Melco Resorts & Entertainment Ltd (MLCO) 2009 Q4 法說會逐字稿

Good morning, and thank you for participating in the fourth quarter 2009 earnings 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 will now turn the call over to Simon Dewhurst, Executive Vice President and Chief Financial Officer of Melco Crown Entertainment Limited. Please proceed.

Thank you, and good morning. Lawrence, Greg, Ted and Constance are all dialed in from Macau via a conference call link-up this morning. Before we get started, please note that today's discussion may contain forward-looking statements made under the Safe Harbor Provision of Federal Securities Laws. Our actual results could differ from our anticipated results. Lawrence.

Thanks, Simon. Good morning, everyone. I am dialed in from Macau and, since the phone lines are not always so clear, I'm going to ask Simon to provide a comprehensive overview on some more detailed operational matters in a minute. But before I do that I want to reiterate a fundamental point, which is that we take a long-term view on our business in Macau. Our fourth quarter has been a tough quarter as we work through important changes to our business, which we did under the shadow of poor hold, which had a severe effect on EBITDA.

Going forward into 2010 I believe our business is in its best shape yet. We are on a forward positive trajectory, with significantly improved mass market trends at City of Dreams and a return to strong rolling chip levels under a more profitable commission environment at Altira. Based on media reports, I understand our January market share has rebounded to 16%, from 12% in December, and we have generated more than $40m in EBITDA in the first month of this year.

There remains plenty of work to do in the coming quarters but I am confident that 2010 will be a great year for us, particularly given the positive economic outlook in China, the strong political support from both the Macau SAR and the Central Government, and also the geographic advantage that Macau enjoys.

I look forward to sharing more with you in the Q&A session, but for now, I will hand the call back to Simon for more detailed comments on the quarter under review. Simon.

Thanks, Lawrence. Shareholders and analysts frequently ask us about two issues which are considered fundamental to our ongoing development and future success. First, how might we expect to continue to manage Altira following the imposition of the Commission cap and, secondly, how will we drive material improvement in the mass market numbers at City of Dreams? A bit simplistic perhaps, but we agree that these two issues have been our priority for the past few months. So we'll concentrate our prepared comments on providing a detailed update for both issues highlighted, and we hope to be able to share with you the very considerable steps achieved since we last reported.

There's been a lot of discussion about our rolling chip operations at Altira recently, and so please let me set the record straight. If you recall, we made a strategic decision back in 2007 to make Altira Macau, then known as Crown Macau, a property dedicated almost exclusively to the junket-driven, rolling-chip business. We teamed up with AMA, an aggregator who was well funded and was able to offer substantial working capital support to a group of junkets.

AMA received a commission based on the roll volume generated by these junkets in compensation for the provision of its working capital. And the junkets were also paid commission which was in line with market practice. Most people familiar with Macau today understand the importance of working capital, and so our unique solution gave us a significant competitive edge. Business literally ramped up over night. I doubt that we could have built up anything like as strong a following at the property even with one or two years of timetable. Please remember that Altira Macau was an unknown property located in an area of Macau separate from the then dominant peninsula.

Over the last two years, Ted and the Altira management team have developed deep relationships with all these junket operators and their patrons. Ted and his team have also put Altira Macau firmly on the map as a property of the highest quality. We achieved four five-star awards for both our hotel and spa at the end of 2009, one of only two properties in Macau to be so recognized.

With the implementation of the Commission Cap in December 1 last year, it was no longer possible to pay the additional commission to AMA. The Commission Cap legislation was the catalyst from us to transition from an outsourced credit provision model under AMA to a more traditional business model where relationships with our junkets are direct.

We're pleased to be able to report that all 12 junkets which had previously operated under the AMA umbrella signed direct agreements with us and decided to stay in Altira Macau. As you'd expect, the transition resulted in some disruption to rolling-chip levels during the fourth quarter and this had a material, but non-recurring, impact on our EBITDA performance in the reporting period.

The transition process started in September 2009 and was completed by the middle of December of last year. Rolling-chip levels have since rebounded and, in January, Altira Macau generated MOP30b of turnover, exceeding the average monthly roll of MOP25b during 2009. Altira Macau earned over US$10m of EBITDA in the month of January 2010; our best monthly performance at this property since October 2008.

Now onto City of Dreams. Mass market table drop was essentially flat between October and the seasonally weaker November last year. Drop volume improved by 14% sequentially into December, breaking US$150m for the first time. Mass market hold also improved in the fourth quarter, reaching nearly 18%, from an average of 15% in the third quarter. We consider mass market hold rate improvement to be operational and not luck related.

