Melco Resorts Could Solidify Premium-Mass Share with New Projects
Posted on: August 12, 2025, 12:24h.
Last updated on: August 12, 2025, 01:21h.
- New projects could be catalysts for resurgent stock
- Research firm sees Melco shares as undervalued
Buoyed by a rebound in Macau gross gaming revenue (GGR), shares of Melco Resorts (NASDAQ: MLCO) are higher by almost 51% year to date, but that doesn’t imply upside from here is limited. New projects could be contributors to further price appreciation.
Those include efforts to diversify its nongaming menu in Macau, which could help the concessionaire solidify market share in the important premium-mass segment – the tier of bettors and tourists above mass market and below VIPs.
We see Melco making greater efforts in increasing nongaming business in its new Studio City phase 2 project, where it has built various nongaming facilities, including 900 luxury hotel rooms, an additional indoor/outdoor water park, and state-of-the-art meetings, incentives, conventions, and exhibitions (MICE) space, as well as other nongaming attractions,” notes Morningstar analyst Jennifer Song. “All these would help the Macao government to diversify its economy and position it well amid Macao’s long-term development.”
The research firm has a fair value target of $10 on Melco, implying the stock is somewhat undervalued as it trades around $8.70 at this writing.
More Than Macau Could Boost Melco Shares
As one of six concessionaires in Macau, Melco is typically viewed by investors as a play on the world’s largest casino hub. To some extent, that’s accurate, and it’s a positive trait when gamblers and tourists are flocking to the special administrative region (SAR).
“We believe its [Melco’s] strength in the premium mass segment and its leadership in product innovation, along with the launch of Studio City phase 2 in 2023 with 900 rooms, will drive solid market share and earnings growth in the mid to long term,” adds Song.
Still, there’s more to the Melco story. Earlier this month, the City of Dreams Sri Lanka property opened its doors and is expected to be a major driver of jobs growth and tourism to the country. The venue, which has a 20-year license, is essentially operating as a monopoly.
Lawrence Ho’s company could also benefit by addition through subtraction. The operator is currently conducting a strategic review of alternatives for its City of Dreams Manila casino hotel. Divesting that property could generate capital for use in Macau or elsewhere. Analysts have also said Melco should consider parting ways with City of Dreams Mediterranean in Cyprus, but the company hasn’t said that’s on the table as of yet.
Melco’s Financial Footing Solid
Adding to the bullish case for Melco shares is the fact that the Macau concessionaire has low liquidity risk and is focusing on reducing its debt burden.
Although net debt remained high at USD 5.90 billion as of the end of 2024, its debt maturity profile has improved after a series of refinancing transactions,” observes Song. “As of end-2024, Melco has around USD 1.3 billion in cash and USD 2.0 billion of credit facilities available, totaling USD 3.3 billion. This is well above its debt of USD 1.2 billion due in 2025, sharply reducing the firm’s refinancing risk in 2025.”
The Morningstar analyst points out that it’s possible Melco will restart its dividend next year.
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