Melco China resorts reports third quarter 2009 financial and operational

BEIJING, Nov. 12 /CNW/ - Melco China Resorts (Holding) Limited (TSXV: MCG) ("Melco China Resorts" or the "Company"), today reported its financial results for the three- and nine-month periods ended September 30, 2009 (the "Reporting Period"). Melco China Resorts reports in Canadian Dollars.

Financial Results

Total revenue and the net results from continuing operations were from minimal resort operations for the three-month period ended September 30, 2009 and 2008, with no real estate sales activities being undertaken during these periods. For the three-month period ended September 30, 2009, the Company generated revenue from continuing operations of $0.22 million versus $0.23 million during the same period in 2008. Operating EBITDA from continuing operations was negative $2.17 million for the three-month period ended September 30, 2009 compared to negative $3.68 million in the same period of 2008.

Resort operations expenses from continuing operations totaled $1.11 million for the third quarter of 2009 compared to $0.29 million for the same period in 2008. The difference in operating expenses from continuing operations was mainly due to the higher operating costs attributed to the new resort facilities at Yabuli Resort. For the nine-month period ended September 30, 2009, the Company generated revenues from resort operations of $1.88 million compared to $0.28 million for the same period in 2008. The increase in revenue was due to resort operations for the whole period in 2009, compared to a four-month operation period recognized in 2008. Operating EBITDA from continuing operations for the nine-month period ended September 30, 2009 were negative $12.16 million compared to negative $8.43 million over the same period in 2008. Net loss from continuing operations for the three- and nine-month periods was $5.5 million ($0.06 per share) and $23.5 million ($0.27 per share) respectively.

The net loss during the nine-month period in 2009 included a $4.9 million one-time charge relating to transaction and closing costs for a new RMB 250 million ($39.87 million) bank loan from China Construction Bank secured in March 2009, an increase in associated bank loan interest, and an increase in depreciation associated with the completion of the new hotels and facilities at the Yabuli Resort.

Capital expenditures totaled $7.92 million and $22.24 million for the three- and nine-month periods ended September 30, 2009 respectively, which was within the Company's budget for the periods and mainly included progress payments for the construction and major improvement of the on-mountain resort center and hotel operations facilities at Yabuli Resort.

Cash and cash equivalents totaled $7.1 million and working capital balance was negative $50.25 million as at September 30, 2009. The balance included an amount due to former related parties of RMB 35 million ($4.78 million) which will be due in November 2009, a RMB 120 million ($19.14 million) bank loan which will be due in February 2010, and construction and other contracts related primarily to the resort and hotel operations and the real estate business amounting to $15.50 million which will be due in 2010.

Operations and Real Estate Development

Sun Mountain Yabuli

Yabuli Resort officially opened in late January 2009 and closed on April 6, 2009. Revenue in Yabuli Resort for the three- and nine-month periods ended September 30, 2009 was $0.01 million and $0.94 million respectively. The shortened season resulted in operations EBITDA of negative $0.87 million in the third quarter and negative $4.48 million during the nine-month period of 2009.

The Company anticipates that with the stabilization of operations of this resort with the completion of the major redevelopment works, ski season operations will re-commence on November 18, 2009 providing a 120 day winter operating season.

During the third quarter of 2009, the Company reached an agreement to complete the construction of 75 homes with Melco China Resorts' existing Harbin general contractor that was also responsible for the construction of the resort hotels. The agreement includes a recommencement payment of RMB 50 million ($7.97 million) paid in three advances of RMB 25 million ($3.99 million), RMB 20 million ($3.19 million) and RMB 5 million ($0.79 million) subject to specific construction milestones being completed.

The recommencement payment of $7.97 million was considered a partial amount of the total construction cost for the resort homes project. Following further negotiations with the general contractor this amount was re-allocated as a progress payment towards the hotel construction. Home construction proceeded throughout the third quarter of 2009, financed by the general contractor for 55 homes under the financing arrangement with their concrete shell structures being completed in 2009. Of these 55 homes three will include full interiors as show homes for sales and marketing purposes and include options for home finishing packages to be selected by the purchaser. The Company aims to have these homes completed in 2010 once all finishes are specified, selected and finalized by prospective buyers.

