Melco set to outperform: Bernstein

Sunday 17th of September 2017

The opening of the 780-room Morpheus, continued ramp up of Studio City, and forecasted GGR growth at City of Dreams Manila is set to drive growth for Melco Resorts and Entertainment, according to Bernstein analysts.

In a Monday note, the brokerage said it tips the company to outperform, pointing out that City of Dreams Macau will be “considerably enhanced” in 2018 with the opening of Morpheus, a luxury casino-hotel expansion targeting premium gaming customers.

“This addition to CoD will allow the property to remain competitive considering the newer property openings targeting a similar client base (i.e., MGM Cotai and Wynn Palace).”

Bernstein also noted that the opening of the rail extension on Hengqin, and a greater influx of visitors over the Lotus Bridge will drive the continued ramp up at Studio City.

Melco’s Philippines operation, City of Dreams Manila, is set to see growth in VIP and mass, with forecasted GGR growth above that of Macau, the brokerage added.

Bernstein says it forecasts Melco to post 9 percent 2016-19E CAGR in revenue.

With a shift towards mass, VIP GGR is expected to make up around 33 percent of gross revenues over the next three years, it added.

Driven by growth and operating leverage improvement, Melco EBITDA is forecasted to achieve 16 percent 2016-19E CAGR, while operating leverage should improve property EBITDA margin from 21 percent in 2016 to 26 percent in 2019E, said Bernstein.

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