Inside Asian Gaming

May 2009 | INSIDE ASIAN GAMING 7 T he recent media preview tour around the new US$2.1 billion City of Dreams resort at Cotai developed by Melco Crown Entertainment (Nasdaq: MPEL) was as interesting for what it missed out as for what it revealed. Crucially, the jewels in CoD’s VIP gaming crown (no pun intended) were not shown to reporters. These are the salon-style high roller table areas on levels 25, 26 and 27 of Crown Towers. Those premium areas are likely to be the real battleground for top-level VIP business on Cotai. They will be up against Las Vegas Sands Corp’s club-style gaming rooms attached to suites at The Four Seasons Macao, and against Paiza, the top line VIP club offer at The Venetian Macao. Priority CoD’s first task must surely be to build MPEL’s VIP business in Macau and/or take share from its industry rivals, given the enduring importance of VIP roll in the local market. Lawrence Ho, MPEL’s Co-Chairman and Chief Executive, acknowledges that a successful launch for CoD will be crucial for the future of his joint venture with the Australian casino operator Crown Ltd, led by James Packer. “We know the pressure is on us,” said Mr Ho, speaking at the time of the media tour. “The success of it will have major implications,” he added. Mr Ho arguably has a more sceptical investment community to deal with than does his father, the former monopolist in the Macau gaming market, Dr Stanley Ho. MPEL is listed on New York’s Nasdaq, and not the generally more Ho-friendly Hang Seng in Hong Kong. If CoD faces any glitches at opening, it shouldn’t be for want of operational cash. In late April Crown Ltd agreed to pump US$45 million in additional equity into the joint venture. The move is part of a US$165 million equity placement recently announced by MPEL. Operating cash MPEL said in a filing to the US Securities and Exchange Commission that it expected the placement exercise would produce a net income (less fees) of US$144.3 million, or US$160.5 million if an over-allotment option by the underwriters Deutsche Bank Securities Inc, Merrill Lynch, Pierce, Fenner & Smith and Oppenheimer & Co Inc is exercised in full. MPEL said in the same SEC filing it intended to use the cash to reduce debt on the CoD project; for funding growth of subsidiaries; for working capital requirements and general corporate purposes. Following the MPEL placement and assuming full exercise of the over allotment option, Crown’s ownership interest in MPEL will be diluted slightly to 36.4%. Towering Ambition Crown Towers’ luxury gaming suites could be City of Dreams’ secret weapons in the VIP war