Macau gaming operator Melco Resorts & Entertainment’s management has expressed confidence in its current marketing strategy, despite it not yet resulting in a market share gain.
According to an investment memo from UBS, released after the company’s third-quarter 2024 results, analysts noted that Melco has implemented a series of initiatives since mid-September aimed at capturing market share. These efforts include improving accessibility at its flagship City of Dreams resort, revamping casino floors, and relaunching its loyalty program.
While these initiatives have not yet translated into a market share gain in 3Q24—during which mass gaming gross gaming revenue (GGR) was down approximately 3 percent quarter-on-quarter—management remains optimistic about their effectiveness. The GGR decline was slightly worse than the industry-wide trend, which saw a smaller drop of about 1 percent QoQ.
As reported previously, Melco’s marketing strategy was restructured with the goal of improving performance. The employee incentive scheme was reorganized and simplified, while the Melco loyalty program was revamped, with the return of the Signature Club, Melco’s highest tier for premium mass players. The objective is to return to 2019 EBITDA levels by the end of 2025.
For 3Q24, Melco Resorts reported group-wide EBITDA of $303 million, reflecting a year-on-year increase of about 15 percent and a quarter-on-quarter rise of approximately 7 percent. Adjusted for a positive VIP hold, EBITDA would stand at $276 million, broadly in line with consensus estimates and UBS’s projections of $272-274 million.
On the cost side, Melco’s daily operating expenses remained stable at $2.9 million per day (excluding residency concerts), consistent with the previous quarter. The company continues to guide its daily operating expenses to trend toward $3 million per day in 4Q24, as it focuses on controlling costs while seeking growth through its revamped marketing initiatives.
The return of its renewed residency show, The House of Dancing Water, is expected to take place in 2Q25, which will add operating expenses of about $100k per day. However, this is expected to be EBITDA positive.
Dividend resumption in 2H25
Melco Resorts’s management has indicated that it will consider resuming dividends in the second half of 2025 (2H25). The company’s outlook has been bolstered by strong performance during October’s Golden Week, with mass table drop rising more than 20 percent year-on-year, in line with broader market trends.
In terms of shareholder returns, Melco implemented a share buyback program in 3Q24, repurchasing 20.7 million American Depositary Shares (ADS), representing approximately 5 percent of its shares outstanding, for a total of $112 million. Of these repurchased shares, 17.7 million ADS have been canceled, and the company remains open to further buybacks in the future.
While the potential for dividend resumption is on the table, management has reiterated its focus on deleveraging, ensuring that the company maintains a strong financial position before returning capital to shareholders.
