Melco Resorts & Entertainment Limited (MLCO) Q1 2015 Earnings Report, Transcript and Summary

Good evening, and thank you for participating in the Q1 2015 Earnings Conference Call of Melco Crown Entertainment Limited. [Operator Instructions] Today's conference is being recorded. I would now like to turn the call over to Geoffrey Davis, Chief Financial Officer of Melco Crown Entertainment Limited.

Thank you for joining us today for our first quarter 2015 earnings call. On the call with me today are Lawrence Ho, Ted Chan and Ross Dunwoody. 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. I will now turn the call over to Lawrence.

Thank you, Geoff. Hello, everyone. In Macau, we continue to face challenges associated with a weak demand environment, which has impacted all segments of the market. In this environment, we're focused on managing the parts of the business we can control, including [indiscernible] investments and other operating expenses and ensuring that we maintain the highest service standards for employee training and development, which in turn maximizes customer experience and loyalty. Our disciplined approach to costs are highlighted by the fact that our property EBITDA margins in Macau has remained stable sequentially despite a backdrop of declining revenues. During the first quarter of 2015, we continued our strong relative trajectory in the rolling chip segment, taking meaningful market share once again. In the mass market table game segment, we have implemented various growth initiatives in a cost-disciplined manner, which are already starting to result in improved market share during April. Our company has always prided itself on taking a leadership role in the true diversification in Macau. While we are extremely proud of our numerous 4- and 5-star awards, which are the most of any operator in Macau, and our world-class hotel, food and beverage and gaming amenities, one area where we are without compare is in our -- where we are without compare is in our relenting commitment to non-gaming entertainment. Despite our peers' attempts to showcase the recent commitment to Macau's goal of diversifying the leisure and tourism experience in Macau, we have been committed to this diversification objective for several years now by delivering world-class must-see experiences in Macau. We began this commitment several years ago when designing and developing City of Dreams in Macau. The House of Dancing Water, which required an investment of USD 300 million to build and produce, is the leading show in Macau and is unrivaled around the region. Over 3.2 million guests have enjoyed the show to-date, which still enjoys high occupancy levels. In addition to The House of Dancing Water, we also delivered Macau's largest nightclub, Club Cubic; Macau's only cabaret show, Taboo; Macau's largest family entertainment center, Kids' City; and we recently introduced SOHO, a diverse dining and entertainment precinct at City of Dreams. Studio City, which remains on budget and on schedule, raises the bar again in terms of non-gaming diversification. The property brings to Macau a range of entertainment and non-gaming amenities [indiscernible] now and unlikely to be matched by any of the properties currently being developed or considered in Macau. [indiscernible] other exciting attractions: Asia's highest and the world's first [indiscernible] Ferris wheel; a Batman-themed digital ride; a DC Comics and Warner Bros. family entertainment center; a 5,000-seat multipurpose live entertainment center; the House of Magic; a TV studio, production studio; and the world's largest nightclub brand, Pacha. We are also proud to collaborate with some of the leading Hollywood icons to bring to Macau a once-in-a-lifetime short film event titled The Audition, featuring A-list stars, including Leonardo DiCaprio, Robert DeNiro and Brad Pitt and directed by Academy Award winner, Martin Scorsese. No other operator can boast [ph] this type of true commitment to the government's long-term vision for Macau, and we are proud of this fact. Furthermore, our leading diversification approach also offers our employees unique career opportunities and [indiscernible], which are generally not available at other concessionaires. As a preferred employer with a strong heritage in Macau starting back to 2003, we have always maintained a long-term commitment to the development of our employees and the community. Our employees are our most important asset, and we invest heavily in career and personal development programs and initiatives. Back in 2009, we established Macau's first In-house Learning Academy, offering approximately 200 courses across various gaming and non-gaming disciplines to all of our employees wanting to expand their knowledge base and further their career paths. To-date, we have had local participation of over 26,000 in these programs. As a sign of our support of the long-term of diversification of Macau's economic model, we'll be extending these exciting programs to employees of local businesses and SMEs. Our Dare to Dream series offers Macau youths a one-in-a-lifetime opportunity to intern with international maestros, including Franco Dragone, the creator of The House of Dancing Water show; legendary piano master, Yundi Li; and Dame Zaha Hadid, the world-renowned architect. These youths were selected in partnership with various government and education departments. As a result of meticulous planning and structure development programs, approximately 72% of our management positions are now held by locals, a number that we will proactively increase through these various initiatives, including the Foundation Acceleration Program. This year, we're going to be the largest new employer in Macau, offering locals an opportunity to join a dynamic and innovative company. We're also firmly committed to offering our current team members incredible promotion and career development opportunities, as evident in the over 18,000 internal promotions and transfers we have made to-date, and many [indiscernible] Studio City. [indiscernible] as an employer of choice as endorsed by the exceptional take-up of our longer-term retention program rather than the short-term focus summer bonus initiative and also the exceptional attendance at our Studio City Career Fair, where we received approximately 7,000 job applications to join our company. Our belief in Macau's long-term success is unwavering. We remain confident that Macau's geographic location, which is perfectly positioned to cater to the fastest-growing and largest consumer-led middle class in the world, together with the anticipated addition of multidimensional attractions and amenities, will ensure a long-term and sustainable economic growth model. Moving to Manila. City of Dreams continues to gather momentum, particularly on the mass market and non-gaming segments. Property visitation levels and customer database sign-ups continue to be very strong. Hotel occupancy levels are already over 75% despite only being in operation for a few months, and our restaurants and entertainment attractions have been well received both by local and international clientele. We are in the process of ramping up our junket operations, which we believe will gain traction over the coming months as more major fixed-room junkets open and will be a meaningful contributor to the property's EBITDA and cash flow in the near future. We're delighted that PAGCOR and the Philippines' government have awarded Melco Crown Philippines a regular license, the first to receive this in Entertainment City, despite being in operation for less than 6 months. We are excited about being a major contributor as the Philippines continues to develop into one of the leading tourist destinations in Asia. With that, I'll turn the call back over to Geoff to go through some of the numbers.

