Melco Resorts & Entertainment Ltd (MLCO) 2012 Q1 法說會逐字稿

Good morning and thank you for participating in the first quarter 2012 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 Geoffrey Davis, Chief Financial Officer of Melco Crown Entertainment Limited.

Thanks, operator. Good morning, everyone, and thank you for joining us today for our first quarter 2012 earnings call. On the call with me today are Lawrence Ho, Ted Chan, and Ross Dunwoody. Constance Hsu is on the line from Macau.

Before we get started, please note that today's discussion may contain forward-looking statement made under the Safe Harbor provision of federal securities laws. Our actual results could differ from our anticipated results.

I will now turn the call over to Lawrence.

Thanks, Geoff. Hello, everyone. In the first quarter of 2012, we've delivered record EBITDA and EBITDA margins on both an actual and hold-adjusted basis. Our EBITDA during the quarter grew by over 100% year-over-year to $243 million on net revenue growth of 27%.

The impressive EBITDA flow through is a testament to the strength of our mass market operation, particularly at City of Dreams, which continue to drive Group wide profitability.

At City of Dreams, our mass market table games revenue grew 70% on a year-over-year basis, compared to the overall market, which grew at 39%. On a sequential basis, City of Dreams' mass market table games segment grew at 19% compared to market growth of 7%.

City of Dreams is now the second largest mass table gaming revenue property in Macau, with market leading win per mass table, demonstrating the success of our focus on this segment. This is an impressive achievement given our flagship property has yet to reach its third year anniversary.

Market wide, the mass market table games segment continues to outpace the overall gaming market, reinforcing our confidence in our mass focused strategy. Even considering this impressive market growth, we have increased our market share in this segment.

We continue to focus on maximizing table yields, ensuring that our most valuable resource is allocated to its best use, whether that is in the rolling chip or mass market segment, or between City of Dreams and Altira Macau. Our rolling chip volumes reflect the effect of this transitional redeployment of tables, particularly at Altira Macau.

As part of this strategy, we recently opened three new fixed junket rooms at City of Dreams, which we believe will start to contribute to our results from the second quarter of 2012. We are also upgrading and improving our gaming and nongaming facilities, ensuring that we continue to cater to our increasingly discerning and loyal customer base, securing our competitive position at the high end of the market.

Earlier this month we opened our new premium mass gaming and entertainment area at City of Dreams, delivering to our key customers a customized and luxurious gaming experience, solidifying our dominance in this key segment and setting a new standard for premium gaming in Macau.

We also continue to refine our management structure, as highlighted by the recent management streamlining initiative. Ted Chan has assumed the role of Chief Operating Officer, which will further facilitate the integration of our gaming and nongaming operations, unlocking both revenue and cost synergies across our entire operating portfolio.

Macau continues its evolution into Asia's leading leisure and tourism destination with an increasing array of gaming and nongaming attractions, specifically in the Cotai region, providing incremental growth drivers for Macau's tourism industry. Our significant exposure and enviable locations within Cotai places us in a position of strength to fully realize the benefits of this shift in the gaming market to one focused more heavily on the mass market.

Visitation to Macau continues to grow, with broadening visitation demographics being driven by Macau's improving and diverse gaming and nongaming attractions. This increasing desire to visit Macau is well supported by the rapidly developing transportation infrastructure network throughout China, which has improved connectivity to our most important target market through improvements such as the intercity and high-speed rail network throughout China.

Hengqin Island's comprehensive development plans provide further evidence of the local and mainland government's support for the development of the region. With the potential for a significant increase in penetration, a supportive infrastructure development pipeline, as well as the economic growth and increasing prosperity of our major feeder markets, we believe the future of Macau is well supported.

In relation to Studio City, we continue to work with the government to bring this project closer to realization. We are respectful of the government process and continue to cooperate with the authorities to move things forward. We remain optimistic that we can restart construction towards the end of this quarter, subject, of course, to government approval.

So, back to Geoff.

Thanks, Lawrence. We reported adjusted EBITDA of $243 million in the first quarter of 2012 on approximately $1 billion of net revenue. This compares to first quarter 2011 EBITDA of $121 million and net revenue of $807 million. EBITDA margin in the first quarter of 2012 was approximately 24% compared to 15% in the same period a year ago.

