Melco could receive 50% of casino EBITDA at City of Dreams Sri Lanka, analysts say

07/11/24

Morgan Stanley estimates that Melco Resorts could receive US$30m in cash flow.

Macau.- Morgan Stanley has shared details about Melco Resorts & Entertainment’s share of earnings from City of Dreams Sri Lanka, a US$1bn integrated resort (IR) in central Colombo that will be developed with John Keells Holdings. Analysts Praveen Choudhary and Gareth Leung said Melco will pay John Keells 50-55 per cent of casino earnings before interest taxes depreciation and amortisation (EBITDA) . It will pay 30-40 per cent income tax on its share.

Analysts noted that gross gaming revenue (GGR) would need to exceed US$300m to achieve US$100m EBITDA. Based on a 50 per cent EBITDA share and 40 per cent tax, analysts suggested that Melco Resorts could receive US$30m in cash flow.

The Government of Sri Lanka has awarded Melco’s wholly-owned local subsidiary a 20-year casino licence. The company will operate the gaming area at the IR, with an initial investment of approximately US$125m. Melco will also manage the top five floors of the hotel, which will represent 113 of the 800 total hotel rooms, under its Nuwa brand.

The casino is expected to open in mid-2025 while the resort, which will have 800 hotel rooms, will open in October this year. The venue will also include retail, food and beverage outlets and MICE facilities. It will be the first IR in Sri Lanka and South Asia.

In this article:

Melco Resorts