The opening of Morpheus (pictured) – a fifth hotel tower – at Macau casino resort City of Dreams will enable the property to “remain competitive” in the face of new gaming venues recently opened or coming soon to the Cotai market, says a Monday note from brokerage Sanford C. Bernstein Ltd.
“This addition to City of Dreams will allow the property to remain competitive considering the newer property openings targeting a similar client base (i.e., MGM Cotai and Wynn Palace),” wrote analysts Vitaly Umansky, Zhen Gong and Cathy Huang. City of Dreams is the flagship Macau resort of Melco Resorts and Entertainment Ltd.
They were referring latterly to competition from the new HKD26-billion (US$3.32-billion) Cotai venue from MGM China Holdings Ltd, which is hoping to launch it in the fourth quarter; and second the US$4.4-billion Cotai venture of Wynn Macau Ltd, which opened in August 2016.
Lawrence Ho Yau Lung, Melco Resorts’ chairman and chief executive, said on the firm’s second-quarter earnings call in late July that the firm hoped to open the new US$1-billion, 780-room Morpheus hotel project in the “first quarter or second quarter next year”. Mr Ho said at the time that the new hotel tower would have space to accommodate up to 50 gaming tables.
The new accommodation was designed to cater for the firm’s “best in-house customers,” said Mr Ho on the call, clarifying that this was so-called premium mass players – customers that bet in high multiples, but in cash rather than via the credit-funded play of traditional VIPs.
Sanford Bernstein said other short-term catalysts for building shareholder value at Melco Resorts included “continued ramp up at Studio City” – a 60-percent owned venue on Cotai opened in October 2015 – as the property “shifts its positioning and benefits from the opening of the rail extension on Hengqin [Island] and greater influx of visitors over the Lotus Bridge”.
The brokerage also said there was likely to be “continued” growth in VIP- and mass-market gambling at City of Dreams Manila – a gaming resort in the Philippine capital that is managed by Melco Resorts – “with forecasted gross gaming revenue [GGR] growth above the growth rate in Macau”.
In early August Andrea Domingo, the head of the Philippine gaming regulator, said nationwide GGR was likely to reach PHP150 billion (US$2.99 billion) in full-year 2017 – a slight year-on-year increase.
A note last month from banking group Morgan Stanley said the market for gambling by Chinese was likely to grow in the Philippines, fuelled by junket-based proxy betting and the prospect of visa-free access for tourists from mainland China.
Sanford Bernstein said in its Monday note that four events at corporate level would be “value creating” for Melco Resorts shareholders if they came to pass: the firm either buying out its minority partners at Studio City, or a “Studio City IPO [initial public offering] at favourable valuation”; the group getting a Japan casino licence; an increase of return of capital to investors; and “restructuring involving merger” of Nasdaq-listed Melco Resorts with Mr Ho’s Hong Kong-listed gaming investment vehicle Melco International Development Ltd.
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"There is still no clarity about when border easing for Macau will occur. In the end these changes are needed to see a rebound for Macau business"
Vitaly Umansky, Louis Li and Shirley Yang
Analysts at brokerage Sanford C. Bernstein