Melco Resorts & Entertainment Ltd (MLCO) 2010 Q1 法說會逐字稿

Good morning, and thank you for your participating in the first quarter 2010 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 would now like to 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 and Ted are here with me in Hong Kong, while Greg and Constance are all dialed in from Macau. 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?

Thank you, Simon. I'm going to keep my remarks regarding our results somewhat brief as I think they speak for themselves. I am pleased with the improvement in our mass market operations at City of Dreams in the quarter. As anyone who has visited the main gaming hall in the past few months will attest, the place feels better and more exciting.

Of course, it also feels busier. We are getting more people visiting us each day. But more importantly, we are delivering a more comprehensive and exciting experience to our customers. And we are getting rewarded by a tangible increase in their length of play.

This shows up in the mass hold rate, which has jumped from the 16 six months ago to the lower 20s today. Increased mass holds after tax dropped straight to the bottom line. It costs nothing to deliver, and actually improved the casino atmosphere, which in turn drives a better experience for newcomers discovering City of Dreams for the first time.

We believe the ramp up at City of Dreams is not only sustainable, but we believe there will be material gains and gaming volume over the next one to two years as we prepare for new property supply in Cotai which will help to fix our backyard as the center of gravity for gaming and non-gaming activity in Macau. We will continue to improve and refine our marketing initiatives, and we will add new amenities.

This includes various dining and entertainment options, the most high profile being the House of Dancing Water, which is expected to open in the third quarter of this year. Our database of card-carrying customers continues to grow which significantly improves our ability to target our best customers. A strong position in the rolling chip market at the City of Dreams has continued through the first four months of this year. And importantly, our success in the rolling chip segment at City of Dreams has not come at Altira's expense.

More specifically on Altira, we successfully managed the transition to a traditional junket business model without any reduction in our gaming volume. And as a result of the commission cap, we enjoyed margin improvement which has got Altira back on to a solid EBITDA trajectory.

For those customers who know Altira, the property keeps moving from strength to strength. Mocha delivers predictable cash flow and good return on investments. I continue to believe this is a business that has room for selective growth. We remain confident in the Macau market in our precision within the market and in the leadership of the Macau government.

We support the table cap limit, and believe it will lead to more orderly supply growth with limited consequences to the broader Macau economy. The backdrop to all this is the growing Chinese economy and the dramatic projected increase throughout Asia of consumer discretionary spending power. It is easy to forget that Macau has not yet celebrated the 10th anniversary of the liberalization of the gaming market.

In this short period of time, the market has changed and grows dramatically. I don't think either of those trends have come to an end. I remain convinced that ideas, an open mind, good local knowledge, and a willingness to embrace innovation will be the hallmarks of success as we look forward. But one constant remains regardless of your venture or location, hiring outstanding people and giving them a platform to grow is a central tenet of what we do at Melco Crown Entertainment. We put our current management team together more than three years ago when we first started as a listed company. Being last rather than first to market was seen by us as an opportunity to be differentiated. We should no longer be considered the last player to enter Macau, but the most innovative and decisive.

The continued improvement in our operational performance is a direct result of our quality and the work that has been put in over the past three years, not just the last three months. Part of this success is derived from our commitment to hire local Macau people and to provide advancement opportunities for them in management roles.

We are proud to say now we continue to make meaningful progress on this front. So my last prepared comments are reserved to our colleagues who continue to demonstrate their commitment to the business and their commitment to excellence. So, back to Simon.

Thanks Lawrence. I'd like to address a few topics that I suspect are top of mind for many investors. First, as we don't have an apple to apples or year-over-year comparison to compare or to help characterize the improvements in our operating performance, I will instead draw some sequential comparisons which will help to isolate the growth drivers in our business.

In the fourth quarter of 2009 using normalized blended VIP hold, we had quarterly EBITDA of $56 million. In the first quarter of 2010 our blended VIP hold was comparable at 2.9% and yet we were able to report an EBITDA increase of over 50%. The drivers of this increase in EBITDA performance are substantive and sustainable; mainly increased gaming volume metrics and Group-wide cost controls.

