Crown gambles on a Macau upside

The Age

Saturday August 29, 2009

By VANDA CARSON

THE decision by James Packer's Crown Limited to write down its US assets by $1.7 billion has turned the spotlight on the performance of the company's remaining assets €” its Australian and Macau casinos.Fortunately for the company, its Crown Melbourne and Burswood casino in Perth are both performing well, posting a 5 per cent increase in earnings in the 2008-09 financial year.And this is expected to continue, with the main gaming floors of both growing at 5 per cent over the first seven weeks of the new financial year, a trend which is expected to continue.While VIP turnover at Crown Melbourne and Burswood reaches all-time records, Crown chief executive Rowen Craigie is less certain about the prospects of the company succeeding in its attempts to grab a share of Macau's $US14 billion ($A16.8 billion) in gaming revenues through its 33 per cent stake in the Nasdaq-listed Melco Crown Entertainment.Mr Craigie said on Thursday that the "recent data indicates that the business environment in Macau is improving"."Gaming revenues [for the whole of Macau] are up year on year in July, which is the first monthly increase since November 2008," Mr Craigie said. "And early reports indicate that August revenues are well up on the previous August."But figures released by Melco Crown Entertainment and the Macau Government tell a different story.The Melco Crown figures show the number of gamblers visiting the flagship new Macau casino, the City of Dreams, fell by 11 per cent last month.An average of 37,000 people a day visited the $US2.1 billion casino in July, down from 41,000 a day in June, its first month of operation.The most recent official figures from the Macau Government, on gambling revenues in the three months to the end of June, show gambling revenues in the territory fell 12 per cent to 25.6 billion patacas ($A3.9 billion).It is the third consecutive quarter of negative year-on-year growth in gambling revenues.Of most concern to Mr Packer's Melco Crown Entertainment was the 19 per cent slump in revenue from VIP baccarat to 16.3 million patacas in the three months to June.Updated figures for July, August and September will be released in October.Melco Crown figures also show that over the past three months the average amount of money won by the house on table games at the Altira casino was half what it was a year ago.The average house win each day was $US10,800 a table in the three months to June, compared with $US22,600 in the three months to June last year.The City of Dreams is also struggling to attract enough mass-market players, who are the highest-profit margin players.Mass-market players are important to the casino because they generate a profit margin of 26-30 per cent, compared with just 6-8 per cent for the high rollers.City of Dreams management is aiming for about 40 per cent of its revenues to come from the mass market. The current contribution is 30 per cent.

© 2009 The Age

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