Thank you, Lawrence. We reported property EBITDA of $253 million in the first quarter of 2015 compared to $388 million in the first quarter of last year. Our property EBITDA margin in the first quarter of 2015, including City of Dreams Manila, was 24.3% compared to 28.8% in the first quarter of 2014 and 25.1% in the fourth quarter of 2014. In Macau, our property EBITDA margin was 25.3% in the first quarter of 2015, in line with the fourth quarter of last year. As Lawrence has mentioned, this result highlights our strong commitment to managing costs, including the player reinvestment rate and our fixed OpEx. During the first quarter of 2015, we benefited by approximately $12 million in EBITDA from a favorable win rate in our rolling chip business in Macau. This was partially offset by an unfavorable impact on EBITDA at City of Dreams Manila of approximately USD 6 million. EBITDA contribution from our non-VIP segments represents over 85% of luck-adjusted EBITDA at City of Dreams and on a Macau-wide basis. Despite Studio City's spectacular attractions and amenities, our design and construction budget of $2.3 billion demonstrates extremely good value for money, particularly compared to other properties being developed in Macau, which are meaningfully more expensive on a per square-foot basis. This budget reflects our forward-thinking construction contracting strategy. For those who follow City of Dreams Manila more closely, our building lease payment for the first quarter of 2015 was approximately USD 7 million. As we normally do, we'll give you some guidance on nonoperating line items for the upcoming quarter. Total depreciation and amortization expense is expected to be approximately $110 million to $115 million. Corporate expense is expected to come in at approximately $32 million, and consolidated net interest expense is expected to be approximately $40 million, which includes finance lease interest of $11 million relating to City of Dreams Manila, net of approximately $37 million of total capitalized interest. That concludes our prepared remarks. Operator, back to you for the Q&A.