As mentioned by Lawrence, we have delivered meaningful year-on-year growth in our mass market business. During the quarter, we increased our Group wide mass table GGR market share by over 100 basis points to 12.5%, through a combination of strong volume growth and significant improvements in mass table hold percentage.

Our mass table hold percentage at the City of Dreams in the first quarter of 2012 climbed to over 28%, representing a significant improvement from 23% in the first quarter of 2011 and 26% in the fourth quarter of 2011. We believe this mass table hold level is sustainable and reflects various initiatives to drive our hold percentage. As a result of these successful initiatives, we now expect our mass hold percentage at City of Dreams to be in the 25% to 30% range.

Assuming that we held at 2.85% across our entire rolling chip business, our first quarter EBITDA was approximately $210 million, up from approximately $200 million in the fourth quarter of 2011 and $175 million in the first quarter of 2011. This marks the 11th consecutive quarter of improving EBITDA on this basis.

This sets a new record in hold-adjusted EBITDA for our Company as well as a record hold-adjusted EBITDA margin of 22%, which compares to approximately 21% in the fourth quarter of 2011. This improvement in margin is attributable to the strength of our mass market business and our operations together with strong cost control.

The EBITDA contribution from our non-VIP segments continues to increase and now represents almost 75% of hold-adjusted EBITDA at City of Dreams and approximately two thirds of our hold-adjusted EBITDA on a Group wide basis.

As a result of our strong operating cash flow, our net debt to shareholders' equity is now 15% at the end of the first quarter of 2012, down from 24% as of the fourth quarter of 2011. Our net debt is approximately $510 million compared to approximately $800 million at the end of 2011.

As we normally do, we'll give you some guidance on non-operating line items for the second quarter of 2012. Total depreciation and amortization expense is expected to be approximately $90 million to $95 million. Corporate expense is expected to come in at $18 million to $20 million, and net interest expense is expected to be approximately $23 million to $25 million.

That concludes our prepared remarks. Operator, back to you for the Q&A.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. (Operator instructions.) David Bain from Sterne, Agee.

Great. Thanks. Guys, one of your competitors recently reviewed their Cotai project plans and looks like they're upping their budget fairly significantly. I guess the question is, is the $1.9 billion in CapEx projection related to Macau Studio City, has that been scrubbed recently? I know it's probably constantly reviewed, but do you anticipate any potential significant changes from the $1.9 billion?

Hey, David. It's Lawrence here.

Hi, Lawrence.

Yes. Our $1.9 billion budget for Studio City remains. We have a very good team of development and design individuals, and we've had our outside quantity surveyor take a look at it. And those -- the packages are currently out with the big bidders right now in terms of the construction companies.

So, so far, we haven't had any pushback. So, I think the budget that we have been working along is a very good one. And as we said on the very last call, our Q4 call, the design was effectively complete. And so, I think our budgeting on that front was quite accurate.

So, anything you want to add?

No, nothing from me on that. From a design and construction budget, the $1.9 billion is still intact, David.

Okay, great. And then, slot handle at CoD, that was up 21% sequentially. Were there some tweaks made to the slot flow or any anomalies? It looks like the average slots actually went down sequentially.

We had a little trouble there with the quality. Could you repeat that question, please?

Yes. No, I was just looking at the slot handle at CoD. It was up fairly significantly sequentially at 21%. And I'm wondering -- we've heard about different table conversions and changes. And I'm wondering if there was something done to the slot floor to help push that increase, or if this is a good run rate going forward looking at slot handle, if there was something different during the quarter.

Hi, Dave. This is Ted.

Hey, Ted.

Yes. In CoD here, we are doing pretty well in the mass segment in 2011. Stepping into 2012, we are looking at the VIP segment of the slot offering. And you might know that the performance in the Peninsula side is very, very good in terms of that segment.

So, we have tried to look at that, and we put a lot of effort in aligning the product offering as well as the sales force. So, basically I think it's because of the increased attention on that area that increased that in that perspective.

Yes, Dave. It's Lawrence here. Let me just reinforce Ted's comment. As you know, we have done very well on the premium mass and also on the higher end mass segment. So, I think there's a lot of synergies between the premium mass and the high limit slots, VIP slots area.

