The boss of casino operator Melco Resorts and Entertainment Ltd says the firm has an “unwavering commitment” to a getting a Japan licence, despite slipping to a second-quarter US$368.1-million loss amid Covid-19. The group also flagged it was likely to face delays in completing respectively the extension to the Studio City casino resort in Macau, and City of Dreams Mediterranean, its flagship venue in Cyprus.
The second-quarter loss compared to a profit of nearly US$101.8 million in the prior-year quarter. In May, the firm’s board suspended the quarterly dividend programme.
Lawrence Ho Yau Lung, chairman and chief executive of Melco Resorts, said in remarks contained in its results filing, regarding Japan: “I want to highlight our unwavering commitment to bring to the country the best IR the world has ever seen.”
The term “IR”, or integrated resort, is used in Japan to describe large-scale casino resorts with associated tourism and events facilities.
But the company noted: “The Covid-19 outbreak has also impacted the construction of the Studio City Phase 2 project and the progress of construction works at the City of Dreams Mediterranean project. We currently expect additional time will be needed to complete the construction of these projects.”
Total operating revenues for the second quarter of 2020 were nearly US$175.9 million, down 88.0 percent from US$1.46 billion in the prior-year period.
“The decrease in total operating revenues was primarily attributable to softer performance in all gaming segments and non-gaming operations as a result of the Covid-19 pandemic, which resulted in a significant decline in inbound tourism in the second quarter of 2020,” said Melco Resorts.
Mr Ho said the group had been “quick to formulate strategies to preserve liquidity and improve the company’s balance sheet”.
Melco Resorts said it had reduced its overall quarterly casino operating costs and expenses by 73.6 percent, to just under US$215.8 million, from US$818.2 million in the prior-year quarter.
Melco Resorts stated that as of June 30, it had cash on hand of approximately US$1.2 billion, and undrawn revolver facilities of approximately US$1.6 billion. A number of fund-raising exercises were due to push those numbers up, said the firm.
Nonetheless, the group’s adjusted property earnings before interest, taxation, depreciation and amortisation (EBITDA) were negative in the second quarter, to the tune of nearly US$156.3 million, compared to positive adjusted property EBITDA of nearly US$448.0 million in the second quarter of 2019.
CoD Macau, CoD Manila
At the group’s Macau flagship, City of Dreams (pictured), second-quarter operating loss was US$141.2 million, compared to operating income of US$183.5 million in the prior-year quarter.
Adjusted property EBITDA there was negative by US$70.3 million, compared to a positive of nearly US$250.8 million a year earlier.
Separately last week, the company reported to Nasdaq that its Philippine unit, Melco Resorts and Entertainment (Philippines) Corp had a second-quarter net loss of almost PHP2.41 billion (US$49.5 million), compared with net income of PHP1.14 billion a year earlier.
Investment analysts mentioned recently that the outlook for Macau casino business had improved somewhat after authorities in mainland China’s Guangdong province said they were set to resume on August 26 the issuance of tourist visas to the city. That includes visas for package tour trips and for independent travel under China’s Individual Visit Scheme, also known by its acronym IVS. The measure would then be reinstated for all mainland provinces from September 23, said China’s National Immigration Administration.
Brokerage Sanford C. Bernstein Ltd said in a Thursday note on Melco Resorts: “Management remains very positive on the medium- and long-term prospects for Macau.”
But the institution added – citing the firm’s management – that near-term recovery was viewed as likely to be “gradual”, rather than “V-shape”.
The memo from analysts Vitaly Umansky, Tianjiao Yu and Kelsey Zhu stated the mainland authorities’ “automated visa issuance system is not currently active in China and it takes seven-to-10 days for in-person visa applications to be processed”.
They added: “If the automated application system stays offline, it could have some impact on visas when issuances come back in late August in Guangdong and September in rest of China.”
Sanford Bernstein further noted: “The company does not currently see any material issues with its junket partners in light of some news reports regarding junket liquidity.”