[Operator Instructions] Your first question comes from the line of David Bain from Sterne Agee.

Guys, have you begun to think about strategic scenarios you could offer incase table allocations are less than expected at MSC? Or how do you think we should view Galaxy's upcoming table allocation versus what MSC may receive? I agree that [indiscernible] commitment to non-gaming, but are there any other indicators that can help us analyze where we stand?

David, it's Lawrence here. I think, unfortunately, we are in the government's hand on this one. But we do believe that unlike Galaxy, which is really an expansion with additional hotel room. Studio City is really the first standalone integrated resort to open in the last 3 years. And that -- given the amenities that we have, I think we followed the government's instructions over the years to the T. And given the amount of national attractions that we have put in here and the fact that we produced a short film really to help promote Macau becoming an even cooler place that we certainly hope to be able to do that. So I think, of course, the Galaxy table allocation, when it does come out, is a telling indication for what potential new properties will get [ph]. But at the same time, we are hopeful that Macau government will really reward us with the contributions we have done over the years. And we have had positive dialogues along the way, and we [indiscernible] as well. But I think we are holding out hope. [indiscernible] But I think we have various plannings, but when we get a better indication of where the government is at, then we'll have a plan accordingly.

Okay. And then from an investor's standpoint at least, it seems as if the new Macau government has made statements that may conflict with sort of the overall success drivers of Macau, in terms of visitation or recently adopted smoking restrictions on the mass floor with lounges. I mean, do you get a sense we may get a clear-cut picture of policies during more of the review session? Or can you provide some interpretive thoughts as to any policy adjustments that you may expect or not expect?

Well, David, it's Lawrence again. I think in terms of the government, as you know, the Chief Executive started his second term in December, but all of the key secretaries and ministers were changed in response to, I think, public demand. And so I think a lot of these policies, we are -- I think, we are hearing it for the first time. But I think the positive thing for casino operators and concessionaires is that the government have engaged us. They have opened a dialogue for us. They understand that the gaming companies are some of the key stakeholders in terms of contributing to government tax and the fact that we do employ a big portion of the local workforce. So we have had dialogue with the government. I don't think the government has shut the door on any particular issue. I would -- I'm look -- I think, like everybody else, we are looking forward to hearing how some of these policies are going to be implemented, whether [ph] the smoking ban or the cap on total tourists.

Your next question comes from the line of Aaron Fischer from CLSA.

I think a couple of quick questions. First of all, your Macau results seem to have come ahead of my expectations, which I guess was due to the strict focus on cost control. But Manila was a little bit lighter than what I'd expected. I know you talked about still ramping up the junket business. Is there anything else in the initial performance on the mass side or the non-gaming side that was a little bit weaker than you would have thought?

Aaron, maybe I'll take a stab at that, and I'll pass it over to Geoff. But I think on Manila, we're quite pleased with how it's tracking. Because after all, we grand-opened on February 2. So we really had half the quarter. And at the same time, I think given the product that we're introducing into that new jurisdiction, we felt that we wanted to go in from a more conservative basis in terms of sign-ups and at the same time, in terms of reinvestment. I think, Manila is a market that our competitors are much more aggressive in terms of the reinvestment, I think, especially since we were opening up. I think over the last couple of months, we have seen the giveaways and the promotions really taper down quite a bit. And so I think like all new properties and, especially the fact that City of Dreams Manila is really not the first one to open in that market, we are ramping up. I think the junket VIP business is going to be a big component of it, and that's really just beginning to ramp up. We have a big junket operator, fixed-room junket operator, opening in Manila this weekend. So I think really, I think you should look at the VIP contribution to start this month. And at the same time, when we first opened, like all property openings, we were -- we probably have more band strings than we need, so we're looking at the cost structure as well. But I think so far, we're pleased with the trajectory of where Manila is going.

