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Melco Resorts (MLCO) Q4 Earnings Lag, Revenues Top Estimates

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Melco Resorts & Entertainment Limited (MLCO - Free Report) posted mixed fourth-quarter 2017 results, with the top line surpassing the Zacks Consensus Estimate and the bottom line missing the same.

Adjusted earnings of 20 cents per share missed the consensus mark of 23 cents by 13% but grew 58.9% year over year. The upside was driven by higher casino revenues from Studio City and Altira Macau, partially offset by lower revenues from City of Dreams in Macau.

Quarterly net revenues totaled $1,332.6 million, surpassing the consensus estimate of $1,326 million by 0.5%. Net revenues grew 12% year over year, driven by higher rolling chip revenues across all properties and increased mass market table games revenues from Studio City and City of Dreams Manila. This was partially offset by lower mass market table games revenues from City of Dreams in Macau.

Melco Crown Entertainment Limited Price, Consensus and EPS Surprise

Though shares did not move in after-hours trading following the earnings release, the stock has gained 60.6% in the past year, outperforming its industry’s 29% rally.

The company’s mass and premium mass gaming revenues are likely to drive growth in Macau business. Additionally, the anticipated completion of the Hong Kong-Zhuhai-Macau Bridge and the ongoing build-out of Cotai will boost demand for Macau services. The company’s integrated resort offerings are also likely to drive traffic and revenues.


Let’s take a closer look at the quarterly results.

Property Performances

City of Dreams

Net revenues at City of Dreams were $612.6 million, down 7.3% year over year. Adjusted EBITDA came in at $169.7 million, reflecting a decline of 10.1% year over year. The deterioration can be blamed on lower mass market table games revenues. This was partially offset by higher rolling chip revenues and recovery of previously provided doubtful debt.  

Rolling chip volumes totaled $11.4 billion, up 2.7% year over year. The rolling chip win rate was 2.7%, up 10 basis points (bps) year over year and at the low end of the projected 2.7% to 3% Range.

Mass market table games drop amounted to nearly $1.22 billion, up 10.5% year over year. However, mass market table games hold percentage was 28.6%, down 770 bps.

Total non-gaming revenues at City of Dreams in the quarter were $71.9 million, down 9.2% year over year.

Altira Macau

Net revenues at Altira Macau were $140.2 million, up 35.7% year over year.  This segment generated adjusted EBITDA of $17.5 million in the reported quarter, compared with the prior-year quarter’s $3.3 million. The improvement was primarily led by higher rolling chip revenues and recovery of previously provided doubtful debt.

Additionally, rolling chip volume was $4.9 billion, up 11.4% from the prior-year quarter. The rolling chip win rate was 3.3%, up 60 bps and higher than the projected range of 2.7% to 3%.

Table drop in the mass market table games segment was $125.2 million, up 11% year over year. However, mass market table games hold percentage was 18.4%, down 80 bps.

Meanwhile, total non-gaming revenues at Altira Macau totaled $7 million, down 1.4% year over year.

Mocha Clubs

Net revenues from Mocha Clubs were $30.7 million, up 6.2% year over year. Also, adjusted EBITDA of $7.4 million increased 37% year over year.

The gaming machine handle for the quarter was $622.7 million, up 1.4% year over year. The gaming machine win rate was 4.8% in the quarter, up 20 bps from the year-ago quarter.

Studio City

In the reported quarter, net revenues at this property were $369 million, up 49.9% year over year. Also, adjusted EBITDA of $91.5 million was up 61.4% on a year-over-year basis. The upside was backed by commencement of rolling chip operations in November 2016 and improved performance at the mass market table games segment.

While rolling chip volume totaled $5.7 billion, the rolling chip win rate was 2.8% in the quarter (at the low end of the guided range of 2.7-3%).

Mass market table games drop was $848.2 million, up 24.2% year over year. However, the mass market table games hold percentage was 26.1%, down 80 bps year over year.

Total non-gaming revenues at Studio City in the quarter were $52.2 million, down 2.1% year over year.

City of Dreams Manila

In the fourth-quarter, net revenues at City of Dreams Manila were $167.5 million, up 15.8% year over year. Adjusted EBITDA was $53.8 million, up 7.2% from the year-ago quarter.

Rolling chip volume totaled $2.9 billion, up 38.1% from the year-ago quarter figure. However, the rolling chip win rate was 3.1%, down 40 bps on a year-over-year basis but slightly above the projected range of 2.7% to 3%.

Mass market table games drop came in at $189.2 million, up 27% year over year. Moreover, the mass market table games hold percentage was 30.9% in the quarter, up 310 bps year over year.

Total non-gaming revenues at City of Dreams Manila were $31.4 million, up 11.7% year over year.

Operating Highlights

Operating income in the quarter was $129.0 million, reflecting an 11% increase from a year ago. Net income totaled $81.2 million, up 87.5% year over year.

Adjusted EBITDA was $339.8 million, up 12% year over year. The upside was mainly attributable to higher contribution from Studio City and Altira Macau driven by increased casino revenues, partially offset by lower contribution from City of Dreams in Macau.

Net non-operating expenses in the fourth quarter were $58.5 million, showing a year-over-year decline of $36.8 million. Depreciation and amortization costs totaled $133.5 million in the quarter under review.

Balance Sheet

Total cash and bank balances as of Dec 31, 2017, were $1.5 billion, including $9.9 million bank deposits with original maturities over three months and $45.5 million restricted cash, primarily related to Studio City.

Total debt, net of unamortized deferred financing costs at the end of the fourth quarter of 2017, was $3.6 billion. Capital expenditures in the fourth quarter grossed $167.8 million, related to Morpheus and other projects at City of Dreams.

Declaration of Dividend

On Feb 8, 2018, Melco’s board of directors approved a quarterly dividend of 5 cents per ordinary share (equivalent to 14 cents per ADS) for the fourth quarter of 2017. The quarterly dividend will be paid on or about Mar 7, 2018, to shareholders of record at the close of business as on Feb 20, 2018.

2017 Results

For 2017, Melco reported net revenues of $5.3 billion, up 17.8% year over year. The increase can be primarily attributed to improved performance in all gaming segments, especially the performance in rolling chip segment including the fully-operating rolling chip operations in Studio City in the current year.

Operating income in the year was $607.6 million, reflecting a year-over-year increase of 67%. Adjusted property EBITDA was $1,422.8 million, up 31% year over year.

Net income was $347 million or 71 cents per ADS, compared with $175.9 million or 35 cents in 2016.

Zacks Rank & Peer Releases

Melco carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Wynn Resorts (WYNN - Free Report) posted fourth-quarter 2017adjusted earnings per share of $1.40 that outpaced the Zacks Consensus Estimate of $1.36 by nearly 2.9%.

Las Vegas Sands’ (LVS - Free Report) fourth-quarter 2017adjusted earnings of 88 cents per share surpassed the Zacks Consensus Estimate of 77 cents by 14.3%.

Upcoming Release

MGM Resorts (MGM - Free Report) is scheduled to report fourth-quarter numbers on Feb 20, before market opens. The Zacks Consensus Estimate for earnings in the to be reported quarter is pegged at 7 cents.

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