So, at the end of Q4 last year and leading into Q1 of this year, Ted and his team have done a lot of work on those fronts. So, I think there is more upside to those. And with our recently opened premium mass area that I talked about in the prepared remarks, there is also a high limit slots area that has been very well received and has been -- our customers have been very complimentary in terms of the innovation that we've put into that area.

Okay, great. And then, just the last one for me, if I could. Do you still anticipate a skywalk between Cotai Central and CoD? And if so, is there a timeline on getting started with that project?

Yes, it's Lawrence again, David. We are looking at that, but I think that's harder since -- as you know, since Cotai Central's opening is a phased one, and that's harder at that level. There is actually nothing there right now.

So, we're kind of slowing down on that part of the skywalk. But, we are in active discussion with the Venetian about building the skywalk between City of Dreams and Venetian. And that is progressing along.

Okay, great. Thanks, guys.

Thanks a lot, David.

Cameron McKnight from Wells Fargo.

Good evening. How are you?

Not bad, Cameron. How are you doing?

Not too bad as well. Just a question on the table cap, Lawrence. Now that the cap is in force, how are you guys thinking about the allocation of tables across your properties and between mass and VIP?

Well, I think I'll probably get Ted to add more color later on. But, with the table cap, we've been on a table optimization and yielding up the table drive probably for the last three or four quarters. And I think even a year and a half or so ago, we talked about that we were hitting an equilibrium point in terms of how well our mass tables were doing versus VIP.

Because if you look back probably two years ago, it was a no-brainer, just give the tables to the junkets and ask them to grow a certain amount per month. I've seen some of the results announcements from our competitors even recently, and that seems like a common theme. But, for us, we would much rather keep those tables to the higher margin mass business.

I think right now that that process is ongoing. But, I think, if anything, there is a bit more tables being shifted between Altira and City of Dreams. Ted, do you want to add a little bit more color?

Yes, Lawrence. Cameron, I think we are so disciplined in terms of the EBITDA enhancement and productivity enhancement, not only in between properties but also in different segments. And I'm sure you all know that the potential is really on the Cotai side, so we'd like to shift some of the greater potential improvement in the CoD side.

So, we decide to move some of the tables from Altira, particularly in the junket and VIP sides, to CoD. Across the last quarter and the first month of this quarter, we moved probably about 15 to 20 tables from Altira to support the expansion in VIP side, in terms of VIP.

We continue to look at that discipline in terms of EBITDA enhancement in the table side. We opened up our new Signature Club in CoD in Grand Hyatt side, and it's very, very great received by the customers. So, we continue to monitor situation and see what the potential will be in the future months.

Great. Thanks. And a follow up, if I may. Lawrence, now that Cotai Central has been open for all of -- for almost a month, can you comment on, I guess, some of the impact or some of the effect that you've seen post that opening?

Well, Cameron, I think since Cotai Central, again, is phase one of a three phased opening, it's a limited offering at this stage. And even with the limited offering, we have seen a uplift in terms of visitation into City of Dreams. So, I think the clustering effect and the moving the center of gravity to -- from Macau Peninsula to Cotai, and even more specifically to the Cotai Strip, is meaningfully happening.

So, we can't wait for the future phases of Cotai Center to open, because I think when they're fully open it's really going to drive significant visitation, especially to the Cotai Strip area.

Great. Thank you very much.

Thanks a lot, Cameron.

Anil Daswani from Citigroup.

Congratulations, guys, on some great results. A couple of questions from me. First, Lawrence, could you comment at all about how the ramp is going for the new mass -- premium mass segment that opened at the Grand Hyatt that you had talked about in your prepared remarks? Is that shifting the mix materially in the second quarter? You mentioned that 75% of EBITDA in the first quarter came from the mass segment. Do you expect that to continue to rise with more mass being added?

Anil, this is Lawrence. Thanks a lot for your support. Maybe I'll get Ted who can provide more color on that.

Yes, Anil. Well, I think in the Signature club reallocation from the Crown Tower side to Grand Hyatt side, it's twofold. First, I think we see a very great depth in the market so that we could further focus on one segment, which is the high end of premium mass, which we see a great potential that we should continue to invest in.

