Casino developer Melco Resorts & Entertainment Ltd “may have continued to gain share” in Macau mass-market gross gaming revenue (GGR) “in January and February,” following a 30 basis points improvement sequentially in the fourth quarter last year, says Morgan Stanley Asia Ltd.
“Melco mass GGR market share improved by 30 basis points quarter-on-quarter in fourth-quarter 2024 to 14.1 percent (2019 was 14.8 percent), and we think the company may have continued to gain share in January and February,” wrote analysts Praveen Choudhary and Gareth Leung in a Sunday note.
They added that the planned opening in May of the revival of ‘The House of Dancing Water’ – a resident show (pictured) at the casino group’s City of Dreams flagship resort on Cotai – “could help market share further”.
Morgan Stanley stated: “House of Dancing Water first opened in September 2010 and led to Melco gaining meaningful share in 2011 to 2012. We expect it to benefit from this unique show again.”
The institution said it forecast Melco Resorts’ 2025 mass GGR market share at 14.5 percent, which it said would be up 60 basis points year-on-year.
Melco Resorts also is majority owner of the Studio City gaming resort in Cotai – where it also offers non-gaming events including concerts – and runs Altira Macau, a casino-hotel in the city’s Taipa district.
Morgan Stanley also made reference to an “asset-light strategy” aim by Melco Resorts, mentioned by Lawrence Ho Yau Lung, the group’s chairman and chief executive, during last Thursday’s fourth-quarter earnings conference call.
Just before the results were issued, the casino group also said it was considering “strategic alternatives” in relation to its long-standing management deal at Philippine casino resort City of Dreams Manila.
Morgan Stanley observed: “Melco management is focused on deleveraging. With Studio City and Sri Lanka-related capex coming to an end, we expect net debt to come down even more.”
The latter was a reference to a deal with a Sri Lanka partner to run a casino in the Sri Lankan capital Colombo. The casino at City of Dreams Sri Lanka is due to launch in the third quarter this year, according to Melco Resorts’ local partner, John Keells Holdings Plc.
Morgan Stanley stated that Melco Resorts’ management had “talked about restructuring its Philippines business,” with the institution stating City of Dreams Manila had made US$180 million in earnings before interest, taxation, depreciation, and amortisation (EBITDA) in 2024, with Melco Resorts’ portion being US$110 million.
Morgan Stanley wrote: “We increase our 2025 and 2026 EBITDA estimates by 4 percent each to US$1.17 billion (+3 percent year-on-year) and US$1.27 billion (+9 percent year-on-year), respectively.
“Our 2025 net income forecast rises 19 percent due to operating leverage and a low base, while 2026 falls 3 percent due to higher interest expense.”
In terms of Melco Resorts’ recent indebtedness, Morgan Stanley indicating – citing Melco Resorts data and its own research – that at nearly US$4.82 billion as of the fourth quarter of 2024, the casino group’s attributable net debt was twice the US$2.41-billion figure recorded at the end of fourth-quarter 2019, prior to the Covid-19 pandemic.
