VIPs drive revenue growth

Melco Resorts & Entertainment launched its first property outside of Macau in December 2014 with the opening of the $1 billion City of Dreams Manila.

It was the second IR to open in the capital’s Entertainment City zone. The resort complex, located on an approximately 6.2-hectare site at the gateway to EC. features about 380 gaming tables, 1,700 slot machines and 1,700 electronic table games.

The resort also has three luxury hotel brands - Nuwa, Nobu Manila and the Grand Hyatt and includes a family entertainment zone developed with DreamWorks.

The DreamPlay center is a first-of-its-kind environment where kids can play and participate in a wide range of creative activities and experiences with the characters of DreamWorks Animation’s world-famous films, including “Kung Fu Panda,” “Shrek,” “Madagascar” and “How to Train Your Dragon.”

Q3, 2017 results showed strong growth momentum at the property despite the additional competition from the opening of Okada Manila. Adjusted property EBITDA in the period rose 27 percent.

Net revenue at City of Dreams Manila was $148.2 million compared to US$131.0 million in the third quarter of 2016, driven primarily by the VIP sector. Rolling chip volume almost doubled to $3.0 billion benefiting from a rolling chip win rate of 2.5 percent, compared with 4.0 percent in the third quarter of 2016. The expected rolling chip win rate range is 2.7 percent-3.0 percent.

Mass market table games drop increased to $174.1 million for the third quarter of 2017, compared with US$146.8 million in the third quarter of 2016, while the gaming machine handle was $757.3 million, compared with $597.0 million in the third quarter of 2016.

Total non-gaming revenue at City of Dreams Manila was $29.2 million, comparedwith $26.3 million in the third quarter of 2016.

Analysts at Morgan Stanley are optimistic about the company’s future growth prospects and maintain an overweight rating on the local stock. The firm sees gross gambling revenue in the Philippines growing by 32 percent this year, up from 27 percent in 2017, outstripping other regional markets.

“We think investors are overly concerned about Okada; the market is underpenetrated in our view, and existing casinos (excluding Okada) were still tracking 17 percent GGR growth in the first 11 months of 2017,” it said in a recent note.

Belle Corp, Melco’s joint venture partner in the Philippines, has indicated that the company may be considering expansion.

On the sidelines of a shareholder meeting last year, Vice Chairman Willy Ocier said the resort was operating at full capacity and had begun to look for additional land, though Melco played down the remarks.

Analysts say any such move would likely be a good catalyst for further growth. 

Melco itself is lobbying hard for a license in Japan and also has plans to open a City of Dreams Mediterranean on the island of Cyprus by 2021. It will be the company’s first foray outside of Asia and the complex it’s proposing will be the biggest of its kind in Europe.