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Macau (MNA) -Net revenues generated by Melco Resorts & Entertainment Limited in the third quarter dropped 11 per cent year-on-year to US$1.22 billion (MOP9.83 billion) as property EBITDA decreased by 26 per cent to US$295 million.
The gaming operator’s latest financial report indicates that the net revenue decrease was mainly due to ‘higher commissions reported as a reduction in revenue’ and ‘lower group-wide rolling chip gross gaming revenues’.
Meanwhile, operating income for the third quarter of 2018 saw a considerable decline of 56.6 per cent yearly, to US$83.6 million, with net income also down, 91.7 per cent to US$10 million.
According to analysts at brokerage firm Sanford C. Bernstein, the results came out below estimates with VIP and mass market being ‘weaker than expected’, especially at Melco’s Cotai property, City of Dreams.
Net revenues generated by City of Dreams went down 16 per cent yearly to US$601 million, with operating income going down 62 per cent to US$76 million.
Meanwhile, Studio City registered a 16 per cent year-on-year drop in net revenues to US$345 million, with operating income dropping 6 per cent to US$43 million.
Altira generated some US$90 million in revenues at the third quarter with no significant yearly change, but with an 83 per cent drop in adjusted EBITDA, leading to US$1 million in losses.
‘City of Dreams continues to be plagued by low hold added to the under-performance […] Low VIP hold impacted EBITDA by US$33 million. Low VIP win rates at CoD Macau, Studio City, and Altira negatively affected EBITDA by US$22 million, US$11 million, and US$6 million, respectively,’ Bernstein analysts concluded.
Low hold in Mass at City of Dreams and a one-time 14th month bonus were also said to have impacted EBITDA by US$32 million and US$20 million, respectively.
The fact that in late July and early August, CoD eliminated smoking in premium mass areas at the Birdcage and the Signature Club at the Grand Hyatt, was adjudged to have had some negative impact on hold, as measures came before new smoking legislation changes were enforced on January 1, 2019.
‘While visitation remains robust to Melco properties, the average spend per customer is falling. Junket partners are definitely seeing softness, but this is also carrying into premium mass,’ the Bernstein note stated.
However, the analysts indicated Melco’s management is positive for the longer-term as future developments such as the NuWa Hotel renovations, the Libertine Hotel redevelopment and Studio City Phase 2 are completed.
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