Melco Resorts & Entertainment Ltd (MLCO) 2009 Q1 法說會逐字稿

Good morning and thank you for your participation in the first quarter 2009 conference call of Melco Crown Entertainment Limited. At this time all participants are in a listen only mode. After the call we will conduct a question and answer session. Today's conference is being recorded.

I'd now like to turn the call over to Simon Dewhurst, Executive Vice President and Chief Financial Officer of Melco Crown Entertainment Limited. You may proceed.

Thank you and good morning. Here in Hong Kong with me are Lawrence, Ted, Constance, and Greg Hawkins is also with us by teleconference from City of Dreams in Macau.

Before I hand the call over to Lawrence, please note that today's discussion may contain forward-looking statements made under the Safe Harbor provision of Federal Securities laws. I'd also like to caution you that the Company's actual results could differ materially from the anticipated results in those forward-looking statements. For further clarification please read the full disclosure in our press release. Lawrence.

Thank you, Simon. For those of you who know us you will know that we like to say it as we see it. And I believe that the worst is behind us in Macau and that we are we well on the road to recovery. There is no other gaming market in the world that I would prefer to invest in, given its location, regulatory stability and leverage to the powerhouse that is China, which will be the engine for growth in the global economy for decades to come.

Consider rolling chip volume, for example. Roll per day has been increasing in the Macau market as a whole since late last year. And this emergence of steady growth in the market has also been reflected at Altira Macau. February's roll was better than January, March was better than February and April was better than March. Indications are that May will be stronger than April.

I said on the last conference call the back-end of the fourth quarter of 2008 looked like it was the low point for the Macau market. Now the market is clearly not totally out of the woods yet and there is likely more room for growth. And we continue to believe that new supplies will lead that growth.

City of Dreams is less than two weeks from opening. Our goal has been to set a new standard for casino design and development in Asia, especially for the emerging premium mass-market customer. I'm confident that we will meet and maybe even exceed our ambition with City of Dreams.

As we've previously said the opening of City of Dreams is transformational moment for us. We shift from being an almost exclusively focused on operations rather than on construction and development. That said we believe that the project development expertise we have built up in the company over the last five years will serve us well in the future as new opportunities arise in Macau and potentially the region.

We take a portfolio approach to development at Melco Crown Entertainment. And though City of Dreams represents the largest component of our portfolio of assets in Macau, Altira will continue to be an important contributor to our success. It represents a differentiated corner in a market that continues to become increasingly segmented.

We have taken a number of steps to minimize the potential for cannibalization between the two properties and I believe that Altira will continue to be a credible competitor for market share following the opening of City of Dreams. Altira's primary focus is a rolling chip customer from China. There is a wide, clear demographic range within this universe and the bulk of Altira's playing comes from the (inaudible) end. Altira has a very limited cash or mass customer business due to its configuration.

We are fortunate to have an outstanding management team at Altira and they will remain completely focused on driving results at the property. The repositioning of Altira Macau is essentially complete following our recent rebranding. We believe Altira provides a highly customized environment for gaming promoters and their clients.

In contrast City on Dreams will focus on the premium mass-market customer. A much high margin business than rolling chip. City of Dreams will have a rolling chip component but its focus will be different from Altira. We will concentrate on direct customers at City of Dreams as well as business from overseas gaming promoters, two customer segments of the market that are currently not meaningful to Altira.

The [six room] operators planned for City of Dreams are different from those currently working with us at Altira Macau. They have been a very specific area of strategic focus for us over the past 12 months to get this right. At the same time, various cross marketing strategies will help capture additional revenue and cost synergies that will become available to us with the opening of City of Dreams. Overall, I'm confident in Macau's future and in our prospects.

I will now hand the call back to Simon for some more detailed commentary on the quarter under review.

Thanks, Lawrence. For the first quarter of 2009 we reported net revenue of $217m, 15% down from the fourth quarter of 2008. Our hold rate in the first quarter of this year was largely to blame, and this combined with rolling chip volumes, which were down sequentially by approximately 11%. I want to stress what Lawrence said earlier in the call, we've experienced repeat improvement in roll volume in every month so far this year at Altira. On roll to date basis we experienced roll volumes up 20% in April as compared with January.