Secondly, I think it's more about alignment of the room products that we have. So, we aligned more Grand Hyatt rooms to our high end premium mass segment. So, continuing to do so, we anticipate improvement in hold percentage and also resulting from the length of stay for these segment customers.

As I said earlier, I think we would like to monitor closely on the productivity in terms of EBITDA for the EBITDA per tables monitoring going forward. So, we'll continue to monitor, and if there is potential there we will reallocate more tables to the high end margin business in there.

Thanks very much, Ted. Just one other question on Studio City. Obviously the guidance is still that one is anticipating to get all the approvals, all the I's dotted and the T's crossed by the end of this quarter. Has there been any change to your guidance with regard to the completion schedules? And in addition, on Studio City, given how strong the balance sheet is now looking with net debt coming under control, can you confirm that you're not looking at equity as a means to raise capital for Studio City?

Hey, Anil, it's Lawrence. I'll answer the first part of that question, and I'll hand it over to Geoff for the second part on the financing of Studio City.

Studio City, we haven't wasted any time. It's progressing along. We have really had time to fine tune the design and also work with contractors. At the same time, similar to the guidance we gave on the Q4 call three months ago, we remain very respectful of the government processes. And I think our approval process is somewhat different than some of our competitors like Wynn or Galaxy or even SJM/MGM in that the Studio City project has been in existence for quite a while.

And that's why, rather than going into the complicated various stages of processes, we will only make an announcement when we actually get the construction permit to restart. So, we're still optimistic that we can get that -- get to restart near the end of the first half.

And it's also no secret that the -- we have done quite a bit of site preparation work as we speak, and pictures have been taken of the site recently. So, we're ready to go. We're just waiting for the government to, as you said, dot the I's and cross the T's.

So, I think our timetable remains the same. So, from when we start construction to the end of construction, we're still expecting about 36 months. So, we're confident that we're still within the previously guided timeline. So, we're -- fingers crossed, hopefully we get the construction permit sooner rather than later.

And I think on the financing of Studio City, I'll hand it over to Geoff.

Yes, Anil, we can confirm that we have no plans to raise equity in either Hong Kong or New York or the US.

Thanks very much, guys.

Thanks, Anil.

Billy Ng from Bank of America.

Hi. Good evening. Basically I have three questions. For the first one, just curious. For Macau Studio City, will you make a big announcement before you break ground, or you will just start as soon as you get approval and then think about -- or maybe later to think about the proper timing to announce it?

And the second question for that is also in terms of the design, since your peers are focusing on either retail or convention space for their next project in Cotai, so like what will Macau Studio City focusing on in terms the nongaming offering?

And for the last question I have is, like looking at your balance sheet and definitely it's improving, and just wonder will it be a possibility that you can handle Macau Studio City and potentially some other opportunities overseas at the same time?

Hey, Billy. It's Lawrence. I'll take the first two and I'll hand over the capital structure question to Geoff, the third one. I think the first two -- your first two questions are actually interrelated. And we're still contemplating whether to hold a event or not.

But, again, I think we tend to try to do stuff in a more low profile and a humble basis, so we'll probably try to get moving first before -- but, we do have some announcement to make, because obviously since we took over the property we've made significant design changes. And so, we would like to share that with the investment community and also the greater public as well.

I can give you a little bit of color in terms of the theming. I think -- contrary to the previous owner's design, Studio City I think we've really taken -- Melco Crown has always done very well on entertainment propositions. You think about House of Dancing Water, the Bubble, and the various nightclubs that we have.

So, we've really taken the Studio City and the movie concept to the next level with Macau Studio City as a theming and also as attractions and nongaming amenities. So, in due course, we will announce all of those together with potentially the restart of construction. But, we are still contemplating when that event would take place, if it's just -- and what format it is in.

Let me hand it over to Geoff to talk about the overseas and how that would impact our capital structure.

Thanks, Lawrence. Given our existing balance sheet, our existing cash position, and our future cash flow, we do have the capacity to consider additional projects, whether they're inside or outside Macau. That said, the focus clearly right now is on Studio City, and we'll evaluate any other projects that come our way down the track.

As far as development outside of Macau, I think the timing there is still somewhat unclear and probably not anything imminent.

