Melco Resorts Expands into New Markets with Asset-Light Strategy

Melco Resorts & Entertainment is exploring expansion into new markets through an asset-light strategy, partnering with local operators to co-run multi-billion-dollar casino projects. The approach aims to reduce debt and capture growth opportunities in emerging markets. The company is already opening its first project under this strategy in Sri Lanka and may reveal more details within the next 12-18 months.

Melco Resorts & Entertainment is expanding its footprint beyond Macau, leveraging an asset-light strategy to explore new markets. The company, led by CEO Lawrence Ho, is partnering with local operators to co-run multi-billion-dollar casino projects in emerging markets, aiming to reduce debt and capture growth opportunities [1].

The asset-light strategy allows Melco to enter new markets without committing significant capital, instead relying on management fees and EBITDA from the projects [1]. Ho, who is also Melco’s founder, mentioned that the company may reveal more details about its efforts within the next 12 to 18 months.

Melco has been facing challenges due to the COVID-19 pandemic, which disrupted its global expansion and increased its debt to over US$7 billion. However, the company is now focusing on reducing its borrowings as Macau’s growth potential has been constrained by Beijing’s crackdown on high rollers and tighter regulations [1].

The group has already announced plans to explore a sale of its Manila resort to help cut debt and free up capital. Ho previously described Thailand’s casino legalisation efforts as a "generational opportunity," but the delay in Thailand's plan could benefit Melco by giving the company more time to cut debt and increase capital [1].

Melco is currently opening its first project under the new strategy in Sri Lanka, a US$1.2 billion joint development between Melco and the country’s major conglomerate John Keells Holdings. The company has invested about US$125 million and will operate the gaming floors and some accommodations [1].

Additionally, Melco operates a casino resort in Cyprus and is exploring ways to recoup part of its investment, such as replacing some of the initial shareholders’ loans with bank loans or bringing in strategic investors [1].

Melco posted US$378 million in adjusted property earnings before interest, taxes, depreciation and amortisation for the three months ended June, up 25 per cent year on year, and beating analysts’ expectations. The performance follows a boom in Macau’s non-gaming activities, including concerts and entertainment shows, as well as a bullish stock market in Hong Kong and mainland China [1].

References:
[1] https://www.businesstimes.com.sg/companies-markets/melco-eyes-global-casino-expansion-new-asset-light-model
[2] https://cdcgaming.com/brief/melco-eyes-global-casino-expansion-on-new-asset-light-model/
[3] https://www.marketbeat.com/stocks/NASDAQ/MLCO/