An analyst urged City of Dreams operator Melco to divest properties in the Philippines and Cyprus to fuel Studio City acquisition and Thai expansion.
Melco Resorts & Entertainment, a prominent casino operator, is facing pressure from an analyst to divest its properties in Cyprus and the Philippines. This strategic move, according to Vitaly Umansky of Seaport Research Partners, would free up crucial capital for two key objectives: a full acquisition of Studio City International and a targeted expansion into the burgeoning Thai casino market.
Umansky highlighted concerns surrounding Melco's current portfolio. While the Philippines property generates cash flow, it faces increasing competition within the Manila market, hindering significant growth. The Cyprus operation has also encountered challenges, particularly due to the impact of geopolitical events involving Russia and Israel.
Melco's stock price has been underperforming, reflecting investor concerns about the company's financial trajectory. Umansky argues that divesting non-core assets would not only improve the company's financial flexibility but also significantly boost investor confidence.
Melco already holds a 55% stake in Studio City International. A full acquisition, Umansky suggests, could pave the way for a merger between the two companies, streamlining operations and creating synergies.
While the Thai casino market presents a lucrative opportunity, it also demands substantial capital investment. To navigate these challenges, Umansky advises Melco to explore strategic partnerships with local entities. This approach, successfully employed by Melco in other markets, would mitigate risks and potentially unlock more favorable market entry conditions.
In essence, Umansky's recommendation emphasizes a strategic shift for Melco, prioritizing capital efficiency and focusing on high-growth opportunities while addressing existing operational challenges.
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