Senior Credit Analyst, Lucror Analytics

Leonard Law, CFA

Senior Credit Analyst

High Yield Experts

Lucror Analytics

Lucror Analytics is a leading credit and ESG research specialist and a provider of technology solutions for differentiated fixed income strategies. Our roots are in bottom-up fundamental credit analysis with a specialization in high yield corporate credits from Europe, Asia and Latin America. We are one of few research specialists integrating ESG considerations with fundamental credit research through a dedicated ESG platform. Our ESG assessment covers five key criteria: Disclosure, E,S, & G Pillars, Controversies, ESG Impact on Credit and ESG Momentum.

Recognizing the importance and value-add of Factor Investing in fixed income, Lucror developed the Smart Quant Navigator (SQN), an intuitive platform that helps clients devise and implement factor-based strategies ranging from pure quant to active fundamental, with integrated ESG.

Our company has been at the forefront of developments in the fixed income markets, identifying opportunities and consistently delivering new products and value-adding solutions to clients. Lucror has close relationships with the largest and most reputable asset managers, family offices, hedge funds, investment and wealth managers globally.

Credit

Melco Resorts and Entertainment (MLCO) announced yesterday that it is planning to issue USD 500 mn in 8NC3 notes. In addition, subsidiary Studio City has initiated a tender offer to repurchase up to USD 100 mn of the STCITY 6.0 '25s. We view positively MLCO's proposed bond issuance and the maturity extension of its credit facilities, as well as Studio City's tender offer, as they demonstrate management's proactive approach in managing the company's debt maturities. The transactions will significantly reduce MLCO's refinancing risk in FY 2025, as the company would have c. USD 1.5 bn of availability under its credit facilities that can be used to help repay the USD 1.0 bn MPEL 4.875 '25s due in June 2025. Moreover, management has committed to prioritise debt reduction over dividend payments in FY 2024. We view the price talk of 7.75-7.875% as fair.

  Melco Resorts and Entertainment (MLCO) announced yesterday that it is planning to issue USD 500 mn in 8NC3 notes. In addition, subsidiary Studio City has initiated a tender offer to repurchase up to USD 100 mn of the STCITY 6.0 '25s. We view positively MLCO's proposed bond issuance and the maturity extension of its credit facilities, as well as Studio City's tender offer, as they demonstrate management's proactive approach in managing the company's debt maturities. The transactions will significantly reduce MLCO's refinancing risk in FY 2025, as the company would have c. USD 1.5 bn of availability under its credit facilities that can be used to help repay the USD 1.0 bn MPEL 4.875 '25s due in June 2025. Moreover, management has committed to prioritise debt reduction over dividend payments in FY 2024.   We view the price talk of 7.75-7.875% as fair. 

Melco Resorts - Event Flash - Proposing USD 500 Mn 8NC3 Notes Issuance - Lucror Analytics

Melco Resorts' (MLCO) results remained soft in Q4 and FY 2023. GGR from the company's Macau properties improved sequentially in Q4, but continued to underperform peers relative to the 2019 levels. Moreover, EBITDA from City of Dreams (COD) Manila was flat, while earnings from COD Mediterranean fell due to conflict in the Middle East. MLCO’s weaker earnings recovery meant that the pace of its net debt reduction in FY 2023 (-7% y-o-y) has lagged those of peers such as Sands China (-19%), MGM China (-23%) and Wynn Macau (-10%). That said, from a credit perspective, we are less concerned about the softer earnings performance of Wynn Macau and Melco Resorts (vs. for MGM China and Sands China), as we believe these companies will prioritise using FCF generation to gradually deleverage. In our opinion, the slower pace of deleveraging for Wynn Macau and Melco Resorts may delay the resumption of dividend payments, but is unlikely to affect the companies' refinancing abilities.

  Melco Resorts' (MLCO) results remained soft in Q4 and FY 2023. GGR from the company's Macau properties improved sequentially in Q4, but continued to underperform peers relative to the 2019 levels. Moreover, EBITDA from City of Dreams (COD) Manila was flat, while earnings from COD Mediterranean fell due to conflict in the Middle East.   MLCO’s weaker earnings recovery meant that the pace of its net debt reduction in FY 2023 (-7% y-o-y) has lagged those of peers such as Sands China (-19%), MGM China (-23%) and Wynn Macau (-10%). That said, from a credit perspective, we are less concerned about the softer earnings performance of Wynn Macau and Melco Resorts (vs. for MGM China and Sands China), as we believe these companies will prioritise using FCF generation to gradually deleverage. In our opinion, the slower pace of deleveraging for Wynn Macau and Melco Resorts may delay the resumption of dividend payments, but is unlikely to affect the companies' refinancing abilities. 

Melco Resorts - Earnings Flash - FY 2023 Results - Lucror Analytics

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.<ul><li><a href='#lucror-entity-5225'>Country Garden Holdings Co</a></li><li><a href='#lucror-entity-810'>Melco Resorts & Entertainment</a></li><li><a href='#lucror-entity-7845'>Road King Infrastructure</a></li></ul>

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.Country Garden Holdings CoMelco Resorts & EntertainmentRoad King Infrastructure

Morning Views Asia: Country Garden Holdings Co, Melco Resorts & Entertainment

Lucror Analytics' ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable). We assess Melco Resorts' ESG as "Adequate", in line with its Social and Governance scores. The Environmental pillar is "Strong". Controversies are "Immaterial" and Disclosure is "Strong".

Lucror Analytics' ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).  We assess Melco Resorts' ESG as "Adequate", in line with its Social and Governance scores. The Environmental pillar is "Strong". Controversies are "Immaterial" and Disclosure is "Strong". 

Melco Resorts - ESG Report - Lucror Analytics

Melco Resorts (MLCO)'s H1/23 results were soft, mainly as its Macau properties underperformed in Q1. That said, the company regained some market share in Q2, as GGR from its Macau properties climbed 43% q-o-q. Q2/23 mass market GGR reached 84% of the Q2/19 level, albeit still marginally below the industry figure of 86%. We expect MLCO's mass market GGR in Macau to continue improving going forward, supported by the opening of Studio City Phase 2. In our view, the main credit concern is the company's aggressive stance towards shareholder returns. This is evidenced by MLCO's small share repurchases throughout the COVID-19 pandemic (between FY 2020 and FY 2022), despite its severely deteriorated balance sheet. Moreover, the company has a history of providing cash support to parent Melco International.

  Melco Resorts (MLCO)'s H1/23 results were soft, mainly as its Macau properties underperformed in Q1. That said, the company regained some market share in Q2, as GGR from its Macau properties climbed 43% q-o-q. Q2/23 mass market GGR reached 84% of the Q2/19 level, albeit still marginally below the industry figure of 86%. We expect MLCO's mass market GGR in Macau to continue improving going forward, supported by the opening of Studio City Phase 2.   In our view, the main credit concern is the company's aggressive stance towards shareholder returns. This is evidenced by MLCO's small share repurchases throughout the COVID-19 pandemic (between FY 2020 and FY 2022), despite its severely deteriorated balance sheet. Moreover, the company has a history of providing cash support to parent Melco International. 

Melco Resorts - Earnings Flash - H1 FY 2023 Results - Lucror Analytics

Hong Kong

Melco Resorts & Entertainment Limited develops, owns, and operates casinos. The Company offers casino gaming, restaurants, bars, and resorts facilities. Melco Resorts & Entertainment serves customers in Asia.

Melco Resorts & Entertainment (MLCO US)

Melco Resorts - