This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Melco Needs Macau Momentum

In the third quarter, Melco reported its first full quarter of data for Crown. While revenue was decent at $98 million, the casino posted a loss, hurting from a high cost structure and volatile VIP play.

To fix matters, Melco signed an agreement with A-Max Holdings, an Asian holding company. A-Max is supplying capital to Ama International, which acts as an aggregator for junket operators. In the Macau casino market, VIP customers are brought into casinos by junket operators.

This week, A-Max finally raised $2 billion in Hong Kong currency through a placement on the Hong Kong exchange.

Under the agreement, Melco is guaranteed $30 billion (Hong Kong), or $3.8 billion in U.S. currency, of VIP chip bets each month. Effectively, this doubles the VIP rolling chip volume at Crown Macau. In return, Melco will pay Ama a commission ranging from 1.2% to 1.35%.

Yet this guarantee seems to be little more than a promise. If A-Max can't deliver, then it appears Melco has little recourse.

Doubling the chip volume makes the Crown Macau profitable. But can it really be done?

I remain skeptical. For one thing, Wall Street analysts have been incredibly bullish on the deal. While a partnership could bring substantial profits, I'm still worried the deal could end up being a bust.

2 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
LVS $55.70 -1.10%
MPEL $22.30 0.22%
WYNN $127.20 -1.40%
AAPL $126.85 -0.59%
FB $84.12 1.20%

Markets

DOW 17,987.72 -47.21 -0.26%
S&P 500 2,101.20 +0.80 0.04%
NASDAQ 5,016.7830 +22.1810 0.44%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs