Melco Resorts Issues Grim Forecast on Coronavirus Impact

Posted on: April 28, 2020, 09:03h. 

Last updated on: April 28, 2020, 01:16h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Melco Resorts & Entertainment (NASDAQ:MLCO) said the coronavirus pandemic is having a material impact on its operations, the bulk of which are in Asia – one of the regions most hard hit by the respiratory illness.

Melco Resorts coronavirus City of Dreams
City of Dreams operator Melco says COVID-19 is materially affecting operations and results. (Image: AFP)

The operator of Altira Macau and the City of Dreams in Cotai, like other concessionaires on the peninsula, is feeling the effects of travel restrictions that are keeping gamblers away from the Special Administrative Region (SAR). With visitations still scant following a 15-day closure in February, analysts are speculating the first nine months of this year could be a wash for Macau casinos and that it could be 2022 before gross gaming revenue (GGR) there returns to pre-coronavirus levels.

The disruptions to our operations caused by the Covid-19 outbreak have had a material effect on the company’s financial condition, operations, and prospects during the first quarter of 2020,” said Melco in a Form 6-K filing with the Securities and Exchange Commission (SEC).

In the filing, Melco pointed to the Guangdong Province’s travel controls, including a 14-day quarantine policy for travelers entering the region from other areas, as one issue weighing on the operator’s results. Guangdong is the mainland province nearest to Macau and serves as a major thoroughfare for visitors to the gaming center.

Not Much Clarity

Some operators believe Macau and other Asian gaming hubs will be quick to rebound when the COVID-19 situation eases. That’s because the region previously dealt with similar scenarios, such as the severe acute respiratory syndrome (SARS) and Middle East respiratory syndrome (MERS) outbreaks earlier this century.

However, like its rivals on the peninsula, Melco can’t pinpoint when the resurgence will occur, and it currently can’t forecast just how deeply the pandemic is affecting results.

“Given the uncertainty around the extent and timing of the potential future spread or mitigation of Covid-19, and around the imposition or relaxation of protective measures, we are unable to reasonably estimate the impact to our future results of operations, cash flows, and financial condition,” said the company in the SEC filing.

The company added that a Macau recovery is largely dependent on easing of travel restrictions, including the temporary ban on the individual visit scheme (IVS), something Beijing isn’t providing any clues on.

“Any recovery from such disruptions will depend on future developments, such as the duration of travel and visa restrictions and customer sentiment, including the length of time before customers will resume traveling and participating in entertainment and leisure activities at high-density venues, all of which are highly uncertain,” according to Melco.

Other Problem Spots

Investors often associate Melco as being a Macau company, and that’s true. But the company has exposure to other regions being affected by COVID-19.

For example, the firm operates City of Dreams Manila. Integrated resorts in the Philippines have been shuttered since mid-March, and those closures were recently extended to at least May 15.

Melco didn’t specifically mention COVID-19 impact on its Manila venue in the Form 6-K filing.