $237 million was above consensus of $202 million, though for Macau alone adjusted EBITDA of $213 million came in below the Street's $217 million.

Ho said China’s anti-corruption crackdown has been consistent, with the “fear factor” much larger than expected.

“In July when the transit visa was first relaxed, we did see some of our premium mass players come back as well. So I think for high spending individuals, these messages are key.”

Melco last month opened its latest property, the $3.2 billion Hollywood-themed Studio City in Macau, which received a lower table allocation than expected from the Macau government. The property also has no VIP gaming.

UBS analyst Robin Farley said in a note following the launch that despite the lower number of tables, “we do not think the floor feels empty, however the mixture of slots vs. tables does feel distinctively higher.”

He added “there might be some VIP action on the 2nd floor in the future.”


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