Melco PBL Shares Tumbles 50%

Written on January 17, 2008 by Macau

Melco PBL continues to lose favour with investors, having lost 50 per cent of its value in the past three months. The slide continued in the US, when the shares fell a further 3.8 per cent to close at $US9.95, slightly above a record low $US9.49 last Tuesday.

The fall has been attributed to various factors including uncertainty surrounding predicted earnings due to a flurry of casino and hotel openings squeezing revenues, a $US400 million ($452 million) shortfall in development funds, and fears of Chinese authorities changing gambling policies arbitrarily, according to the Sydney Morning Herald yesterday. Melco PBL has also delayed the final purchase of the land for the third project on the Macau Peninsula, Trinity, and says it is unlikely to secure the land until the middle of this year.

Trading in Melco PBL has been volatile since it listed on the US Nasdaq market just over a year ago at $US19 a share. It rose to as high as high $US23.55 on December 19, 2006.The company has been dogged by cost overruns on two of its Macau projects, volatile VIP visitor numbers, a threatened crackdown on visitor visas by Chinese authorities and concern about oversupply of casinos in the enclave. Falls in Melco PBL’s share price in November and early December were blamed on concerns its junket agency, AMA, would not get funding.PBL, which has since demerged its gambling interests into Crown Ltd, contributed about $US400 million for an initial 43 per cent stake in the company in December 2006.

It also transferred to it a $US900 million casino licence. After a series of capital raisings, Crown now has a 38 per cent stake. PBL and Melco’s six-star casino and resort, Crown Macau, fully opened last August after a gala opening in May. The first stage of the $US2.3 billion City of Dreams project is to open late in March 2009. Putting the heat on Melco PBL have been recent openings of big, brash casinos such as last month’s $1.5 billion MGM Grand Macau. But Mr Packer’s recent move to invest in Pennsylvania is looking up, with an international gambling consultancy report released yesterday saying that poker machines in that state were yielding higher profits for casinos than in any other state on the US east coast.

ASX-listed Crown, in which Mr Packer is a major shareholder, last month agreed to buy Pennsylvania racetrack-casino The Meadows, which has more than 1700 poker machines and is set to expand to 3000. Each of these machines grossed $US347 a day between September and November last year.