Melco International Development Ltd, Hong Kong-listed parent of casino operator Melco Resorts & Entertainment Ltd, says it expects to have a non-cash impairment of at least HKD838 million (US$107.8 million ) on “certain assets” from the overall group’s majority interest in the Studio City casino resort (pictured) in Macau’s Cotai district.
“The estimated impairment results primarily from the long-term discounted cash flow valuation method required under Hong Kong Financial Reporting Standards (HKFRS) given the longer than expected ramp up of operations following the opening of Studio City Phase 2.”
The latter has been in phases, with an indoor water park and the Epic Tower hotel accommodation at Studio City having opened in the spring of 2023. The W Macau hotel at Studio City started to take bookings from the public in August 2023.
Melco International said the impairment report applied under HKFRS, though not under the United States Generally Accepted Accounting Principles (U.S. GAAP) used for the accounts of U.S.-listed Melco Resorts.
In a Friday filing after market hours, the Hong Kong parent Melco International said the non-cash impairment loss on the Studio City assets could be as much as just over HKD1.02 billon.
The impairment would increase Melco International’s net loss for the year ended December 31,2024 “by approximately HKD774 million to HKD956 million”.
The parent added: “The group expects to record net loss between approximately HKD1.592 billion and HK$1.775 billion for the year ended December 31, 2024, as compared to the net loss of HKD3.494 billion for 2023.”
It added: “The aforementioned expected impairment is a non-cash item and will not impact the group’s cash flow, operations, or liquidity.”
Melco International further noted: “No such impairment is required under U.S GAAP as impairment testing is conducted based on long-term undiscounted cash flows and therefore, no impairment was recorded” in the fourth-quarter and full-year financial statements of Melco Resorts, as disclosed on February 27.
