Melco Resorts & Entertainment has reported stronger-than-expected 1Q25 results, demonstrating significant market share gains in Macau while simultaneously reducing operational expenses.
According to an investment memo released by Seaport after the company’s earnings, the company’s property EBITDA exceeded estimates by 8 percent, reaching $341 million, a 15.4 percent quarter-over-quarter increase driven by high hold rates.
Melco’s market share in Macau jumped to 15.8 percent, marking a substantial increase of 150 basis points year-over-year and 100 basis points quarter-over-quarter. This growth underscores the effectiveness of the company’s strategic initiatives in solidifying its market position in the world’s largest gambling hub.
The company has been implementing new marketing and operational enhancements to drive business while optimizing costs. These efforts have proven successful, with Macau’s hold-adjusted Property EBITDA reaching $271 million, reflecting an 8 percent quarter-over-quarter increase despite a slight 1.8 percent yearly decline.
Cost efficiency has been a significant factor in Melco’s improved performance. Daily operational expenses in Macau decreased by approximately 9 percent quarterly to around $3.1 million. This reduction was accompanied by lower player reinvestment at City of Dreams, while Studio City saw a slight increase in this area.
A key development supporting Melco’s market position is the reopening of The House of Dancing Water, which can accommodate up to 4,000 daily patrons. This attraction serves as a differentiated marketing advantage for Melco, helping to drive foot traffic into City of Dreams.
The company is also making significant progress with digital table implementation, with all baccarat tables at Studio City already upgraded and near-complete implementation at City of Dreams. These technological advancements will enable better-targeted player reinvestment strategies and improved operational performance through enhanced table management.
Business volumes have remained strong into 2Q25, with April’s market share maintaining the high level of approximately 15.8 percent. The May Golden Week holiday period showed year-over-year growth, with the days following the holiday performing better than expected.
On the capital allocation front, Melco has been actively repurchasing shares. Between January 1st and May 7th, the company repurchased $165 million worth of stock, representing over 7.5 percent of outstanding shares. For 2024 alone, $125 million has been repurchased, with $223 million remaining in the current buyback program.
For the coming period, analyst Vitaly Umansky expects Melco’s focus to shift toward debt reduction in the coming quarters rather than large share repurchases. Nevertheless, with its strengthened market position in Macau and operational improvements showing results, Melco’s valuation remains attractive with a compelling risk/reward profile.
