Melco Resorts Committed to Macau, as Earnings Continue to Sour
Melco Resorts reported a second-quarter net loss of $251.5 million — a loss that’s more than 35% higher than the same three months in 2021.
The Hong Kong-based gaming operator that does business in Macau, the Philippines, and Cyprus said April through June operating revenue totaled $296.1 million, representing an approximate decrease of $270.3 million from the second quarter of 2021. The business drop-off was primarily attributed to heightened border restrictions between Macau and mainland China because of a June COVID-19 outbreak.
It goes without saying that our results for the second quarter of 2022 were heavily impacted by the COVID pandemic and the restrictions imposed across mainland China and Macau. Throughout the pandemic, ensuring the health and safety of our colleagues have been very important, and it continues to be our highest priority through the recent outbreak,” said Melco Resorts founder, Chair and CEO Lawrence Ho.
China and Macau continue to adhere to a zero-COVID policy that necessitates significant government responses, including travel and business restrictions, when even a handful of new cases are detected. The policy has devastated Melco and the five other casino operators in Macau by preventing any meaningful recovery in the enclave.
Melco Ready for New License
The concessions that allow Macau’s six casino companies to operate games of fortune in the Chinese Special Administrative Region are slated to expire at the end of the year. Macau is amid its bidding period to issue fresh tenders, and Ho expects the process to be relatively seamless regarding running City of Dreams, Morpheus, Studio City, and Altira.
In Melco’s investor call, Ho thanked the Macau government for its publication of the new gaming law in June. He said the next regulatory environment “provides clear direction” for the retendering process, and as a result, the company expects “a smooth transition once the concession is awarded.”
Ho added that Melco is committed to Macau and the local government’s vision of further developing its economy with more diversified industries outside of gaming.
Melco shares traded on Nasdaq have lost about three-fourths of their value since the onset of the pandemic. Melco shares in January 2020 were trading at $25. Today, they’re at $5.50. And Melco has been on a rally of late. Shares were off worse before gaining about 5% in value over the past 30 days.
Melco is optimistic about an eventual recovery. During its earnings presentation, the company confirmed it would be repurchasing 35 million shares from its majority owner — Melco Leisure and Entertainment Group. Once the transaction is completed, Melco Leisure’s stake in Melco Resorts will drop from 55.8% to 50.4%.
Studio City Expansion
Ho didn’t just say Melco remains committed to Macau — he demonstrated that by providing an update on the second phase of Studio City. The CEO said construction of the integrated casino resort’s expansion is progressing on time.
“We’ll be monitoring the market closely to determine the appropriate time to open,” Ho explained. “We currently anticipate phasing the opening beginning in the second quarter of 2023.”
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