Q4 2021 Melco Resorts & Entertainment Ltd Earnings Call
Today's conference call is due to begin shortly until such time your lines will remain on music hold please continue to standby. We thank you for your patience.
[music].
Ladies and gentlemen, thank you for participating in the fourth quarter of 2021 earnings conference call of Melco Resorts <unk> 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 Mr. <unk>, Kim Senior Vice President Group Treasurer of Melco Resorts Sunday Entertainment Limited. Please go ahead.
Thank you. Thank you everyone for joining us today for our fourth quarter 2021 earnings call.
On the call are Lawrence Ho, Geoff Davis, Evan Winkler, and our property presidents in Macau and Manila in Cyprus 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.
In addition, we may discuss non-GAAP measures.
Initial and reconciliation of each of these measures to the most comparable GAAP financial measures are included in the earnings release.
Finally, please note that our supplementary earnings slides are posted on our Investor Relations website.
With that I'll now turn it over to Mr. Hoh.
Thank you Jamie.
While results in the fourth quarter continue to reflect COVID-19 related disruption and their impact on travel and customer presentation.
That said.
Volumes across all segments in Macao increased in the fourth quarter of 2021 compared to the third quarter. Despite short term changes in the VIP segment.
Group property EBITDA also showed meaningful sequential improvement this quarter.
Which demonstrates our disciplined cost controls.
Going into 2022.
Hey, Colby flare up and why led to softer performance in the pre <unk> period.
However volumes across our segment increased year over year during the Chinese new year holiday period, and this is carried over into the week following the holidays.
Premium direct business at city of Dreams, Macau more than doubled compared to the Chinese new year period in 2021 and continue to outperform into default.
Mass base mass table drop also demonstrated strength increase.
Increasing around 20% compared to <unk> 2021.
In the Philippines, we recorded the strongest quarterly EBITDA performance and COVID-19, thanks to a full quarter of casino operations.
With capacity restriction.
Going into 2022, the authorities, we opened the Philippine border for fully vaccinated Internet through effective on February 10th.
And Metro Manila is operating under alert level one from March one.
Consequently, our venues can now operate at 100% capacity and it is the first time COPD Manila can operate at full capacity since March 2020.
Turning to slide three.
Our casinos, we remained open throughout the fourth quarter of 2021 and.
And we saw sequential growth in EBITDA, along with an increase in gaming spend per patron.
Gaming volumes in the fourth quarter reached 90% of pre Covid levels and we are hopeful for further normalization going into 2022.
We remain committed to our global Capex and development program.
In Macau, we continue our effort to complete construction of studio city phase two deadlines set in the land concession.
December 27 2022.
For phase two we recently announced the partnership with Marriott International.
To bring the W Hotel brand to one of our two new hotel towers.
The W. Macau studio City will have 550, 70, and further enhance with studio city premium mass offerings.
In Europe , the construction of city of Dreams Mediterranean is on track for opening in the second half of 2022.
Finally, I would like to thank the Macau government pretty opportunity to contribute our view during the public consultation process and for providing a clear framework for the new gaming law.
We are committed to participating in the upcoming public tender and.
And we remain fully confident that melco can remain a key contributor to <unk> growth and diversification in the years to come.
Our enthusiasm for Melco medium and long term growth prospects remains unchanged.
And we are ready to welcome August one travel restrictions normalize with that I'll turn the call over to Jeff to go through some of the numbers.
Thanks Lawrence.
In the fourth quarter of 2021, we reported group wide property EBITDA of approximately $94 million the.
The increase in EBITDA was largely due to tight cost control measures, including bonus reversals.
Luck adjusted property EBITDA came in at $120 million in each of our geographies in Macau, and Manila, and Cyprus reported sequential improvements in EBITDA.
And unfavorable VIP win rate negatively affected EBITDA at Cod, Macau studio city, and CRD Manila by approximately $26 million in total.
$22 million of this was in relation to CRD Macau.
Details of these adjustments can be found in the supplementary earnings slides posted on our Investor Relations website.
At the end of December 2021, we had approximately $1 7 billion of consolidated cash on hand.
Available liquidity, including cash and Undrawn revolving credit facilities at the end of December was $3 2 billion.
To provide more clarity on our capital structure Melco, excluding its operations at studio city, the Philippines, and Cypress had cash of around $850 million and gross debt of $4 5 billion at the end of December 2021.
In February we announced equity and bond offerings at studio city, raising a total of $650 million.
$300 million via a private placement of equity and $350 million senior secured notes.
Based on our latest forecast our Capex plan for studio City Phase II is now fully funded with a meaningful buffer to support studio city's liquidity requirements going forward.
As we.
We do we will give you some guidance on non operating line items for the upcoming first quarter of 2022.
Total depreciation and amortization expense is expected to be approximately $145 million.
Corporate expense is expected to come in at approximately $20 million.
And consolidated net interest expense is expected to be approximately $90 million to $95 million, which.
Which includes finance lease interest of $7 million relating to city of dreams, Manila, and $10 million to $12 million of capitalized interest.
That concludes our prepared remarks, operator back to you for the Q&A.
Certainly ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question. Please press star one on your telephone keypad and wait for your name to be announced if you wish to cancel your request you can press the pound or how should.
Please note that might be a slight pause as to collate the questions. Once again it is star one to ask a question.
Okay.
Do you have the first question coming from the line of Joe <unk> from Jpmorgan. Please go ahead.
Good morning.
Afternoon, everybody.
Lawrence just the.
City of Dreams came in nicely ahead on margin.
In the fourth quarter in Macao hold adjusted $71 million.
Is there anything one time in there I know you have referenced reversal bonus at that provision.
What extent did that aid to that $71 million.
Hey, Jeff Hi, Joseph.
Yes, thanks Laurence.
So in total we had $34 million of bonus reversals in the quarter.
And our bad debt provision was a credit to expense of $11 million.
And how much of that hit at the property level at city of Dreams Macau.
So at city of Dreams Macau.
The reversals were approximately.
$12 million.
And.
The credit.
Against expense for city of Dreams on the bad debt provision was about $3 million.
Okay.
So if we look at it then.
Sort of outside of the benefit of those two things it's $56 million is that the run rate that youre seeing in the first two months of this year at that property.
Yeah.
Well I'm not sure we want to comment.
On first quarter results and obviously, we have some some noise with Chinese new year and of course the.
The weakness that we saw in between new year, and Chinese new year as a result of some COVID-19 .
Covid flare ups.
But other than the amounts that I described.
That's a that's a solid run rate.
Great and it is probably has a question or topic, you don't get much but what is the future of alterra.
It's probably never going to contribute a ton in terms of EBITDA in a normalized environment and maybe thats a fair comment on my part, but the asset value is certainly something that's not reflected in the equity how how do you think about utilizing that asset.
Drive incremental equity value.
What's the future of better quality.
Well as you know.
Last year, we transitioned heroes for me and we did that early I think.
For the entire VIP junket industry and loaded.
So we moved out here to a premium mass focused property.
I think I agree with you what the current visitation into the entire Macau.
It really doesn't I think many properties not just altera doesn't really address the volume being there.
Yes.
We do think that with.
<unk>.
Normalizing hopefully.
Within the calendar year 2022 in Macao gets.
No.
Closer to the traditional visitation that we will get.
Alterra has a niche positioning.
David you want to share some details.
Sure. Thanks, Laura look.
As we transitioned away from being kind of a VIP centric property and more being more mass and premium mass focused.
It's taking some time, but we're starting to get more traction now with that.
Alterra, although a small property. Its certainly has a lot of unique features to it I think one of the cool things. We just had happen without <unk> was during the the fireworks display over Chinese new year, we saw occupancy pick up over there in a big way. We saw a lot more covers we saw drop going up in a meaningful way as well so.
While its here a small it does have a unique unique place I think in the market and I think with our strategy of kind of converting more and more to mass over there I think we will see.
While it may not be as large as it once was I think we will see a nice EBITDA pick up over there.
As we head into the future here more and we get out of Covid.
Great. Thank you and then Jeff can you remind us.
Capex for this year.
Sure Joe So capex for 2022 is about $765 million.
About 650 of that.
Is related to project Capex for COPD, Mediterranean and studio city phase two.
Thank you guys.
Yeah.
Thank you.
We have our next question. This is coming from the line of George Choi from Citi. Please go ahead.
Thank you very much congrats on the great results.
Just one question for me and licensing revision of the.
Any law.
Is your plan for your incentive casino, Glenn Reagan and I guess more importantly, give us any I guess most of us would never call. It a satellite casino, but do you think the government would look at it.
Thank you.
Hey, George as Loren.
Hello.
I think we've never.
We've never looked at studio city is a satellite casinos considering local resorts owns the majority of the.
The ownership of studio city.
We believe that the gaming longer vision also doesn't seem curious any satellite casino.
Of course as part of the the gaming law has been so far a expedite it fair and reasonable process.
We are still seeking a lot of clarification from the government.
Before the law get approved in the Legislative Council sometime in June .
So we'll be working with.
With the government on that front.
And Jeff I know Theyre more details wondering here.
Well other than the the differentiation and equity ownership Lawrence just as a reminder.
There is three year runway on this issue from the time that the gaming laws implemented.
And I think it's also very important to note that.
Studio City structure has been explicitly approved by the Macau government.
Okay.
And George on your question.
Unlike some of the other operators were only up one satellite casino, which is Grand Dragon and the reason we kept that was really for the moca venue there.
So I guess, we will continue to work with the government to see.
What's the solution for all of this highlights the team.
Thank you.
Yes.
Good question. Thank you.
Thank you.
We have the next question this is coming from the line of Guy though.
<unk> from Deutsche Bank. Please go ahead.
Hey, guys. Thanks for taking my question I was wondering if you could provide some color on your direct VIP as strategy going forward and if you have seen you know improve interests or incremental sign ups give.
Even the whole situation with the junkets.
Hey, Juan.
Okay.
Hand, it off to David later on but in terms of our direct VIP strategy. We're very proud of the fact that <unk>.
<unk>, who is the fact that we pioneered the premium mass segment. We were one of the early adopters of the <unk>.
Direct premiums to be up in your strategy.
I think to this day, we are still the market leader on that front. So we were very earlier on in terms of predicting the future of the market with regards to premium and also premium direct and really owning our database.
David do you want to share more information.
Sure.
One of the great things that we've been able to do with our iam team as we've been over the last few years, we've really been working really hard and want to grow our premium direct business. But also we started early on im trying to attract more of our VIP players that were coming from the junkets into our premium direct program. So we saw a lot of that so this transition has actually worked out.
Fairly well for us as we've gotten out of the VIP junket business and really have more and more as we continue to see more and more growth in our premium direct business, it's worked very well for us.
And as Lauren said, we've always been very premium mass focused premium direct very bottom line driven on that.
The junket business has always had a very kind of a very minimal amount of impact to our bottom line. Overall. So again. This transition there is a very natural and fairly easy transition for us.
No.
Great. Thank you so much for the color one housekeeping item.
Pro forma for the.
The equity contribution to studio city.
All the cash comes from the Macau Resource Finance group or was there was it funded.
No.
<unk> or cash from outside of the restricted group.
So so far the studio city financing obviously, the 350 came from bond investors and then the 300.
<unk> pro rata from the existing shareholders that represents about 99, 5% of the equity ownership in studio city.
Yes, so your share.
All that pro rata contribution came from.
Cash that you guys discussed was on the restricted group from a milk correct.
The contribution of the Melco equity into the studio city private placement.
<unk> from our revolving credit facility.
Great. Thank you so much.
Thank you.
We have the next question coming from the line of Billy <unk> from Bank of America go ahead.
Thank you and good evening.
Couple of questions. One is that would you guys provide.
A bit more color.
What's happening globally.
We saw relatively strong Chinese new years, and then after that it seems like at least from the Macau government data points.
Visitation continues to improve.
What have you seen so far in <unk>.
Studio.
Studio city in terms of.
Cody.
What kind of color you can share.
Hey, Bill I wanted to get the beginning of that and then David and <unk>.
<unk>.
I think in the first two months of the year.
Really reinforced all.
Offices on the last call, where we are in a range bound environment and I think the first two months of it certainly.
<unk>.
And as long as the Euro Covid.
Policy is in place.
Visitation into Macau.
Ltd.
I think what we're going to see.
So after a good Chinese new year period.
The visitation.
Lastly degrees so.
David do you want to supplement.
Sure.
And again Billy this is one of those things, where obviously as you know Chinese new year got off to a great start for US I thought was great was weak one obviously the first seven days were very good but the second week for US was very good as well both in our volumes from both our Permian direct premium mass and mass.
Slot volumes everything worked very well for us.
As you know, there's always a kind of a malaise that happens after Chinese new year, where things slow down I think you've kind of seen that as you look at kind of the statistics from the government coming out over the last couple of weeks. Additionally, we've kind of seen some flare ups now coming through for not only Hong Kong is omicron has kind of taken hold over there, but we've had.
<unk> seen some flare ups across the border as well until you high and around certain other areas. There. So things have slowed down a little bit and then just kind of goes back to what Laurence said our hypothesis for this year was we're going to be in a fairly range bound thing theres kind of other things that are going on with the Olympics, we saw happen and certainly with some of the party meetings that are going to be coming up.
Here. This next week, so I think theres going to be other activities are going to kind of continue to go up and down and kind of maintain that range bouncing a little bit and unfortunately, I think we're going to still see some flare ups now and then coming back from Covid that will kind of start and stop type of activities that are going to take place here.
Thank you and can I ask about the Philippine situation.
It seems like at least in terms of policy things.
That's a normal almost completely.
So.
Should we expect.
<unk> should follow.
It will get back to you.
Corporate level very quickly because like if you looked at other jurisdiction.
Even in the U S.
There is always pent up demand.
In gaming revenue.
Some places already exceed print.
Pre COVID-19 levels, so what should we think about the Philippine market.
Hey, Geoff Andres can you get that.
I did.
Things are definitely getting better in the Philippines. We are now effective today a lot of to operate at 100% capacity, which is a fantastic feeling right now just walk to the casino and we are very busy.
We are also open to foreign tourism, if youre fully vaccinated you can enter the Philippines quite easily.
Challenge, we have right now, though is that our foreign tourists with the exception of the United States.
Can't get back to their home country without going through corn team. So we're still missing.
There are customers from Japan, and Korea, and other some other southeast Asian countries. For example, so we're looking forward to our future easing of the.
Quarantine restrictions for our customers to be able to return it or home country, but right now it.
It really is feel feels very good to operate in a very normal basis, and we're seeing our volumes bounce back quite nicely.
Yeah.
Thank you and one last thing Jeff.
Jeff mentioned about the sub debt.
11 million I, just want to make sure I get it correctly that it's a credit cycle.
That does that does that reverse right. So it's positive.
That's correct.
Thank you.
Thank you we have the next question coming from the line of bromine chartering from Morgan Stanley . Please go ahead.
Thank you.
Thanks, very much for taking my question.
March one question for you.
When you all of you do you expect China to ease.
Inland to East zone.
Before.
Hong Kong open shop, or do we need to wait for Hong Kong to normalize and we see Hong Kong mainland opening before China further relaxes and the reason for asking just full determine how long does it take to normalize.
Second question I had was interesting observation that you said.
You will have 557 keys.
Many places you have earlier used 900 rooms is it new change are you making to rooms bigger at such a late stage or am I missing anything.
Hey, Praveen why do I think the second larger first so what I referred to in the prepared remarks was actually that W. W Tower at studio city for the.
Entire studio city phase two it is close to 900 keys between <unk> and our own self managed hotel that were.
Indicative Lee, calling iconic power so iconic power would make up the difference of the.
900, so it's still 900 team at studio City Phase two.
So I think thats on that.
The second question.
On the first one about when we'll Macau resume group visas.
<unk> group tours and also <unk>.
Hi.
It's a very unique year in China is very important here of course, we went through Olympics.
And then of course there is the.
The two sessions meetings happening this week, which I will be going up tomorrow.
And then after that you have the Hong Kong, Hong Kong CE election in the 25th anniversary at the Hong Kong handover, and then by far and away. The most important event is going to happen in October which is the <unk>.
<unk> Party National Congress meeting.
So I.
Again I think.
The Chinese policy is going to be very conservative this year with regards to opening up its borders.
And so and even recently, we've seen how certain call Vince view Macao as being so close to Hong Kong and therefore, the global outbreak in Hong Kong somehow would affect Macau. So.
Honestly I don't have a lot of hope that group tours or ease as theyre going to be normalized.
Before the.
Hong Kong, China corridor, meaning the Hong Kong Macau border will be open.
Thank you very much thanks for the comment.
Stay safe everyone. Congrats on good results.
As we have no.
As we have no further questions I would like to hand, the conference back to kidney Kim police vehicles.
Thank you for participating in our call today, we look forward to speaking with you next quarter. Thank you.
Okay.
Yes.
Thank you.
Ladies and gentlemen that concludes our conference call for today. Thank you all for your participation you may disconnect now.
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Ladies and gentlemen, thank you for participating in the fourth quarter of 2021 earnings conference call of Melco Resorts <unk> 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'd now like to turn the call over to MS. Jeanie, Kim Senior Vice President group pleasure of Melco resorts Suddenly Entertainment limited. Please go ahead.
Thank you. Thank you everyone for joining us today for our fourth quarter 2021 earnings call on.
On the call are Lawrence Ho, Geoff Davis, Evan Winkler, and our property presidents in Macau and Manila in Cyprus.
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.
In addition, we may discuss non-GAAP measures a definition and reconciliation of each of these measures to the most comparable GAAP financial measures are included in the earnings release.
Finally, please note that our supplementary earnings slides are posted on our Investor Relations website.
With that I'll now turn it over to Mr. Hal.
Thank you Jamie.
While our results in the fourth quarter and continue to reflect COVID-19 related disruption and their impact on travel and customer visitation.
That said.
Volumes across all segments in Macao increased in the fourth quarter of 2021 compared to the third quarter. Despite structural changes in the VIP segment.
Property EBITDA also showed meaningful sequential improvement this quarter.
Which demonstrates our discipline.
Joel.
Going into 2022.
Hey, Colby flare up and why led to softer performance in the pre <unk> period.
However volumes across our segment increased year over year during the Chinese new year holiday period, and this is carried over into the week following the holiday.
Premium direct business at city of Dreams, Macau more than doubled compared to the Chinese new year period in 2021 and continue to outperform into the fall.
Mass base mass table drop also demonstrated strength increase.
Increasing around 20% compared to <unk> 2021.
In the Philippines, we recorded the strongest quarterly EBITDA performance and COVID-19, thanks to a full quarter of casino operation.
With capacity restriction.
Going into 2022, the authorities, we opened the Philippine border for fully vaccinated international through effective on February 10th.
In Metro Manila is operating under a level one for March.
Consequently, our venues can now operate at 100% capacity and ended the first time COPD Manila can operate at full capacity since March 2020.
Turning to slide three.
Our casinos remained open throughout the fourth quarter of 2021 and.
And we saw sequential growth in EBITDA, along with an increase in gaming spend per patron.
Gaming volumes in the fourth quarter reached 90% of pre Covid levels and we are hopeful for further normalization going into 2022.
We remain committed to our global Capex and development program.
In Macau, we continue our effort to complete construction of studio city phase two deadlines set in the land concession.
December 27 2022.
For phase two we recently announced the partnership with Marriott International to bring the W Hotel brand to one of our two new hotel tower.
The W. In Macau at studio City will have 557 key and further enhance the studio city premium offerings.
In Europe , the construction of city of Dreams Mediterranean is on track for opening in the second half of 2022.
Finally, I would like to thank the Macau government pretty opportunity to contribute our view during the public consultation process and for providing a clear framework for the new gaming law.
We are committed to participating in the upcoming public tender.
And we remain fully confident that melco can remain a key contributor in the calc growth and diversification in the years to come.
Our enthusiasm for Melco medium and long term growth prospects remains unchanged and.
And we are ready to welcome August one travel restrictions normalized.
With that I'll turn the call over to Jeff to go through some of the numbers.
Thanks, Lawrence and.
In the fourth quarter of 2021, we reported group wide property EBITDA of approximately $94 million the.
The increase in EBITDA was largely due to tight cost control measures, including bonus reversals.
Luck adjusted property EBITDA came in at $120 million in each of our geographies in Macau, and Manila, and Cyprus reported sequential improvements in EBITDA.
An unfavorable VIP win rate negatively affected EBITDA at Cod, Macau studio city, and CRD Manila by approximately $26 million in total.
$22 million of this was in relation to Cod Macau.
Details of these adjustments can be found in the supplementary earnings slides posted on our Investor Relations website.
At the end of December 2021, we had approximately $1 7 billion of consolidated cash on hand.
Available liquidity, including cash and Undrawn revolving credit facilities at the end of December was $3 2 billion.
To provide more clarity on our capital structure Melco, excluding its operations at studio city.
<unk> and Cypress had cash of around $850 million and gross debt of $4 5 billion at the end of December 2021.
In February we announced equity and bond offerings at studio city, raising a total of $650 million.
$300 million via a private placement of equity and $350 million via senior secured notes.