Our adjusted EBITDA of $21m in the first quarter was 5% down sequentially. We benefited from a full quarter under the overhead reduction program at Altira Macau and we also reduced corporate overhead costs in the quarter under review. We will continue to work to identify further cost efficiencies which will become more apparent once we have multiple property operations in Macau.

As we've done in previous calls I will review a couple key issues related to our financial conditions. These are a review of our balance sheet and our view on the potential to monetize assets.

First, our already strong balance sheet was meaningfully enhanced by our recent follow on offering. As at the end of the first quarter of 2009 we have approximately $800m in cash or approximately $975m pro forma for the recent equity raise. In that transaction we raised $174m net proceeds with our founding shareholders, Melco and Crown, taking exactly 50% of the offering.

We expect to spend approximately $250m of our $975m on hand on construction and pre-opening preparations at City of Dreams from the end of the first quarter of this year until the opening on June 1. We fully expect that City of Dreams will be immediately cash generative.

Now I want to say a few words about the share placement. The primary purpose for raising additional funds was to put us in the best capital structure position possible as we look forward to 2010 and to move from having construction debt to having a more typical corporate loan facility supported by real cash flows.

Construction loans are by their very nature very cumbersome to operate and are a handicap to our further development. The funds we raised will likely prove to be very helpful to us as we look to replace or restructure our existing facilities.

Now the other question we get asked is do a placement now. And the simple reason for that is we remain cautious of global market conditions, which we cannot control or predict. So we stuck to our view that we raise money when we can and not when we need to. We've got no significant near term debt maturities with our $250m revolver maturing in 2012 and our $1.5b term loan fully maturing in 2014.

Our term loan is fully drawn and $200m of our revolver has been drawn. There are no plans to draw down the remaining $50m on the revolver. The first operating covenant tests under our debt facility are not expected apply until the end of the third quarter of 2010.

Finally, I wanted to also repeat that the budget for City of Dreams is unchanged from our previous update.

As of the end of the first quarter of 2009 our book value was roughly $5.40 per ADS, slightly below yesterday's closing price of $5.79.

Now my second topic concerns the opportunities for asset monetization in Macau. Monetizing the apartment hotel development opportunity at City of Dreams continues to be an attractive option for us but it is still too soon for us to make a formal decision to move forward with this opportunity. We will continue to constantly assess what might be a rapidly evolving situation.

Our motivation for pursuing the potential sale of apartment hotel units is to boost shareholder returns and not to provide us with a source of additional capital for committed construction or other purposes. Consequently, we're in a position to be opportunistic on the timing of any sales should we decide to move in that direction. We see the real estate market in Macau improving and we'll continue to closely monitor market conditions going forward.

Before I provide some underlying color on the current quarter I'd like to address our expectations for the opening of City of Dreams in relation to that of Altira in May of 2007. We made plenty of mistakes when we opened Altira but I want to assure you that there were also many lessons learned from those early missteps and we've taken every effort to avoid repeating them at City of dreams.

If I compare where we are with City of Dreams of today versus where we were at the same point with Altira the differences are dramatic and very favorable. Our management team is committed to doing it right this time around.

Now as I've done in past calls I'll give you some guidance on non-operating line items for the second quarter of 2009. Depreciation and amortization cost in the second quarter of 2009 is expected to be in the $33m to $35m range. Second quarter corporate costs should be approximately $6m to $7m. Net interest expense in the second quarter of 2009 is expected to be approximately $5m and pre-opening expenses for City of Dreams is expected to be approximately $70m. Second quarter capital expenditure is expected to be in the range of $300m to $340m.

Before I finish and hand the call back to the operator I just wanted to say that these conference calls are sometimes hard to follow since we're out here in Asia and there is a large amount of detailed information that we want to impart through them. So we will continue to give prepared comments before moving to Q&A on our calls.

As a reminder, Ted, Greg and Constance, our three business Presidents, are patiently waiting here with Lawrence and me, and so please direct your questions where you see fit. Josh, over to you.

