Melco Resorts & Entertainment Ltd (MLCO) 2012 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the fourth quarter 2012 Melco Crown Entertainment Limited earnings conference call. At this time, all participants are in a listen-only mode. There will be a presentation, followed by a question-and-answer session. (Operator Instructions). I must advise you that this conference is being recorded today, Wednesday, February 6, 2013.

I would now like to hand the conference over to your first speaker today, Mr. Geoffrey Davis, Chief Financial Officer. Thank you, sir. Please go ahead.

Thank you, operator, and good morning, everyone. Thank you for joining us today for our fourth quarter 2012 earnings call. On the call with me today are Lawrence Ho, Ted Chan, Constance Hsu, and Ross Dunwoody.

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.

I will now turn the call over to Lawrence.

Thanks, Geoff. Good morning everyone. In the fourth quarter 2012 we reported EBITDA of $248 million, on approximately $1.1 billion of net revenues, delivering an EBITDA margin of approximately 22.5%. Our record EBITDA performance in this quarter is the result of market-leading growth in our core mass market table games segment, together with above-market performance in the rolling chip segment.

We also delivered record Group-wide rolling chip volumes, and mass table games growth in revenue in the fourth quarter of 2012.

Our luck-adjusted Group-wide EBITDA margin continued to expand, and is now at approximately 22.5%. This improvement in margins was driven by increased contributions from the higher-margin mass market segment, together with significant operating leverage, which is further strengthened by our Group-wide cost-control focus.

Our table yields at City of Dreams continue to outperform all other major properties in Macau, while, at the same time, our table yields in the rolling chip segment at both Altira Macau and City of Dreams continue to improve.

Our table optimization initiative is ongoing as we proactively look for ways to maximize the performance of our most scarce and valuable resource.

During the fourth quarter, Altira Macau generated more gaming revenues with fewer tables, whilst City of Dreams' mass table yields expanded meaningfully, despite an increase in the number of tables on the main gaming [floors].

Our growing premium customer base enables us to generate higher levels of revenue with fewer tables, which is critical in a fixed table supply environment.

We are well positioned to benefit from the growth in the mass market segment, as we target this high-end customer through our best-in-class facilities and service program, together with our targeted entertainment and non-gaming offering.

The longstanding property-wide strategy of targeting a higher-end mass market customer enables that City of Dreams will remain in a unique position to cater to increasingly discerning and wealthy Macau visitors; a visitor who was previously underappreciated and underserved in this market.

The ongoing trends in Macau further validate our long-term approach of targeting the mass market, with market-wide mass market table games revenue increasing from 31% year over year in the fourth quarter.

The rolling chip segment has also begun to return to growth, with rolling chip volume expanding on a year-on-year basis in both November and December of 2012.

The Macau and regional governments continue to position Macau for long-term success with the numerous and significant transportation infrastructure programs continuing to advance. Construction on the Macau Light Rail system and the Macau-Zhuhai-Hong Kong Bridge is well underway. And the Taipa ferry terminal moves closer to opening.

Hengqin Island's impressive expansion is clearly evident, and will be a major contributor to the ongoing success of Macau and the region.

At the same time, there has been positive development in relation to immigration, infrastructure and policy. We believe these expansive and wide-reaching improvements will have a strong positive impact on tourists' overall experience, opening up Macau to a broader spectrum of customers who increasingly demand a world-class leisure and tourism and enjoyable offering.

While penetration levels in our core feeder market, China, are potentially at a nascent stage, the strong increase in visitation from provinces further afield than Guangdong demonstrate the early stages of a broadening of the catchment area of Macau. We believe this will further unlock the potential of Macau as the leading leisure and tourism market in Asia.

Turning to our development pipeline, we continue to make progress towards our various growth initiatives. We plan to close our transaction with our co-licensee in the Philippines in the near term and expect to open our exciting integrated resort in Manila in mid-2014.

We also recently acquired a majority stake in Manchester Holdings International, a company listed on the Philippines Stock Exchange.

Studio City remains on track to open around mid-2015. We successfully completed a senior note offering of $825 million in relation to Studio City and recently closed general syndication of our $1.4 billion senior secured credit facilities.