Based on our latest forecast our Capex plan for studio City Phase two is now fully funded with a meaningful buffer to support studio city's liquidity requirements going forward.
As we normally do we'll give you some guidance on non operating line items for the upcoming first quarter of 2022.
Total depreciation and amortization expense is expected to be approximately $145 million.
Corporate expense is expected to come in at approximately $20 million.
And consolidated net interest expense is expected to be approximately $90 million to $95 million.
Which includes finance lease interest of $7 million relating to city of dreams, Manila, and $10 million to $12 million of capitalized interest.
That concludes our prepared remarks, operator back to you for the Q&A.
Okay.
Certainly ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question. These press star one on your telephone keypad and wait for your name to be announced if you wish to cancel your request you can press the pound or how should.
Please note that might be a slight pause as it relates to questions. Once again it is star one to ask a question.
Okay.
If you have the first question coming from the line of Joe <unk> from Jpmorgan. Please go ahead.
Good morning.
Afternoon, everybody.
Lawrence just the.
City of Dreams came in nicely ahead on margin.
In the fourth quarter in Macao hold adjusted $71 million.
Is there anything one time in there I know you have referenced reversal bonus at that provision.
What extent did that add to that that.
$71 million.
And Jeff do you want to take that Joseph.
Yes, thanks Laurence.
So in total we had $34 million of bonus reversals in the quarter.
And our bad debt provision was a credit to expense of $11 million.
And how much of that hit at the at the property level at city of Dreams Macau.
So at city of Dreams Macau.
The reversals were approximately.
Yes.
$12 million.
And.
The credit.
Against expense for city of Dreams on the bad debt provision was about $3 million.
Okay.
So if we look at it then.
Sort of outside of the benefit of those two things it's $56 million.
Is that the run rate that youre seeing in the first two months of this year at that property.
Well.
Im not sure we want to comment.
On first quarter results and obviously, we have some.
Some noise with Chinese new year and of course the.
The weakness that we saw in between new year, and Chinese new year as a result of some COVID-19 .
Covid flare ups.
But other than the amounts that I described.
That's a that's a solid run rate.
Great and it is probably has a question or topic, you don't get much but what is the future of alterra.
It's probably never going to contribute a ton in terms of of EBITDA in a normalized environment and maybe thats a fair comment on my part, but the asset value is certainly something that's not reflected in the equity how how do you think about utilizing that asset.
Drive incremental equity value.
What's the future of that quality.
Well as you know last year, we transitioned alterra from a and we did that early I think before the entire VIP and junket industry and devoted.
And so we moved out here to a premium mass focused property.
I think I agree with you with the current visitation into the entire Macau.
It really doesn't I think many properties not yourself hereof doesn't really justify being there.
Yes.
We do think that with Covid.
Normalizing hopefully and.
Within the calendar year of 2022 in Macao gets.
No.
Closer to the traditional visitation that we will get.
Alterra has their niche positioning.
David do you want to share some details.
Sure. Thanks, Laurence look to.
As we transitioned away from being kind of a VIP centric property and more being more mass and premium mass focused it's taking some time, but we're starting to get more traction now with that.
Alterra, although a small property. Its certainly has a lot of unique features to it I think one of the cool things. We just had happened without here was during the the fireworks display over Chinese new year, we saw occupancy pick up over there in a big way we saw.
Mark covers we saw drop going up in a meaningful way as well so.
While its here a small it does have a unique unique place I think in the market and I think with our strategy of kind of converting more and more to mass over there I think we will see.
While it may not be as large as it once was I think we will see a nice EBITDA pick up over there.
As we head into the future here more and we get out of Covid.
Great. Thank you and then Jeff can you remind us.
Capex for this year.
Sure Joe So capex for 2022 is about $765 million.
About 650 of that.
Is related to project Capex for CODI, Mediterranean and studio city phase two.
Thank you guys.
Yes.
Thank you.
We have our next question. This is coming from the line of George Choi from Citi. Please go ahead.
Thank you very much congrats on the great results.
Just one question from me and licensing revision of the.
Any law.
Is it your plan for your incentive casino, Glenn Reagan and I guess more importantly, mosquitoes any I guess most of us would never call. It a casino, but do you think the government would look at it.
Thank you.
Hey, George as Loren.
Hello.
We've never.
We've never looked at studio city is a satellite casinos considering melco resorts owns the majority of.
