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Melco Resorts and Entertainment Ltd ADR MLCO

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Rising COVID-19 Cases in Hong Kong Dampen Market Sentiment, but Little Impact to Macao’s Recovery

Jennifer Song Equity Analyst

Analyst Note

| Jennifer Song |

Today’s pullback in Macao gaming companies’ share prices of 3.2%-6.5% was largely driven by the news of rising COVID-19 cases in Hong Kong and the delay of an air travel bubble between Hong Kong and Singapore, which has dampened market sentiment. However, we expect limited impacts to the sector’s near-term outlook and long-term prospects, which are primarily driven by recovery of tourism traffic from mainland China, as well as China’s expanding prosperity. We maintain both our earnings forecasts and fair value estimates for the six Macao gaming companies. We continue to expect Macao's gaming sector to return to profitability in the fourth quarter of 2020, and a full recovery to pre-pandemic 2019 levels by early 2022, underpinned by our base case view for a COVID-19 vaccine to be available by mid-2021.

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Company Profile

Business Description

Melco Resorts is one of only six companies with a licence to operate casinos in Macao, the only region in China with legalized gambling. It operates Altira, a complex focused on VIP customers; City of Dreams, an integrated resort in Cotai serving both mass-market and premium-end patrons; and Mocha Clubs electronic gaming machines. In addition, the company also has a majority interest in Studio City, a new casino in Cotai that opened in October 2015. Outside Macao, Melco also owns City of Dreams Manila in Philippines, and 75% stake in City of Dreams Mediterranean in Cyprus. The business mix in term of adjusted EBITDA was about 84% from Macao, and the rest largely from Philippines as of 2019.

60 Wyndham Street, 36th Floor, The Centrium
Hong Kong, Cayman Islands
T +852 25983600
Sector Consumer Cyclical
Industry Resorts & Casinos
Most Recent Earnings Sep 30, 2020
Fiscal Year End Dec 31, 2020
Stock Type
Employees 23,078