Changchun Resort

Changchun Resort opened after winter operations on November 23, 2008 and closed for operations on March 15, 2009 for a 113-day operating season. Revenue and operations EBITDA at the Changchun Resort for the three- and nine-month period ended September 30, 2009 was $0.21 million and negative $0.02 million, and $0.95 million and negative $0.003 million respectively. The resort primarily services a regional market from the city of Changchun and was originally purchased as a feeder resort to drive traffic to the Company's larger destination resorts of Yabuli and Beidahu.

The Company is in discussions regarding the possible divestment of the Changchun Resort so as to limit its ongoing capital expenditures and reduce debt. Current debt attributed to this resort is $3.99 million and is repayable on demand.

No real estate development, construction or sales activities were undertaken at the Changchun Resort during the Reporting Period.

Sky Mountain Beidahu

The Company previously announced on October 5, 2009, the agreement (the "Acquisition Agreement") with the Jilin Beidahu Sports and Tourism Industry Development Company Limited ("Jilin Beidahu Development Zone") dated November 22, 2007 for the acquisition of the Beidahu Resort was terminated. The acquisition terms for Beidahu Resort included an initial payment of RMB 30 million ($4.78 million) paid on March 1, 2008, a second installment of RMB 70 million ($11.16 million) due December 31, 2008, and a final payment of RMB 120 million ($19.14 million) due December 31, 2010. The Acquisition Agreement was terminated pursuant to its terms as MCR had failed to pay the RMB 70 million ($11.16 million) payment which was due on December 31, 2008. The Company was unsuccessful in renegotiating terms of the Acquisition Agreement to defer the acquisition payments and the operation of the Beidahu Resort was handed over to Jilin Beidahu Development Zone in mid-August 2009. Revenue and net results from discontinued operation of the Beidahu Resort totaled $0.06 million and negative $0.49 million, and $1.79 million and negative $2.58 million, respectively, for the three- and nine-month periods ended September 30, 2009.

Beidahu Resort was handed over to Jilin Beidahu Development Zone during the third quarter of 2009 and the payment obligations of RMB 190 million ($30.30 million) and capital expenditure required for the future expansion of Beidahu Resort were eliminated in connection to the termination of the Acquisition Agreement by Jilin Beidahu Development Zone.

China Entertainment Globe Ltd. ("CEG") Transaction

The Company announced on August 20, 2009 that it had entered into a definitive agreement with CEG in which CEG would subscribe for 95,000,000 common shares at a subscription price of $0.15 per share for a total subscription price of $14.25 million representing approximately 49.8% of the equity interest of the Company (on an enlarged basis and assuming the conversion of Melco China Resorts' outstanding Class B non-voting shares). The private placement was expected to close in late September 2009. On September 22, 2009, the Company was informed by CEG that it would be unable to close the private placement because one of its financial partners had withdrawn. However, CEG advised the Company that it wished to proceed subject to it being able to replace the financial partner. There can be no assurance that any alternative financial partners will be available to CEG, or amended terms will be reached between the Company and CEG, or the Company will complete a financing with CEG.

Financial Highlights

Summary Financial Results


                                                                  Period from
                                                                  February 6,
    (in thousands of      Three-month  Three-month   Nine-month   2008 (date
     Canadian dollars          period       period       period    of incorp-
     except for per share       ended        ended        ended   oration) to
     data and number of     September    September    September    September
     shares)                 30, 2009     30, 2008     30, 2009     30, 2008
    Operating revenue
     (from continuing
     operations)          $       218  $       234  $     1,882  $       278
    Loss from continuing
     operations           $    (5,486) $   (11,501) $   (23,540) $   (15,744)
    Results of
     operation            $      (489)  $     (963) $    (2,580) $    (1,293)
    Net loss              $    (5,975)  $  (12,464) $   (26,120) $   (17,037)
    Loss per share from
      Basic               $     (0.06)  $    (0.13) $     (0.27) $     (0.34)
      Diluted             $     (0.06)  $    (0.13) $     (0.27) $     (0.34)
    Net loss per share
      Basic               $     (0.07)  $    (0.14) $     (0.30) $     (0.37)
      Diluted             $     (0.07)  $    (0.14) $     (0.30) $     (0.37)