The performance of our mass market business stepped up again in January of this year. Mass table drop increased 11% sequentially from December to over US$170m for the month, and mass table revenue increased 20% sequentially to approximately US$31m. This has translated into improved profitability at City of Dreams. We generated over US$30m in EBITDA in January of this year.

Now what's driving this improvement? Of course, there is no magic bullet. It comes from a variety of different initiatives, and we will outline a few key elements that we believe are behind the improvement in mass market performance at City of Dreams.

First, the addition of 800 rooms from the opening of Grand Hyatt in the fourth quarter. Those first rooms came on line at the end of September. The full compliment of rooms was not available until the end of last year. We see a strong correlation between filling these rooms and raising our mass market gaming metrics. We expect to see continued improvement as occupancy at Grand Hyatt approaches the 90% plus level, which we consistently achieve at Crown and Hard Rock.

Second, we reconfigured the casino floor last quarter and those changes have started to bear fruit also. We believe the new layout improves traffic flows and has led to an increased length of play, as well as a more comfortable and, importantly, a much more exciting gaming atmosphere. As with any casino there will be future ongoing adjustments to our floor, but not to the same degree as we implemented in the fourth quarter.

Third was the re-launch of our marketing campaign at City of Dreams. Our first-phase message of Live the Dream was built around our diversity of brand and experiences at the property. And this is now moved on to a second-phase campaign which is more simple and visceral. It delivers a clear message of 'Let's Get Lucky' and is anchored to a single City of Dreams casino brand message. The first-phase marketing campaign gave widespread awareness of City of Dreams and the next phase is leading to better conversion of those visitors onto the casino floor.

We've made a number of minor improvements at the property targeting the mass market gamer over the past quarter. Looking forward, we will open a kids club later this month, and we've previously spoken to the introduction of a nightclub on the second floor of the property. We're committed to transitioning the second floor of City of Dreams into the center of entertainment and nightlife in Macau; a true Las Vegas style gaming and entertainment experience right in the heart of Cotai. We will make further announcements relating to this over the coming months.

Our below-expectation hold in the rolling-chip segment at both City of Dreams and Altira in the fourth quarter of last year was largely to blame for the quarter EBITDA miss. If we normalize fourth quarter EBITDA using 2.85%, the mid-point of the commonly-expected VIP hold range, we would have reported $56m of adjusted EBITDA.

This leads me onto the discussion on covenants and our plans for refinancing our existing debt. Our first covenant test will take place at the end of the third quarter of this year. It is a trailing 12-month test and we're required to meet a maximum leverage ratio of 4.5 times on gross debt. We cannot ignore that this will be a challenge, given the impact of weak hold in the fourth quarter of 2009.

It remains our intention to refinance our current bank facility, which has served us well during the construction of City of Dreams. Given the current operating performance of our assets and the ongoing strength in the capital markets, we remain confident that we will be able to complete the full refinancing some time in the first half of 2010, ahead of the approaching covenant check date. We're at an advanced stage of planning for this refinancing with our investment banking advisors, and we will most likely wait until our next quarter results are known before proceeding with our plans.

We'd also like to reaffirm that raising equity is not a consideration for us at this time, as we believe the current EBITDA performance of our portfolio of assets is sufficient to support our current debt load.

Now, as I normally do, I'll give some guidance on non-operating line items for the first quarter of 2010. Depreciation and amortization cost is expected to be approximately US$75m. Net interest expense in the first quarter is expected to be approximately US$20m. Pre-opening expense will be approximately US$5 million, related entirely to the ongoing pre-production of our House of Dancing Water Theater show which will open to the public in about six months from now.

So, with that, let's go to the Q&A. Operator, back to you. Thanks.

Thank you. (Operator Instructions). Our first question comes from the line of Lawrence Klatzkin with Chapdelaine. You may proceed.

Hi, Simon, it's Larry Klatzkin. How are you doing?

Hi, Larry. Good to hear you.

A couple of questions. One, the numbers out of Macau in January were pretty exciting. Any chance the Chinese Government gets a little sensitive about hyper-growth and [looks to] take actions to slow things down again? I don't think so because you're coming off of a -- obviously, a very easy comp, but is there any indications at all out of Government?

Hi, Larry, it's Lawrence here.

Hi, Lawrence.

No. I think at the end of the day we have a new administration that just recently took over, with Dr. Chui Sai On being the new CE, literally a month and a half ago. So based on history and our understanding the National Chinese Government will be more supportive of this current Government. And usually Chinese policies do take a longer term view, so they don't look at monthly or even quarterly specifics. They will look at probably a one-year or two-year horizon.

