MELCO Resorts and Entertainment Ltd. expects stiff competition in Entertainment City, the country’s main gambling site where four major integrated resort and casinos are located.
Lawrence Ho, the company’s chairman, said they are more cautious on its Philippine operations, the City of Dreams (COD) Manila. Melco owns half of the casino and is also its operator.
“The City of Dreams Manila in the fourth quarter of 2018 delivered its 12 consecutive quarters of luck—adjusted Ebitda growth. However, due to competition in and around Entertainment City, we’re more cautious about 2019 and beyond,” he said in a transcript of the company’s earnings call.
COD Manila had a net revenue of $155.2 million during the fourth quarter of the year ending December, down 7 percent from the previous year’s $167.5 million.
It generated adjusted earnings before interest, taxes, depreciation and amortization of $67.9 million for the period, up 26 percent from the previous $53.8 million. The year-on-year increase in adjusted Ebitda was mainly attributable to better performance in all gaming segments.
Rolling chip volume was down to $2.4 billion in the fourth quarter of 2018, from $2.9 billion in the fourth quarter of 2017. The rolling chip win rate was 3.7 percent in the fourth quarter of 2018, from 3.1 percent in 2017.
The expected rolling chip win rate range is 2.7 percent to 3 percent.
Mass market table games drop increased to $197.3 million for the fourth quarter of 2018, compared with $189.2 million in the previous year.
The mass market table games hold percentage was 31.4 percent for the period compared with 30.9 percent in the fourth quarter of 2017.
Total non-gaming revenue at City of Dreams Manila for the period was at $29.4 million, down from $31.4 million in 2017.
Geoff Davis, Melco’s chief finance officer, said the Philippine operation delivered “luck-adjusted Ebitda of approximately $61 million, representing an increase of 4 percent year-over-year.”
The luck adjusted result is calculated using the actual result plus the total unnormalized luck rate.
“The luck-adjusted Ebitda margin at COD Manila declined by approximately 120 basis points quarter-over-quarter, but increased by approximately 120 basis points year-over-year to 42 percent,” Davis said, attributing the quarter-on-quarter Ebitda margin drop to a $2-million one-time bad debt payment.
“Adjusting for that, the luck-adjusted Ebitda margin from COD Manila would have been broadly flat quarter-over-quarter,” he said.
Melco said gaming machine handle for the period hit $933.6 million, up from the prior year’s $793.3 million.
Gaming machine win rate was 5.3 percent in the fourth quarter of 2018 versus 5.5 percent in the previous year.