Balance Sheet Key Indicators

    (in thousands of Canadian dollars              September 30, December 31,
     except for ratios)                                    2009         2008
    Current Ratio(1)                                     0.33:1       0.33:1
    Free Cash                                             7,086        3,494
    Working Capital(2)                                  (50,253)     (51,497)
    Total Assets                                        239,429      311,276
    Total Debt(3)                                       123,261      154,368
    Total Equity(4)                                     116,168      156,908
    Total Debt to Total Equity Ratio                     1.06:1       0.98:1

    (1) Current ratio is defined as total current assets divided by total
        current liabilities
    (2) Working capital is defined as total current assets less total current
    (3) Total debt is defined as total current liabilities plus total non-
        current liabilities
    (4) Total equity is equal to the total shareholders' equity

The ability of the Company to meet its current obligations is dependent on its ability to source financing and/or investment from external sources due to its limited income generating capability while in a development stage. The ability of the Company to arrange such financing in the future will depend in part upon prevailing capital and financial market conditions, as well as upon the business success of the Company.

Other than as indicated above, no other agreement with lenders or potential investors has been reached yet and there can be no assurance that such agreements will be reached, nor that financing efforts will be successful. If the financing efforts are unsuccessful or are not available on acceptable terms, the Company therefore does not have sufficient funding to meet its current obligations or on going operational and development requirements. In this situation, the Company would need to immediately suspend portions, if not all, of its operations and consider other alternatives. If the going concern assumptions were not appropriate for these financial statements, adjustments would be necessary in the carrying values of assets and liabilities, the reported net loss and the balance sheet classifications used.

Melco China Resorts will host a conference call to discuss its year end operational and financial results. Graham Kwan, CEO and Danny Liu, CFO of Melco China Resorts will host the call.

Management invites analysts and investors to participate on the conference call:

    Date:                    Friday, November 13, 2009

    Time:                    10:00 am Eastern Standard Time

    Dial In Number:          416-340-8018 or 1-866-223-7781

    Taped Replay:            416-695-5800 or 1-800-408-3053
                             (available for 7 days)

    Taped Replay Pass code:  6557716

    Live webcast link:

About Melco China Resorts

Melco China Resorts is the premier developer of four season destination ski resorts in China. Melco China Resorts is transforming existing China ski properties into world-class, four seasons luxury mountain resorts with excellent real estate investment opportunities for discerning buyers. In February 2009 the Company's Yabuli Resort was awarded Best Resort Makeover in Asia by TIME Magazine. Melco China Resorts' leadership team boasts a proven record of resort development success both internationally and in China.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.


Information in this press release that is not current or historical factual information may constitute forward-looking information within the meaning of securities laws, and actual results may vary from the forward-looking information. Implicit in this information are assumptions regarding future operations, plans, expectations, anticipations, estimates and intentions, such as the plans to develop the ski resorts in China. These assumptions, although considered reasonable by Melco China Resorts at the time of preparation, may prove to be incorrect. Readers are cautioned that actual future operating results and economic performance of Melco China Resorts are subject to a number of risks and uncertainties, including general economic, market and business conditions, uncertainty relating to land use rights, adverse industry events for the ski and real estate industries, Melco China Resorts' ability to make and integrate acquisitions, the requirements of recent Chinese regulations relating to cross-border mergers and acquisitions, the inability to obtain required approvals or approvals may be subject to conditions that are unacceptable to the parties, changing industry and government regulation, as well as Melco China Resorts' ability to implement its business strategies, and to raise sufficient capital, seasonality, weather conditions, competition, currency fluctuations and other risks, and could differ materially from what is currently expected as set out above.

Forward-looking information contained in this press release is based on current estimates, expectations and projections, which MCR believes are reasonable as of the date of this press release. Melco China Resorts uses forward-looking statements because it believes such statements provide useful information with respect to the operation and financial performance of Melco China Resorts, and cautions readers that the information may not be appropriate for other purposes. Readers should not place undue importance on forward-looking information and should not rely upon this information as of any other date. While Melco China Resorts may elect to, it does not undertake to update this information at any particular time.

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For further information: For further information: Melco China Resorts, Investor Relations, Kevin O'Connor, Tel: (416) 962-3300, Fax: (416) 962-3301, Email:

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