So, from our standpoint, we certainly think that there is not going to be any measures in the near future but, having said that, Chinese policies, especially national policies are unpredictable. But having said all of that, we still think that if you look at a growth rate of 15% to 20% this year, there is probably more of a risk to the upside rather than the downside.

I would agree with you on that. In January did you guys -- the hold you're saying was normal or it was a little bit higher than normal?

Yes. Larry, this is Simon. The hold at Altira was normal. No adjustment required there. The hold at City of Dreams was a little ahead of theoretical, and so the US$30m that we've reported for January would need to come back by about US$5m to bring it in line with theoretical.

All right. Well, those are still pretty decent numbers. And could you give us the timing of the remainder openings on City of Dreams?

Sorry, Larry, for the -- which components are you referring to?

Just the rest of the project, even down to the apartments and what you're seeing on that. Is there any -- do you have any feel for timing you're thinking [for this stuff]?

Well, Larry, it's Lawrence here. I think the next big opening, the Hyatt is fully open now. It took a little while to ramp up, hence, not all the room inventory was in the system during parts of the fourth quarter. So the next big thing to open for us really is the House of Dancing Water show. That is being directed by Franco Dragone.

And of course we have a few more entertainment spots, nightclubs and the Kids Zone that will open progressively. So the Kids Zone is going to open at Chinese New Year, the nightclub, probably -- the two nightclubs Q3/Q4. So I think by the middle of the year, in Q3, the entertainment destination of Macau I think we can firmly claim that.

And the other component, just to add, would be we've got roughly a doubling of the available retail in the property, so the second phase is our retail will open around June this year. So we've got brands fully committed to that component, so that will add another raft of retail experiences, some of them which -- have frontage onto the casino floor. So I think it will be a positive sense in casino ambience as well as an expanded range of retail experiences.

Have you been --

And on the apartment hotel, the site where we have it, I think our focus right now is really to further improve the operating leverage of the business and improve the performance further. As I said, there is a lot of potential and room to grow for us. So in the near future -- I think in the next two quarters we're not going to make a decision on it. At the same time we're keeping a very close eye on what our neighbors are doing. So I think the market is improving in Macau quite a bit and we'll make that call later on.

All right. Great, guys, and sounds like the first quarter is going to be an exciting one. Thanks.

Thanks a lot, Larry.

Our next question comes from the line from Cameron McKnight with Buckingham. You may proceed.

Good morning, guys. Just, Simon, would you mind running us through some of the operating statistics you gave in your prepared remarks again?

Yes, sure. Which ones in particular are you looking for, Cameron?

The progression of mass volumes through the fourth quarter and into the first quarter at City of Dreams.

Yes, no problem. October to November was basically flat. November is traditionally, or seasonally, a slightly weaker month than October. It doesn't have that holiday week in it. But we were basically flat. And as we stepped up from November into December we saw a 14% uplift. That brought our drop for the whole month up to a little bit north of US$150m. In MOP terms that work out at around about MOP39m a day in the property.

And then we saw another step up in drop volume into January from December. It went up by about another 11% to over US$170m. Of course, it's not just the drop volume. It's also the hold has been improving over the same period as well. So it's a combination of the two that's delivered through the improvement in the bottom line in revenue terms. So we're now running -- through January we've run at about MOP45m a day of drop. That's our current run rate.

Okay, great. And I guess you're expecting or you've seen mass volumes increase through December and into January as the full 800 hotel rooms weren't open until the very end of December. Is that right?

Yes, you've have the combination at the property, as I talked to, of the hotel rooms coming on stream, the effect of the relay of the casino floor and also a light switch-change in the way in which our marketing campaign has been working. For anybody on the ground here in Macau or in Hong Kong they will have seen a very significant outdoor component to the advertising campaign for City of Dreams. And what's that's done is it's helped to turn strong visitation numbers into better casino presence -- penetration numbers, so that's really helping.

Okay, great. And at Altira the 12 junkets that you've now go onboard as direct partners, you're paying those 1.25%?

Yes, that's correct. Sorry, go on Ted.

Yes, we pay the junkets a flat rate of 1.25% or revenue a share of 44%.

Okay.

I'd just add to that, remember we've also -- we've got the 12 junkets that previously operated under the AMA umbrella, but we've always had five junkets at the property that were outside of the AMA umbrella. So in total there are 17 junkets operating at Altira.

Okay, great. You were paying above 1.3% in the fourth quarter and prior quarters, so you should have a bit of a margin tailwind there, right?

That's what you'll see coming through in the EBITDA performance of the property in the first month of this year.

Okay, great. And just finally, if I may, Simon, would you mind giving us a little bit more color on how your discussions with the banks are progressing at a high level? And whether you've drawn from the experience that MGM Macau had in refinancing their debt around about a year or year and year ago?