Can I have a follow up question? Let's say assuming the Philippines is a possibility to do some joint venture there, like how much investment you can put in, let's say a year from now or two years from now? Or, are -- you guys consider Philippines as an opportunity at all?

Hey, Billy. It's Lawrence. We -- as you know, Melco Crown is a focused -- between Melco, Crown and Melco Crown, we have focused on Asia. So, anything within Asia we would look at.

But, as we have previously guided, we are more interested in the larger and more stable jurisdictions. And of course Philippines is a very quick up and coming market. So, again, I guess it's too hypothetical in terms of what happens in a year.

And there could be various -- you talked about joint venture structures and stuff like that. It's kind of hard to answer, but I think what Geoff said is right. Our main focus right now is on Studio City and getting Studio City off the ground, hopefully with some assistance from the government sooner versus later.

So, that's kind of -- we're a very focused Group. And right now that's our number one priority.

Thanks. Thanks a lot.

Thanks, Billy.

Aaron Fischer from CLSA.

Yes. Actually, most of my questions are already answered. But, maybe I can just ask a more specific question on the potential of dividends. Is there any -- are one your shareholders in particular expecting a material dividend to be paid at some point, for other opportunities they might be looking at around Asia, the Asia-Pacific market?

Well, I think given the strength of the balance sheet that, down the track, might be an option for our Board to consider. But, right now, given the focus on Studio City and the potential for --.

Phase three City of Dreams.

Phase three of City of Dreams and potentially other projects, that it's hard to gauge the timing of that.

I think -- Aaron, this is Lawrence. I think at the Board level we have discussed this. And I think ultimately, even before we undertook Studio City in the middle of last year, we had a long chat at the Board meeting about we could have paid the dividend this year if we didn't undertake that project.

But, I think the development is just so amazing in Macau that it was too hard to pass up, because how often can you be -- operate and be lucky enough to operate in the biggest market in the world and still the fastest growing? So, yes, definitely if the other jurisdictions don't open up in time and we have the ability to pay a dividend, I think on behalf of the two principal shareholders, we would love for that to happen.

Okay, excellent. Thanks very much.

Thanks, Aaron.

Praveen Choudhary from Morgan Stanley.

Thank you. Thanks, Lawrence. Thanks, Geoff. How are you guys doing?

Not bad. How are you doing, Praveen?

Very well. Very well, thank you. Obviously very good results. I have two quick questions. The first one is regarding Cotai project, Studio City.

Six months ago when you mentioned and you bought this project, we were not looking for three competing projects to complete around same time in 2015 and '16. So, not only in the number of tables you will be competing, but construction workers, you will have to compete with them. Do you have any color to give us that, while you are competing on construction workers, you will be able to get enough of them, and also number of tables?

Yes, Praveen. I think we've -- I think similar to the two other operators who recently said they got the land grant, again, the exact process in the construction is going to be different, because even after land gazetting, it's very complex. You still have to get your designs and piling -- foundation designs approved.

So, again, I think the government will continue to follow what they have told us in the past, which is they're going to stagger these projects. And they obviously don't want a repeat of what happened in 2007 when you effectively had four casinos, major resorts, open in the same year, thereby causing a bit of chaos in terms of the society in general and also in the labor sector.

We have had a lot of communications not just with the main senior leadership of the government, but also at the working level. And we have been assured time and time again that they will process what is foreign labor quota. But, of course, subject to us meeting the rules of the game.

So, in terms of construction schedule, we're not concerned. And obviously with Studio City, the previous owners had put in significant foundation and piling work, which does give us quite a few months of head start on that basis.

So, I think the government has told us that the current unemployment rate in Macau is 2%. So, when there is a need for workers, they will do the right thing and allow more foreign labor to come in to help out in the development of the City.

And on your question about table cap, again, I think the government has been very transparent in terms of communicating that their view is at 3% a year for the next 10 years. So, there's a very clear and transparent pipeline from now until 2022 that there's going to be an addition of approximately 2,000 tables.

But, the government has also said that they are -- they will -- when these properties open, and of course they're not going to open from 2017, 2018, so they could create -- allocate those tables. So, as long as they meet that 3% per annum increase until 2022, it's probably doable. So, again, I think we've all gotten the necessary assurances.

Sure. We still struggle to give -- or get an idea who will be first to complete and who will have to postpone until 2016 and '17. But, we will keep coming back to you guys on that later.

