Melco China Resorts
TSX VENTURE : MCG
TSX VENTURE : MCG.WT

Melco China Resorts

August 18, 2008 07:00 ET

Melco China Resorts Reports Second Quarter Results; Enters Into Advisory Services Agreement With Melco Services Limited

--Development plans on schedule--

BEIJING, CHINA--(Marketwire - Aug. 18, 2008) -

NOT FOR RELEASE OR DISSEMINATION INTO THE UNITED STATES

Melco China Resorts (Holding) Limited (TSX VENTURE:MCG)(TSX VENTURE:MCG.WT) ("Melco China Resorts" or the "Company"), today reported its operating and financial results for the second quarter of 2008. The Company also announced today that it has entered into an advisory services agreement with Melco Services Limited, a wholly-owned subsidiary of Melco International Development Limited ("Melco International"), pursuant to which Melco Services Limited has agreed to provide advisory services to the Company relating to internal audit and control, finance and capital markets, property development, legal and Company secretarial functions, human resources, business development and information technology.

Second Quarter Results

Melco China Resorts was incorporated on February 6, 2008 (the "date of incorporation"). In March 2008, the Company undertook a private placement raising $72 million. On May 27, 2008 (the "transaction date") the Company acquired five operating ski resorts (Yabuli, Beijing, Lotus, Changchun, and Beidahu, collectively the "Resorts") in China from Melco China Resort Investment Ltd. ("Melco Cayman") for redevelopment into "four season" mountain resort destinations. Melco Cayman had been operating the Resorts and undertaking significant operational improvements since 2007. Melco China Resorts became a publicly traded company on May 28, 2008. The Company's year-to-date results are the same as the quarterly financial results for the three months ended June 30, 2008 and reflect operations during the period from the transaction date of May 27, 2008 to June 30, 2008. Melco China Resorts reports in Canadian Dollars.

Total revenue and the net results were from resort operations with no real estate sales activities being undertaken during the reporting period. For the second quarter of fiscal 2008, the Company reported a net loss of $4.5 million as the resorts were acquired by Melco China Resorts post ski season as noted above, and are currently undergoing renovation and redevelopment, and therefore generating minimal revenue. Loss per share for the second quarter was $0.14. Year to date, loss per share was $0.22. The decrease in loss in the second quarter relates to an increase in the weighted average number of shares outstanding.

Capital expenditures totaled $29.9 million in the second quarter of 2008, which was within the Company's budget for the period and included minor improvements to plant and equipment at Changchun and Beijing together with major improvements at the Yabuli Resort. Capital expenditures at the Lotus Resort were limited as the Company elected to close this resort as a public ski area as it will be redeveloped as a private and exclusive members only Mountain Club.

Cash and cash equivalents totaled $37.9 million and working capital was negative $0.18 million as of June 30, 2008. The Company believes that its current cash position is sufficient to meet the immediate needs of the business. However, the Company may choose to access capital markets and/or bank financing for funding of its continued developments.

Operational update

Yabuli

The Sun Mountain Yabuli resort is the core focus of Melco China Resorts immediate development plan. Located approximately two and a half hours south east of the city of Harbin, Yabuli is China's most recognized destination ski resort and will host the World Winter University Games in early 2009. As part of the resort's capital works program expected to be completed in late 2008, capital improvements for the second quarter of 2008 totaled approximately $25.3 million. On mountain improvements currently under construction include new ski trails, snowmaking system, eight person heated gondola, and six person heated high-speed chairlift. The Company is constructing a mountain top hotel that includes 20 luxury hotel suites above a ground floor dining area that will be a unique feature of the resort. The base area and village improvements currently under construction include two 5 star hotels (133 and 155 rooms respectively) featuring new skier services facilities (tickets, equipment rental, guest service, ski school); five new food and beverage outlets (casual dining, fine dining, family dining and bar / lounges, specialty retail (operated by Melco China Resorts); new underground parking and surface parking, and new skier plaza and landscaping.

The Company broke ground on its first resort vacation homes on April 30, 2008. Marketing programs have recently begun to support the sales of these homes. In addition, Melco China Resorts is under full design for its first condo hotel project at this resort.

