Melco keeps plans for third casino as trump card
The US$900 million purchase of Macau's sixth and last gambling licence last month by Melco International Development and its Australian partner Publishing and Broadcasting Ltd (PBL) has paved the way for the gaming firm's third casino.
But for now Melco, which yesterday unveiled a ninefold increase in last year's net profit to $548.7 million, is not showing its hand to rivals.
Chairman and chief executive Lawrence Ho Yau-lung, son of Macau gambling mogul Stanley Ho Hung-sun, said the licence would be the firm's ultimate wild card in the gaming and entertainment market of the former Portuguese enclave.
The company had not yet formulated a specific plan for the casino, said Mr Ho, and any new project would hinge on the demand and supply in the market.
'Since the licence is bought, we are considering the third casino project, but up to this second, we have no concrete plans yet,' he said. 'The deal will not only save us annual fees payable to licencees but also give us direct control of all gaming and entertainment operations.'
In an alliance with PBL, Melco paid US$160 million for a 40 per cent equity stake in the licence while PBL paid US$240 million for a 60 per cent stake. In addition, the partners, who also agreed to a 50-50 split of the economic benefits of the licence, paid the vendors of the licence a further US$500 million raised through a bank loan.
The licence, sold by Wynn Resorts, will allow the Melco-PBL joint venture to operate an unlimited number of casinos and unlimited number of tables and machines until June 2022.
Mr Ho said the joint venture was on track to complete next year Crown Macau, a $1.5 billion project with a luxury hotel and a casino, and in 2008 City of Dreams in Cotai Strip, an $8 billion entertainment resort featuring an underwater casino, restaurants, clubbing facilities and high-end hotels.
Despite the intensified investment in casinos and gaming facilities by the Ho family members and big rival players from Las Vegas, Mr Ho said Macau had yet to show any signs of oversupply.
The booming market last year lifted earnings before interest, taxation, depreciation and amortisation of Melco's profit spinner, Mocha slot machine parlours, to $65 million.
Previous figures were not comparable as Melco modified the depreciation period of slot machines to five years from 10 years.
Mr Ho said two to three new Mocha outlets would be opened this year.
The bulk of Melco's net profit last year included a non-recurring gain of $514 million from setting up the Melco-PBL joint venture.
Melco International Annual$mNet profit548.71Revenue600.64 EPS (?)52.19