The second question I would have is in terms of competition that you are seeing both in the mass segment and the VIP segment. Maybe -- you are doing pretty well, so maybe you are not seeing it. But, can you talk about in general in the market, now that the growth rate has slowed down somewhat to 15%, 20%, and a lot of that is coming from Sands so the others may not be growing that fast, have you seen any pressure in terms of either the marketing cost, promotion cost on either mass side or VIP side, if not for yourself, for your competition? Thank you.

Hi, Praveen. This is Ted. Maybe I should respond to your question on that. First of all, let's talk about the VIP segment. I think, especially in Cotai here, we are no longer competing like in the past in the pricing or credit side. I think we are more focused on differentiation as well as the service and the quality of the property. I think that's what happened, particularly with the new supply in the first quarter or late fourth quarter last year.

In terms of mass, well, you see some changes in the market. But, particularly in our Company, in CoD here we do not see a -- really a significant increase or whatever in terms of that mass market. That's basically we've focused pretty much on the right segment of that market.

As I mentioned earlier, I think we are quite amazed with the affluent markets, particularly the mass side, that we identified this segment to be focused. So, in our case, we do not see any increase from the first quarter this year compared to last quarter of last year.

That's very helpful. And then, any indication on bad debt numbers? I know this is a great quarter, so not to ask about it. But, I just want to make sure that there is no escalation of either bad debt or account receivable increase.

Well, you can see that we actually had a sequential and year-over-year decline in our receivables, Praveen. And our provision was roughly flat with where it's been trending for the last few quarters. We're not seeing, in our premium direct business, any change in collection cycles and we're not hearing about any change from our junket partners.

That's very helpful, Geoff. Thank you so much. Have a good evening.

Grant Chum from UBS.

Good evening. Thanks for taking my question. I have a few questions. The first one is on the VIP side. I think you obviously discussed some of the issues with Altira in the last conference call and looking to improve the yield and reallocate some of the tables there. But, just looking at City of Dreams on the VIP side, I mean, there was a 6% sequential decline in the volumes. I think that is worse than the market.

Just wondering can you help us understand the drivers behind that? Is it because of certain operators in the property doing worse, or is it just the general effect of keener competition? Or, do you attribute it just to the market backdrop?

Hi, Grant. It's Ted. I think on the CoD side, you may see that in the last quarter or late last quarter in last year there is some additional supply in the market, particularly in Cotai. And these supplies are all new and upgraded supply. So, I think that's resulted in some slowdown in CoD volume in terms of VIP rolling chip perspective.

But, also you might also notice that in the first quarter and the -- in April this year, we continue on the renovation part of it. So, we responded to the market by improving our quality of the property. We are actually the last one in the three properties in Cotai in terms of the -- how new the property is. So, we feel that this is the right time that we have to do some renovation work. So, I think that's the combination of these two factors resulting in a slight reduction in the rolling chip volume.

But, you also notice that we have three new fixed junket operators operating by either late March and early second quarter. That will be resulting in a better improvement in our rolling chip volume in CoD in the second quarter.

I see. Thanks, Ted. And my second question is on the development side, perhaps a question for Lawrence. I mean, your net debt is coming down very fast, as already mentioned by another questioner. I mean, why wouldn't you move ahead with the tower on CoD more rapidly, I mean, given that's a relatively smaller investment versus a new project and given that CoD mass is doing so well? By the time that tower gets finished, timing could be very opportunistic. By 2016, I guess that whole area will be even better. So, why wouldn't you think about moving ahead with an additional tower?

Grant, it's Lawrence. You're absolutely correct. We're actually looking at that, and certain submissions have been made to the government. And, at the same time, the design is in -- I think it's in detailed but conceptual design stage. So, it's ongoing.

But, I think from our planning purposes, we want to make sure that Studio City gets off the ground first, because ultimately the balance sheet and also the capital structure of -- ultimately what happens with Studio City also has a overall impact on Melco Crown Entertainment as a group. So, we are doing -- the things that we can do in parallel we are. But, I think the preference is still to get Studio City off the ground first.

I don't know if -- Geoff, do you want to add any color too?