Beijing

Star Mountain Beijing is situated near the region's wealthiest suburbs and is targeted as a feeder resort that will showcase Melco China Resorts brand in a significant market. Capital improvements for the second quarter of 2008 totaled $0.24 million, and included the completion of improvements to ski trails and snow making and renovations to the existing base area buildings including general improvements to the ticketing and rental areas and food and beverage outlets (new dining concepts, new fast food outlets, new kitchen equipment) initiated in 2007 by Melco Cayman. The goal of these operating capital improvements is to position this resort with initial guest enhancements in service, equipment and atmosphere. In addition, a new parking lot was constructed directly adjacent the resort's base area to enhance customer access and convenience for the 2007/08 winter season. With the inclusion of the existing parking lot, the total parking available at this resort allows for 1,600 cars and coaches.

Lotus

The Lotus Mountain Club was closed in order to undergo redevelopment into an exclusive mountain club and marquee resort facility. Capital expenditures for the second quarter of 2008 totalled $0.24 million, and included works associated with the temporary closure of the resort, surveying and planning.

Changchun

Adventure Mountain Changchun successfully hosted a World Cup Freestyle Aerial event in December 2007 sanctioned by the Federation International de Ski ("FIS") and will continue to host this event in 2008. This is the only World Cup event in China at the present time. Capital expenditures in the second quarter of 2008 totaled $1.2 million and included minor improvements to on-mountain winter facilities and base area improvements for summer activities.

Beidahu

Sky Mountain Beidahu hosted the 2007 Asian Winter Games and is the second most popular ski destination in China (Yabuli is number one). Capital expenditures in the second quarter of 2008 totalled $0.05 million, and included minor changes within the existing hotel. The Company is in full design for its first condo hotel project at this resort.

"We continue to make excellent progress at all the resorts and are on schedule to accomplish our 2008 milestones," commented Graham Kwan, CEO of Melco China Resorts. "In addition to the major resort redevelopment and capital works activities, Melco China Resorts has worked very hard to instill our brand and quality approach at each resort. Discerning customers recognize that our resorts are unique in China with MCR committed to offering a world-class, year round resort experience. Our focus remains on the re-launch of the Yabuli resort at this new standard for this coming winter and initial resort homes sales to select buyers."

Business Highlights

Year to date, Melco China Resorts achieved the following milestones:

- Raised $72 million through an equity financing to support its growth initiatives in China

- On April 30, 2008, Melco China Resorts announced it had topped out two hotels at the Yabuli Sun Mountain resort and broke ground for its first luxurious mountain home project that will be available for sale later this year in Heilongjiang Province. The luxurious mountain homes are designed by internationally acclaimed architects and will be introduced to a limited number of potential buyers.

- On May 28, 2008 the Company completed the reverse take-over of Virtual China Travel Services Co. Ltd. and began trading on the TSX Venture Exchange.

- On June 25, 2008 the Company announced it had acquired in aggregate an additional 144.6 hectares of land at its flagship Sun Mountain Yabuli Ski Resort project in Heilongjiang Province, China. The significant addition to the Company's land bank that now totals 220.3 hectares enabled Melco China Resorts to obtain a RMB 120 million ($18 million) loan from the Harbin Bank, allowing the Company to expand its development plans at Yabuli.

- On July 30, 2008 the Sun Mountain Lodge, currently being constructed at the Company's Sun Mountain Yabuli Resort was accepted as part of the Small Luxury Hotels of the World (SLH) brand. Recently ranked the top overall luxury hotel brand and the brand that offers the "Best Customer Experience", by the New York-based Luxury Institute, the SLH portfolio comprises more than 450 luxury hotels in more than 70 countries.