Okay, excellent. One other question is on the dividends. I guess most of the other operators have maintained a decent dividend. But then Wynn talked about cutting the dividend at the parent-company level. What's your latest view on dividends?

I'll let Geoff talk [indiscernible]. But I think from -- between the 2 founding shareholders and also the Melco Crown board and -- we continue to want to return capital to shareholders, and so we haven't -- I think that was part of the reason why last year, when we reintroduced our regular dividend policy, we wanted to do it at a level where we can withhold potential pipeline development and also be able to weather a downturn in the gaming market. So I think that decision was wise and...

And I guess just to add, we were prudent in setting the initial dividend policy. And despite the pressure in the market, we're still comfortable maintaining that dividend.

Your next question comes from the line of Cameron McKnight from Wells Fargo.

Just a question for Lawrence on the non-gaming side. I mean, you guys are one of the few that have made a show financially viable with The House of Dancing Water. Is your aim at Studio City to make the non-gaming independently financially viable? Or are you looking at it all as one blended entity? And then I have a few follow-ups.

No, I think, Cameron, on Studio City, I think the attractions are very different from City of Dreams. So I think we're even more confident that the non-gaming attractions in Studio City will have a positive standalone P&L. So as you know, we have rides and family entertainment centers and magic show. I think we are -- and the Ferris wheel. So we're projecting all of those to be in the black.

Got it, sure. And then just moving on, on the question of tables, can you talk to table utilization across the week across your properties? I mean on the -- when we speak to investors, I mean investors are almost in a lather over table allocations and who's getting 150 tables or who's getting 100 tables. I mean, when revenues are down 35% year-on-year, labor policy remains tight, and the government is encouraging a diversification away from tables, should investors be so focused on the question of tables?

Let me hand the question over to Ted to address what our kind of EBITDA generation per table and utilization per table is.

So in general, I think, we're one of the very first properties -- I mean, companies to focus much on the optimization of EBITDA rather than the top line. So we, over the last 2 years, we've focused a lot in both VIP, mass, property-wise, Altira and COD. So you look at the current EBITDA per table as overall compared to the next 5 concessionaires, I think, we're still ranked in the first or second rank in terms of the EBITDA per table performance, which is the [indiscernible]. And also, you look at the utilization perspective in-- I'm sure we should look at VIP in terms of the rolling volume per month and also the EU [ph] on that VIP segments. I think for COD, we're at par with the market and probably, Altira is getting a little bit more than COD at this stage, i.e., I think we are doing a little bit better than the Macau average in the VIP segments. In the mass segment, we look at COD, either look at the top 75 percentile or the lower 25 percentile, I think we -- in terms of that EBITDA contribution, we are ranging quite high, a range in terms of all the properties in Macau -- I mean, major properties in Macau, even if you look at the 25 percentile of our performance in COD. So I think that's a general overview as a summary.

Okay, great. And then just 1 final follow-up. I mean, occupancy was pretty strong at 99% in the quarter, certainly better than some of your peers. Can you talk to what drove that and whether there were any changes in mix during the quarter, such as cash versus comped rooms?

So -- this is Ted again. So if you compare the first quarter to Q4 last year, we do see some increase in the midyear premium mass segment. So we -- in terms of database management, we have very high-end premium mass and also mid-tier. In the middle of this first quarter, we started a strategy in focus more on the mid-tier premium mass segment, so you'll see some improvement during the course of the quarter. And in general, I think, in the later part of the first quarter, we comped in average 100 more hotel rooms to the mid-tier premium mass customers to make it a very strong occupancy. And with that, the EBITDA equilibrium point, I think, in the current gaming to non-gaming, we're over close to 90% gaming in average. Of course, during the weekend, most of the rooms are occupied by the gamers.

Your next question comes from the line of Billy Ng from Bank of America Merrill Lynch.