Yes, that's correct. We certainly don't need to wait until Studio City is complete before we would consider commencement of construction on phase three. But, the pecking order is clearly Studio City first and then phase three. So, we are looking to expedite that process to some degree.

And Lawrence, I mean, sorry to push you on this. But, in terms of the process of getting the permits to restart on Studio City, I mean, do you need the land concession to be re-gazetted with the new terms, or should we understand this process slightly differently to perhaps some of the other applications?

Yes, the process is different. But, ultimately -- just to put things into perspective, City of Dreams has been re-gazetted four times. So, every time you make a change to the design of the property or you want to shift GFA around from, say, the hotel tower to the podium or the podium to whatever, including the Hard Rock Cafe, because half of it is in the casino and half of it is in the hotel tower, you have to go through a re-gazetting.

So, re-gazetting is just part of the process. And again, I like to say that our process works kind of differently from other people, because their land -- unlike, for instance, the Wynn land that was granted to them last week, the Studio City land was granted to our previous -- the previous owners of that property 11 years ago.

So, there is significant difference, and it would get very complicated. And that's why, unlike some of our competitors, we don't want to issue announcements or mistakenly issue announcements based on these approvals.

Okay, understood. Thanks very much. That's helpful.

Joe Greff from JP Morgan.

Good evening, guys. Thanks for taking my question. Most of my questions have been asked and answered. Just wanted to get a sense of how you're maybe viewing City of Dreams with the additions of three new junkets there in terms of how that might change the mix between non VIP and mass -- or between non VIP and VIP.

Hi, Joe. It's Ted. In terms of the three new junkets operating, we added about -- totally about 23 tables for these three new junket operators, which means about 10% more on the VIP tables allocated in VIP in CoD compared to the last quarter last year. And in terms of the number of tables in mass, we remain similar number of tables, which is about 230, 229.

So, basically if you look at the revenue growth, we should look at a fast growth in the second quarter in terms of VIP. But, in terms of EBITDA margin and also EBITDA -- absolute EBITDA percentage, I think our newly added Signature Club in terms of the high end of the premium mass will contribute in the second quarter as well. So, we remain our expectation on the existing ratio.

Thanks.

Shaun Kelley from Bank of America.

Hi. Good evening, guys. I just wanted to ask a little bit more about premium mass. You've been very successful in obviously your initiatives there. But, I was wondering if you could just give us a little bit more granularity on the hold percentage. And we've seen this tick up at a variety of other operators as they've kind of changed their mix towards premium mass. But, could you give us a sense in terms of what you're doing? Is it the type of customer that you're seeing? Is it the average level of play? What exactly is driving mathematically that higher hold ratio that you're comfortable with now?

HI, Shaun. It's Ted. I think basically it is more efficiently run casino floor. The average bets improve every quarter, and also the service level as well as the room product alignment as well as the nongaming alignment to the right customer. That means that will contribute to the length of stay of the same customer that you have, and then also increasing the number of customers in that segment. I think that's the focus that we have been doing in the last four or five quarters.

So, continue aligning with the room products as well as reallocations of the right tables to the right area, then will contribute -- that will contribute to a further length of stay in this property, as well as more aggressive in terms of our pricing strategy on those tables will improve our average bet on those customers.

So, I guess combining all of the efforts, we see a lot of improvement in that area and we continue to do so.

That's helpful, Ted. And then, just one on the margins for the property, for City of Dreams overall. As you guys have continued to increase your mix towards mass there, I think you said you were up to 75% in the prepared remarks. Just theoretically, how do you think about the margin potential at that property? Is 30% achievable? I think the Venetian obviously sets the standard, but they have a much higher mix of retail that's very high margin in that. So, could you just give us a sense of obviously not guidance, but strategically kind of what you think would be possible in that property over the medium or long term? That'd be helpful.

Shaun, it's Geoff. I think that 30% is not out of reach for us. I won't add a timeline for that. But, given the growth trajectory of the various segments in Macau right now favoring mass and our ability to take share and our success in that segment, might suggest that we will continue to mix shift towards more mass, which should result in a higher blended margin at City of Dreams. I think something in that ballpark over time is something that we can definitely shoot for.

Thanks, Geoff. Good results, guys.

Thanks a lot.

Charlene Liu from Nomura.

