Melco Crown Entertainment Limited MPEL posted dismal second quarter 2015 results wherein both earnings and revenues missed the Zacks Consensus Estimate owing to a sluggish environment in Macau. Macau is a key operating region for this Central, Hong Kong based casino operator. This marked the fifth consecutive earnings miss and the third consecutive revenues miss.
Earnings and Revenue Discussion
Adjusted earnings of 8 cents per American Depository Share (ADS) missed the Zacks Consensus Estimate of 9 cents by 11.1%. Further, earnings declined 72% year over year. The downside reflects a significant decline in revenues.
In the quarter, net revenue plunged 23.6% year over year to $916.0 million and also missed the consensus mark of $1,007 million by 9%. The sluggish revenues reflect lower group-wide rolling chip revenues and mass market table games revenues. However, these declines were partially offset by revenues generated at City of Dreams Manila.
Adjusted property EBITDA was $204.9 million, down 35% year over year owing to lower group-wide rolling chip volumes and rolling chip win rate, and lower contribution from the mass market table games segment.
The overall downside reflects a slowdown in Macau gambling growth as a result of high-stake gamblers curtailing spending amid a cooling Chinese economy. The region has struggled owing to the anti-graft corruption drive, which has lowered footfall at the casinos. Also, credit growth concerns, tighter restrictions on visas, partial smoking ban in casinos and protests in Hong Kong have adversely impacted revenues generated from the region. Gross gaming revenues in Macau declined in double digits in all three months of the quarter.
Other companies that are also bearing the brunt of a weak gambling business in Macau include Las Vegas Sands Corp. LVS, Wynn Resorts Ltd. WYNN and MGM Resorts International MGM.
Segment Operations
Melco Crown’s four existing operations include — City of Dreams Macau, Altira Macau, Mocha Clubs, and City of Dreams Manila.
Net revenue at City of Dreams Macau was $654.2 million, down approximately 32.4% year over year. Adjusted EBITDA of $179.0 million in the second quarter of 2015 declined 38% from the year-ago quarter. The downside was due to lower rolling chip revenues and mass market table games revenues. Rolling chip volume totaled $11.1 billion, down approximately 50% year over year. Mass market table games drop was $1.2 billion, down approximately 10% year over year.
Total non-gaming revenue at City of Dreams was $63.8 million, down 5% year over year.
Net revenue at Altira Macau was $143.9 million, down 20.8% year over year. Adjusted EBITDA of $6.5 million in the reported quarter was down approximately 58.3% year over year, primarily due to lower rolling chip revenues. Rolling chip volume totaled $6.5 billion, down 21.7% from the year-ago quarter. Mass market table games segment drop was $166.7 million, down 15.3% year over year.
Total non-gaming revenue at Altira Macau was $8.2 million, down 9.9% year over year.
Net revenue from Mocha Clubs totaled $33.2 million, down 9% year over year. Adjusted EBITDA of $8.6 million declined 17.4% from the year-ago quarter.
City of Dreams Manila, a new integrated casino resort that began its operations in Dec 2014, generated revenues of $75.0 million and adjusted EBITDA of $12.6 million. Rolling chip volume was $495.8 million while mass market table games drop was $116.6 million. Total non-gaming revenue at City of Dreams Manila was $28.6 million.
Melco Crown has a Zacks Rank #3 (Hold).
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