These project financings, when fully drawn, combined with the full contribution of committed shareholder equity from both MCE and our minority shareholder in this venture, are designed to deliver a fully-funded project.

Last, we also continue to evaluate and refine our plans in relation to Stage III at City of Dreams.

Back to Geoff.

Thanks, Lawrence. We reported adjusted EBITDA of approximately $248 million in the fourth quarter of 2012, compared to approximately $232 million in the same period in 2011.

Our EBITDA margin in the fourth quarter of 2012 was approximately 22.5%, in line with the third quarter of 2012.

On a luck-adjusted basis, assuming a VIP win rate of 2.85% across our entire rolling chip business, our fourth quarter EBITDA was approximately $255 million; an increase of approximately 28% when compared to the fourth quarter of 2011 and up from approximately $210 million sequentially from the third quarter of 2012.

The EBITDA contribution from our non-VIP segments continues to represent approximately three-quarters of luck-adjusted EBITDA at City of Dreams and approximately two-thirds of our luck-adjusted EBITDA on a Group-wide basis.

As mentioned by Lawrence, our capital structure has improved significantly over the last few years. We have ample capacity to fund our future growth pipeline, including Studio City and our Philippines project, as well as Stage III of City of Dreams with our cash and cash flow.

Furthermore, we are pleased to have put in place the fully-funded plan for Studio City as described by Lawrence with our $825 million high-yield bond, with an 8.5% coupon, and our senior secured credit facilities at HIBOR plus 450 basis points, which is expected to close this month.

We are very pleased with the pricing on both transactions, which reflect the fact that both are essentially greenfield construction loans and both are non-recourse to MCE.

We recently successfully priced a $1 billion 5% coupon senior note offering, the bulk of which we will use to refinance the existing 10.25% coupon senior note and reduce our cost of funding by more than one-half.

The remainder of the proceeds will be used for a partial repayment of the $368 million sovereign RMB notes that are due in May of this year.

The attractive pricing and more relaxed covenants reflect the significant improvement in our underlying operating fundamentals since 2010.

Our net debt, as of December 31, 2012, was approximately $70 million and our net debt to shareholders equity was 2%. This compares to net debt of $266 million as of September 30, 2012 and net debt of over $800 million as of the end of 2011.

As we normally do, we'll give you some guidance on non-operating line items for the upcoming quarter.

Total depreciation and amortization expense is expected to be approximately $90 million to $95 million. Corporate expense is expected to come in at $20 million to $22 million.

Net interest expense attributable to MCE is expected to be approximately $38 million to $40 million, which reflects the mid-quarter issuance and refinancing of our high-yield bonds, excluding an expected one-time charge associated with the repurchase of our 10.25% , but including approximately $18 million of interest expense from Studio City financing on a fully-consolidated basis.

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

Thank you. Ladies and gentlemen, we will now begin the question and answer session. (Operator Instructions). James Omstrom, JPMorgan.

I guess first, and we're getting a lot of questions on this, overnight there was an article published regarding an upcoming crackdown on junket operators in Macau, which I know weighed on the Macau shares.

I was wondering if you'd heard anything about this or if you could talk about this? If you're hearing anything at all and if you have any comments regarding that.

I heard that we're having some audio difficulties, so we'll try to speak louder.

With regards to that story, I think it came from a British media. So I think that, in itself, speaks volumes. And also, the British media covering China politics. So I think I would start getting worried if it came from China Daily.

From our perspective, we haven't heard anything like that. If you see our fourth quarter -- our fourth quarter was a record fourth quarter and the year has started off really with a boom. So, right now, at this moment in time, there's a quiet period slightly before Chinese New Year. It's usually the third day of Chinese New Year where Macau becomes completely packed.

But, overall, we haven't heard it. And we continue to be very positive about this year. I think this year is definitely going to be even better than last year.

Great, that's very helpful. And then one other question, margins at City of Dreams. You guys have done a very solid job over the last two years, increasing them there above our expectations for the quarter at 28.4%.

Can you give us a sense of where you can go with that and how much room? And is this 28.4% level sustainable, assuming normalized hold going forward? Thanks a lot, guys.