Thank you very much, sir. (Operator Instructions). And our first question comes from the line of Larry Klatzkin from Klatzkin Advisors. Larry, you may proceed

Hey, guys, good luck with the opening here.

Thanks, Larry, good to hear from you.

Thank you, Lawrence. Is A-Max going to be in City of Dreams at all or is that still up in the air?

Larry, it's Ted Chan here. Ama at this moment does not have a concrete plan to go to CoD. But we recognize Ama as a very good partner for us and we do not rule out any possibility in the future if they can bring in new capital (technical difficulty).

Okay, that's fair. Did you guys buy a bus fleet or something to help get the customers around Macau to your property?

Sorry, Larry, could we, Larry, your first part of the question was cutting in and out. Could you repeat?

Have you guys -- do you have a set of buses or you maybe contracted with someone to transport people around from the borders and everything like that to your new property?

Yes, it's Lawrence here. I'll let Greg answer the question because we have a very comprehensive marketing plan. So, Greg?

Yes. The inbound transportation plan to City of Dreams is something we've put a lot of time and effort into. So the scale of that fleet, the branding of the fleet of buses, the scheduling into the bump-and-go strategy, we're expecting to execute is really in line with the largest volume operators in Macau. So we've put a lot of time and effort in terms of locational pick-ups and drop off at all inbound arrival points and obviously frequency is a key issue with the shuttle bus program activity as well.

So all of that transportation methodology and access to City of Dreams is a very strong strategic focus for us. As I said we're simulating the execution activity in both transportation inbound as well as our broad base operational readiness across the property as we speak.

How many buses did you guys buy?

The number's around 55 or so. Obviously there's scale of bus capacity as well, which comes into play in terms of large fleet [of business], smaller shuttles as well. So we've got a good mix and a flexible approach as to how we can optimize the utilization of that fleet.

Okay. And then, Lawrence, any word on the commission cap? Obviously that's going to be a benefit to you.

Yes, for sure, it's Lawrence here. We just had a Macau Casino Gaming Association meeting on Monday and obviously the commission cap was a topic of discussion. And we're glad to say that the government has replied to us and have liaised with us with the first draft of the proposed legislation. And I think the Chamber is going to get back to the government to coordinate this.

But at the end of the day, this is Macau government law and I'm sure there is a process that they need to go through. And I'm uncertain about the timing but at least from our standpoint it is positive, we've seen the first draft, so good news.

All right, well thank you, guys, and good luck with the opening.

Well, thanks a lot, Larry. So hope to see you soon.

And our next question comes from the line of Karen Tang from Deutsche Bank. Karen, you may proceed.

Hey, guys, it's Karen here. Congratulations on getting one step closer to the opening. My question's with regard to the marketing strategy.

Karen, it's Lawrence. Sorry, can you speak a little bit louder, we can barely hear your questions.

Sure, this hopefully will be better. My question is with regard to your marketing strategy up in China. In Hong Kong we have already seen some of the TV advertising or magazine promotions on City of Dreams. I'm just wondering what kind of marketing strategy you're doing up in China to target your mainland customer base.

And my second question is with regard to the VIP junket. How many of the VIP junkets have you signed up at City of Dreams? Thanks.

Well, again, Karen, it's Lawrence here. Well, I'll direct the question to Greg because at the end of the day Greg and the marketing team have down a tremendous job. And have actually used a very innovative approach such as doing road shows in China and they've been met with some very positive reviews and publicity. So, Greg, maybe you can highlight what you can with regards to the marketing plan.

Sure, I think the various approaches we're taking to the pre-opening marketing strategy is really straddled across an aggressive approach to PR momentum, people in the mainland China. So we've taken a number of road shows, as Lawrence referred to into key Chinese cities both in Southern China and other areas as well, which is really taking significant awareness, product amenity overview, experience and expectations on service experiences, into the key market.

So in each of those areas we have met with many hundreds of journalists and they'll start to diffuse, which has been happening for some time, the awareness through various media forms into those key markets. Running in tandem with that across a managed schedule is a firmer advertising approach, which is both about I guess tactically driven with regards to the experience and giving the range of products but also building the momentum around the awareness of the opening date for the property as well.

