Melco Crown Entertainment LTD Breakup Will Affect Macau Gambling, JP Morgan Predicts

Melco Crown Entertainment Limited, a joint venture between Hong Kong-based business Melco International Development Limited and Crown Resorts, one of the largest gambling and entertainment enterprises to operate out of Australia, is to be split between the two organizations, ending a joint venture than began in 2004. JP Morgan Securities Australia Ltd has speculated that the Melco Crown uncoupling will negatively impact the gambling and entertainment industry in Macau.

International experts are now weighing in on whether a reunion of Crown and Melco could be feasible. The dissolution of the 13-year-old joint venture is poised to change the atmosphere of Macau’s Chinese-administrated gambling district.

JP Morgan Securities Australia brokerage analysts contend the move is probably not the right one to make at this time. An official JP Morgan Securities Australia LTD report held by Shaun Cousings, Shalin Doshi, and Donald Carducci states that the Melco International Development exit from Melco Crown is less than ideal given Crown Resorts’ most recent earnings report.

Melco International Development Ltd reported strong performance in the first quarter of 2017. Rolling chip revenue was strong, mass market performance was decent, and margins came in higher than forecast. The Melco company is said to be selling 165.3 million of its shares in addition to a concurrent repurchase of Crown Resorts shares, which are reported to represent an estimated 11% of Melco’s total. The share sale is scheduled to occur on or around the 15th of May, 2017.

Crown Resorts, meanwhile, is expected to use the proceeds from sales of its shares to reduce its debt holdings and financially restructure.

Melco Crown Entertainment Ltd was responsible for a string of entertainment establishments along Macau’s Cotai Strip, the most notable of which is the City of Dreams. Located directly across from the Venetian Macau, which is operated by the Las Vegas Sands Corporation, the City of Dreams’ four towers represent the Crown Towers Hotel, the Hard Rock Hotel, and two towers of the Grand Hyatt Macau.

In November 2016, Melco Crown Entertainment Ltd chairman Lawrence Ho announced the planned addition of a fifth hotel, Morpheus, to be completed in 2018.

The City of Dreams currently provides accommodations for 1,400 guests. Its casinos offer 450 gaming tables and more than 1,500 gambling machines. The megastructure also contains 175,000 square feet of retail shopping space spread over two levels, including more than 20 dining establishments. Special attractions located in the City of Dreams include the Vquarium, the retail space’s Bubble Fountain, and the Dancing Water Theatre, a 2,000-patron theatre with 70 VIP seats. The City of Dreams accounts for approximately 66% of Melco Crown Entertainment LTD’s revenues on the Cotai Strip.