I have 2 questions. First one, actually, is regarding your long-term strategic option. One of the thinking is like you guys can buy back the 40% minority stake in Macau Studio City. So given the macro environment change and given all the table allocations issues, have you changed your thought process for this option? Will we see you expedite or may be slow down or whatever options available regarding this opportunity?

Billy, it's Lawrence here. I think, as we have said on previous calls, it's always a conversation that we could have with our minority shareholders, being New Cotai. And we have always been open to a discussion, and I think, on and off, we've had some discussions. I think our commitment and our view about Macau hasn't changed. I think long term, Macau will get through the current downturn, and it's still one of the best -- it is the best market in the whole world, given how close it is to the Chinese population base and the biggest middle class in the whole world. I think, at this point in time, I think the main focus is really on just opening Studio City and opening it as perfectly and as well as we can. So I think we'll take a look at it, I think, in terms of what happens in the next few months or next year or so.

Second question is regarding Philippines. And which quarter do you think is the fair quarter to judge the full potential of this property? I know like this quarter is still ramping up. And then this weekend, you mentioned there will be a bigger junket starting serving. But are we talking about Q3 or Q4 or maybe even next year, 1Q, is we will start to see the full potential?

Well, I think -- Billy, it's Lawrence again. I think, all I can say is, I think in looking at our competitors in the Philippines, as you know, every jurisdiction is different in terms of how quickly you can ramp up the property. And -- but in terms of Philippines, our most successful competitor and the one that's across the street from us, I think took 8 quarters to ramp up. So given our expertise, we certainly hope that we can ramp up much quicker than that. So if you look at it that way, I can't give you an exact answer. We have very specific targets over the next 2 or 3 quarters. But we're exactly in the -- really the first full quarter that we've been open. So the goal is to significantly shorten that amount of time to ramp up. And given where we're tracking in terms of the non-gaming and also the mass gaming spend, I think we'll get there much sooner than some of our competitors.

Your next question comes from the line of Karen Tang from Deutsche Bank.

It's Karen here. And clearly, this focus is on the very good stable margin quarter-on-quarter. My question is, how do you manage to do that on -- particularly, like which part do you manage to contain your cost? And being analyst, we're kind of greedy. So we want to see if there are more of these cost savings we can expect in the next 1 or 2 quarters. The second question is also probably for Ted, which is that I've noticed the mass whole rate has, again, kind of slightly edged down this quarter. So should we be expecting this trend to come down? And then my final question is probably on the financial side, which is there's a well-broadcast document talking about your Studio City loan covenant, expecting a 400-table minimum by, I think, 2016. So how do you plan to resolve this potential covenant difficulty?

Karen, maybe I'll address your first question regarding how we do it and the sequential basis from Q4 last year to Q1 in terms of margin. First of all, I think we identified issue of the VIP decline during the course of Q4 and Q1, spreading to the very high-end premium mass segments. So we further look at the -- our database management, and we further look at the next level in terms of segmentation, which is the mid-tier of premium mass customers. So we focus a lot on that. Although we are losing some of the shares during the course of the first quarter, but I'm very happy to say that in April, we just finished the month, that we are back on the one of the highest market share that we have in mass over the last, let's say, 2-year time. So I think that strategy paid off, and that was the reason that we are doing a little better than the others. In terms of the whole percentage, I think we're quite happy with the current premium segment. We do look at not only on the table whole percentage but also on patron approach, which means no matter where we are, we track the performance of customers. So we're quite happy with the premium mass whole percentage. In terms of the declining from the third quarter to fourth quarter, I think it could be addressed by the fact that we have booking issues -- [indiscernible] issues since October last year. So it impacts pretty much on the mass gaming floor. And sequentially in Q1, I'm sure you know that the whole percentage will be averaged down if you have a higher number of the lower average bet mix of your customer. So with the strategy of shifting to a little bit more on the mid-tier premium mass customer, then you have a little bit lower average bets, which contribute to whole percentage. But having said that, if we are able to increase the drop which is the volumes, which is customer-based, then we could be able to sustain the GGR, which is what we want. So I guess that is the basic of what's happening. In my view, I think we should be able to sustain the whole percentage, and I see some improvement already in the April number. So maybe...

