Casino developer and operator Melco Resorts and Entertainment Ltd is “well positioned to outperform” rivals in terms of Macau’s anticipated gaming market recovery during 2020 and into 2021, suggested a note from brokerage Sanford C. Bernstein Ltd. The institution said it expected a Macau recovery to “begin in June” as travel restrictions between Macau, Hong Kong and the mainland “are removed and China begins the issuance” of visas under the Individual Visit Scheme (IVS) for better-off travellers.
“In the early phase of the recovery, operators that have higher exposure to higher-end play are likely to outperform others,” wrote analysts Vitaly Umansky, Eunice Lee and Kelsey Zhu. “Melco (and Wynn [Macau Ltd]) should show outperformance in the early stages of the Macau recovery.”
The brokerage said also that Melco Resorts had “enhanced” the group’s liquidity with a new credit facility, and the recent divestment of its stake in Australian casino operator Crown Resorts Ltd.
Melco Resorts, the operator of City of Dreams Macau (pictured) – among other properties – announced on April 29 that its unit MCO Nominee One Ltd had secured from a syndicate of banks HKD14.85 billion (about US$1.92 billion) in revolving credit facilities for a five-year term. The new facility also provides an option for Melco Resorts’ subsidiary to increase the amount to a sum not exceeding HKD7.75 billion, “subject to the satisfaction of certain conditions”.
Melco Resorts said it intended to draw the first loan under the new credit facility around May 6, with the proceeds being used to refinance the HKD13.65 billion credit facilities agreed in June 2015, with a portion maturing this year; and for general corporate and working capital purposes.
Melco Resorts confirmed in a Wednesday filing that it had sold its entire 9.99-percent stake in Crown Resorts to an entity linked to U.S.-based asset management firm The Blackstone Group Inc. The sale was at a 37.3-percent discount compared to the price Melco Resorts paid in May last year.
Sanford Bernstein said the divestment from Crown Resorts did not come “at an opportune time”, as it represented an investment loss of circa US$250 million. “While there is a loss on the Crown Resorts investment, looking forward, Melco Resorts augments its liquidity position by adding the cash proceeds and putting the Crown Resorts deal in the rear-view mirror,” added the brokerage.
Melco Resorts confirmed recently that the firm’s chairman and chief executive, Lawrence Ho Yau Lung, was forgoing his salary for the remainder of 2020, and that the rest of the executive team was reducing salaries by 33 percent. The company also saw the departure of a number of senior executives, amid the negative impact of the Covid-19 pandemic on the group’s business.
