Investors ignore Melco PBL’s Q2 loss

Aug 21, 2007 6:16 AM

Second quarter losses mounted for Melco PBL Entertainment Ltd. (MPEL) but investors were more impressed with increasingly higher numbers in July and August as well as an easing of restrictions for Chinese travelers.

Lawrence Ho, who has partnered with Australian publishing and gaming magnate James Packer in pursuing Macau gamblers for their casinos, called the second fiscal quarter a "period of transition for MPEL."

He pointed out that Crown Macau was only partially open during the quarter whereas the property is currently fully functional.

"All major construction and finishing works at Crown Macau were completed during July," he said, adding, "We believe Crown Macau will receive full recognition as a pre-eminent VIP gaming experience in Macau."

He noted that in the 50 days of operation during the second quarter the daily VIP "rolling chip volume" (considered a method of determining the amount of action available) was about $20 million. That amount more than doubled to $44 million in July and has increased to $55 million since the beginning of August, Ho said.

"Market share is also trending in the right direction. In May and June, Crown Macau’s market share of total gaming revenue was roughly 1.7% and 2.7%, respectively. In July, its market share increased to 4.9%," he said.

Apparently investors were impressed by the presentation, sending the share value on Friday to $11.48, an increase of $1.38 for the day.

As for the quarter, the company said it had total revenue, net of rebates, of $45.1 million, up from last year’s $5.5 million when there was no Macau activity. Operating costs were listed as $121.7 million resulting in a net loss of $69.2 million or $0.06 per share.

The travel restrictions imposed earlier this year by officials of Guangdong province had caused concern among MPEL investors as well as at Las Vegas Sands Corporation (LVS) whose new Venetian Macao opens next week and at Wynn Resorts Ltd. (WYNN). The latter company showed early reluctance to move forward with projects but later dropped that concern.

Analysts called the relaxation of travel restrictions a positive for all Macau gaming facilities.

Trump Entertainment

Trump Entertainment Resorts Inc. (TRMP) experienced a difficult second quarter, primarily due to nearby competition and a smoking ban that Donald Trump insists must be waived.

In a two-page letter to Atlantic City officials, Trump blamed the smoking ban for causing gamblers to flee to the casinos in Pennsylvania, New York and Connecticut. He pleaded that if the officials won’t repeal the ban, imposed last April, it should at least suspend its enforcement until the competing states impose smoking bans of their own.

Atlantic City casinos have experienced a 4% decline in business in the first seven months of this year but TRMP has seen its revenue fall by 5% when compared to the same period a year ago.

For the second quarter, gaming revenue slipped to $249.1 million from $272.9 million.

The company said the loss for the period amounted to $13.5 million or $0.43 per share. Last year, the loss for the second quarter was $4.9 million or $0.16 per share.

Gaming Partners

The Macau gaming market has not been too lucrative for Gaming Partners International Corp. (GPIC) causing at least one analyst to downgrade the company’s stock.

Analyst Traci Mangini of ThinkEquity Partners said she remains confident in the company’s market presence in Europe and North America but worries about weakness in Asia.

That feeling was underscored by the company’s second quarter report that showed the company’s revenues had fallen 24% to $14.8 million compared to the $19.4 million recorded in 2006.

The drop in revenues, the company said, was due to fewer chip sales to casinos in Macau and a decrease in sales of high-margin products.

Net income was $440,000 or $0.05 per share compared to last year’s $2 million or $0.25 per share.