Melco's Global Growth Continues through a Collaboration in Sri Lanka
Melco Resorts, a world-renowned casino operator with operations in Macau, the Philippines, and Cyprus, has entered the Sri Lankan market in partnership with John Keells Holdings, the country's largest conglomerate. This collaboration means that Melco will be the casino operator for John Keells' $1 billion integrated resort in central Colombo.
Melco Resorts is also lending its globally recognized City of Dreams brand to the development, which is set to be completed and commence operations in the third quarter of 2024. The company is paying John Keells $125 million for the 20-year casino rights and has received a gaming license from the Sri Lankan government. Both parties will share the net gaming revenue.
Melco Resorts Chairman and CEO, Lawrence Ho, expressed excitement about joining this significant project in Sri Lanka and alliance with John Keells. He believes that Sri Lanka offers significant potential and that this venture will complement their existing portfolio of properties.
John Keells Holdings, established in 1870, is one of the most prominent companies in Sri Lanka, an island nation off the southeastern coast of India. Besides hospitality ventures, the conglomerate has interests in IT, food and beverage products, supermarkets, tea trading, life insurance, and financial services.
Melco Casino, Hotel Locations
Melco Resorts' $125 million investment gives them access to 113 guestrooms at the hotel, which will be operated under the Nuwa hotel brand. The hotel is called Cinnamon Life Integrated Resort. Melco's share of the hotel features 5 floors. The entire resort will have a capacity of 800 guests, and the remaining 687 keys will be managed by John Keells.
The casino will feature the latest slot machines and live dealer table games. Operations are set to begin in the middle of next year. Although Sri Lanka has small casinos, it doesn't have a competitive or comparable integrated resort to the City of Dreams.
Melco Resorts' Successful Recovery
Melco Resorts' shares on the Nasdaq have not yet reached their pre-pandemic values. As of this afternoon, they were trading at $6.60, significantly lower than the $25 they were worth in early May 2019.
In their first-quarter 2024 earnings report, Melco pointed out that their operating revenues increased by 55% to $1.11 billion. The resurgence was due primarily to the continued growth in Macau tourism, where Melco has a significant presence with City of Dreams, Studio City, Altira, and Mocha Clubs.
John DeCree, a gaming analyst at CBRE Equity Research, issued a buy recommendation on Melco today, setting a price target of $13. He cited their strong first quarter, improvements made in Macau operations, and the efforts being made to win back lost market share in Macau.
DeCree also thinks that Sri Lanka has potential benefits, considering the low cost of market entry. "Melco is aiming for annual gross gaming revenue of $200-250 million, which could result in a 25-30% annual cash return on their $125 million investment, after lease payments," he wrote on behalf of CBRE.
The Sri Lankan government imposes a 15% tax on all gross gaming revenue.
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Source: www.casino.org
