Melco PBL raise casino cash

Melco PBL Entertainment, a venture between James Packer’s Publishing and Broadcasting and Melco International Development Ltd., has exceeded expectations and collected $1.14 billion in a share sale to help fund its Macau casinos.

Investors quickly grabbed $60.3 million American depositary shares in Melco PBL Entertainment for $19 each. Before the sale it was predicted the shares would go for around $16 to $18.

Melco PBL plan to invest $3.31 billion over a period of five years as they begin plans to build their three casino resorts in Macau. Macau is currently the only Chinese city where gambling is legalised and not only is it the number one destination in Asia for gambling, it recently overtook Las Vegas as the world’s largest gambling destination in terms of revenue.

“This demonstrates international investors' appetite for Macau-related stocks,” said Ken Yeung, a Hong Kong analyst at BOCI Securities Ltd.

U.S gambling company Las Vegas Sands currently operate a casino in Macau and Melco PBL plan to follow its successful lead. Their casino is due to reach operating growth of around 30% this year. However, many analysts are unconvinced that Macau’s success will be ongoing. Daily revenue per gaming table has fallen from $22,382 in 2002 to $12,000 this year. And with increased competition entering the market, profit margins are expected to fall.

Undeterred, investors are banking on China’s burgeoning economy, which is currently growing at a rate of ten per cent a year, to provide a fruitful environment for Melco PBL’s to flourish.

“Las Vegas Sands spent $265 million on its first casino in its first year and made a 120 percent return,” said Lawrence Klatzkin, an analyst at Jefferies and Co.

“When you get those kind of numbers I think it's a pretty good bet if you can build a decent place.”

Melco PBL plan to open their Crown Macau Hotel Casino by mid-2007, costing $512.6 million and hosting 220 gaming tables. Work has also started on their bigger project, the City of Dreams, which will cost $2.1 billion and host a massive 2,000 rooms and 450 tables, and is expected to be completed by late 2008.

Editor, - 2006-12-19 11:02:18

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