On comparing first quarter of 2010 with the fourth quarter of 2009, combined rolling chip volume increased by 8% to $19.7 billion and combined mass market drop increased 12% to $550 million. Slot handle volumes at City of Dreams improved 18% to $442 million. More importantly, our mass market table revenue increased 27% sequentially as our blended mass market hold increased to nearly 20%. As Lawrence indicated earlier, the increase in our mass hold percentage is sustainable, real and driven entirely by the fundamental improvements to our business.

The second factor in driving EBITDA gains was cost control. The improvements in gaming volume and revenue were combined with improvements in table efficiency and productivity. This is favorable cost implications given that staffing cost represent over 70% of our fixed overhead.

In addition to the reduced table count, our first quarter results benefited from the commission cap, the reduced junket payments on Altira. And we continue to make progress in improving the overall efficiency of our operating units on a standalone basis as well as extracting economies of scale from centralizing some common functions between the three operating units in Macau.

We are frequently asked what is driving the improvement in the mass market of City of Dreams. As we've said before, it comes from a number of programs and initiatives rather than any single factor.

First was getting the full benefit of the addition of 800 rooms from the opening of Grand Hyatt at the end of the fourth quarter last year. We will continue to drive additional benefit going forward by pushing occupancy at Grand Hyatt into the 90% plus level.

Second was the reconfiguration of the casino floor in the fourth quarter, which has helped improve the overall gaming environment. And third was the launch of phase II of our marketing campaign in City of Dreams. The Let's Get Lucky campaign has been a significant component of the improvement by increasing awareness and driving more gaming focused guests to City of Dreams.

We believe that we are still in the early innings of ramping up our mass market business at City of Dreams. As Lawrence mentioned, over the next 12 to 18 months we will introduce a number of additional non-gaming amenities to the property and will launch further iterations of our multi-layered marketing programs.

I'd also like to highlight a shift in the EBITDA mix of our business. Since we entered the casino market with the opening of Altira in 2007, our Company has been focused on the rolling chip or VIP market. As the mass market performance at City of Dreams picks up, this characterization of our Company is becoming obsolete. We are shifting to a more balanced distribution of rolling chip and mass market contribution to the bottom line.

And in the first quarter, the EBITDA split between the mass market and rolling chip segments was roughly 50-50 at City of Dreams. We expect to drive a majority of our EBITDA in City of Dreams from the mass market going forward. This mixed shift reduces the overall volatility of our earnings and should make our results more predictable.

Last, I'd like to provide a quick and necessarily brief update on our plans to complete the refinancing events in the second quarter of this year so as to extent maturities and to materially reduce short-term senior secured leverage. We now have concrete transaction plans which will be the subject of a formal announcement in the very near future. And so for the time being we are limited as to what we can disclose.

I will mention that I'm confident of preserving a substantial portion of our below market priced bank debt facility, which fully matures in 2014, will allow us to construct a refinancing that will keep our blended cost of debt below that of most all global gaming companies.

Now as I normally do, I'll give you some guidance on non-operating line items for the second quarter of 2010. Depreciation and amortization cost is expected to be approximately $77 million. Net interest expense in the second quarter is expected to be approximately $20 million. The pre-opening expense will be approximately $4 million, which is primarily related to the House of Dancing Water.

As so with that, let's go the Q-and-A. Operator back to you. Thanks.

(Operator Instructions) And your first question comes from the line of Cameron McKnight from Buckingham. Please proceed.

Good evening guys. How are you?

Hi, Cameron. Good, thanks.

Just first of all Simon, you mentioned in your prepared remarks Group-wide cost controls. Could you elaborate on some of the controls you put in place in particular the outlook for staff costs given that you hired the majority of staff at City of Dreams a year ago when market conditions were considerably more depressing than they are now?

As the operation continued to mature at City of Dreams and elsewhere within the portfolio, so we are able to find efficiencies in the way in which we're doing things. We're confident that we can continue to find net savings in our overall fixed cost structure after you take into account tax and commissions, as we look out over the course of the next 12 months and then beyond so as to be able to make sure that's a very stable environment, Cameron.

