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Melco Q1 misses estimates, revenue in line, as VIPs exit

Melco Crown Entertainment Q1 earnings plunged more than 63 percent as China’s high rollers dried up, with rolling chip revenue at the company’s flagship City of Dreams Macau property falling by almost half.

Adjusted net income was $87.1 million down from $239.3 million a year earlier. Per ADS the company said earnings were $0.16, down from $0.45 and below estimates for $0.19.

On a U.S. GAAP basis, net income  fell to $60.6 million, or $0.11 per ADS, compared with net income of $239.5 million, or $0.44 per ADS, in the first quarter of 2014.

Net revenue fell to $1.05 billion, representing a decrease of approximately 22 percent from a year ago, but was close to expectations for $1.08 billion.

Despite the plunge, UBS analyst Robin Farley said the results were in line with her expectations.

Melco “reported group EBITDA US$221m (-10 percent QoQ, -38 percent YoY), in line with our estimate of US$222m and slightly ahead of consensus at around US$215m - a solid result in our view, while most peers missed in Q1,” the note said.

Casino revenue fell to $1.01 billion from $1.32 billion a year earlier. Rolling chip revenue at its flagship City of Dreams property in Macau fell by almost half to $13.5 billion versus $24.6 billion in the first quarter of 2014.

The mass market table games drop at COD Macau decreased to $1.2 billion compared with $1.3 billion in the first quarter of 2014.

“While the demand environment in Macau remains challenging, we are firmly committed to maximizing customer experience and loyalty by leveraging our premium hotel rooms, food and beverage amenities and entertainment attractions," Co-Chairman and CEO Lawrence Ho said. "We are also firmly committed to maintaining a strict discipline on player reinvestment and operating costs, as demonstrated by our Macau Property EBITDA margins which remained flat sequentially despite declining revenues."

Ho said the company's upcoming resort on Cotai, Studio City, remains on budget and on schedule.

However, UBS said it expects delays and a mid-Q4 opening is a more likely target than Q3, while there remains a question mark over table allocations.

For its newly opened City of Dreams Manila, which held its official launch during Chinese New Year in February, net revenue was $52.7 million and adjusted EBITDA was $2.9 million.

Rolling chip volume totaled $185.5 million and the mass market table games drop was $101.8 million.


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