Big Casino

The $5.9 billion Marina Bay Sands, the world’s No.2 most expensive casino after MGM Mirage’s CityCenter in Las Vegas, has opened in Singapore. Photo: Reuters.

KATE LAHEY

Crown Limited has scotched speculation it is preparing to sell its stake in Macau casinos, saying it is committed to the investment because of its exposure to the flourishing Chinese market.

Crown yesterday reported a return to profit in the first half of the financial year, of $115 million, as it climbs back from $1.7 billion in write-downs.

The chief executive, Rowen Craigie, credited the Macau market with ”growing the pie” of high-rollers for Crown’s Australian venues and said the group had no plans to leave the area.

”We’ve had no negotiations with any party and we’re committed to our investment in Macau,” Mr Craigie said.

The US casino giant Harrah’s Entertainment is believed to be eyeing Crown’s interests in Macau. Crown has a 32 per cent stake in Melco Crown Entertainment, which operates Altira Macau and City of Dreams. That investment gave Crown a $48 million share of Melco Crown’s reported loss for the period, attributed largely to the casinos taking less from gambling tables than expected.

In Melbourne and Perth, VIP gamblers turned over a record $23.4 billion for Crown in the first half, an increase of 23 per cent on the year before. The VIPs – drawn increasingly from China – won $12 million more than they were supposed to but still delivered $316 million in revenue.

Growth on the main gambling floors was slower than in the VIP areas due to renovations – revenue was up 1.6 per cent.

Crown’s total revenue for the six-month period was $1.2 billion, down 0.3 per cent on the same time last year. Normalised revenue growth was 7.1 per cent.

The Deustche Bank analyst Mark Wilson said the results indicated Crown was on track to achieve earnings growth of between 4 and 6 per cent a year over the next three years.

Crown is yet to decide if its disastrous investments in North American casinos are a total loss. They were written down to zero but the chairman, James Packer, has expressed hope that Crown may recover something.

Yesterday, Mr Craigie said the US market was ”very depressed”.

”We wouldn’t expect to get much, or anything really, from either Fontainebleau or Stations, but Harrahs is a chance and we just need to see how that unfolds,” he said.

Crown was yet to see the effect of the new Singapore casino and another due to open soon, and the company had no opinion on a proposal before the Victorian government for a second casino in the regional town of Mildura.

Work on Burswood’s main gambling floor is expected to finish in this half and Crown plans to open its new Metropol hotel in Melbourne next month.

Crown shares rose 17c yesterday to close at $8.

An 18c dividend franked at 60 per cent is due to be paid to shareholders on April 23.

AT A GLANCE

Sales $1.2b -0.3%

Profit $115m +128%

EPS 15.2c n/a

Dividend 18c steady

Sands China and its parent, the casino company controlled by billionaire Sheldon Adelson, raised $HK19.4 billion ($2.8 billion) in a Hong Kong share sale conducted at the low end of its forecast range.

A total of 1.87 billion shares were sold at $HK10.38 each, compared with the $HK10.38 to $HK13.88 that the company sought, according to Bloomberg data. Sands joins Wynn Macau Ltd. in selling shares in Hong Kong after other casino operators surged this year. Las Vegas Sands Corp.’s shares surged 176 per cent this year, after dropping 94 percent in 2008.

Sands China’s share of the proceeds, together with $US1.75 billion in bank financing, will help it resume construction of the 13.3 million square foot (1.24 million square meters) casino-resort that was halted in November 2008 after credit markets seized up and revenue dwindled.

The completion of the project will help strengthen Adelson’s challenge to 87-year-old magnate Stanley Ho, who controls SJM Holdings, the biggest casino operator by market share in Macau, the world’s largest gambling hub. Adelson, 76, is betting that more convention space, hotel beds and shopping malls will entice visitors to stay longer in the world’s biggest gambling hub.

Bloomberg News

OSKAR GARCIA

Saying his 37 percent stake in MGM Mirage should be worth more, billionaire investor Kirk Kerkorian said Tuesday that he may cut his investment in the struggling casino operator.

Kerkorian, 92, MGM Mirage’s majority stockholder until this year, said through his investment firm Tracinda Corp. that he is “exploring the possibility of strategic partnerships or other alternatives” for his stake in the Las Vegas-based casino company.

But Tracinda also said there might not be any change.