Okay great, thanks. And secondly, are you hearing or seeing any action as far as service apartments are concerned? What are your plans for the rest of the site at City of Dreams?

Cameron, this is Lawrence here. I think for us as we guided in the last conference call, I think our focus for the next 12 to 18 months is still to make sure our portfolio of assets right now, City of Dreams, Altira, Mocha are all operating optimally. So at this point in time, Grand Hyatt recently was fully opened. So we would like to see what the take up on that room supply is first before we decide to move forward on the service apartment project. Whether the service apartment or a hotel by itself, we are pretty open minded with regards to that.

Okay, great. Thanks very much.

Thank you.

Thank you. Your next question comes from the line of Larry Klatzkin, Chapdelaine. Please proceed. Your line is open.

Hey Lawrence. This is Larry Klatzkin in Chapdelaine.

Hi, Larry.

How you doing? Singapore, have you seen any effects from that at all? I mean, (inaudible) for a bit, it doesn't seem like you have it all, but I thought I'd just ask the question.

Yes, I think our view is pretty aligned with our competitor. Singapore is a very different market from Macau. It mainly serves a regional Southeast Asian market, whereas if you look at the growth in the Macau market since Resorts World has opened in Singapore, it really has had very little impact on us. So we are confident that Macau ultimately -- geographically, we are located in the best place in the world right now. So we haven't seen any impacts at all.

All right, good. That's what I expected you to say. And then what's next? I mean you cancelled a peninsula project. Once you get this tower done and open everything in Cotai, where is this Company's next growth coming from?

Well, Larry there is -- I think there are with the table caps I think the supply growth in Macau is naturally controlled for the next couple of years. I think that is going to be positive for all the competitors in the market. But going forward, beyond 2013, when the cap effectively releases, I'm sure there are new opportunities in Macau. And I guess we have -- we will look forward to those opportunities in due course.

But again, as I said earlier on, for the next 12 to 18 months, we are 100% zeroed in on making sure that the underlying performance of the existing assets within the portfolio are operating at an optimal level. We think there is a lot of room to grow. So I think this is really just the tip of the iceberg for us.

All right. I don't disagree if the growth rate continues like it has been. All right, thanks guys.

Thanks a lot, Larry.

Thank you. And your next question comes from the line of Carlo Santarelli, JPMorgan.

Hey guys, thanks. Good morning. I was just wondering if you can comment a little bit about what you have seen here through the first 27, 28 days of April, and maybe talk a little bit about the mix of patrons that you are putting in Grand Hyatt at present.

Well, Carlo, it's Simon. From an overall market perspective, I know that there has been a bit of chatter around in terms of trying to get a sense as to how the market's been moving along in April. And this fear that we have at the moment is that through, with three days to go to the end of the month, we are up 70% year-on-year. In fact, April looks like it's up slightly less than 10% against March at this point in time, which seasonally is not what you would expect to see. And so we might be on track to see a new record month in April as far as GDR is concerned.

And how are we tracking against that? We are tracking in line with the stresses in the market. We are very happy with what we are seeing through April, and we will continue really over the course of the next six months to be focused on bringing in the key attractions, the additional amenities at City of Dreams, which I think will be the anchor for improved performance for us as we look out to the fourth quarter of this year.

Great, thanks a lot, Simon. And just a quick follow up on the Grand Hyatt and what are you seeing in terms of the mix, is that a lot of mass or is that some VIP players being put in there?

Greg, you want to take that?

The objective of the Grand Hyatt brand is obviously to have a strong brand, which has very good recognition in the core markets, and particularly Hong Kong and China are inbound. So to date, we are putting a reasonable amount of casino program activity in there. Beyond that, about 85% of the occupancy in the hotel is represented from Hong Kong or PRC with the rest of it from other markets to date. So we expect to grow occupancy in there quite strongly into Q2.

Great. Thanks, guys.

Thank you.

Thank you. Your next question comes from the line of David Bain from Sterne Agee.