So I guess it's a combination of PR, formalized approach to media positioning and awareness strategy is something that from our point of view is building to a significant momentum now, which will drive a strong awareness and inbound visitation into the property. And particularly focusing on the key elements of differentiation which City of Dreams brings to the market.

From a VIP junket point of view I'll just say a few words and, Lawrence, by all means if you want to follow on. As we referred to before the objective for VIP operations at City of Dreams is really to ensure overall incremental business into the [Melco] portfolio. So junket operators which we are currently interacting with and I believe it's a very positive demand in terms of inbound positioning at City of Dreams. Broadly new junkets into the portfolio so that as we progress the identification and the commercial finalization of those, that will become public.

As we have discussed previously before I think the key with City of Dreams in terms the amenities we have here, particularly across the clientele with our [total] portfolio and the purpose built (inaudible) VIP areas, which clearly we've had a significant amount of experience in operating now in Macau so the design elements really reflect what we think the market wants. We built it to really push into that strong direct market from a VIP point of view is something which we're fully focused on.

The added advantage of that market as well is that obviously can come with a higher margin component as well. So any responses to those questions, Lawrence, I'll hand back to you if you want to add any further comments.

No, I think you articulated that very well.

Actually I have one follow-up question. Greg, you mentioned differentiation. Can you highlight to us in a simple one or two line sentence what differentiates City of Dreams from the rest?

Not sure I can do that in a one or two line sentence. But I guess realistically what City of Dreams is bringing to Macau, from my point of view, is the next generation of resort experience. So part of the evolution of Macau experiences, City of Dreams is a broad based integrated resort.

By nature of that we're very diverse, our multiple brand alignment across brands powers, to Hard Rock, to Hyatt, to retail areas are something, which are all very new. The market, whether or not it's a frequent visitor market to Macau or new visitor market to Macau, in my view is continually after new experiences.

The design elements which we offer absolutely world class, the tourist based elements are second to none. So, for example, our Bubble Theater we think is absolutely world class, in fact we know it. And it will become not just an attraction for City of Dreams but a must-experience attraction for Macau and this part of Asia as well.

So I think the amalgamation is significantly evolved design elements, which segment across the gaming environment. And obviously our gaming environments are particularly exciting and varied enough to really appeal to a broad based demographic, combined with the overall design which is both sophisticated, it's convenient, our retail is very well scaled, our range of hotels is diverse so I think again suit various markets positions us particularly well. So it's probably more than a couple of sentences.

and our next question comes from the line of Grant Chum. Grant, you may proceed.

Good evening. The first question on capital expenditure. What do you -- can you guide us a little bit on how much cash CapEx will be spent between when the property opens and the end of 2009, and just give some indication on the phasing of that?

Yes, Grant, hi, it's Simon. As I've already steered in my prepared comments, the CapEx from -- I'll give the complete picture so that it's clear for everyone. The CapEx from the start of the second quarter here until the point when we open two months in, June 1, is about $250m. And that obviously includes all of the pre-opening expenses that we have associated with the property as well.

And then once we've opened the property, we have in total around about $500m of CapEx still to go, and of that $500m, $300m will flow during the remainder of 2009, and approximately $200m will flow during the course of 2010. As far as the phasing of the $300m is concerned over what is seven months, it will actually be quite smooth right across that period.

We are obviously working up to the opening of Phase 2, which is the Grand Hyatt property, and completing construction works at the theater, and the retail components associated with both of those parts up through the end of the third quarter of this year. And then obviously you go into the probably 12 month long process after all construction is completed, you settle out final accounts, and you deal with retention amounts and so on. So hopefully that's the color you're looking for, Grant.

Great, great. And that's great, Simon. And just a question on hiring, maybe this one is for Greg. Can you just update us on your hiring ramp-up in City of Dreams for the opening? And I think recently you said that you would open with somewhere close to 7,000 employees. I'm just wondering if you could give some color on the kind of wage levels we're seeing? And then also once Grand Hyatt Towers open, what will be the total FTE by the time Phase 2 is open?