I think the assumption of the margin at City of Dreams is really coming from the mix of business itself. And the continuous improvement in the mass side, of course, with a higher margin area, we're going to contribute more on that side.

More importantly, we are looking into more control in terms of cost in non-gaming side. And there is meaningful improvements in the last two quarters of the year. And I think the trend is becoming very well.

So I think we are looking at somewhere, at this very moment, at 26% to 27% in terms of COD margin. And we're looking at some improvement from this level onward.

Great. And then just one last one, speaking of the mass volumes at City of Dreams, they were obviously up solid year over year but came in a little bit below, I would say, expectations. Could you speak to that? Are you seeing increased competition? I guess it's with LVS and new property, etc. Thanks.

In COD, the sequential growth for the fourth quarter in COD was 27.7%, where the market is about 11%. And year-on-year growth was 48%, compared to market roughly of 30%, even though new supply in market. I think we are performing quite well on that respect.

Great. Thanks so much, guys.

David Bain, Sterne Agee.

Can you guys speak to the competitive environment in premium mass, maybe with regard to tactics, such as rebating in premium mass? Have you seen any changes in the market in that respect or foresee any?

I think, first of all, premium mass is really about products and services, and even the type of customer who are classified in premium mass are very different from VIP or junket players. So you really need the full suite of products in order to satisfy them.

And I think, looking at the premium mass, I know a lot of our competitors have started trying to copy our playbook, but, at the end of the day, you really do need the hardware and also the services. And I think, in our opinion, we were kind of the pioneer in this field and also we perfected it over the last two years.

So yes, we know some of our competitors are doing it. But I think, given hotel rooms, supply capacity and also our supporting amenities, it's hard to match what we have.

And I know one of our competitors did this over -- on their call as well, but I think we could proudly say we probably have the best hotel inventory in Macau because there are, technically, three Forbes 5-star hotels in Macau and one of it is Altira, and another one is -- now, as of this year, we can quote already, which will be announced soon, is Crown Towers at City of Dreams. And obviously the third one would be Wynn.

So I think we've given what we can offer in terms of pure product and services; we are very comfortable on this segment.

I don't know if Ted -- do you want to complement?

Talking about the competitive landscape in our reinvestment rate, looking ourselves, I think in the last three quarters, particularly in the last two quarters, our investment management is doing very well and I think we are staying at the same level in the last two quarters, meaning that, even though with a lot of people focusing on that premium mass segment, our margins, i.e., our actual results of our investment management, remains stable.

Okay, great. And then, based on your outlook on the Government approvals, do you still think Phase III could get underway this year?

We were optimistic that -- obviously Phase III is still subject to our official Board approval, but I think we are very advanced in terms of the designs and schematic designs.

We are waiting -- as you know, Phase III used to be apartment hotels, so we are waiting for that piece of land to be re-gazetted. And the moment it's re-gazetted, we're almost ready to go. So we are optimistic that it we could get started at the end of this year.

Okay, great. Nice results. Thanks.

Cameron McKnight, Wells Fargo.

Lawrence, if you could comment on what you see as the 2013 outlook for Macau, that would be very helpful?

Well, I think if you look at the -- obviously our biggest market is China, and Macau has a strong correlation to Chinese GDP growth. And, as we predicted, probably middle of last year, obviously we went through a period where there was a slowing of growth.

We had always predicted that there would a transition in Chinese leadership and when that happened, there wouldn't be any more uncertainty. And also, at the same time, Chinese economy would pick up again.

And I think that's all playing out and that's why you're seeing the fact that, in the fourth quarter of last year, the market did pick up quite a bit, and also Melco Crown also had our record quarter.

So we're very optimistic. I think the new administration is just ramping up at this stage and I think give them a few more months, they would be in full swing.

And, at the same time, I think if you look at most of the China production index, they have all turned quite positive over the last little while.

So our view is that the market this year should definitely grow stronger than last year. And I think we always predicted a 10% to 15% or more growth, so I think there will probably be more upside than downside.

Great. Thanks very much. And just to follow on from an earlier question, Lawrence, can you perhaps comment a little more broadly and generally on how you see the political and regulatory environment at the moment, as it relates to both China and Macau?

