Melco Crown Outlines IPO Risks at Las Vegas Sands, MGM Too (MPEL, LVS, MGM, WYNN)

Melco Crown Entertainment Ltd. (NASDAQ: MPEL) is holding up better than many might have expected after the stellar rise seen in the casino stocks with Macau ties.  Melco Crown turned a wider loss over a year ago, despite a 70% revenue rise.  The loss was on a net basis rather than operating basis on higher depreciation and related expenses as well accounting for interest payments from the City of Dreams project.  This has implications for the coming Las Vegas Sands Corp. (NYSE: LVS) IPO, and possibly even for MGM Mirage (NYSE: MGM) after Wynn Resorts Ltd. (NASDAQ: WYNN) managed its IPO for Macau.

The net loss was $39.5 million, or -$0.08 EPS. The good news is that Thomson Reuters was at -$0.09 EPS.  The 70% revenue jump was to $500.3 million, but that was short of Thomson Reuters figures of about $520 million.  The revenue gain was due to the opening of City of Dreams in June 2009.

The company said that its estimated share of gross gaming revenue in Macau was approximately 17% in the third quarter.  The CEO further noted, “…. It is important to note that our gross gaming revenue market share has been achieved with player rebate rates at City of Dreams set at a level that is compliant with the announced commission cap legislation…. Our grind mass market business has demonstrated sequential volume improvements across the reporting quarter and this growth trend has continued into the fourth quarter of this year. We have not yet reached our full potential in this segment and the recent opening of the Grand Hyatt Macau is now having a positive impact on performance….”

Las Vegas Sands Corp. (NYSE: LVS) is on deck for its overseas asset IPO soon.  The company did confirm that it will resume construction in January on massive gambling resort.  The company had suspended development because of funding and operations elsewhere.

Las Vegas Sands started offering the IPO out on Monday and the hope is to raise some $3.3 billion from the deal.  Of that, about $500 million will be used for restarting the construction.  The company will also pay down a large chunk of debt.  This IPO follows a very similar IPO path already seen by Wynn Resorts Ltd. (NASDAQ: WYNN).

Because of Wynn’s success, it seems that even MGM Mirage (NYSE: MGM) may get in on the Asian asset IPO game.  What is still true is that the opportunities are huge for Macau and those companies operating there can realize significant rewards.  But this is not without risk and not without regulation at the local level.

JON C. OGG