Yes. Well, I think that everyone's experiences are different. The MGM deal, they restructured their debt and they went through about six quarters of purchasing relief against covenants. That's a very different scenario from where we are. We have put a considerable amount of work into preparing our refinancing, which you would do in the normal course with a construction loan once you finished building. It's just that we live in peculiar credit market times where, once you remove the construction risk, you get to borrow less money and pay more coupon for it.

And so we've managed our way through that, but we've put our preparation in place. And I am very confident that we will be able to replace a debt that had an amortization schedule that starts to kick in at the end of this year with a tranched facility that will have maturity out between five and eight years. And I expect that we will be able to put that in place during the course of the second quarter of this year.

Okay, great. Thanks very much.

Thanks, Cameron.

Our next question comes from the line of Karen Tang from Deutsche Bank. Please proceed.

Hi, guys, it's Karen here. Good to hear that you get the ramping of City of Dreams' mass and of Altira in January. I've got four questions. The first one is that you mentioned your change at Altira, a change in the business model, to dealing directly with the junket promoters instead of an aggregator. You also mentioned that that could have a positive impact on margins. But on the costs side that also means that you may need to commit more working capital on that. Can I get some clarity on how much working capital have you provided since the transition, and how much more should we expect you to commit? That's my first question.

My second question is with regard to commission pays as a percentage of rolling versus revenue. The reason why Q4 you have such a big impact, given the negative pull, is partly because you paid a big proportion of commission as a percentage of rolling instead of revenue. Can we get a sense of that at City of Dreams?

My third question is with regards to your balance sheet. I understand that you have a shareholder loan that was supposed to be repayable middle of this year. Would the shareholder loan be extended now?

And, finally, Singapore opening. We are all trying to gauge direct the VIP play of all the casino operators in Macau who came from South Asia. So can you give us a breakdown for your direct and non-direct played from players in South Asia? Thanks.

Simon, can you handle the first one?

Yes, I'll do that, Lawrence. And let's hope that we can remember what the other three were as we go through it. So on your first question, Karen, working capital provided, and is there anymore, we -- your absolutely correct, we extended CCF support to the junkets that were previously supported with outsource credit under the AMA umbrella when they came in to direct agreements with us effective from December 1 of last year.

The effect of that was that we extended about HKD525m of working capital support. If you take that together with the other market receivables that we've got in our balance sheet, net of the provisions that are set against it, and you can see this information what we've published, it means that we now have market receivables of about US$300m sitting in the balance sheet.

If you deduct from that the outstanding chip liability of about US$180m, which is just chips that have been left as they sit within the system and, so, there is no credit exposure component there, then it's around about US$120m, of which about US$20m is with direct customers and US$100m is our combined exposure across 29 junkets in two properties.

If you look at that in terms of what does that represent on a multiple of the commissions that we pay every month, we're around about 1.2 times monthly commission at City of Dreams and we're about 1.5 times monthly commission at Altira. And we think that that is towards the low end of working capital provision in the Macau market currently.

Karen, it's Lawrence. Our answer is Singapore -- your last question which is the Singapore question first, I think we -- us, together with most of our fellow competitors in Macau, believe that Singapore's impact to Macau will be probably minimal because, at the end of the day, the Macau market benefits from a great geographical location with China as a major backstop and support.

So on the mass business and the Chinese VIP business I think it's going to be minimal impact. I think the impact might come a little bit from the premium direct players from South East Asia because, obviously, Singapore will become a much easier, accessible location for them. But even then we think we can backfill some of that business with junket-led South East Asian players in due course. So, again, we think the impact is minimal.

On your second question, Karen, what -- on the City of Dreams revenue share versus commission question, can you repeat that one?

Sure. At City of Dreams, of the number of junkets that you have there, roughly how many of them are paid as a percentage of rolling, which I suppose is 1.25%? And how many of those are paid as a percentage of revenue, because that would have a different impact on your EBITDA line if you have a neg -- bad luck.

Lawrence, I've got that data here with me. We're at 70% of our roll volumes at City of Dreams as being run on commission-based models, and approximately 30% is being done on the revenue share model, Karen. That obviously ignores the fact that we're still doing around about 17% of our roll volumes at City of Dreams direct.

You also asked a question -- to your first question, you asked whether we'd be providing any more CCF going forward. We're comfortable that we've got the right amount of CCF extended to our junkets. It probably represents less than 20% of the total working capital that they're operating with across both properties. So I don't expect to see any material increase in the amount of CCF that we have extended.