Of the ownership of studio city, and we believe that the gaming law revision also it doesn't seem curious any satellite casino.
Of course as part of the the gaming law has been so far a expedite it fair and reasonable process.
We are still seeking a lot of clarification from the government.
For the ball get approved in the Legislative Council sometime in June .
So we'll be working with.
With the government on that front.
And Jeff I know there are more details wondering here.
Well other than the the differentiation and equity ownership Lawrence just as a reminder.
There is three year runway on this issue from the time that the gaming laws implemented.
And I think it's also very important to note that the.
Studio city structure has been explicitly.
Proved by the Macau government.
Okay.
And George on your question.
Unlike some of the other operators were only up one satellite casino, which is Grand Dragon and the reason we kept that was really for the moca venue there.
So I guess, we will continue to work with the government to see.
The solution for all of this out licensing.
Thank you.
Yes.
Very good question. Thank you.
Okay.
Thank you.
We have the next question this is coming from the line of Gautam.
Chinchilla from Deutsche Bank. Please go ahead.
Hey, guys. Thanks for taking my question I was wondering if you could provide some color on your direct VIP as strategy going forward and if you have seen you know improve interests or incremental sign ups given the whole situation with the junkets.
Okay.
Hi, Noah.
<unk>.
Hand, it off to David later on but in terms of our direct VIP strategy.
Very proud of the fact that similar to the fact that we pioneered the premium mass segment.
We're one of the early adopters.
Direct premiums the odds in your strategy.
I think to this day, we are still the market leader on that front. So we were very early on in terms of.
Big thing the future of the market.
To premium and also premium direct and really owning our database.
David you want to share more information.
Okay.
Sure. So I think one of the great things that we've been able to do with our RM team as we've been over the last few years, we've really been working really hard and want to grow our premium direct business. But also we started early on im trying to attract more of our VIP players that were coming from the junket into our premium direct program. So we saw a lot of that so this tree.
<unk> has actually worked out fairly well for us as we've gotten out of the VIP junket business and really have more and more as we continue to see more and more growth in our premium direct business, it's worked very well for us.
As Lawrence said, you know, we've always been very premium mass focused premium direct very bottom line driven on that the <unk>.
<unk> business has always had a very kind of a very minimal amount of impact to our bottom line. Overall. So again. This transition there is a very natural and fairly easy transition for us.
Sure.
Great. Thank you so much for the color one housekeeping item.
Pro forma for the the.
The equity contribution to studio city.
All the cash comes from the Macau Resource Finance group or was there was it funded.
Contribution or cash from outside of the restricted groups.
So so far the studio city financing, obviously, the $3 50 came from bond investors and then the 300.
<unk> pro rata for from the existing shareholders that represents about 99, 5% of the.
The equity ownership in studio city.
Yes, so you're you're sure.
That pro rata contribution came from.
Cash that you guys discussed was on the restricted group from a milk correct.
The contribution of the Melco equity into the studio city private placement.
Came from our revolving credit facility.
Great. Thank you so much.
Thank you.
We have the next question coming from the line of Billy <unk> from Bank of America. Please go ahead.
Thank you and good evening.
Couple of questions. One is would you guys provide a bit more color.
What's happening in February .
We saw relatively strong Chinese new years, and then after that it seems like at least from the Macau government data points.
Visitation continues to improve.
What have you seen so far.
In terms of.
Studio City, and then in terms of.
Cody.
What kind of color you can share.
Hey, Bill I wanted to get the beginning of that and then David and supplement.
Alright, I think in the first two months of the year.
Really reinforced all.
Hi, Paul said on the last call, where we are in a range bound.
Ironman.
The first two months that certainly.
Proven that.
As long as the neuro COVID-19 .
Policy is in place.
Visitation into Macau.
Ltd.
I think what we're going to be.
So after a good Chinese new year period.
The visitation.
Lee degrees so.
Do you want to supplement.
Sure.
And again Billy this is one of those things, where obviously as you know Chinese new year got off to a great start for US I thought was great was weak one obviously the first seven days were very good but the second week for US. It was very good as well both in our volumes from both our premium direct premium mass and mass and slot volumes everything worked very well for us.
<unk>.
As you know, there's always a kind of a malaise that happens after Chinese new year, where things slow down I think you've kind of seen that as you look at kind of the statistics from the government coming out over the last couple of weeks. Additionally, we've kind of seen some flare ups now coming through for not only Hong Kong is omicron has kind of taken hold over there but.