Great. Thanks, guys. I guess this was touched on, but is there a possibility -- I mean we are not restricted from looking at other M&A opportunities with the table cap. And I'm wondering if that is something that we could see in the next 12 months and if you are hearing that multiples are even reasonable out there or what type of product you would look for, if you do look for a product in Macau?

Hi, David. It's Simon. Unsurprisingly, I am going to repeat what Lawrence has said a couple of times on this call. Singly, our focus is on the existing portfolio, and we know that we can make significant gains there. And as one of the other callers pointed out earlier on, we have got $1.6 million square feet of developable GSA at that site as approved, confirmed by the government.

So we will be looking at what we can do with that, as we look out over the next 12 months and beyond rather than concentrating on M&A activity whether it's in the market or outside. Just one other comment that I would make and I would just ask that everybody looks at M&A activity or potential M&A activity in Macau with a very clear understanding of how the local legal framework works and in particular how gaming licenses work because it is not typical as compared with, for example, the U.S. market. So be cautious on your assumptions there.

Okay, great. And then on the Dragone show when it opens, we are currently viewing it as a sort of push in terms of receipts versus expenses, but the potential for a draw on additional growth in mass, I mean is that the way we should be viewing it or is there a potential for a profitable standalone business there?

I am good. Greg, perhaps you could address that from your perspective.

We are currently just finalizing our approach both to the commercial and pricing positioning of House of Dancing Waters. So it's probably too early to guide a too detailed a response. Suffice to say we expect it to be a standalone positive contribution position. Just as importantly, is what it does for total property visitation and brand profile particularly into mainland China.

So I think the return on the investment from a standalone basis is something we are focused upon. As we have said before that is a huge development, an opportunity for a world class [shard] of property. So I think the branding profile associated with a master branding City of Dreams into key markets is going to be as strong in driving the return on that investment.

Okay. Then and just a final one from me on the moving the Hyatt occupancy to the 90% level, I didn't know if that was a sort of a near term or a longer term goal. And prior to maybe the Club opening up and the Dragone show, is that something that we should look for?

Yes, it's Greg here again. I think yes our focus on driving occupancy in Grand Hyatt is very strong at the moment. So both Crown Towers and Hard Rock have been running basically full the past four or five months from an occupancy perspective. So now that the Grand Hyatt is complete as a total property amenity and is clearly establishing its inbound channels, we see the ability to drive that occupancy up certainly within the next quarter or end of two. So I think across the next three to five months, you can expect to see quite a significant increase in occupancy in that property which combines both casino program activity with appropriate inbound retail demand from -- particularly from PRC.

Okay, great. Thanks guys.

Thanks, David.

Bye.

Thank you. Your next question comes from the line of Shaun Kelley, Banc of America Merrill Lynch.

Hey, great. Thanks guys. I have just a quick macro question for Lawrence specifically. I mean we have seen a lot of headlines about some property -- an increase in property price restrictions in mainland China. And I was wondering if you could just give us your thoughts, Lawrence, on kind of any response you have heard or seen from any of your high rollers. I know you guys have a lot of direct relationships. So anything you are hearing from your customers on that front yet?

Well, I think sometimes there is a -- certain people predict there is a high correlation between monetary tightening and also real estate prices with respect to gaining revenue in Macau. But I think, to be honest, to operate in this part of the world you need to understand that the government do intervene, and I think so far from what we have seen over the past 10 years, they have done so in a wonderful manner. So there are tightenings and there are loosenings at times.

I think our view is, unless it is a prolonged period of increase in asset prices, such as real estate prices or a prolonged period of tightening, there is very little correlation with respect to asset prices in China and the current gaming revenue in Macau. I think even throughout the first four months of this year, there has been various tightening and loosening in various aspects of China, whether it is the property sector or the financial sector. And so far the Macau market has continued to show resilience and have grown, as Simon said earlier on, 65% so far year-to-date. So I think overall we're very confident with respect to this market.

Great, thanks. And just can I go back to the -- some of the hotel statistics at the Grand Hyatt. Anyway we could get like some thoughts on occupancy, how it's improved by month and then maybe a bigger picture on how the -- like how it's been working with a third party brand on filling casino rooms versus regular cash rooms?

