Global gaming operator Melco Resorts & Entertainment Ltd could “garner close to US$600 million” from any disposal of its interest in the City of Dreams Manila casino resort (pictured) in the Philippine capital.
That is according to a Thursday note from analyst David Bain at Texas Capital Securities, instituting coverage of Melco Resorts’ U.S.-listed stock.
“We believe Melco Resorts could garner close to US$600 million should it sell its Manila operations, which could reduce net leverage close to 3.5 times by the end of 2026,” stated Mr Bain.
He added: “While Manila has become more competitive, the market has stabilised, in our view.”
Mr Bain further noted: “Should Melco Resorts’ strategic review of its Manila integrated resort result in a sale, we believe it could reduce leverage by an approximate half a turn.”
Commenting on Melco Resorts’ diversified business elsewhere in Asia and in Europe, the analyst said, referring to City of Dreams Mediterranean and City of Dreams Sri Lanka, the latter having opened in August: “We believe Cyprus and Sri Lanka create asset light value, and Cyprus has EBITDA momentum,” i.e., for earnings before interest, taxation, depreciation and amortisation.
For Melco Resorts’ core market, Macau, Mr Bain observed that what he termed “heightened player reinvestment levels” in Macau gaming “are not permanent,” and should “give way to a longer-term trend of competition based on product and service”.
Such a trend should be “benefitting” Melco Resorts, said Mr Bain.
“Melco Resorts’ unique non-gaming offerings and premium mass focus aligns it with record Macau visitation and a K-shaped China economy, in our view,” wrote the analyst.
The latter reference was to diverging levels of economic recovery on the Chinese mainland, the main feeder market for Macau tourism.
The analyst added, referring to Macau’s own post-pandemic rebound: “Macau market gross gaming revenue (GGR) continues to close the gap with 2019 levels and growth should remain above 10 percent most of first-half 2026.”
The institution also described Macau as a “cleaner market” than hitherto, with “opportunities”.
Mr Bain stated: “We believe the near elimination of junkets reduces market volatility and other junket-related risks. It also offers uncaptured GGR margin opportunities.”
A number of investment analysts has recently commented on margin pressure not only from operating expenses, but also from some shift of play mix to lower-margin “premium and super premium” gambling.
Mr Bain acknowledged that while “premium mass player reinvestment is currently elevated,” nonetheless “heightened promotional periods in Macau historically revert to rational levels.”
He said newer operating expenses related to non-gaming and events “should continue to drive visitation, diversify and grow GGR, leading to absolute EBITDA gains”.