And then, finally, to your third question with regards to the shareholder loan, that shareholder loan has been rolled by our shareholders since the time of the IPO. It is still due more than 12 months, if I am correct, as at the end-of-year balance sheet date, so it doesn't fall due mid this current year. And we will continue to roll it, to hold it out beyond 12 months so long as that is the appropriate thing to do.

Excellent, thank you very much. So, Simon, you mentioned that -- at the end that your CCF implies that at City of Dreams it's 1.2 months' of monthly commissions. And, at Altira, was it 1.5?

That's about right, Karen, yes.

Thanks.

Our next question (multiple speakers).

The difference between the two obviously recognizes the fact that City of Dreams has got about 20% of its business being done direct, Karen.

Our next question comes from the line of Carlo Santarelli with JPMorgan. Please proceed.

Thanks. Most of my questions have been answered, but I did have just two quick ones. I see you guys were refunded your deposit on the peninsula site. Is that in this quarter's numbers?

The refund -- the cash refund came in just before the end of December and so, therefore, that cash is in, yes.

And that was about $13m. Is that correct?

It's US$12m.

Okay, thanks. And obviously there's been a lot of chatter in the press recently. I was wondering if maybe you guys could comment on some of the news about possibly speaking with the government about some strategic initiatives.

Carlo, this is Lawrence here. Can you be more specific?

Obviously, there's been a lot of commentary and color around possibly a US-based operator looking to buy a stake into your Company. And some have actually come out and said the new Chief Executive has been speaking with his attorneys to study a possible transfer. Is there anything you guys could possibly say about that?

Yes, sure. I think from our perspective it's total nonsense. Both James and myself and the management team have really come this far and we see a lot of potential growth trends, and the business is ramping up very, very nicely. So I think it's really nonsense all the rumors that we've heard.

Thank you, Lawrence.

Thank you.

Our next question comes from the line of Dennis Forst with Keybanc. Please proceed.

Yes, good morning, or evening for you. I wanted to ask a number of questions. Can you give us an idea of the rolling hold by property in the fourth quarter? Were they similar, both have low hold, or was it more tied to one property?

Yes, our rolling hold at both properties was actually pretty much identical, at around about 2.45%.

Okay. And then in January you had about a 16% market share, I think Ted said.

Yes, according to reports that came out today, that's correct, yes.

Okay. And that compares to around 11% a year ago?

No, it compares to around about 11% in December of last year, so it's a sequential change.

Okay, but wasn't it about 11% in January of last year also?

You are stretching my recollection. But of course January of last year we didn't -- we only had one property and today we have two.

You had one property, right. I'm just wondering, I've seen the SJM market share number was up, your market share number was up, Las Vegas Sands was about the same, do you have a feel of who lost substantial market share, because there was a material change?

These things move around every month and I'm sure that there will be sell-side analysts who will be selling some reports tomorrow morning on what those numbers are.

Okay, then, the next question was about paying down debt. Are you in a position to reduce your debt at all this year or will capital expenditures eat up all the free cash flow?

We could, if we wanted to, stick with our existing facility and move into a repayment program on it. As is set out in the amortization schedule, we have the ability to be able to do that. That's not what we would choose to do. We're happy with the debt to equity mix that we have in the capital structure of the Company. What we need to do is we need to take out a construction loan that was secured three years ago and is coming to the end of its life, and replace it with new five to eight-year money. And that is the refinancing exercise that I spoke to earlier on, and I expect that we will have that completed before the end of the second quarter of this year.

Okay. And then, lastly, it was garbled when you were giving the guidance. The pre-opening number for first quarter was inaudible. Can you give us that again?

Yes, I'm sorry. It's a small number. It's about $5m and it relates solely to the production, the show that we will be launching at the City of Dreams, the water-based show that will open to the public in about six months from now.

Okay, great. Simon, thank you very much.

Thanks, Dennis.

Our next question comes from the line of Anil Daswani with Citigroup. Please proceed.

Hi, good evening, guys, and congratulations on a great January. I have three questions. First of all, could you comment a little bit on what the interest expense will look like or what the cost of debt will look like once you restructure? Is there any internal plan in what additional interest expense would be required as you move off the construction-based loan onto whatever route you guys choose? That's question number one.

Question number two, could you talk a little bit about what happens to the cost base at the City of Dreams once the show opens? I understand that the costs would probably go up a little bit after that opening. Or are there any plans to offset that by some cost cutting at City of Dreams? That's the second one.

Thirdly, is this the marketing campaign that you guys are going to be sticking with going forwards? We've seen two very, very different campaigns and you mentioned, Simon, this phase one, phase two. Is there a phase three lined up or is this the right track for you guys going forward?

Okay, I'll take your first question and then I'm going to -- and I'll comment on your second question. I'm going to bounce the marketing campaign discussion over to Greg in Macau.