I think as recent as last Friday when the China Liaison Office Director, who effectively is the most senior Chinese government official based in Macau, did make a statement during one of the public functions saying how supportive China is of Macau, and the fact that, from his perspective, China will continue to monitor the infrastructure that can bring people into Macau.

I think that leads to a separate topic, which is what we alluded to earlier on, which is there is significant infrastructure improvement coming online, starting this year, with the widening of the immigration border. And then you have bigger things up and coming, including, potentially, the 24-hour ground immigration border.

So I think, with all those things, China continues to be very supportive, and any suggestion that there are visa restrictions or crackdowns on certain things, we just haven't seen it.

And even with regards to the VIP segment and junket crackdowns, there was big stories last November and December about a widespread crackdown on junkets, that also didn't happen because, don't forget, December was the biggest GGR month in history.

And naturally, occasionally there are crackdowns on specific junkets for certain acts but it's not a market-wide crackdown.

So all in all, we are extremely pleased and encouraged by, at least, the first month and a half of 2013.

Right. Thanks very much, Lawrence. And then a quick question for Geoff. Geoff, it looked as though expenses at Altira ticked up a little bit in the quarter, but expenses at City of Dreams ticked down. Could you give us a little color as far as what's going on below the revenue line?

Maybe on a normalized basis for Altira, you'd probably pull out about $8 million of EBITDA and add $16 million at City of Dreams. Other than that, ongoing OpEx there are really no major changes at any of the properties.

Okay, great. Thanks very much.

Grant Govertsen, Union Gaming.

Quick one for Ted on COD. The slot line item really looks like it's inflecting nicely here. Could you give us a sense for what's driving that? How much of that is being driven by your ETG segment, relative to a traditional slot?

In terms of the slot business, it really performed very well in the fourth quarter. I think there is two reasons for that, with one being the VIP slot performance is doing very well in the fourth quarter, primarily due to our opening of the VIP slot area at the Grand Hyatt, which is what we called the Signature Club area. And it took some time, probably four months, five months after our opening, and it (inaudible) and that's one contribution.

And the other area, of course, you just stated is our Stadium Gaming contribution. I think that contributes roughly about maybe a 20% to 30% of the contribution of the incremental revenue on the fourth quarter.

Great. Thanks. And then, Lawrence, if I could ask you, in your prepared remarks you mentioned -- you talked about equilibrium at Altira, I believe, but I had a hard time hearing. Could you go over that again, just give us a sense of where you're at with respect to distribution of tables amongst the properties and if you feel Altira at the right size here.

I regret earlier on I was told that the prepared remarks were hard to hear. But I think, if you look at Altira's results, from a year ago versus December 2012 we effectively removed around 40 tables from Altira and moved them to City of Dreams. But, at the same time, we're doing the same volume in terms of gaming roll.

So this really part of our productivity drive initiative, and it's proving to be a great success.

So I think, from an ongoing basis, obviously we're not going to rip another 40 tables out of Altira, but we will use the same metrics and follow the same discipline, in terms of driving table productivity and maximizing our yields across the board. So whether it's VIP converting to mass tables, or just less productive VIP junkets moving to more productive junkets.

So that's part of a recurring theme, and I think on that front during some of the slower growth stage during last year, we really made use of the time to upgrade our VIP facilities. And, henceforth, you see the results for both City of Dreams and Altira in the last quarter. And, again, that reinforces our positivity for this year.

Great. Thanks, and congrats again.

Shaun Kelley, Bank of America.

Just wondering if you could talk for a quick moment on drivers in the premium mass segment. Obviously you're now at the point where you're putting up probably one of the best hold ratios in mass at close to 31%. So could you talk a little bit about what you're seeing in terms of whether it's foot traffic growth in the property, or your ability to raise table minimums, even beyond what's probably market-leading average? What you think can drive that segment further up in 2013?

I think if you're talking about the hold, of course we improved our hold percentage throughout the last 18 months. And I'm sure you understand the hold is a function of efficiency and the length of stay of the customer. And we improved that efficiency effort in this mass floor in the last 1.5 years' time. I think we reached a level where we should say that we're doing very job in terms of efficiency on that front.

And just the latest state, I think it's coming from, not only the gaming floor operations, but also the quality of the service, including the non-gaming side.

