Lowering Uncertainty Rating to High for Melco Resorts on Improved Demand Visibility

We believe the gambling market in Macao will enjoy solid growth in the longer term. This structural tailwind is driven by the rising middle class in China and the penetration rate of less than 2% in Macao, compared with Las Vegas' 13%. The new hotel rooms by major operators in the next few years should accommodate increased and extended visits from bigger spenders from these provinces, and drive the top line for integrated resort operators like Galaxy Entertainment. With the gradual ramp-up of traffic allowed on the Hong Kong-Zhuhai-Macao bridge, new Hengqin border and the Gongbei to Hengqin extension rail, Macao's carrying capacity for tourists would increase. In addition, neighboring Hengqin Island, 3 times the size of Macao, is under rapid development to complement Macao's growth.