GGRAsia – Melco Resorts 1Q loss narrows y-o-y, revenue down

Melco Resorts 1Q loss narrows y-o-y, revenue down

Apr 29, 2021 Newsdesk Latest News, Macau, Philippines, Top of the deck

Casino operator Melco Resorts and Entertainment Ltd posted a net loss of US$232.9 million for the three months to March 31, an improvement on the US$364.0-million loss recorded a year earlier. The result was however worse than the US$199.7-million loss reported in the fourth quarter of 2020, according to a Wednesday filing to Nasdaq.

Melco Resorts run gaming operations in Macau; in Manila, in the Philippines; and in the Republic of Cyprus.

The company’s total operating revenues for the period between January and March were US$518.9 million, down slightly from the US$528.0-million revenue achieved in the fourth quarter 2020. Such revenue was down 36.0 percent from US$811.2 million in the prior-year period.

Melco Resorts reported positive group-wide adjusted property earnings before interest, taxation, depreciation and amortisation (EBITDA) for a second consecutive quarter, following two quarters of negative results.

Nonetheless, the casino operator’s adjusted property EBITDA fell to US$30.1 million in the first quarter of 2021, 43.6 percent lower than in the final quarter of 2020 and down 60.0 percent year-on-year.

Melco Resorts said first-quarter 2021 EBITDA result was negatively impacted by a loss of US$28.8 million on bad debt, up from US$23 million in the previous quarter.

In commentary included in the first-quarter results announcement, Melco Resorts’ chairman and chief executive Lawrence Ho Yau Lung said the group’s properties “experienced a moderate recovery in business levels”.

The executive said however that “Covid-19 and the subsequent travel restrictions continue to have a significant negative impact” on the group’s operating and financial performance.

Brokerage Sanford C. Bernstein Ltd said in a Wednesday note that Melco Resorts’ recovery during first-quarter 2021 and into April was “being driven by premium mass and premium direct,” with the company’s management seeing “improving trends”.

“The quarter was clean, with no outsized bad debt provision (US$17 million versus US$23 million in fourth quarter) and normal bonus accruals,” wrote analysts Vitaly Umansky, Louis Li and Kelsey Zhu.

“Macau daily opex slightly increased to US$2.1 million in first-quarter 2021, compared to US$1.9 million in fourth-quarter 2020,” said the analysts, adding that as per Melco Resorts’ guidance, “variable costs increased with business activity recovery in the quarter.”

Property performance

Melco Resorts’ flagship property in Macau, City of Dreams, saw its operating revenues fall 5.8 percent sequentially to US$302.5 million. City of Dreams generated adjusted EBITDA of US$40 million in the first quarter of 2021, down 30.2 percent from the final quarter of 2020, and a decline of 34.4 percent from a year earlier.

The decline in adjusted EBITDA at City of Dreams “was primarily a result of softer performance in the rolling chip segment, partially offset by lower operating costs as a result of lower business volumes and our cost containment efforts.”

Meanwhile at its majority-owned Studio City casino resort in Macau, first-quarter adjusted EBITDA was negative by US$5.2 million, an improvement on the negative US$5.5 million in the previous quarter. Revenues were US$97.9 million, up from US$88.2 million for the three months to December 31.

The second phase development of Studio City “is progressing,” said Mr Ho in his prepared remarks. That phase includes a new family-entertainment focused water park scheduled to open on May 22, as well as 900 additional luxury hotel rooms and suites to be launched at a later stage.

But the company noted: “The Covid-19 outbreak has also impacted the construction of the Studio City Phase 2 project and the progress of construction work at the City of Dreams Mediterranean project [in Cyprus]. We currently expect additional time will be needed to complete the construction of these projects.”

Melco Resorts’ operations in Cyprus remain suspended due to “nationwide measures” introduced by the local authorities in an effort to prevent the spread of Covid-19.

On Wednesday, Melco Resorts said the City of Dreams Manila resort in the Philippines posted positive first-quarter adjusted EBITDA of US$29.4 million, up from US$16.8 million in the previous quarter. Revenues were US$79.5 million, compared to US$63.8 million in the fourth quarter.

Melco Resorts stressed that City of Dreams Manila, which had been conducting a trial run of its gaming and hospitality operations with a limited number of participants, has been temporarily closed since March 29 as part of community quarantine measures in Metro Manila.