Melco Resorts Stock Rebounds, Investors Optimistic Despite Q2 Net Loss

Posted on: July 28, 2021, 01:49h. 

Last updated on: July 28, 2021, 02:33h.

Melco Resorts shares surged more than 10 percent today. The investor enthusiasm comes less than 24 hours after the Macau integrated casino resort operator reported a net loss of $185.7 million in the second quarter.

Melco Resorts Stock Rebounds, Investors Optimistic Despite Q2 Net Loss
Several Melco Resorts properties are seen on the Cotai Strip, including City of Dreams, Morpheus, and Altira. Shares of the publicly traded Macau casino company skyrocketed during trading on July 28. (Image: Melco Resorts)

Melco’s US shares are traded on the Nasdaq. The stock jumped $1.36 per share today to close at $14.91. For long-term holders of the casino firm, Wednesday’s trading was much-welcomed, as the stock has tumbled nearly 17 percent in 2021. 

April through June, Melco’s operations in Macau, the Philippines, and Cyprus generated revenue of $566.4 million. While that’s a nine percent quarter-on-quarter rise from Q1’s $520 million, the income wasn’t enough to offset expenses. 

However, Melco’s outlook, some investors believe, is bright. That’s a notion shared by Melco’s billionaire founder, Chairman and CEO Lawrence Ho.

“We are pleased to see a progressive recovery in business levels,” Ho told investors and gaming industry analysts. “We remain optimistic on our Macau market outlook, especially as Macau explores scenarios for more flexible travel with other cities in the Greater Bay Area.”

The three other US-based casino firms licensed in Macau didn’t experience nearly the same midweek trading surge. Las Vegas Sands gained two percent, MGM Resorts one percent, and Wynn Resorts 1.8 percent. 

Melco Mass Motivation

Melco Resorts shares tumbled on Tuesday as the Q2 earnings report was unveiled. Shares lost almost four percent, but today more than regained those losses.

During the call, Melco and Ho revealed that the customer focus at Altira Macau is changing. Altira is a casino resort located within Melco’s City of Dreams campus.

Formerly known as Crown Macau, Altira features 216 guestrooms and a casino floor with 220 table games and 500 slot machines. Long focused on VIP business, Ho says the Cotai Strip property will pivot to the so-called premium mass market. 

At Altira, we’ve embarked upon a strategic shift that aligns Melco’s first integrated resort with the company’s broader focus on the high-margin premium mass segment. Consequently, we’ve shut down VIP operations at Altira and moved both its existing junket and premium direct VIP business to City of Dreams and Studio City,” the Melco boss explained.

Ho added that Altira’s former VIP gaming spaces will be reconfigured for the premium mass segment. 

Melco Kindness Doesn’t Pay

In May, Melco Resorts launched its “Thinking of You” employee initiative. The program afforded workers the opportunity to take time off. Though those who took Melco up on the offer do not receive their full salaries, they do receive a monthly subsidiary.

For workers who step aside for six to 12 months, they receive 40 percent of their full pay. For workers who take a leave of absence for 13 to 18 months, they collect 55 percent of their scheduled compensation.

Gaming analysts at Sanford C. Bernstein said the program negatively impacted Melco’s Q2 bottom line. However, in the quarters ahead, the brokerage says the initiative “will lead to slightly lower compensation expenses.”