Casino operator Melco Resorts and Entertainment Ltd said in a Tuesday update that its daily operating costs during the second quarter were “approximately US$1.5 million”.
In its first-quarter earnings call in May, Melco Resorts mentioned it had brought down its daily Macau operating costs from about US$3 million before Covid-19, to US$2.5 million, and down again to US$2.2 million. The group has most of its business in Macau, where its flagship resort is City of Dreams (pictured).
Tuesday’s update filed to Nasdaq in the United States didn’t clarify whether Melco Resorts was consolidating in its latest daily costs number the expenses associated with Studio City – a Cotai casino resort in which Melco Resorts is the majority owner – and the daily costs of City of Dreams Manila, a Philippine gaming resort the group manages; and the operating costs of its interest in some casinos on the Mediterranean island of Cyprus.
But the group said that in arriving at the US$1.5 million daily figure, it had taken “various mitigating measures” to manage its business “through the current Covid-19 outbreak challenges”.
Steps included “a cost-reduction programme to minimise cash outflow” on non-essential items, and “rationalising our capital expenditure programme with deferrals and reductions,” in order to help the balance sheet.
The group also said it expected to be able to achieve break-even in terms of adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA), “upon reaching approximately 35 percent to 40 percent of our historical gross gaming revenues run-rate.”
The group had quoted the same figures last week in relation to Studio City adjusted EBITDA break-even.
Melco Resorts gave the commentary in a filing on Tuesday, the same day it announced the pricing on proposed US$500-million senior notes.
The update said that as of June 30, the group held cash and cash equivalents of US$670.7 million and restricted cash amounting to US$300,000.
“We also had HKD12.12 billion (equivalent to US$1.56 billion) under the 2020 credit facilities and HKD1.0 million (equivalent to US$129,000) under the 2015 revolving credit facility which remain available for future drawdown,” stated Melco Resorts.
Making reference to some easing in regional travel restrictions – the latest announced this week – Melco Resorts noted: “In the initial phase of opening travel channels between Macau and other regions in Greater China, it is expected that visitors seeking entry to Macau will need to test negative for Covid-19 before entering Macau.”
The firm added: “We are currently unable to determine when these measures will be lifted from additional regions and cities throughout China; and lifted measures may be reintroduced if there are adverse developments in the Covid-19 situation in Macau and other regions with access to Macau.”
It noted that total visitor volume from mainland China to Macau decreased by respectively 97.2 percent, 96.3 percent, 99.6 percent and 99.4 percent in February, March, April and May.
The decrease was driven by factors including “the outbreak’s strong deterrent effect on travel and social activities,” and “the Chinese government’s suspension of its visa and group tour schemes that allow mainland Chinese residents to travel to Macau,” noted Melco Resorts.
The Macau government said in a Tuesday briefing it was not expecting a spike in visitors from Guangdong, following the easing of some quarantine rules for travel to Guangdong from Macau.
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"The most worrying [thing] is whether [mainland] China will again tighten the issuance of travel visas [for visits to Macau]"
Luiz Lam Kai Kuong
Macau junket investor