Yes, on the loan covenant tables, Karen, it's Geoff. We don't know the number, and we don't want to speculate on that at this point. We're really not in a position to comment on this until we get the final decision from the government on the number of tables. And of course, our actions and how we move forward will depend on that number and prevailing conditions at that time. But it's probably worth just mentioning and reminding people that Studio City and the City of Dreams have their own non-recourse financing arrangements. There are distinct covenants, separate creditors, different equity ownership structures and no cross-guarantees. These factors may make it potentially difficult to move gaming tables between the 2 groups, and investors should not rely on that being done.

Your next question comes from the line of Anil Daswani from Citigroup.

My first question is with regards to the Philippines. You clearly talked about 1 major junket that's opening this weekend. Have you got any major junkets from Macau that are lined up for that property or is it just really the first one?

Anil, it's Lawrence here. Maybe I'll let Ted talk -- sorry, let me let Ted go into the details. But the major junket opening this weekend is obviously a big one. But we've had one major junket open and slowly ramping up since early April. I think similar to our experience in Macau in the VIP junket space, it's definitely quality over quantity. And I think we've gone through the tough days whether it was Altira or City of Dreams where we had way too many junkets. So to be honest, we have never -- in the last few years, now that we've become older and wiser, we don't pride ourselves on having a lot of junkets. So it's really quality over quantity. I don't know if, Ted, you want to address...

Yes. If you look at our junket portfolio planning for the Philippines market, we probably, after the weekend's opening, with this largest junket operator in Macau, we have 2 largest junket operator out of the 5 big top -- top 5 in Macau. We are hoping that we'll be able to add one more, which means the one that is also top 5. In that perspective then, we will be eventually, perhaps, with 3 of the top 5 junket operator operating in the Philippines in our property eventually. And of course, we have quite a lot of casual junket operator overseas in Macau in our properties, and we're able to introduce it to the Philippines as well in the next few months.

I think, Anil, as well, knowing that in order to attract customers to the Philippines, we really have to deliver a better experience in many ways than even Macau, because in order for them to make the trip over there, it needs to be worthwhile. So I think, for instance, DreamPlay, which is the DreamWorks' family entertainment center, and a lot of the beach villas, the [indiscernible] pool [ph] villas and the big gigantic villas have only recently been completed. I think we completed most of the suites. But now that we really have a full selection of amenities to offer, we're much more confident of attracting the international VIPs. So far, even our premium direct VIPs, the in-house VIPs, we have had very, very favorable comments, and people are visiting Manila for the first time. So I think while we're working out -- and at the same time, when we first opened, we had to work out some issues with the gaming regulators in terms of what is really in the best interest of the market and the city. So I think we've got a lot of those issues ironed out, and we look forward to contribution from VIP much more significantly in the quarters to come.

And my second question is, obviously, Galaxy is supposed to open in a few weeks' time. They still don't know how many tables they're going to get, I'm guessing. But with that type of planning, when you get to Studio City, do you have to make a decision on what you're doing to your table allocation pretty much at the time of opening? Or when can this thing get resolved before the table issue is resolved?

Well, I think, even with -- if you look back at 2009 when we opened City of Dreams, we actually got the table allocation, I think, even back then, 4 to 6 weeks before opening. And I know it's 3 weeks until Galaxy opens. But I think at the same time, we just need to -- I think the good thing right now is we have a very large labor force, and we can kind of shift people very easily between properties. And so I think from a physical table standpoint, regardless of how many tables that we get from an ease of operation and efficiency standpoint, we're going to have at least a minimum amount of tables on the table -- I mean on the floor. So in terms of table positioning or the cabling and surveillance, that's not so much an issue. So I think, we're well equipped over the years and with our shared services and centralized services to be -- we'll be able to navigate through that and be nimble throughout the whole process.