In the last three or four quarters, we increased substantially our non-gaming facilities, including the F&B area and the hotel rooms. So I think that contributes quite a lot to the service level, i.e., the length of stay. So I think we continue to improve the hold percentage on the mass side. We've invest a lot in the service side.

Talking about the premium mass, how do we improve further contributing hold, and I think, in the past, we look at these segments carefully and we're quite amazed about the depth of the market. So we've selected this marketing reinvestment into all the marketing activities.

I think that's the outcome and we see that as great feedback, and you see a gap between the grind mass industry on the mass floor and the real premium mass area.

At this moment, we still see 40%, 50% difference in terms of average number. So we see there's great potential that we continue to look at the yield and numbers. I think minimum bet level is just one of the very many tools. I think there's a lot of things that we could do to improve. I hope that helps.

Yes, that's great. Thank you, Ted. And then the second question would just be on capital expenditures. Have you guys outlined just kind of what you think your CapEx is going to be this year going into Studio City? And what your outlook is for next year as well, in terms of contributions or let out for that project?

I'll take that one. From a CapEx perspective, for MCE legacy portfolio, it's roughly $75 million to $100 million. And then for Studio City, we have an obligation to fund $825 million of cash equity into the project. We have $350 million of capital calls already funded into the project. And, of the remaining amount, 60% approximately is required to be funded by MCE, a pro-rata share, or about $285 million.

On top of that -- so I'm answering the question a little more broadly than strictly from a CapEx standpoint, but looking at our cash contribution.

In addition to that, we have a $225 million sponsor guarantee. We may fund 100% of that, or we could fund up to 60% of that. That depends on an option that our minority shareholder has to fund up to 40% of that amount. So that's a little bit of an unknown. But the maximum is the full amount of $225 million.

The last remaining piece would be for the Philippines. And for the Philippines, we anticipate spending approximately $450 million to $475 million this year into that project.

And just to be clear, the $450 million to $475 million, is that coming out of cash flow? Or just are you going to draw off the revolver for that?

Well, we have a few options as far as how we choose to fund the full amount of the CapEx, including a local loan, or other means of funding that amount. So we'll --

And is there any intent to raise -- with the listing in the Philippines to eventually raise primary equity in the Philippines? Or how do you think about that vehicle?

We're not ruling out anything at this point.

Okay, fair enough. Thanks, guys, I appreciate it.

Karen Tang, Deutsche Bank.

My question is with regards to your debt. You mentioned that your senior securities that you recently raised have some more relaxed covenants that you may be entitled. So can you comment on that?

And what is your dividend policy for MPEL? Thank you.

I'll take the first part of that, Karen. There are a number of covenants that have been relaxed. I'll highlight two. One of our bills increased our senior security headroom up to $2 billion more than previously, at about $1.4 billion.

And then our RP builder is slightly more liberal than what it was previously, with 75% of net income, 2 times fixed charges, previously it was 2.25 times fixed charges.

So those are a couple of the additional elements of flexibility that we have as a result of the refi.

For the dividend part, well not currently paying dividends but I'll defer to Lawrence for the outlook.

I think between Melco and Crown, the two founding shareholders of Melco Crown Entertainment, over the last few years we've only put more money into the Company; we've never taken any money off the table. We've converted all of our shareholders' loans and some previous equity fundraising we also topped up. I think the two shareholders would definitely like to see a dividend in the future. And I think we are committed to that.

But I think for 2013, we are in a significant development mode because we do have one of the most exciting growth pipelines, I think, in the gaming market today with Studio City, Manila, and also Phase 3 of City of Dreams.

But once we can really afford to pay dividends, we would love to. So that's definitely something that we're committed to, and as soon as time is right, we'll do it.

Excellent. Thank you very much for your comments.

Anil Daswani, Citi.

Congrats on a great set of results, guys. First question from me would be can you maybe comment a little bit, Lawrence, on how you're seeing forward bookings for the Chinese New Year period compared to last year? And is there any visibility on that thus far?

In terms of forward bookings, I think we've always been completely full during Chinese New Year. I think, even as of last week, I was hearing our international marketing and our casino marketing guys literally physically fighting over rooms.