So on the first question of interest expense, we currently have a facility which is costing us around about $20m a quarter in interest expenses. That includes, not just the interest costs that we pay to the bank under the facility, but also the hedging costs that we were required to take out at the time that we drew the facility when interest rates were much higher than they are today.

We have looked very carefully at the composition of the refinancing. It will have various parts to it; a bank debt component, probably a high yield component as well. And so there will be different interest rates. In the process of replacing our debt we are looking to try and achieve a net outcome in terms of interest costs which doesn't increase our overall annualized costs by much at all, if anything.

So that is the intent. Ultimately, we still live, we have lived in and we continue to live in a very low-yielding environment where debt is a very, very cheap form of capital, and we will look to try and take advantage of the current environment in order to lock into some five to eight-year money that allows us to continue to benefit from that for many years to come.

On the second question of cost base at the City of Dreams, when the show comes on stream we will be adding somewhere around about $100,000 of incremental daily costs. But you should set off against that the revenues, the purely incremental revenues that we'll get from ticket sales. Based on our early forecasts around that, we think that it'll be awash.

So, pre-show/post-show, you won't see any net change in our EBITDA performance at the property vis a vis just the addition of the show. Where we feel very positive is that by bringing the show on stream you will see a knock-on effect into the broader property and the gaming revenues that are seen there from.

I'm going to pass the question on marketing over to Greg.

Thanks, Simon.

Good question. If we looked at the phases of marketing for the property, clearly, the initial phase was about introducing, particularly the diversity of the brand at City of Dreams, into the core markets. And part of that direction was also centered around the most effective ways to position awareness of those brands and amenities into mainland China where there's obviously some restrictions on advertising, so we thought that was the most effective way to progress with the introductory awareness.

As you've seen over the last eight to 10 weeks, what we've done now, we've moved away from that as a complementing approach much more to stronger awareness around casino participation, and that's really clearly about driving volume activity into gaming locations within the property, so probably moving from a strategic position into one which is far more tactically based. We see, as we look across 2010, a continuation of a very strong focus on casino participation, growing visitation but, at the same time, ensuring that that penetration and conversion rate at that broad visitation into the properties is very much continued in line with optimizing EBITDA across 2010.

What you will see probably towards the last quarter of 2010 is probably another subtle complementing adjustment, so continuing with the casino theme. But as we bring in some of the capital projects that we've touched on before you will see more of an entertainment positioning being built into some of our broader advertising strategy as areas, nightclubs, Hard Rock Cafe and a few other amenities which we have in the pipeline will come into stream in areas of the property. So that's the general approach across 2010.

Sorry, and one follow up. You guys mentioned in January you had MOP30b of roll at Altira. Can we get a similar number for COD, please?

Yes, the roll in January at COD was about MOP28b.

Thank you, Simon.

Thanks, Anil.

Our next question comes from the line of Grant Chum with UBS. Please proceed.

Good evening. First question probably for Simon. Just looking at the cash balance, going from $686m at the end of Q3 to $449m, is quite a big reduction between end of Q3 and Q4. I think at the time of Q3 you said there was about $100m of cash outflow in CapEx in Q4. Firstly, can you just confirm that that's the right number as it turns out, and is the rest of the cash reduction attributable to working capital? That's my first question.

Yes, we actually were able to close out and settle down a little bit more cash than I forecast for the fourth quarter, so it was around about US$120m on closing out project costs at City of Dreams. The faster we get that done the faster we can shut down the projects office and get some cost savings into the business. The remainder of the reduction that you see in cash is because it gets absorbed into the working capital in the businesses as we push CCF out into the property. So what I talked to on Karen's questions folds in and explains that other portion.

And is that also the case at City of Dreams? IS that incremental in Q4 also an increase in the working capital in that property versus Q3?

Yes, City of Dreams is still very young as a property. At the start of Q4 it had only been open for four months. It's also growing its volumes from Q4 as against Q3. And it has a very strong, very healthy direct component to its business which inevitably, in some portion, has longer repayment cycles attached to it. So you're always going to see in a property like City of Dreams some expansion in the overall working capital that's required to continue to operate the property. And you've seen a little bit of that from Q3 to Q4, probably US$20m or thereabouts.

Okay. And just for the sake of completeness, on the split between revenue share and commission and volume, can you just give that split for the Altira property as well as City of Dreams?

Yes. At Altira we run about 80% on commission-based volume and about 20% of our roll is done through junkets who, at any point in time, choose to opt to get paid on revenue share. And, quite frankly, that mix between commission and revenue share has stayed stable at Altira for as long as I can remember.