Sure, Greg. The -- you put it in an overall (inaudible) very well, so obviously being relatively close to open we have the full -- broadly the full contingent of headcount on board currently. So we're hitting around the 6600 mark in terms of direct headcount. We'll have some further contracts of course across that, and I think as we signaled today again, we've had that team on board, really working through a fairly formalized simulation activity and load testing of various components of the property.

I think we're very confident, as Simon expressed before, that the ability to access the site and some of our -- the relations that we've had, which are very positive from a contractor point of view, have enabled us to be in a very strong position for opening.

I think the labor pool we've taken on board we have approached to ensure we can put as much flex into that as possible, so obviously being conscious of OpEx in the current environment, so the ability to look at part-time ratios and progressing recruitment more on a 40 hour basis as opposed to a 48 hour basis is something that we think we've executed well.

And I guess to answer your question generally, I'm quietly confident that our labor costs on a per head basis will certainly be above the lower end of the market, partly through the ability to recruit at a time when others are perhaps trying to scale, but it is our big focusing on both 40 hour and part-time. I think it puts us in a very strong position in terms of overall labor OpEx.

From a hired point of view, those numbers are being crunched at this stage. It will probably anywhere from 1500 to 1800 incremental on top of that number, so that would be a broad guidance at this stage, Grant.

Okay, that's great. And just a final question, I don't know whether Ted or Greg can best answer this for me. In terms of just some general commentary on the health -- the financial health of the junkets generally in Macau right now, and the level of risk appetite in extending credit to customers and their own working capital cycle, can you give some commentary on what you've seen in recent weeks?

Sure, Grant, it's Lawrence here. So obviously Ted is living and breathing this every day, and working with Ama and our various junket operators, so maybe Ted can give us some color on this?

So, Grant, I think it's quite in line with the performance in the last quarter, and last -- particularly in the last three months' time. You can see the fall of -- the rolling chip [board] improving every month, and that is actually [prime selling]. Some of your (inaudible) capital helping [us] all, the junket itself. And we do sense that there is a huge improvement, particularly in the last few months' time that the capital recovery of (inaudible) over the last two or three months.

Thanks, Ted. Thank you very much.

And our next question comes from the line of Cameron McKnight from Buckingham. Cameron, you may proceed.

Thanks guys, good morning.

Hi, Cameron. Good morning.

This is a question for Lawrence. Lawrence, in your comments on your positioning on City of Dreams, it sounds like you're going pretty squarely after Wynn's business, in particular VIPs from outside of mainland China and direct, and premium mass customers. How confident are you that you can take that business?

Well, Cameron, I think, first of all, I don't think we are targeting Wynn's business, because after all, we are developing a next generation integrated resort in Cotai. So -- and a big component of our business is how we have segmented the City of Dreams itself. If you could literally go to Crown Towers without having to visit -- if you're a real premium direct VIP you can literally go to Crown Towers without visiting Hard Rock, the mass casino, or Grand Hyatt.

So I think it's a very, very different proposition from Wynn or Venetian or anything in the market. So I think it's really an accumulation of five years of hard work and effort of the whole team.

And this is Simon, Cameron. I just wanted to add to that that short term, I think that the view is given just the broader market dynamics at the moment that the business that we're able to generate will, to some degree, come from existing properties in the marketplace.

But we're absolutely convinced, particularly given the type of product that City of Dreams is, that new supply continues to drive the market, and that phenomena has not gone away. So this isn't really about cannibalizing business away. It's about building Macau into the future, and City of Dreams is an important part of that.

Okay, got it, thanks. And can you give us some color on when you'll get to the full 400 or 500 tables at City of Dreams?

We'll open with all of the tables at City of Dreams.

Okay and what's the final table count there?

Greg?

Yes, the final table count is 519, so we'll open with 376 tables across our mass areas and 143 across our VIP areas. That's both for the junkets fixed as well as direct in the Crown Towers.

Okay, great, thanks. And just a general question, probably for Lawrence. Lawrence, since Q4 of last year, would you say that working relationships between the operators in Macau have improved?