Summary Financial Results
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(in thousands of Canadian Period from
dollars except for per Three months ended February 6, 2008
share data) June 30, 2008 to June 30, 2008
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Revenue $ 56 $ 56
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Operating Expenses (153) (153)
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----------------------------------------------------------------------------
Other Income 971 971
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Interest Expense (184) (184)
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General and Administrative
Expenses (4,907) (4,907)
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Depreciation and Amortization (353) (353)
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Provision for Future Income
Taxes (4) (4)
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Net Loss $ (4,574) $ (4,574)
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Net Loss per share $ (0.14) $ (0.22)
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Weighted average number of
shares outstanding (basic
and fully diluted) 33,617,478 20,953,359
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Note: The average exchange rate for the second quarter ended June 30, 2008
was $0.1395 to RMB 1.



Balance Sheet Highlights

(in thousands of Canadian dollars except for ratios) June 30, 2008

Current Ratio 1:1
Cash 37,851
Working Capital (177)
Total Assets 346,443
Total Debt 70,628
Total Equity 275,815
Debt to Equity Ratio 0.26:1

Current ratio equals Current Assets / Current Liabilities
Debt to Equity equals Total Debt / Total Equity


Advisory Services Agreement

The Company also announced today that it has entered into an advisory services agreement (the "Agreement") with Melco Services Limited ("Melco Services"), a wholly-owned subsidiary of Melco International, pursuant to which Melco Services has agreed to provide advisory services to the Company relating to internal audit and control, finance and capital markets, property development, legal and Company secretarial functions, human resources, business development and information technology.

The Agreement will be in effect from July 1, 2008 to June 30, 2009 and will automatically renew for successive one-year terms unless terminated by either party before the expiry of each term. The Company has agreed to pay Melco Services an aggregate monthly services fee of HK$500,000 (being approximately CDN$67,868 based on current exchange rates) for the provision of the advisory services and an extra one-off service fee of HK$120,000 (being approximately CDN$16,289 based on current exchange rates) in the 2008 year for certain internal audit and control advisory services (which is inclusive of the monthly service fee for the provision of internal audit and control advisory services).

Graham Kwan, the Company's Chief Executive Officer said: "Melco International is a leader in the leisure and entertainment industry in Asia and has considerable experience in acquiring, developing and operating Asian-based leisure and entertainment businesses. We do not currently have these resources in-house and the Agreement fees are more favorable to Melco China Resorts than external professional service firms, as confirmed by a report from independent counsel. We look forward to leveraging the expertise, experience and personnel that Melco Services will contribute to the development of the Company's five ski resorts."

Melco International indirectly holds approximately 43,109,134 common shares, 8,437,565 non-voting class B shares and 1,000,000 common share purchase warrants of the Company through its wholly-owned subsidiary, Melco Luxembourg S.a.r.l. Melco China Resorts Governance and Nominating Committee and Audit Committee, consisting of the independent directors of the Company have unanimously approved the Agreement and the transactions contemplated therein.

Melco China Resorts will host a conference call to discuss its second quarter 2008 operational and financial results. Graham Kwan, CEO and Paul Zhang, CFO of Melco China Resorts will host the call.

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



Date: Monday, August 18, 2008
Time: 10:00 am Eastern Standard Time
Dial In Number: 416-641-6141 or 1-866-300-7687
Taped Replay: 416-695-5800 or 1-800-408-3053 (available for 7 days)
Taped Replay
Pass code: 3268699


Live webcast link: http://events.onlinebroadcasting.com/melcochina/081808/index.php

About Melco China Resorts

Melco China Resorts is China's single largest ski resort developer and operator with five premier destination resort properties. The portfolio includes Sun Mountain Yabuli, host for the 2009 World University Games; Sky Mountain Beidahu, host of the 2007 Asian Winter Games; The Lotus Mountain Club, to be developed as an ultra-exclusive and private mountain resort club; Adventure Mountain Changchun, an experiential mountain adventure centre retreat; and Star Mountain Beijing, the Company's' first ski area in the major Beijing market and home to Melco China Resorts ski school headquarters, The Perfect Turn. Melco China Resorts is committed to developing the five properties and transforming them into world-class, four seasons luxury mountain resorts with excellent real estate investment opportunities for discerning buyers. Melco China Resorts' leadership team boasts a proven record of resort development success both internationally and in China.

FORWARD LOOKING INFORMATION

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.

The TSX Venture Exchange has neither approved nor disapproved the contents of this press release. The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.

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