Melco Resorts & Entertainment Ltd’s Macau property earnings before interest, taxation, depreciation and amortisation (EBITDA) could rise 6.6 percent sequentially in the fourth quarter, on a hold-adjusted basis, to US$251 million, says JP Morgan Securities LLC.
That would be helped by the institution’s forecast that Melco Resorts’ Macau property-level net revenues will grow 1.2 percent quarter-on-quarter, to reach just over US$1.00 billion in the three months to December 31.
CBRE Capital Advisors Inc thinks Macau fourth-quarter property net revenues for the group will be almost flat sequentially, at US$997.3 million, as per a Tuesday memo from analysts John DeCree and Max Marsh.
JP Morgan analysts Joe Greff and Samuel Nielsen said in a Tuesday note following the casino group’s third-quarter results: “We struggle to find a reason for Melco [Resorts] to experience near-term multiple expansion from here, given recent market share losses and above peer quarterly earnings volatility, though we acknowledge the stock’s undemanding levels.”
Vitaly Umansky of Seaport Research Partners stated in a Tuesday memo after the quarterly figures: “Melco lost share quarter-on-quarter – as expected – in the third quarter, falling to 14.6 percent” compared to 14.9 percent in the second quarter.
That was already “well below” a 16.4 percent share it achieved in 2019, said the brokerage.
Mr Umansky added: “While management hopes to get share back to 2019 levels – in several years – we do not expect this to happen.
“We estimate share will remain as is or slightly down over the next few quarters as other [Macau] operators ramp their properties further.”
The analyst mentioned in that context Sands China Ltd’s Londoner Macao and Venetian Macao; Galaxy Entertainment Group Ltd’s Galaxy Macau; and SJM Holdings Ltd’s Grand Lisboa Palace.
Melco Resorts’ American depositary shares were trading at US$6.74 apiece, up 2.59 percent at the close of Tuesday trading in New York, in the United States, coinciding with the group reporting a third-quarter profit attributable to the majority owners amounting to circa US$27.3 million.
As well as its Macau properties City of Dreams (pictured) and Altira Macau, and the group’s majority-owned Studio City, the casino firm also operates City of Dreams Manila in the Philippines, and developed and runs City of Dreams Mediterranean in the Republic of Cyprus.
JP Morgan anticipates City of Dreams Macau’s EBITDA margin will decline sequentially by 2.1 percentage points, to 26.8 percent, on a year-on-year EBITDA decline of 6.1 percent.
CBRE forecasts City of Dreams’ fourth-quarter EBITDA margin will be flat quarter-on-quarter, at 28.9 percent.
Seaport’s Mr Umansky did identify the introduction of so-called ‘smart tables’ in Macau casino operations as a long-term positive for the overall industry and noted Melco Resorts was “making progress” with introducing them.
He stated, quoting company management: “Melco already has all of its baccarat tables at Studio City up and running with City of Dreams [Macau] likely fully up in the first quarter next year.”
