Melco Crown shares slip after prior day's surge

The company's shares surged 16 percent on Thursday. On Friday afternoon, the shares dropped 37 cents, or 4.8 percent, to $7.36. The stock has traded between $5.70 and $19.09 during the past 52 weeks.

Early Thursday, Melco reported that its second-quarter losses totaled $5.7 million, or 1 cent per American Depositary Share, compared with a loss of $69.2 million, or 17 cents per ADS, in the second quarter of 2007.

Meanwhile, revenue spiked to $384.6 million from $45.1 million in the year-ago period, driven by improved operating performance at Crown Macau, which opened during the second quarter 2007.

Melco's management attributed a sequential decline in Crown Macau's financial performance to a hold rate of 2.7 percent, which was much lower than the 3.1 percent first-quarter rate. A casino's "hold rate" is the percentage of wagers that it keeps.

The company also booked $4 million in one-time costs, including a $1 million charitable donation to earthquake victims.

Melco also said that the first phase of its City of Dreams development remains on schedule to open during the first half of 2009. The development includes a 420,000 square foot casino, as well as Crown Towers, Hard Rock and twin-towered Grand Hyatt hotels.

In a note to investors, Jefferies & Company analyst Lawrence Klatzkin noted that the company is the only U.S.-traded gambling company "that has no exposure to the U.S. market and its current economy. It operates in a market in which gaming revenues exceeded growth of 45 percent in 2007 and is on pace to come close to that in 2008."

Citi Investment Research analyst Anil Daswani said that the second-quarter results were weaker than expected, but come "with a silver lining."

"We maintain (Melco) is one of the best positioned Macau casino operators over the long term given its complete slate of gaming products." Daswani said. "It still has City of Dreams and Macau Peninsula casinos coming on stream over the next few years, catering to the mass-market and day trippers."