And Lawrence, finally for me, any guidance on timing for the opening? I know you said third quarter in the past, but can you give us any more specific guidance?

Well, Anil, it's still -- we're targeting the third quarter. But I think to be honest with the way that the Macau market is trending, I think, like Geoff said earlier on, we've got saw the best value for money, prices in terms of per square foot construction cost, because we started earlier than a lot of our competitors. But at the same time, we've done this song and dance quite a few times, whether it's City of Dreams or Altira or City of Dreams Manila, that we know contractors near the last mile is going to try to extort money from us. So given our very cost focus -- our cost focus, I think we're going to hold very firm and say, "Look, if it's going to take a little bit longer, it's going to take a little bit longer." I think from a -- we would much rather open this property in an improved market and also open it with as big of a wow as possible. So we are still targeting Q3, but I think given the scale of these projects, we'll -- we're not going to put a gun to our own heads.

Your next question comes from the line of Brian Maher from Brean Capital.

Can we draw just a little bit more kind of top line on the Philippines? When I was over there in February and you guys built quite a impressive property, and particularly when it comes to the VIP rooms, I think yours and Solaire's and the new sky Tower are equally impressive than anything that's in Macau. But can you talk about how big that market can grow? I think consensus is we're, about a $3 billion market, may be headed to $5 billion when the other properties open. Can, Lawrence, you give me your view on how big you think that market can grow and what your opportunities are to expand your property over time?

Well, we are -- I think we're very happy and grateful to be in the Philippines market. I think, if you look at the Asian gaming environment, Philippines is, in my opinion, going to be one of the fastest-growing for the next -- for years to come. And I think that's underpinned by the growth in its local economy and the rise of its middle class -- upcoming rise of its middle class. From a international VIP visitation standpoint, it can only get better, because infrastructure is improving. Philippines is -- I think people's perception of the Philippines, it's going to be hard to get them to go the first time, that's what we're experiencing. But at the same time, after they have visited, the feedback has been very positive in terms of the service culture, in terms of the terms of the level of amenities that we're providing. So I do think that Philippines, in the next 5 years or so, when it gets built out with more critical mass, with the coming online of the other integrated resorts, it could rival the size of like a Singapore or Las Vegas. And so I think geographic location is very important in our business. And I think the reason that Singapore was successful for ASEAN was because Singapore was kind of halfway between Australia and, say, Southeast Asia. And -- but if you look at it, Philippines is halfway between Singapore and the rest of kind of Southeast Asia. So I think geographically and with infrastructure support coming online very soon, I am very optimistic about that market.

And we know -- I think we all know the advantages that the Philippines have with lower cost structure, no smoking-related issues and a much lower tax rate. But can you tell us if there is any kind of pushback you're getting or hearing from the junket operators to get more mainland traffic over to the Philippines?

I think for that, let me hand it over to Ted.

Yes, this is Ted. We've kicked off our in-house [indiscernible] first, and then we also started our junket operation very softly last month. And then we have opening -- a big opening in the biggest junket operator in the weekend. Over conversation with our junket operator, our players, I think, the issue is more about, do they know the Philippines? Do they know Manila? And once they come and experience the same level of service and quality of property as we -- as they experience in Macau, then they are happy about that, going there. But as Lawrence mentioned here earlier, the biggest obstacle is actually convincing the customer to have a look. And due to, perhaps, a historical reason and with our property opening to the Entertainment City being 2 properties in the regions, we've got a higher chance that customer will be coming and that will have a better experience with us. I think that's -- in our limited kind of experience in the last 2 to 3 months, I think that's the only reason.

As there are no further questions, I would now like to hand the call back to Geoffrey Davis for closing remarks. Please go ahead, sir.

Great. Well, thanks everyone for your time. Appreciate it. Bye.

Thank you for joining today's conference. You may all disconnect. Thank you.