Can I -- this is Simon. Can I just make a macro comment to that first?

I think it's important to remember and you can see within our published results. Take a look at the revenues that we generate in Macau hotels as compared with what we do from gaming. And remember that 95% of customers that we see in the casino do not put a head in a bed when they're in Macau. So yes, we can drill in a little bit more into the hotel inventory and occupancy pacing if you wish.

But just let's keep it relevant. We've already indicated that we're at 90% plus occupancy on three of the four hotels that we operate. And we're running below that at Grand Hyatt. It's only really fully been operational for three-and-a-half months. It's in the sort of 70% area right now. And Greg has given us steer as to when we think that will also be up into the 90% plus territory, thanks.

Great. Thanks Simon.

Thank you. Your next question comes from the line of Justin Kwok, Goldman Sachs.

Hello, good evening.

Hi, Justin.

Hi, thanks for the call. Just a few housekeeping thing before I get on the question. I just wanted for the sake of completeness do you mind if you walk us through the win rate for in terms of VIP and mass segments for COD and Altira respectively.

I'm sorry, Justin. I don't know whether it's unclear for everyone, but I can't hear very clearly what it is that you're asking.

Okay, sure -- is that better?

Yes, try that.

Okay, sure. Before I go into the question just a housekeeping thing there. Do you mind you walk us through the win rate for VIP and mass segment for COD and Altira respectively because I --

Yes, we are not going to breakdown the data. We've provided the blended data. Our policy is that we will continue to do that if properties are within the bands that we expect. All properties were in the bands that we expect on the VIP side.

On the mass side as you've seen from our report, we've seen a very significant shift up above the bands that we had previously expected on that. That's really a function of length of play. And so we will now, going forward, steer that mass should be holding between 18% and 20% as opposed to the old 16%-18% mass that we had used previously.

Okay, all right. My second question is on the mass drop at the COD. Do you mind if you give us some bit more color on how that $418 million drop has been distributed throughout the first three months, how is the progress or sequential changes in the first quarter?

Again, Justin we're doing a quarterly report, not three monthly report. And so we're going to stick with what's required here and not try to break it down by month.

All right. And my last question is on the table capacity because I when I look at the Altira number, it seems that your (inaudible) number table has dropped a little bit in terms of COD now have reporting 400 table. In terms of a table cap that we've seen announced by the government I believe that they're counting on the tables by the way of a paying tax. And how many tables would that be expecting within these two properties and what sort of buffer or a capacity that we can see in Cotai for your properties? Thanks.

Justin, it's Lawrence here. I think we're still discussing with the government in terms of how the tables get accounted for and I think the early indication is that they will use the amount of tables that we pay taxes on. But right now I think going forward the key for the operator in Macau is really to look at ways to yield those tables better. So I think from our standpoint, we have a lot of tables within the Group, the Melco Crown family, and I think going forward we will maximize our yield on those tables.

All right, thanks.

Thank you. Your next question comes from the line of Chris Zee, BNP.

Hey guys, this Chris on the line here.

Hi, Chris.

Okay. Just a few questions from me for the House of Dancing Water which due for opening in 3Q. Any color in terms of the monthly OpEx for this project?

Yes, we obviously -- it would be a lot easier to get an absolute fix on that. We're more open. We're still working through with the operator as to where the final expectations are there, but to reiterate a comment that Greg made earlier on in terms of what does that add-on do to our business. Well, certainly we are of the view that it is a net positive contribution.

By that, we mean that the money that we will generate from tickets, merchandizing and other aspects on the revenue side will more than match any costs that are incremental to our existing costs at or associated with that show. The real task for us now, as Greg mentioned earlier on, is to see how we can drive the superlative, the world's first characteristic of that show right back across the whole property fitting in with the master brand to drive our visitation numbers and to drive the performance of the casino. That's really where we get the return from running that product there.

Okay. My second question is the average monthly mass market drop at COD worked out to be $160 million per month. We do have a couple of days left in April, but any color or any guidance for the month of April and going into May what do expect that to be?