MGM Mirage chief executive Jim Murren noted on Tuesday that Tracinda has a long history of capitalizing on situations where investments are undervalued.

“Its play book is large and would be worthy of an NFL team,” Murren told The Associated Press.

“I can’t speak for what their intentions are right now, but I can say that their investment intent has apparently changed,” Murren said. “And it’s gone from one as somewhat a passive investor to one that’s going to take a more active role in attempting to increase shareholder value for all shareholders.”

MGM Mirage had announced minutes earlier on Tuesday that its third-quarter earnings will show a $955 million charge to reflect the falling value of CityCenter, its $8.5 billion joint venture on the Las Vegas Strip.

MGM Mirage said its stake in CityCenter was worth about $2.44 billion as of Sept. 30.

CityCenter had to reevaluate itself after cutting prices on its nearly 2,400 condos this month to parallel a decline in Nevada’s real estate market since the units went on sale in January 2007. The 67-acre project is a 50-50 partnership between MGM Mirage and Dubai World, the investment arm of the Persian Gulf state.

A one-and-a-half year slide in Las Vegas gambling revenue also has hurt MGM Mirage and its shares, which closed at $11.93 on Tuesday, up 1.1 percent for the day but down more than 87 percent from their peak Oct. 23, 2007, when they closed at $92.69.

Tracinda said it would not act until late December, after the casino at CityCenter opens.

“There is substantial unrecognized value in MGM Mirage and CityCenter that is not reflected in the market value of MGM Mirage’s stock,” Tracinda said in a statement.

Shares of MGM Mirage jumped early to $12.26 one minute after the market opened Tuesday, but soon fell to around its Monday closing price.

Analysts and other investors closely watch Kerkorian, who lost his majority holding in MGM Mirage in May when the company issued new stock and he didn’t buy enough to maintain the stake.

This isn’t the first time Kerkorian has signaled he might change his MGM Mirage stake, but investors are more likely to believe something will happen this time because he let his majority stake slip, BMO Capital Markets analyst Jeffrey Logsdon said in a note to clients.

Murren said investors are regaining their interest in casino and hotel companies now because of a sense that the economy is turning around.

“I know just from the dialogue that we’re having that there are more people interested in the gaming sector than earlier this year when the future of a lot of these companies in the industry was in doubt and the economy was in worse shape,” Murren said. “We’ve turned the corner.”

Kerkorian also referred in 2007 to “substantial unrecognized value” when he tried to buy CityCenter and the Bellagio resort next door from MGM Mirage.

MGM Mirage said it will report charges of about $200 million before taxes on its third-quarter results for its share of the write-down in CityCenter’s residential developments, in addition to the $955 million charge to reflect the project’s overall drop in value.

“Investors have long expected (and will probably expect further) write-downs of the carrying value of its residential towers at CityCenter,” Logsdon said. “We do not expect investors to have a negative reaction to this step.”

Murren _ who has credited U.S. Senate Majority Leader Harry Reid with calling banks on behalf of the casino company to help CityCenter’s funding _ said news for the past year and a half about CityCenter has focused on its financing troubles, and perceptions about the project will take a while to change.

Casino operator MGM Mirage says its CityCentre joint venture with Dubai World, the investment arm of the Dubai government, is not affected by Dubai World’s request to delay repaying billions in debt and will still open on time.

Dubai World, which has about $US60 billion ($A65.7 billion) in debt, said on Wednesday it asked creditors if it could postpone forthcoming payments until at least May.

The news revived worries about bad debt and sparked concerns of a ripple effect around the global financial system. World markets dropped on Thursday when Wall Street was closed for the Thanksgiving holiday.

MGM representative Yvette Monet said in a statement the joint venture was unaffected by Dubai World’s announcement.

“CityCentre is fully funded, on schedule and ready to begin welcoming guests starting next week,” Monet said.

CityCentre is an $US8.5 billion ($A9.3 billion) casino complex in Las Vegas that is half-owned by Dubai World. The 27-hectare development of plush resorts, condominiums, a retail mall and one casino on the Las Vegas Strip will start opening in phases on Tuesday.

Earlier this month, MGM said it lost $US750.4 million ($A822 million) for the three months that ended September 30 because of falling revenue, and it wrote down the value of the CityCentre project.

Investor Kirk Kerkorian has said he may cut his 37 per cent stake in MGM.

aap