Melco Resorts and Entertainment CEO and chairman, Lawrence Ho is very optimistic about the company’s annual potential. During Wednesday’s conference call, Ho said he was confident that a decent amount of growth will be seen in the Macau market. He was also positive that his company will perform well. According to HO, the year will not be as good as in 2018, which exceeded everyone’s expectation. That period brought about a 14-percent growth year-on-year.
But, he still believes that the results of the year will be solid. The annual casino profits of the entire Macau casino industry went over $37 billion in 2018. This data comes from the enclave’s Gaming Inspection and Coordination Bureau. So far, the results are nowhere near. In the first two months, the enclave saw a contraction of the profit. There was an upswing in the profits in February, but it was likely the result of the increase in visitors during the Lunar New Year.
Melco’s Viewpoint
Ho explained that for the company, the metrics that are more important are the EBITDA and its cash flow. The EBITDA stands for earnings before interest, taxation, depreciation, and amortization. Ho believes it and especially the cash flow will be better than ever. He suggested that the main reason for his optimism is the unique strength of the casino operator. This includes a strong focus on the mass as well as a premium-mass segment of the customer market.
So far, many analysts have recognized a fall in the VIP segment of the market. Yet, the Nomura company, a brokerage from Japan, suggested that the operator was able to gain shares in VIP gambling volume during this month. Ho echoed these suggestions while once again noted the success of the company in the mass gaming market.
In the previous years, the market of the middle-class casual gamblers has proven to be more flexible to the general economic strains. On the other hand, the Chinese VIP market has been feeling the crunch of the economic uncertainty. These include the trade war with the US as well as slack in Chinese economic growth.
The Second Phase of Studio City
Ho also said that the operator is waiting for the final approval from the government of Macau for their Studio City phase two. This development on Cotai is not new, but it got an extension of three years for the development of the plot on which the second phase will commence.
Studio City should have two hotel towers, but also a water park, a cineplex movie facility and some additional gaming space. During a recent earnings call, Ho said that the operator is waiting on the government approvals from the final departments on the list. But, the company is ready to go and will commence the next phase the same moment their approval arrives. Presently, the government of Macau is trying to urge casino operators to increase their non-gambling facilities.
Studio City is a perfect example of this family-oriented approach the enclave is trying to foster. The problem is that the city’s casinos tried the same thing before. In 2015, the House of Magic started working but it has not managed to find a reasonable margin of success. This is why it closed down in 2017 and left the casino operators wary of this option. But, it appears that Melco is ready to try the route once more with even more investment than before.