he stock declined 5.8 per cent to us$ 2.09 in Hong Kong, after falling as much as 7.3 per cent earlier. Deutsche Bank Hong Kong-based analyst Karen Tang cut her recommendation on Melco’s stock to "hold" from "buy" and her target price to us$ 1.91 from us$ 2.68 in a report published Tuesday, after the venture opened its first casino, the Crown Macau.
The resort’s share of the city’s VIP gaming market "could disappoint in May to June" because some VIP rooms were not open yet, Tang wrote in the report. "We are also concerned a new hike in junket commission would eat into margins."
Melco PBL Entertainment opened the us$ 500 million-Crown Macau on May 12. The hotel competes against billionaire Stanley Ho and US operators including Las Vegas Sands chairman Sheldon Adelson and Stephen Wynn.
Gaming operators are betting that the growing incomes of China’s 1.2 billion people will help fuel gaming revenue in the city, the only place in China where casinos are legal.
Melco is controlled by Lawrence Ho, Stanley Ho’s eldest son. PBL is controlled by Australia’s richest man, James Packer. Junket operators bring high rollers to casinos in return for a fixed percentage commission or a share of the casino’s winnings in the VIP rooms. Casino operators have started paying junket operators more as they seek to build market share.