So it's about how we maximize those rooms and putting the absolute best and highest yielding customers in them, and turning over the rooms as quickly as possible.

So it's the third day of Chinese New Year. For us sometimes it's the second day because, as you know, we do entertain a more sophisticated and more cultural customer than most of our competitors. So it's always going to be full.

This is the quiet period right now, because in traditional Chinese heritage, people do stay home on the New Year's Eve and also the first day, but right after that Macau's going to be jam packed.

Secondly, Lawrence, is there any more visibility as to whether or not the minority partner at Studio City will take up their share of the incremental equity? Or is this an opportunity for you to take your stake up in Studio City?

Well, I think the clock started ticking at the end of November when we did our high-yield bond with Studio City. So we don't really expect any movement from them probably until literally six months from that date.

So we don't quite know at this point, but, as we have communicated in the past, we would love to have more skin in the game for Studio City and we're very excited by that development. We think we have the best location in the whole gaming world, not just Macau. And we have a very exciting proposition that we have cooked up.

Thanks, Lawrence. And the last one, I guess, for Geoff. Maybe given the new debt funding, as it's come in half way through the first quarter, can you give us some sense as to what ongoing net interest expense would look like in the second quarter and beyond? Once the new debt's in place, you've retired all of the old debt, can we see a material cut, or a material reduction, in this net interest expense clearly that won't be capitalized for Studio City going into the accounts post second quarter?

Maybe a simplified way to look at it, Anil, is that with the 5% coupon bond now, that cuts our funding costs roughly in half for $600 million. So, on an ongoing basis, a reduction of about $30 million a year in interest expense.

And for the repayment of the RMB notes, while those are 3.75% coupons, fully hedge cost to us is about 5.25%. So that's essentially a push on that amount. So, primarily, you get the savings from the refi of the $600 million down to a 5% coupon.

Thanks, Geoff. Thanks, guys.

Billy Ng, Bank of America, Merrill Lynch.

Can you guys provide a bit more detail on the progress of your two projects; the Macao Studio City and the Philippine projects.

What we want to know is, to be exact, how many workers are on the site right now and what kind of status in terms of the constructions. Are we totally done with the piling and move onto the next stage? Or any color will help. Thanks.

I think, first, with regards to Studio City we've been in heavy duty construction mode since summer. We have done, I think, 95% of the piling work, and we are ready to move on to the basement very soon.

We have about 500 workers on site, and so far the main contractor has been doing a good job. And we're very excited. So we'll just keep moving forward on that front.

With regards to Manila, well, and I alluded to earlier on, we hope the closing of the agreement with our Philippines co-licensee is going to be in the very near future; hopefully within this month. And so I think once that -- there's some work being done right now, including -- there's more work that the Philippines party is doing. I know on a construction term people refer to it as phase II, but in reality we're really opening phase I and II together.

So there's some structural work being done on that front.

Thanks. Thanks a lot.

Grant Chum, UBS.

Firstly, Geoff, when you were answering Karen's question about the less restrictive aspects of the new bond, just couldn't hear your answers. I think you mentioned there were a couple of issues or factors that had been relaxed. I wonder if you could just repeat those.

Sure, hopefully you can hear me better now. The first one was our ability to raise senior secured debt. That headroom has increased to $2 billion. And our RP basket, our restricted payment basket, builder is slightly accelerated versus where it had been under the existing MCE high-yield notes.

In a sense that there's just less cash will be trapped from your ongoing cash generation?

Well, as you know, we run through a formula every quarter to determine the increase in the size of the RP basket. And 75% of net income less a ratio of our fixed charges; that fixed charge used to be 2.25, so 2.25 times our fixed charges. It's now 2 times our fixed charges. So, in other words, we're increasing the build more quickly than we would have under the previous bond.

I see. But the 75% remains?

75% is already, on a comparative basis, very healthy.

I see, I see. And just, Lawrence, (multiple speakers) just to come back to this dividend question, not meaning to push you harder on this, but, given your basically net cash and the run rate of EBITDA is over $1 billion now, Studio City is fully financed, you have no issues injecting the equity into the project, how do you think about the difference between paying out something in 2013 versus 2014, beyond just the simple fact that by 2014 your development projects will be somewhat more advanced?