Hi, guys. Thanks for taking my question. I would like to know the EBITDA on a luck-adjusted basis. Geoff, can you help me on that one, please?

Sure. Luck-adjusted at 2.85% was $210 million.

Okay. That's helpful. I have a second question on Macau Studio City. Is it correct to assume that the project would have to restart at the end of the quarter, contingent upon government approval? So, we do need a sort of like formal announcement before the project could be restarted. Is that a correct assumption to make?

Charlene, it's Lawrence. As we said, when we -- I think when we get the construction permit to restart, we'll probably restart first and then organize some sort of event and announcement afterwards.

Understood. Thank you so much.

Thanks a lot.

Bill Lerner from Union Gaming.

Thanks. Hey, guys. Luxury high rise residential demand and pricing in Macau has been very strong, obviously, like La Scala or One Oasis recently. When you overlay that with what you're talking about and showing with your balance sheet, I suspect you'd want to revisit this at City of Dreams. I guess the question is, if at all, how is the strata title dialog with government these days?

Hey, Bill. It's Lawrence here. I think, as a Company, Melco Crown even probably two, three years ago had given up on the strata title initiative, because at the end of the day, again, we're very respectful of the government's wishes, and we also understand the land in Cotai and their view and the public pressure that they're under if we were to go the strata title route.

So, in any case, the gaming business is so good that we do need the additional hotel rooms. So, I think we've -- even three years ago, we decided that this would be a hotel tower.

Okay. That's helpful. Thanks, Lawrence.

Thanks, Bill.

Simon Cheung from Goldman Sachs.

Hi. Thanks for taking my questions. I have three quick questions. One, you mentioned that you have 23 VIP tables in three new VIP rooms. Can you help to quantify how much of rolling turnover that would bring in? Because I suppose some 15, 20 rooms going to be shifting over from Altira. That's the first question. I have two follow up. Thanks.

Hi, Simon. It's Ted. Yes, we added 23 tables in CoD. I can't really disclose the individual unit performance on this -- junket operator. But, these are the -- one of the biggest junket operators in town. I'm sure some of you might know it.

But, in terms of the improvement in the rolling chip volume with these 23 tables, for sure it's better, much, much better than the Altira one. Giving some color, I think we are talking about 30% more in terms of individual table productivity compared to Altira. So, that might be the benchmark.

Right. Okay. Okay, that's helpful. The second question is, to the extent that -- again on Macau Studio City, to the extent that you can perhaps share with us on the gaming facility side, how many tables as well as slot capacity are you planning to add on? And also, can we confirm the number of hotel rooms that are going to be added in the Studio Cities? Thanks.

Hey, Simon. It's Lawrence here. I think in terms of the number of tables, on that front I think we are in the same boat as our competitors, that I think the government will approve those after the table cap is unfrozen, which is at the -- March of 2013 whenever those projects open. But, again, I think they will award those based on the type of investment and what we're adding into Macau in the nongaming aspects and how we're helping Macau diversify.

So, again, I think we've gotten the necessary assurances, similar to our competitors in terms of restarting. So, we look forward to working with the government on that front.

And sorry, I missed the second part of your question.

Was it number of hotel rooms at Studio City? 1,600 in phase one.

1,600, great. Okay. The last one is actually a similar question. On the hotel tower, can you remind us the CapEx as well as the number of hotel rooms that you are planning to push out into the market?

Well, I think, Simon, on phase three, we are -- as I said earlier on, we are going through the detailed but conceptual design. So, we will finalize -- it is a big project. It is 1.5 million square feet in total GFA. We are looking at the budget right now.

So, I think -- I don't want to really -- can't guide you to a number that we are not 100% confident on, similar to -- unlike Studio City, where it's a number that has gone through multiple iterations with quantity surveyors and contractors. So, I think perhaps the next call or even the call after that we would provide more color.

Okay. Okay, no worry. Okay. Thanks a lot, guys. Okay.

Thanks a lot.

Ladies and gentlemen, we have now come to the end of our question and answer session. I would now like to turn the call back to Geoffrey Davis for closing remarks. Please go ahead.

Great. Well, thanks, everyone, for joining us today. And we look forward to getting back to you with the next quarter.

Thank you, everyone, for joining today's conference call. You may all disconnect.