Macau | I’m happy with the 2018, Q4 results – Melco Resorts CEO

Macau (MNA) – The CEO of Melco Resorts & Entertainment, Lawrence Ho, said on Wednesday that although he was disappointed with the  group’s results in the third quarter of 2018, results in the last three months of last year have given him more reasons to smile.

Between July and September of last year, Melco recorded a 26 per cent yearly drop in its property EBITDA to some US$295 million (MOP2.3 billion), while operating income dropped 56.6 pct to US$83.6 million, with analysts attributing the drop on poor VIP and mass market results at City of Dreams.

MNA was informed that after the results the Melco Resorts personally expressed his dissatisfaction not just to the operator’s senior management but also down the ranks, and demanded better efforts for the end of the year.

“We had a very rough Q3, certainly, with Morpheus opening on the beginning of June I was expecting more, given Morpheus was a US$1.1 billion dollar investment. But I have to say after all the years I’ve been operating I think I have now the best management team I’ve ever had. It’s another reason I was disappointed, I saw the potential,” the Melco CEO said today before the world premier of Studio City’s new show, Elēkrŏn.

“I think it takes time. I’m very happy with Q4 and even more importantly I’m happy with the effort everybody has put in […] We have a team majority composed of locals and they’re very mature. I think they understood we built some of the best assets not just in Macau but the world and that we should be providing results that reflected that”.

The Melco CEO also stated that since City of Dreams focuses on premium mass and Studio City has always had a main focus on the mass market, the properties would be “more insulated” for any economic impact by the US-China trade war on the local VIP market.

“It’s not going to be an easy year but with Morpheus opening in 2018 and this year going strong with Elēkrŏn and [the Ferrari: Under the Skin exhibition] I’m optimistic with the outlook,” he added.

Rethinking Studio City

 

Mr.Ho also addressed Melco’s plans for Studio City after having recently announced that it will cease VIP rolling chip on the property from January 15, 2020, with the local gaming businessman considered that the casino hotel positioning close to Hengqin and increased visitation from the Hong Kong-Zhuhai-Macau Bridge would help the property attract more of its main mass market target.

“Hengqin has many beautiful buildings, not all occupied but when there’s more people there will be more energy there. We’re really looking for the long term,” he added.

Previously analysts have also suggested after 2020 Melco will relocate Studio City’s tables to City of Dreams or Altira, with Mr. Ho only stating that gaming tables “are a very precious and finite and precious resource provided by the government” and that the group would always look to better reposition them.

Concerning Studio City’s Phase 2 he indicated all the plans and design are completed and that the company was just waiting from some “last minute” government approvals with the group to start construction immediately after the green light.

He also remained open to the possibility of the company asking for more tables after the completion of Studio City’s Phase 2.

“It’s a very sacred resource from the Macau government, we’ll see. There’s still space in the main Studio City gaming floor downstairs. It was built for 400 tables originally. As you know we opened 250 so we still have space. If we we’re lucky enough that the government rewards us with for additional investment, we’re not going to say no,” he added.

The property’s second phase of the development is to include two hotel towers, a gaming area, a water park, retail, food and beverage outlets and a home theatre for an estimated cost between US$1.35 billion and US$1.4 billion, with Melco having been granted a development deadline for its land concession until July 24, 2021.

He also addressed the Studio City initial public offering (IPO) on October, 2018 describing the refinancing as a way to obtain a better capital structure and a way of “providing better returns to shareholders”.

Post-IPO, the remaining stake held by New Cotai now has reduced to 24.4 per cent of interest in the form of Class B shares, while Melco retains majority ownership at 53.2 per cent.

In terms of the gaming license process to be conducted by local authorities – with Melco’s license to end in 2022 – Mr. Ho said the company is still waiting for further information.

“In 2015 the Macau government conducted an internal review. Melco ranked first for all categories. It’s a very good sign in positioning Melco, but of course this year everybody is cautious on how the renewal goes,” he said.