Yes, we've continued to get satisfactory improvement in all operating aspects at City of Dreams from week to week. And I think that we are looking at it now with a six-month plan rather than a six-week plan. I think you would characterize our mindset at the backend of last year or with a quarter to go at the end of last year was what can we do in six weeks. Now, it's really about what can we do over the course of the next six months. And we are very excited about how we can build on the base that we've got right now. Certainly no indications leading into the second quarter than it's -- than other than it is doing what it is that we hoped it would do.

Okay. And lastly for the debts side. So we should expect some sort of an announcement or confirmation within the second Q, right?

Within the what, sorry?

Within the current second Q.

Certainly. We said that we will complete a refinance transaction during the second quarter. And I have no doubt that we will do that.

Okay, very well. Thank you.

Thanks.

Thank you. Your next question comes from the line of Rohan Sundram, Austock. Please proceed.

Good evening guys. Can you hear me?

Hi Rohin.

Hi, yes, thank you. Just two questions from me. Firstly, with the main gaming floor reconfiguration, can you just elaborate on that and how that is resulting in improved yield? And with the improved outcome under the light of the marketing campaign, what have you done differently on product campaigns and what were you feeling there?

Greg, you want to take those?

Sure. I think the objective with the main flow of layout has just been to really drive more of an energy focused experience from a consumer perspective. So layout change has been about providing a bit more of an intimate sense to the floor. We've certainly changed the mix and just as importantly, looked at what you would call the pricing point yields of the floors, so the pricing at the table is by time of day relative to demand.

So I think, combining the environmental experiences with the price yielding has really paid some strong dividends. And also a combination of slot machine layout as well important to focus on the slot area which we've seen very, very solid growth coming through as well at obviously a particular high margin.

I think with the marketing approach, our objective initially was obviously to increase the profile of the casino experience, the City of Dreams, which is something which is important when you are building a new brand in the market. So increasing overall visitation, the conversion to casino experience penetration has been the focus. So that's really been the backbone of the marketing expenditure and promotional style just to make sure we are underlining the casino experience and converting broader visitation to casino participation, which then plays into loyalty.

Okay. Thank you, guys.

Thank you. Your next question comes from the line of Anil Daswani, Citigroup. Your line is opened.

Hi, there. Congratulations on a great quarter results. A couple of questions.

Thanks, Anil.

First of all with regards to you mentioned a guidance on net interest expense of $20 million in the second quarter. Does that guidance reflect the refinancing that you expect to announce in the second quarter? Or is that guidance assuming the status quo?

And as a follow on to that, could you comment, obviously, one of your competitors has completed a very successful refi at Hibor plus 450. Are you guys clearly looking for something better than that given your comments that it will be one of the lowest funding rates in Macau? But will that come at the expense of the amendments that you have got to pay on your loan covenant? So that's the first question.

And the second question is a bit of more of a macro question which is, clearly there is a lot of supply coming in Cotai in 2011 thanks to two of your competitors. Do you guys view that as a threat or an opportunity?

Well, I will take the first question and then Lawrence will give you his thoughts on the Cotai supply question. First of all, just in terms of what I guided for 2Q interest expected net, it's not pro forma for the refinancing event that is currently being worked on. But I will repeat what I said in my prepared comments, which is that I'm not expecting any major change in our overall blended interest rate costs as we look out over the life term of the financing that we will have in place post refinancing.

And obviously I will give you plenty of color on that once we've completed the exercise. We will work through that with you. You asked for me to comment on the recent announcement from one of our competitors with regards to their financing. The only comments that I am going to provide there are that we are encouraged to see, certainly from their press release, that they are in a position to be able to move to completion on their site in Cotai, and that does tell very neatly in with what I'm sure Lawrence will say in terms of the importance of adding additional supply into Cotai. Lawrence.

Yes, Anil, it's Lawrence here. If you look at the growth in the Macau market, we have always said and we continue to believe that Macau will be a supply driven market. So -- and based on the completion date that our -- the two competitors have talked about, theirs -- we are probably still a year away. And so I think that is more than ample time to give us a buffer, really build up our own database.