Great. And just a final question, maybe one for Greg. On the hotels in City of Dreams, now that Grand Hyatt is fully open, can you just give us a rough sense of -- in terms of the sold -- sorry, the occupied rooms across the three hotels, what's the relative proportion going to VIP, mass market, casino and non-casino?

Sure. More recently as a broad guideline, Crown Towers tracking close to 90% of which about 90% of that is VIP clientele. Hard Rock consistently 97% to 98%, so it really runs as a full operating hotel. Currently, about 50% of that is casino or mass casino program related. So the other half is driven by broad-based retail, FIT and inbound package elements.

Hyatt still in its evolutionary stage, and I guess coming to a greater number available rooms. But if you look at some of the more recent results in January, sitting at around that 70% occupancy mark of available rooms, of which at this stage about half of those are being absorbed through casino program use as well.

So I think the key outtake from that is that we see the ability to drive more broad retail business into Hyatt as a key element of growth over the next quarter. So we're working very closely with them to access their inbound retail channels as well to make sure we get that property up to 90% ASAP.

Great. That's great. Thanks, Greg.

Our next question comes from the line of David Bain from Sterne Agee. Please proceed.

Thank you. Can you give us a sense of the trajectory of the database volume at City of Dreams? I think you were at 100,000 names at the end of September.

Yes. Obviously a very important element of our growth plan, so we've, from that number you quoted, have roughly doubled the number of our members in our loyalty database.

Okay, great. And then, as you guys know, China's announced a proposed tightening of credit and our junket contacts are saying their credit system works on different metrics. But can you give us your sense on credit currently and how it may differ longer term? I guess what I'm trying to ask is if you expect China's bank policy to have an impact on your longer term?

David, it's Lawrence here. I think we talked about it a little bit earlier on. But I think the monetary tightening is probably going to affect the Chinese property market first and foremost, and it will have a delayed effect, if any, to trickle down to effectively the consumer sector in Macau. Anyways, I think Chinese policies, I think the jury is still out in terms of what real impact Chinese policy has had on Macau, those gaming revenue in the past few years anyway. So I think, all in all, the current monetary tightening it will take some time before it even trickles to Macau.

Okay, great. Thank you.

Thanks.

Our next question comes from the line of Praveen Choudhary from Morgan Stanley. Please proceed.

Hi, guys. Thank you very much. Most of my questions have been answered. Just one question. Most of the time you guys have lower hold. At least in Q2 and -- at least in Q3 and Q4 we saw on a VIP basis. I'm just wondering, can you just pinpoint on why that happens when everybody else has a better hold?

Praveen, this is Simon. You were very feint for us. I suspect you might have been feint for others. Your question, if I got it correctly, was could we comment on our historic hold rates at our two properties, given the perception that we hold low as a Company. Let me just give some color to that.

First of all, let's just state the facts rather than working on fiction. Life to date since we opened the Altira property it has held at 2.71% through until the end of January this year. Life to date since we opened City of Dreams has held at 2.8% until the end of January this year. We've always argued that the hold rate long term in Macau is somewhere in between 2.7% and 3%. I grant you we are at the bottom end of that range, and I also recognize that there are other properties that push out hold rate numbers that sit at the top end of that range.

I do think that there are accounting differences between the way in which different operators report their table performance, and that that can have an impact on the denominator and, therefore, an impact on the hold number. There are also people who look to Government statistics rather than operator statistics, which exclude direct play, and that also causes property-to-property variances and need to be adjusted out.

We don't feel that there is anything structurally wrong with our operations at either of our two properties. We have sustained a sequence of three quarters of low hold at Altira, and we note that that is no different from what our partners, Crown, have seen at their property in Melbourne if they look back over the last 10 years. And we are now looking forward to having three quarters where hold is sorting itself out on the long-run basis. So that's really I think, all that we can do in terms of commenting on it right now, and we will continue to report against our actuals.

Thanks very much for clarification. I understand, Simon, and I sympathize with lower hold rate, but I don't find any other concessionary or any other company giving us different EBITDA number based on theoretical, probably because their hold rate has always been okay. So what I'm trying to understand is that why are you guys holding so little for the last three quarters? And I understand it's again luck factor.

And on your changes in January, could it sustain? Are you doing anything that you could do on your capacity to move into a program which other concessionaries are doing, or anything that is in your hand, let's put it this way?

I understand the question. You're asking whether we can change the luck that is experienced at the baccarat table, whether there are any operational tricks which can affect the outcome of how a player plays and how a table turns out. And I think the honest answer to that is that there is nothing that we can do to affect that. Players play in certain patterns and we all know in this industry that luck happens, can run over very considerable periods of time; quarters to years.

