Melco Resorts & Entertainment (NASDAQ:MLCO) stock fell 0.078% (As on June 21, 11:29:50 AM UTC-4, Source: Google Finance) after Credit Suisse upgraded the company to Outperform from Neutral with a price target of $18.20, up from $14. Given a better-than-expected recovery in the first half of 2023, it lifts its GGR estimates and is turning more constructive on the sector. The firm’s analysts said MLCO has an undemanding valuation, and they see a likely positive second quarter earnings surprise on the way.
With a better-than-expected recovery in 1H23, the firm’s analysts note four positive key structural trends and are turning more constructive on the sector: (1) a supportive government; (2) increasing per-player value; (3) successful non-gaming events so far; and (4) an early recovery sign in the VIP segment. The GGR QTD beat expectation, with the mass GGR at ~90% of FY19’s level (1Q23: 67%). The VIP segment also pleasantly surprised, at 25% of FY19’s level (1Q23: 15%). By segment, MLCO should gain 2% mass share, while Wynn/SJM each ~1% VIP share. Credit Suisse has lifted its 2023/24/25E GGR for MLCO to 66%/87%/99% of 2019’s level and estimates the sector 2024 EBITDA at 101% of 2019’s level.
In addition, they see catalysts such as a stronger-than-expected June GGR, an earnings upgrade ahead of the 2Q results, the summer holidays, and potential China’s policy stimulus on consumption ahead. “Shorter term, MLCO should offer the most positive earnings surprise in 2Q23,” the analysts concluded.
On the other hand, Total operating revenues for the first quarter of 2023 were US$716.5 million, representing an increase of approximately 51% from US$474.9 million for the comparable period in 2022. The increase in total operating revenues was primarily attributable to the improved performance in all gaming segments primarily due to the relaxation of COVID-19 related restrictions in Macau during the quarter. Operating income for the first quarter of 2023 was US$0.4 million, compared with operating loss of US$135.9 million in the first quarter of 2022. Melco generated Adjusted Property EBITDA of US$190.8 million in the first quarter of 2023, compared with Adjusted Property EBITDA of US$56.0 million in the first quarter of 2022.
Net loss attributable to Melco Resorts & Entertainment Limited for the first quarter of 2023 was US$81.3 million, or US$0.18 per ADS, compared with US$183.3 million, or US$0.39 per ADS, in the first quarter of 2022.