Melco Resorts launching new players’ club in Macau this week: management

Casino operator Melco Resorts & Entertainment Ltd is on Thursday (November 5) launching in the Macau market a new players’ club, following changes to its sales team in the last few months and as the company addresses “a period of lower demand”. So said Evan Winkler, company president, on the firm’s third quarter earnings call held on Wednesday. He stated that, as Macau entered a period of lower demand, it was important for the firm to ensure it was “not trying to chase unhealthy levels in reinvestment to get the business that’s there.” These efforts, he said, included introducing guardrails to make sure Melco Resorts could maintain its margins moving forward. “We think the right thing to be doing… is to continue to be disciplined in what we’re doing… because it’s very easy to chase everybody down to the bottom, especially if you’re in a market where people feel like they need to grab a little bit of share because revenues are soft,” Mr Winkler said. Earlier on the call, his boss Lawrence Ho Yau Lung, chairman and chief executive, had stated: “The Macau market remains extremely competitive. We have been increasingly disciplined in allocating resources, with a sharper focus on customer acquisition and reinvestment… Alongside these efforts, our performance has improved, with our business outperforming the broader Macau market in October.” Mr Winkler noted on the call that market-wide “softness” in demand was not only among the “top players”. He stated: “We are seeing some general softness as you go down, which makes us feel like it’s probably a little bit more the overall China economy than just the specific tax [issue] that’s sort of getting the highlights.” That was a reference to an October deadline set by the mainland authorities for Chinese consumers to pay tax on overseas investments. Government guidance fund Mr Ho was also asked on the call about the aggregate US$1.11-billion payments by the six Macau gaming concessionaires towards what is termed a Macau-government “guidance fund” to support the city’s economic diversification. Melco Resorts’ contribution was disclosed in an October 23 filing as MOP828 million (US$102.5-million). Mr Ho said: “The most important thing for Melco and our fellow competitors in the industry is that this counts towards our stated [concession-related] investment.” He added: “If anything, it does remove some of the uncertainties of having to do more events or other things” related to non-gaming on behalf of the government. “So all in all, I think it’s a good outcome.” Geoff Davis, chief financial officer, had stated on the call that Melco Resorts’ total daily operating expense in Macau declined to approximately US$3.2 million during the third quarter, inclusive of House of Dancing Water, the group’s resident show at City of Dreams Macau, “and below our prior guidance”. He added: “We’ve been able to bring down capex [capital expenditure] for the remainder of 2026 and for 2027 as compared to prior guidance. So for the fourth quarter of this year, we’re looking at about US$95 million of capex, bringing the [2026] total to roughly US$375 million. And then for next year, we’re looking for total capex of around US$275 million.” Management was asked on the call what impact the refurbished and rebranded hotel tower at City of Dreams Macau now known as REM had on group expenses. REM began welcoming guests through a private invitation-only programme in August, during the third-quarter reporting period, and had a ‘grand opening’ in October, during the fourth quarter. Mr Winkler stated: “The team at City of Dreams have worked very hard to try and move bodies around not to increase incremental costs in terms of opening up the additional room count. “We are going to see a tick-up in expenses overall just because it still is an incremental 150 [room] keys, but we’re trying to find other places where we can rationalise expense. So I would say it’s not a dramatic move up.” 4Q costs, dividend timing CFO Mr Davis gave some forward guidance on non-operating line items within the fourth quarter. He said total depreciation and amortisation expense was expected to be approximately US$140 million to US$145 million, with corporate expense at approximately US$20 million to US$25 million. Fourth-quarter consolidated net interest expense was anticipated at approximately US$115 million to US$120 million. That included finance liability interest of approximately US$6 million relating to fees payable in relation to the Macau gaming concession and the group’s Republic of Cyprus gaming licence, and finance lease interest of approximately US$5 million relating to the Philippines casino resort it operates, City of Dreams Manila. In terms of timing on reinstatement of a Melco Resorts dividend, CFO Mr Davis noted: “We would still aim to recommence a dividend… potentially towards the end of next year, but it’ll be very hard to predict the exact timing given that we will have potentially other opportunities to continue to buy back stock.” Mr Davis said that from July 1 through to November 3, the group repurchased approximately 33.1 million of its American depository shares (ADSs) for a consideration of approximately US$160 million. That brought total repurchases in 2026 to circa 47.1 million ADSs for an aggregate consideration of approximately US$236 million. Mr Ho noted on the call: “Our corporate priority, as we’ve stated for the last two to three years, has been to delever. “But recognising there is a massive dislocation of share prices versus what we believe the fair market value of Melco Resorts is… we have bought back a lot of shares.” During the quarter, Studio City redeemed US$165 million in aggregate principal amount of its 6.5 percent senior notes due 2028. Mr Davis stated: “The redemption was funded principally through a drawdown under Studio City’s senior secured credit facility and cash on hand, which reduces interest expense.” In September, Melco Resorts also redeemed its outstanding aggregate principal of US$600.0 million of its 5.625 percent senior notes due 2027, observed the CFO. The redemption “in full” was funded through a drawdown under Melco’s revolving credit facilities and also resulted in reduced interest expense. “We currently do not have any debt maturities in 2027,” added the finance boss.