Friday, September 30, 2022

Melco 3Q profit slumps; net income ahead of consensus, revenue below

Melco Crown Entertainment posted mixed Q3 results, with a sharp drop in earnings that still narrowly beat forecasts and revenue that missed as growth at its Manila property was outweighed by slumping gambling volumes in Macau.

Net income was $33.2 million, or US$0.06 per ADS, sharply lower than the $132.2 million, or $0.24 per ADS, posted in the prior-year period.

Adjusted net income per ADS was $0.11 down from $0.28, beating forecasts by a penny, according to Capital IQ.

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.

Net revenue dropped 16% to $945.7 million, missing the average estimate of $958.1 million.

The decline was due to lower rolling chip revenues and mass market table games revenues in Macau, partially offset by the net revenue generated by City of Dreams Manila, which started operations in December 2014. Net revenue at City of Dreams Manila was $91.7 million.

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 company said a letter has been sent to lenders of its Studio City project requesting among other things, approvals to amend the documentation on a $1.4 billion term loan. The proposed amendments include changing the Studio City project opening date condition from 400 to 250 tables, consequential adjustments to the financial covenants, and rescheduling the commencement of financial covenant testing.

Analysts have said there is a possibility Melco will seek to amend the ownership structure of Studio City.

 "In the medium-term, we believe a potential buyout of the 40 percent JV partner in Studio City remains a significant upside catalyst for MPEL," Bernstein Research said in a note on the results.



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