So we don't see that there is anything that is outside a statistical expectation. We have some of the world's best experts looking at this. We've got solid systems that monitor it, that are externally provided to us. We go through all of the necessary checks and balances. So it is what it is, and we will continue to monitor it as we go forward.

Okay, perfect. Thank you very much. And I hope that January turned out for good. Thank you.

Thanks, Praveen.

Our next question comes from the line of Justin Kwok with Goldman Sachs. Please proceed.

Hi. A lot of questions have been answered. I just have one quick follow up on the COD and one broader-based question. On the COD, do you mind to share a bit more on the reconfiguration you mentioned on the second floor where you're going to introduce nightclubs? What sort of impact we should expect and what sort of CapEx we should expect for this sort of reconfiguration?

And on the -- the broader-based question was on the -- after the 1.25 cap. Do you mind to comment a bit more on the competition among the junket, and especially on the competition among junket with -- or against your direct VIP business? What sort of going forward that you see this competition's going to be, especially when you said you are now running about 17% of VIP in COD? Thanks.

I think, Greg, do you want to --?

Sure. In terms of the level-two space we've looked at growth focus from a management team perspective. As an initial step we've clearly been predominantly looking at some of the layouts, product and performance issues on level one. As we move to level two we see the Hard Rock Casino there really becoming the hub of the precinct that will evolve over time, incorporating a number of branded, and of a popular club, gaming-orientated experiences which we'll advise further as we progress.

Obviously, in this market we're trying to look at partnerships with those who have reputable international brands, where the partner will provide the majority of the capital into the project. So as we announce some of these publicly I'd expect a couple of them to be provided for from the operator perspective and a couple of others would be -- from a branded point of view the capital would be provided to us. So we're looking at a number of different models.

So the general logic is that we create an entertainment-style hub on level two which is centered around the Hard Rock Casino to optimize the performance of that area. A Hard Rock brand, a casino area up there, as you would expect, optimizes over weekends and during the evenings, so we also have a number of different flexible ways which we want to consider to drive volumes and utilization into that space during daytime periods as well.

We have announced some of those. They range from, I guess, a family-orientated destination which is more the daytime, to club-style, nightclub-style and then some expansion of Hard Rock Cafe and a number of other brands who we're in discussion with at the moment. So we'll advise more on that as we progress and lock away a number of those deals over the next six to eight weeks.

Justin, it was very hard to hear your second question. Would you paraphrase it?

Sure. It's on the competition landscape, so the 1.25 cap. Is that because everyone's now competing on same level? What's your view on the competition among the junket? And also your direct VIP going forward, because now you (multiple speakers)?

Well, my comment to that is that it has been remarkable, only in as much as it seems that the market predicted that the implementation of the commission cap would cause some sort of musical chairs amongst all of the properties. Whereas, in fact, we have a very stable market, post the cap, which I think is how most of us operators expected the outcome to be. We're all playing on a level cost structure playing field, so that is not going to be a catalyst for rapid or random movements of operations from one corner of the market to another.

Just to follow up, what about the share of direct VIP going forward in your view?

Well, the City of Dreams continues to punch well. There are only really a couple of properties in Macau that are able to service the real VIP customer, the direct customer, and City of Dreams is one of those properties. It has been from the day that it opened.

I mentioned earlier that we're still doing about 17% of our total roll volumes in direct play at that property, and we will certainly be tasking our international marketing team and their network that runs right across the region to continue to deliver that volume or that relative measure of performance into the property over the course of the coming quarters.

Thanks.

Thanks, Justin.

Our next question comes from the line of Shaun Kelley from Banc of America, Merrill Lynch. Please proceed.

Hi. Thank you very much. Just one quick follow up on the working capital question, Simon. Could you just give us a little bit more color on -- for the accounts receivable? Is that going to -- is there going to be an increase there through the end of January and shall we look for that to be a little bit higher at the end of the first quarter? Or is the end-of-year balance pretty reflective of the transition at -- of the AMA business? Thanks.

Yes, thanks, Shaun. The transition's done. So what you can see at the end of December is a very fair reflection of what I would anticipate you would see at the end of March. Certainly, when I look at my balance sheet at the end of January nothing has changed. In fact, if anything, it's come down slightly. So, yes, I think that we are at status quo at the current level.

Okay, I think that we're going to close the call off there, operator.

As we said at the start of the call today, with hindsight, we feel that quarter four 2009 should be remembered, not as the quarter with poor hold or the quarter with below consensus earnings, but as the quarter when we successfully executed on some major operational improvements at our properties.

We look forward to reporting back to everyone in another three months' time, and would especially like to thank you for your questions and for listening in on our conference call today. Good morning.

Thank you for joining today's conference. You may now disconnect. Good day.