Moody’s upgrades Melco Resorts credit rating

Analysts cited Macau’s strong gaming revenue recovery and Melco’s shift towards premium mass and direct VIP customers.

Macau.- Moody’s Investor Services has upgraded Melco Resorts Group’s credit outlook from negative to stable. The decision follows the release of the company’s third-quarter results, in which operating revenue was US$1.02bn, up from US$947.9m in the previous quarter and up 321 per cent in year-on-year terms.

The rating agency foresees Melco Resorts & Entertainment Limited (MRE) and Studio City generating free cash flow in the next 12-18 months, aided by the market recovery and the completion of major capital spending projects. 

A shift towards premium mass and direct VIP customers is anticipated to increase margins, with Melco Resorts’ adjusted EBITDA expected to reach US$0.9bn in 2023 and US$1.3bn in 2024. Studio City’s adjusted EBITDA is projected to turn positive in 2023, increasing to approximately US$0.3bn in 2024. 

Macau’s gross gaming revenue (GGR) has recovered since China’s reopening in early January, reaching 93 per cent and 38 per cent of 2019 levels for the mass and VIP segments, respectively, in the third quarter. Moody’s estimates mass-segment GGR at about 85 per cent of the 2019 level this year and a full recovery in 2024, driven by premium mass customers. The VIP segment GGR is expected to reach 32-36 per cent of the 2019 level in 2023-24 as direct VIPs replace some businesses lost due to regulatory restrictions on junkets.