So furthermore, I just hope that our competitors will meet their completion dates that they have stated because I think longer term building up Cotai and having more of a critical mass in Cotai will further drive the center of gravity in the gaming market in Macau from the current Macau Peninsula to the Cotai market. So again, I honestly wish that our competitors will finish on time.

And Anil, this is Simon. I guess I am (inaudible) constrained to what I can say on the refinancing. I can certainly talk about our existing debt. Just to draw a comparison there, we have debt as we de-leverage going forward over the course of the next four years, drop down a bit to 150 basis points over. That is substantially below any market price which is just clearly been established at 450 over that by one of our competitors.

So what you will see is a characteristic of how we move that capital structure forward is we will be retaining a very substantial part of our existing facility because they are at below market prices and that's a very, very important part of our overall cost structure.

Okay. Fantastic, congratulations again, guys.

Thanks a lot, Anil.

Thank you. So our next question comes from the line of Karen Tang, Deutsche Bank. Your line is opened.

Hey guys, it's Karen here. Congratulations on the good margin. My question is with regard to City of Dreams, their VIP. Can you give us a percentage for first quarter? And considering that Encore has just opened up more VIP tables, what's your view on that? How do you plan to keep more of your direct customers? Thanks.

Well, I think Karen, it's Lawrence here. I think I will -- maybe I will defer to Greg to go into the details, but I think we continue to be very pleased with our international marketing efforts. When we believe we are one of the leaders in this field in Macau, but maybe Greg, can you elaborate a little bit more?

Sure, Lawrence. I think the objective always of City of Dreams was to build a very solid VIP business without impacting Altira. I think we have done that successfully and that's proved in the type of role we've had in the property in Q1. We have got eight good established fixed operators who have very good relationships with -- who are operating both across turnover revenue share programs and a good base of casual junkets.

I think with Encore opening clearly early days, we are obviously monitoring things closely. They have obviously established their junket operations with that facility in Q4 that we think we are expecting minimal impact, but obviously that they are going to push to try and expose the property as much as possible in the short term. So I think there will be some trial there, but I think our basis of relationships with our VIP partners is very strong. So we expect that to grow. In fact, we have ongoing demand for more VIP space in the property which is a positive outlook.

I think it's right to say, Greg, that we've had the best roll of the day at City of Dreams during April of anything that we have seen since we opened the property, right?

Yes, that is true.

Thanks --

Right. (inaudible) give me the first quarter percentage.

Sorry, Karen?

First quarter percentage direct VIP?

Yes, I will tell you what it is. It was round about 18%.

Thank you.

Thank you. Your next question comes from the line of Gary Ngan from UBS.

Hi, good evening everyone. Thanks for taking my question. I just have a couple of questions. First, in the April overall gaming revenues, just now you mentioned that is almost up 70%. My understanding is that throughout middle of the month, it could be slightly down, perhaps 15% sequentially from March, and just wondering is that understanding correct and also what is driving the latter part of the month in terms of the revenue growth? Is that mainly because of overall volume or significant high win rate also impacted that overall results in April?

Yes, Gary, I -- we didn't give any theory as to where the market was at. As we understood it mid month, we've given a steer as to where it is at after 27 days as we understand it. We believe that the report mid month was erroneous. All of the data that I have seen across April suggest that the market has been running at the same year-on-year growth rate that we have seen since the start of this year. It had been slow in the first half and speed up in the second, that would just be incorrect in my view, (inaudible) that will happen.

I see. And do you see any sort of higher win rate in April or is it really just driven by very good volume growth overall in the market?

I think it's being driven by very, very strong volumes in the overall market. I think that one can never rule out that the whole market has held 5 or 10 or 15 basis points ahead of where you might think, but I have never seen that as being an explanation as to why the market is showing the strengths that it is showing.

It is showing that strength because all the factors that drive principally on the head line numbers on the revenue numbers is principally rolling chip business. And that's about understanding the liquidity cycle and how that works between mainland China and Macau, and try to understand what the key drivers are for all of that. And if you focus on that, I think that you will get to the bottom of why pushing along 70% pace year-on-year.

