US research firm revises down Melco Resorts’ revenue forecasts for 2023-2025

US research firm Morningstar has lowered Melco Resorts’ projected revenue for 2023–2025 by 5–10% and adjusted EBITDA by 8–11%.

The shift might be attributed to decreasing gaming volume and increased operating costs due to increased competition in Macau. Increased interest costs, according to Morningstar’s prediction, would cause a $66 million net loss in 2023, followed by a $344 million profit in 2024 and a $762 million profit in 2025. This contrasts with the prior estimate of $338 million in 2023, $783 million in 2024, and $983 million in 2025 for net profit.

Melco Resorts’ 3Q23 performance fell short of Morningstar’s expectations, mostly because of decreased VIP visitation and win rate in Macau sites. Both the foreign business and mass sector performed as expected. The net loss for the third quarter of 2023 was $121 million, notwithstanding the optimism of Melco’s management on Macau’s recovery trajectory. Important rivals, on the other hand, declared a net profit for the first half of 2023.

Melco’s total Macau gross gaming revenue (GGR) share dropped by 50 basis points to 14.5 percent quarter over quarter, according to research firm CBRE. This decline was mostly caused by a decline in VIP hold. However, it was anticipated that the mass market share would stay mostly stable. Melco shares are still recommended as BUY by CBRE, but the target price is lowered from $20 to $15 due to a reduced FY24 EBITDA estimate of $1.47 billion, down from $1.59 billion. Because to a strong Golden Week, management claims that October was the best month since Macau reopened. October saw a purported resurgence in GGR, excluding junkets, to approach 2019 levels, with Studio City establishing a record for the largest monthly loss in tables and coin-in. Due to a full quarter of new hotel supply, operating expenses are probably going to increase somewhat in 4Q. They should then level off in FY24 before increasing once again when the House of Dancing Water show returns.

Original story by: Asia Gaming Brief