Lucror Analytics, a Singapore-based investment firm, says Melco Resorts and Entertainment Ltd. is “the strongest among (its) peers” in Macau with 22 months’ worth of working capital.
In a memo issued August 18, the firm said Melco beats its rivals in the Chinese gaming hub, including Wynn Macau, which has 14 months’ of “liquidity runway”; Sands China, with 12 months; MGM China, with 11 months; and SJM Holdings, with nine months.
As of the end of June, reports GGRAsia, Melco had a cash balance of US$1.65 billion and an undrawn revolving credit facility of US$1.1 billion.
“We estimate that this would be sufficient to support 22 months of cash burn—until April 2024—under the worst-case scenario of zero revenues,” wrote senior credit analyst Leonard Law. Melco saw a second-quarter net loss of US$251.5 million, up 35.4 percent year-over-year.
The group’s primary market, Macau, shut down for 22 days in July due to an outbreak of Covid-19 that affected some 1,200 people.
Melco’s City of Dreams Manila in the Philippine capital, on the other hand, has been operating at 100 percent capacity since March, thanks to the easing of Covid-19 restrictions there. The company’s second-quarter revenues in the Philippines doubled year-over-year.
The group was also seeing an uptick in Cyprus, where its City of Dreams Mediterranean integrated resort is expected to open in the second quarter of 2023. Melco currently operates a temporary casino in Limassol as well as satellites in Nicosia, Larnaca, Ayia Napa and Paphos.
When complete, City of Dreams Mediterranean is expected to be the largest destination resort in Europe with a 14-story luxury hotel; more than 100,000 square feet of MICE space; an outdoor amphitheater; a family adventure park; and a variety of fine-dining outlets and luxury retail.
In calculating Melco’s liquidity, Law “assumed an operating expenses run rate of US$1.7 million per day—unchanged from second quarter 2022—and maintenance capital expenditure of US$5 million per month.”
Law added: “We also factored in expansionary capital expenditure of US$250 million for Studio City Phase 2, and a deposit of MOP5 billion (about US$620 million) required under the concession retender process.”
In the company’s second quarter earnings call on August 18, Melco Chairman and CEO Lawrence Ho said the company would launch the second phase of its majority-owned Studio City casino resort in Macau’s Cotai district in the second quarter of 2023.
Melco Resorts and five other incumbent Macau licensees will see their current gaming rights expire on December 31. All are expected to bid for and win new 10-year gaming concessions, which will begin next January.