I see, thank you. My second question is, just that -- just curious on the mass market of City of Dreams. How does the performance compare between the Hard Rock Casino and the main mass market flow in the first quarter? Can you give some color on the relative performance?

Maybe we will let Greg elaborate.

So without going into the specific splits, we're obviously driving a large majority of cash drop from our level one mass flow. That's partly driven by a lower spread in Hard Rock. Hard Rock is a strong focus for us now. I think we have clearly established a good base of what we call [grind] business across level one of the business so, now moving into more of the niche profile market of Hard Rock, we see further upside in that area.

So Simon alluded to as sort of six-month planning is obviously continuing to drive what's happening on the level one property, but really putting a stronger focus on yielding Hard Rock as well.

Thanks, and I just want to follow up. It's the unit productivity for both mass table and slots are very different between the two floors?

Look, Gary, we are not going to start getting into a discussion from day to day or week to week as to how one table performed against another. It just becomes too complicated. I don't think you'd learn anything from it. Take away from this as is typical on any property where you have a ground floor and a first floor, we are hitting out straight on the ground floor. There is still plenty of opportunity for us to deliver a better result up on the first floor. Tied into those amenities that we have been talking about, got a great round up there. And we are excited that it will all happen out over the next six months. Thanks.

Okay. Thank you very much.

Thank you. And your next question comes from the line of Gary Pinge from Macquarie.

Hi, guys. Can you hear me?

Hi, Gary. We can hear you clearly.

Thanks very much, Simon. But first a congratulations on a very solid set of results, as like everyone else has said. I just wanted to point out one interesting metric. Obviously, it was the fact that your hold rate in the mass market side of City of Dreams is obviously quite strong and I appreciate what you are saying in terms of length of play at that property.

Can you give us some insights into what amenities are likely to open up in the second half of this year? And kind of where you think that that hold rate can top out based on your experience and studies done on some of the other properties and some of the other competitors?

Gary, it's Lawrence here. I think the, as we said, the most high profile project to open in the second half of the year would be the House of Dancing Water show. But at the same time we are also looking at opening up additional dining outlets and also a night club. So I think we are striving to what's really making City of Dreams a real -- a world of wonder for entertainment. And really a world of first in terms of the wide attractions that we offer, be it the Dragon's Treasure, House of Dancing Water and all the entertainment attractions.

With regard to the mass hold rate, we've always said that it's really a function of the length of play. And I think ever since you -- ever since the opening of the Hyatt rooms, we have been able to drive that the length of play and also the hold rate up. And I think credit needs to go to the operating team, Greg's team, in terms of some of table configurations that we have done along the way.

I think, Greg, do you have any further comments to supplement to that?

I'm going to just jump in before that. The benchmark is across the street promos in Cotai and the Venetian has pushed hold rates on the mass side up north of 25% quite consistently. And so this is very clearly a benchmark there and we've got that very much in our target in terms of where we expect to get our performance to over time.

Hi Gary, it's Greg here. I think our stated range of 18% to 20% is at the right side. It is absolutely at the upper end of that, but we keep a close eye on the mix and what is happening. But a bit clearly we've taken a step forward based on the length of play. Also dealer productivity and just yielding for utilization to a table as well.

I think Lawrence covered all, I think, the amenities, House of Dancing Water, Hard Rock Cafe, adding a night club. Retail expansion is an important one as well. So we're virtually doubling the retail experience in the property and some of that has frontage on the casino floors. That's another positive addition both from a retail perspective but also influence into the casino as well. We also have a few other (inaudible) developments in the pipeline.

So all of that is just more reason to stay at the property as opposed to depart which gives us greater debt compared to when we opened.

Right. Thanks very much.

Thanks Gary.

Thank you.

Thank you. There are no other questions at this time. And I would like to hand the call over to Mr. Simon Dewhurst for closing remarks.

Thank you very much. We look forward to reporting back again in three month's time. We thank you for your questions and also for your patience in listening to the conference call today. Good bye.

Thank you for your participation in today's conference. This concludes the presentation and you may now disconnect. Have a great day.