We've had seen some flare ups across the border as well and tissue high in around there is certain other areas. There. So things have slowed down a little bit I think this kind of goes back to what Laurence said our hypothesis for this year was we're going to be in a fairly range bound thing theres kind of other things that are going on with the Olympics, we saw happen and certainly with some of the party meetings that are going to be coming.
Up here. This next week, so I think theres going to be other activities are going to kind of continue to go up and down and kind of maintain that range bouncing a little bit and unfortunately, I think we're going to still see some flare ups now and then coming back from Covid that will kind of start and stop type of activities that are going to take place here.
Thank you and can I ask about the Philippine situation.
It seems like at least in terms of policy things that.
That's a normal almost completely.
Should we expect.
<unk> So Paulo.
And we'll get back to the.
Copa level very quickly because like if you looked at other jurisdiction.
Even in the U S.
There is always pent up demand.
In gaming revenue.
Some places already exceed.
Pre COVID-19 levels, so what should we think about the <unk>.
Market.
Hey, Geoff Andres can you get that.
I did.
Things are definitely getting better in the Philippines. We are now effective today a lot of to operate at 100% capacity, which is a fantastic feeling right now just walk to the casino and we are very busy.
We are also open to foreign tourism. If you are fully vaccinated you can enter the Philippines quite easily.
The challenge we have right now, though is that our foreign tourists with the exception of the United States can't get back to their home country without going through <unk>. So we're still missing.
There are customers from Japan, and Korea, and other some other southeast Asian countries. For example, so we're looking forward to our future easing of the <unk>.
Warranty and restrictions for our customers be able to return to their home country.
But for right now.
It really is feel feels very good to operate in a very normal basis, and we're seeing our volumes bounce back quite nicely.
Yeah.
Thank you.
As Jeff mentioned about <unk>.
11 million I, just want to make sure I get it correctly that.
That does that reverse so it's positive.
That's correct.
Thank you.
Thank you we have the next question coming from the line of bromine Charles <unk> from Morgan Stanley . Please go ahead.
Thank you.
Thanks, very much for taking my question.
Lauren just one question for you.
How do you view do you expect China to ease.
Inland to east.
Before.
Hong Kong open shop, or do we need to wait for Hong Kong to normalize and we see Hong Kong mainland opening before China further relaxes and the reason for asking just full determine how long does it take to normalize.
Second question I had was interesting observation that you said.
You will have 557 keys.
Many places you have earlier.
900 rooms is it do you change are you making to rooms bigger at such a late stage or am I missing anything.
Hey, Praveen why don't I take the second question first so what I referred to in the prepared remarks was actually that W. Tolar that W tower at studio city for the.
Entire studio city phase two it is close to 900 keys between <unk> and our own self managed hotel that were.
Indicative Lee, calling iconic power so iconic power would make up the difference of the.
900, so it's still 900 team at studio City Phase two.
So I think thats on.
The second question.
On the first one about when we'll Macau resume group visas.
<unk> group tours and also <unk>.
Aye.
It's a very unique year in China is very important here of course, we went through Olympics.
And then of course there is the.
The two sessions meetings happening this week, which I will be going up tomorrow.
And then after that you have to Hong Kong, Hong Kong CE election in the 25th anniversary of the Hong Kong handover, and then by far and away. The most important event is going to happen in October which is the <unk>.
<unk> Party National Congress meeting.
So I.
Again I think.
The Chinese policy is going to be very conservative this year with regards to opening up its borders.
And so and even recently, we've seen how certain call Vince view Macao as being so close to Hong Kong and therefore, the COVID-19 outbreak and Hong Kong somehow would affect Macau. So.
Honestly I don't have a lot of hope that group tours or ease as theyre going to be normalized.
Before the.
Hong Kong, China corridor, meaning the Hong Kong Macau border will be open.
Thank you very much thanks for the comment.
Stay safe everyone. Congrats on good results.
As we have no.
As we have no further questions I would like to hand, the conference back to kidney Kim police vehicles.
Thank you for participating in our call today, we look forward to speaking with you next quarter. Thank you.
Okay.
Yes.
Thank you ladies.
Ladies and gentlemen that concludes our conference call for today. Thank you all for your participation you may disconnect now.