Just one last comment on your prior question before I hand it over to Lawrence. To be clear on the RP basket, we don't start from scratch. We carry over everything we have built up in the normal course on the RP basket, plus the $400 million that we achieved through the consent invitation.

On your dividend question, I think the Company, Melco Crown, went through -- we've really gone full circle and we've had some tough times during the global financial crisis period where we were building City of Dreams. And everybody else stopped other than us, but that was a very tough process, and really opening the property during the financial crisis was tough.

So I think, given the professional nature and very high quality of our Board, and having lived through that experience, we tend to be a bit more conservative in terms of leveraging up or utilizing our balance sheet.

But, having said that, I think we will monitor it very closely and, again, between Melco and Crown and our shareholders we are completely aligned. We would want to pay a dividend definitely sooner rather than later, and we will continue to monitor that.

And I think if 2013 plays out to the way we think it will play out, and given the development nature is as smooth as we hope it will be, I definitely think we can commit to the dividend policy early.

Great, that's a very good message. Thanks, Lawrence.

Simon Cheung, Goldman Sachs.

I have two questions. One, Ted just on the mass market. You earlier mentioned that because you do have some new facilities built out earlier last year, and therefore you'd be able to drive the table yield. Perhaps can you talk a bit more about further new facilities on the pipeline.

And also secondly, on the Sands Cotai Central obviously have seen they add another 2,000 hotel rooms. How did that help your table yields, if any? That's my first question.

So what I referred to was actually in May, we actually expand our premium mass footprint to somewhere close to Grand Hyatt area. We added another 20 tables in the area. And that was a very, very -- what we call the VIP service-centric area to the mass customers. So that took some time to build up the momentum. So we did it in May and it performed quite well in the fourth quarter.

And in the last month of the fourth quarter, December, we just complete our renovation on the high limit premium mass area in the casino and that did contribute quite substantially to the service level that we had, and that's also reflected in the result of the premium mass gaming area.

I think that, in terms of the hardware improvements, I must say that we have done probably more than 90% being completed in 2012 (technical difficulty).

In terms of a comment on the additional rooms added in our neighbor hotel, I think that really, really improved the visitation or the movement of customers from the Peninsula side to the Cotai side. We're very happy that COD is located in the current location, where we can capture a lot of these high-end mass, middle mass, and the smaller customer.

As you may notice, we introduced -- by the second quarter, first quarter of the year, we introduced the stadium gaming in the casino floor whereby we able to capture some of the medium-sized customer coming from our neighbors.

So, we see that momentum being built and it will carry on in the next three to five quarters.

Okay, great. Thanks. The second question related to Philippines project. I know it's a bit too early, but perhaps you guys can talk a bit about how -- what the project looks like, the target segments, any theme for that project, if any. Thanks.

I think for the Manila project, I think the benefit we have there is we believe we have the best Filipino partner in SM since they have really the largest retail footprint and also exposure to both the financial and real estate sector and they do have really a membership database that's over 8 million people.

But, from our perspective, and having seen what's currently open and what's going to be open, we feel very confident that what we are building is going to be top of class in the Philippines and it will be a full-blown integrated resort that will target -- I think naturally before some of the infrastructure support comes on board from the Government, it will focus more on the local market.

But in the longer term and leveraging on our international marketing VIP database, we feel very confident that, again, it's going to be an integrated resort that will cater to all segments. And with Melco Crown Entertainment, entertainment and attractions is always part of our main DNA.

So, with regards to the Manila property, it will also have the very unique attractions that will only be at our property in Manila. And Manila is a giant city with a lot of population.

So, we are very happy with the development on that one.

Okay, great. Again, congrats on the great result. Thanks.

Thank you. There are no further questions at this time. I would now like to hand the conference back to the management for closing remarks.

Thank you, operator. And, just before we sign off, we know it's been a little difficult hearing us. I just wanted to clarify one point, that the fourth quarter luck-adjusted, or the EBITDA for the quarter was approximately $255 million. But, on that note, thanks very much, everybody, and we'll be back in a quarter. Bye.

Thank you. Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may all disconnect.