Melco Resorts poised to consolidate upper-middle and lower-end market segments through upcoming developments
Melco Resorts Expands Beyond Macau with Asset-Light Strategy
Melco Resorts & Entertainment, a prominent player in Macau's casino industry, is diversifying its operations beyond the world's largest casino hub. The company's focus on nongaming ventures, particularly in the premium-mass segment, is driving its growth prospects in emerging Asian markets.
As one of six concessionaires in Macau, Melco is traditionally viewed by investors as a play on the casino industry. However, its strategic expansion plans indicate a broader focus on diversification. The Macao government also supports these new projects, aiming to diversify the economy.
Melco's asset-light expansion strategy targets markets such as Sri Lanka and Thailand. A key initiative is the opening of City of Dreams Sri Lanka, a joint venture with John Keells Holdings, in August 2025. This project, expected to create 20,000 jobs, will boost the Meetings, Incentives, Conventions, and Exhibitions (MICE) sector in Colombo, supporting non-gaming revenue growth beyond Macau.
In Thailand, Melco is engaging closely with regulators to align its development plans in the integrated resorts (IR) market, estimated at a potential value of $15 billion. The company's asset-light approach, which uses joint ventures and reduces capital risk, provides flexibility amid uncertainties in new markets.
Melco's efforts to diversify nongaming business are evident in its successful entertainment offerings. The reopening of the House of Dancing Water show in Macau with refreshed content and near-full theater occupancy has attracted more visitors, enhancing overall revenue streams.
The company's financial strength supports its expansion plans. Melco's cash and credit availability is well above its debt of USD 1.2 billion due in 2025, reducing its refinancing risk in 2025. As of end-2024, Melco has around USD 1.3 billion in cash and USD 2.0 billion of credit facilities available, totaling USD 3.3 billion.
The potential growth of Melco Resorts (NASDAQ: MLCO) is not limited to its Macau operations. The stock, which has increased by almost 51% year to date, is expected to benefit from new projects contributing to further price appreciation. Morningstar analyst Jennifer Song believes these new facilities will help Melco increase its nongaming business.
However, Melco's net debt remains high at USD 5.90 billion as of the end of 2024, and the company is focusing on reducing this burden. It is currently conducting a strategic review of alternatives for its City of Dreams Manila casino hotel.
The City of Dreams Sri Lanka property, a major driver of jobs growth and tourism, has opened its doors and operates under a 20-year license. These new projects are expected to position Macao well amid its long-term development.
[1] Melco Resorts & Entertainment Limited - Company Profile and Information [2] Melco Resorts & Entertainment Ltd. - Yahoo Finance [3] Melco Resorts & Entertainment Limited - Company Overview [4] Melco Resorts & Entertainment Limited - Company Profile [5] Melco Resorts & Entertainment (MLCO) Q4 2022 Earnings Call Transcript
- Melco Resorts & Entertainment's focus on nongaming ventures, such as commercial gaming and real-estate development, extends beyond Macau, as seen in their asset-light strategy targeting emerging Asian markets like Sri Lanka and Thailand.
- In the Asia Pacific gaming scene, Melco Resorts & Entertainment is not just a play on the casino industry; it's also an investment opportunity in the broader financial aspects of casino-and-gambling culture, including its cruise ship business and entertainment offerings like the House of Dancing Water.
- The approaching opening of City of Dreams Sri Lanka, a joint venture with John Keells Holdings, will not only boost the MICE sector in Colombo but also contribute to Melco's growth in the commercial gaming sector, particularly in the premium-mass segment.
- Melco Resorts & Entertainment's financial strength, with a substantial cash and credit availability, allows it to continue its diversification efforts in casino-games and casino-culture, while minimizing refinancing risks.
- The success of Melco Resorts & Entertainment is not limited to its financial statements; its growth and expansion plans in Asia Pacific gaming markets are closely watched by analysts like Jennifer Song, who believe these new projects will contribute to further price appreciation of the stock (MLCO).
