Costs at James Packer’s Macau casino business have blown out by another AUD 90 million over the past three months as the joint venture between PBL and Melco battles delays on the construction of its first casino/hotel development, the Crown Macau.
The US-listed Melco PBL Entertainment, whose shares have fallen almost 20 per cent since its listing last December, announced at the weekend that the cost of the project had blown out by another USD 71 million or around 14 per cent to USD 583.6 million (AUD 760 million). A similar announcement to the Australian Securities Exchange is expected today.
The fall in the shares of Melco PBL Entertainment prompted one popular US share market commentator, Jim Cramer, last week to urge his followers to sell the stock.
„Melco has been an unmitigated disaster and I apologise for getting this one wrong,“ he said, including the company in the „Sell Block“ segment of his Mad Money television program.
„I’d cut my losses and take profits.“
In December, Melco PBL said the total cost of its three proposed casino developments in Macau had almost doubled to USD 3.3 billion, with the cost of the Crown Macau then estimated at USD 512.6 million.
The latest figure for the Crown Macau, described by PBL and Melco as a „six-star casino/hotel project“ is now three times the figure of USD 192 million in construction costs estimated for the project by the joint venturers in August 2005.
In an announcement to the US over-the-counter market Nasdaq on Friday US time, Melco PBL Entertainment blamed the latest blowout in costs for the casino on rising pre-opening and property market expenses, food and entertainment expenses for the casino and design and fit-out expenses for the hotel and casino.
The company said the Crown Macau hotel casino was scheduled to open „on a trial basis“ on April 28, while the full public opening would be on May 9 and a grand opening event was set for May 12.
PBL and Melco are pushing to complete the project amid a construction boom in Macau which is substantially increasing prices of materials and labour.
Some Macau observers told The Australian last week that the Crown Macau looked as if it had some way to go before completion.
The latest announcement has also raised questions about the potential cost of the much larger City of Dreams project, which is now under construction in Macau’s Cotai strip with a current cost projection of around $US2 billion.
Melco PBL chief financial officer Simon Dewhurst said in the statement that the company was making „excellent progress“ with Crown Macau.
„Our construction program remains on schedule and we look forward to the trial opening,“ Mr Dewhurst said.
Crown Macau will feature a 36-storey tower with around 220 gambling tables and more than 500 poker machines.
The opening of the Crown Macau comes only months ahead of the massive $ 2 billion Venetian hotel casino project, run by the Las Vegas Sands group, which will be the big new drawcard for upmarket visitors to the city.
Mr Packer’s Crown Macau does not have a prime location, situated across the water from Macau’s traditional downtown area, which is home to the Lisboa and the new Wynn Macau and the Grand Lisboa, and some way from the new Cotai strip area which will be home to the newer, larger casino projects, including the Venetian and the City of Dreams.
PBL Melco enjoyed a successful US listing last December of its Macau casino assets, raising some USD 1.1 billion.
But after a brief rise, shares in the company have plunged.
The stock initially listed at USD 19, rising quickly to a high of USD 22.34. But it then plunged to a low of USD 15.52 this year before recovering a little recently.
Friday’s announcement of the opening dates for Crown Macau saw the stock gain US3c to close at USD 15.96.
The fortunes of Melco PBL Entertainment have been actively debated on US financial blogs, particularly after Cramer’s „Sell Block“ recommendation last Thursday.
One supporter of the stock on the Google Finance website, calling himself ryan greg, noted after the release of the statement that: „Melco PBL finally put some news today on the Crown openings.
„Hopefully it can stop some of the bleeding. Now we need some definitive news on City of Dreams.“