Yes, I think the fact that the operators have formed the Casino Chamber is definitely a positive step forward, because there are Macau and industry specific issues that we all share a common interest in. So yes, I do think it's a lot more cordial than it has ever been. And I think that's very positive for the development of Macau in general.

Great, thanks very much.

Thank you.

Thanks, Cameron.

And our next question comes from the line of Brett Pulley from Bloomberg News. Brett, you may proceed.

Thank you. Could you guys expand a little bit on the abnormally high win rate? Is there any one individual, or is there any -- are there any singular factors or flavors that you can point to that led to this result?

Brett, this is Simon. I presume you're not referring to our first quarter results, because we didn't have an abnormally high hold rate. We actually had a hold rate that was below where we expect it to be. We held just under 2.8% in the first quarter and we normally expect hold to be around about 2.85%.

But having said that, you might be referring to what has been some very, very high holds that have existed during the first quarter across the broader market rather than specifically with us, and I would simply say that hold rate moves around, and over the long term -- over the long term it sorts itself out. And volume is the key component to that. Once you've got the volume and there you'll find that the volatility smoothes quite quickly.

Well, forgive me if I'm terming it incorrectly, but I'm referring to the decrease in revenue that was primarily driven by an abnormally high win rate.

Okay, so the decrease in revenue in first quarter '09 as compared with the first quarter '08 is due to us having had a high hold rate back in 2008.

I see.

We had a lower hold rate in 2009. We held at 3.1% in 2008 first quarter, and we held at 2.79% in the first quarter of 2009. And as your hold rate comes down, so obviously your revenues come down.

Thank you.

(Operator Instructions). Our next question comes from the line of Anil Daswani from Citigroup. Anil, you may proceed.

Hi, a couple of questions from me. The first one, can you guys possibly comment on junket commission at City of Dreams? Will it be at the same sort of basis as of Altira, or are you guys going to go around the same approach as the other big mass market players such as Wynn and LVS?

Yes, hi, this is Simon, Anil. The model that -- we're going over old ground here, but the model that we have followed at Altira is one where we've outsourced credit. And we are not following the same outsourced credit model at City of Dreams.

If you go down the outsourced credit model that we have at Altira, there is a margin that you need to pay for outsourcing that credit, which sits on top of the commission rates that you're paying for the junkets to bring the players to the table.

And so you should expect that our commission rates will be very much in line with what you see at the other integrated resorts in the marketplace. We are competing with comparable products in an outstanding location, and we can compete on a level playing field.

Thanks. The other thing I wanted to touch base on just a little bit is you've given us some great guidance for the second quarter, but once everything's fully operational in the third quarter could you possibly give us some guidance on SG&A and also corporate expense interest and so on, because clearly there's going to be a material shift in these accounts as we go through to the full scale opening of COD.

Yes, I'm not expecting our corporate cost structure to change dramatically. We obviously have had costs in centralized areas that have been very much supportive in the process of project management and in the process of recruitment, which have been areas of very significant focus for us for the last few quarters, and we're going to be able to go in there and work out how we can restructure that to recognize the business as an operating business rather than as a development business primarily, post the open of City of Dreams.

It's not immediate. We've still got work to do at City of Dreams through the second and third quarters of this year. So there is going to be some pull-back there. But basically I would assume -- I would forecast that corporate costs will stay pretty much flat.

On the interest side of things, it's a little bit more complicated, because obviously as we move to open, the interest that we've been able to capitalize can no longer be capitalized. So it's being charged to the P&L account.

I've steered net interest expense for the second quarter as $6m. Obviously that's one month's worth, so if you times that by three, you've got a pretty good idea as to where our interest expense will flow out on a quarterly basis going forward. Is that all right, Anil?

Cool, and the other thing I wanted to touch base on was at the moment they still haven't opened the road, if I'm correct, between the Venetian and you guys at the City of Dreams? Is that something that will be addressed by opening, or is that something that will happen later on?

Anil, it's Lawrence here. Good to hear from you. The road, as we speak, we are knocking down the blockades, so it will definitely be ready. All the roads, north, south, all the roads will be ready. Right turns and pedestrian crossings, they will be ready. Pedestrian crossings I think is probably one of the keys, all those will be ready by June 1.

Fantastic. Good luck with the opening, guys.

Thanks, Anil, see you soon.

And our next question comes from the line of Simon Cheung from Goldman Sachs. Simon, you may proceed.

Hi guys, I have one quick question that is the guidance on your City of Dreams. Can you give (technical difficulty)? What sort of rolling chip turnovers, overhead costs, specifically for City of Dreams on opening, and the timeframe of until you've got full opening, what's all of -- how long does it take you to get it up and running on a (multiple speakers)

Yes, Simon, this is Simon. We're not going to provide guidance for City of Dreams at this point in time. You will appreciate that we haven't given guidance on any of our properties before they've opened previously, and that's a policy that we follow and we'll stick to it.

We obviously spend a lot of time conversing with sell-side analysts in the market, and we think that the consensus out there is not vastly inconsistent with what we expect from the property as the base line. So I would point you to that, and your own research.

And, Simon, it's Lawrence here. In terms of operational ramp-up, maybe I'll direct the question to Greg. But I think from a Melco Crown Entertainment standpoint, we were deeply humbled by our previous Crown Macau opening experience, and this time around, we believe that we are very well prepared, and we currently, as we speak, have actual simulations going on at City of Dreams, and a lot of effort has been put in by the City of Dreams team to train our employees. So we are feeling good. So maybe I can ask Greg to give a bit more color on operational ramp-up.

Great, thanks.

Sure, thanks, Lawrence. A couple of key points which we hadn't referred to already, so I think properties. The handover from the contractor has progressed particularly well, so definitely in line with the schedule expectations, and just as importantly, the quality of work as we have taken that over from the contractor has been something that we're very, very happy with.

So really the focus from a property point of view is really on finalization of some of the external landscaping and road works that we've referred to previously and some of the minor (inaudible) specification. We've touched on recruitment, so again, as Lawrence referred to, we're deep into simulation at the moment.

That's an important part of preparing ourselves for the going live period, and that's really the chance to say to our team, who are as you would expect are very energized and very passionate at the moment (inaudible) to as real a life scenario pre-opening as possible, and we load that at various levels, just to increase the pressure relative to what we expect post-opening. And we'll obviously finalize that leading into the final weekend prior to opening, and then progress through, deep cleaning the property, etc, and final (inaudible) and preparation.

From a licensing point of view, from a governmental perspective, we're working very collaboratively with the various government agents as we work through the licensing process. It can be quite a sophisticated area to work through and we've had exceptional teams working on that, so we're in very good shape and feeling confident with regards to the licensing matters as they come to a final process as we speak, and I've spoken to the marketing activity previously. So I think we're putting all that together.

We're quietly confident in terms of our readiness for June 1. We've touched on some of the previous marketing relativities in strategic areas across the key market segments, so we're in overall good shape. We certainly expect to come out of the gate quickly in terms of cash flow, and I think similar to most other operations over Macau, across the progression, progressive quality. We see improvement in margin coming through, so we're feeling quietly confident with those.

And our next question comes from the line of Larry Klatzkin, Klatzkin Advisors. Larry, you may proceed.

Hey, guys, just a follow-up. Lawrence, now that you're getting done with your construction cycle, some opportunities seem to be developing outside of Macau and some in Asia. Are you guys still looking to pursue some of that?

Larry, I think our principal focus for the next 12, probably 18 months, is really to make sure that our core assets in Macau, City of Dreams and here in Mocha, are all operating and running as smoothly as they can. So I think at this point in time, although there are developments in Asian markets, I don't really see too many of our competitors rushing in either.

So we will definitely keep an open mind and with a close eye on it, but the focus really, and I reiterate, in the next 12, 18 months is really that our Macau assets are delivering fantastic shareholder value to our shareholders.

All right, that's fair. Thanks a lot, guys.

Thank you.

And at this time we are showing no further questions available. Mr. Dewhurst, you may proceed.

Thank you very much. Thanks very much for listening in on our conference call through the course of today, and we look very much forward to reporting back to you in another three months' time with some information about City of Dreams. Thank you.

Thank you for joining today's conference call.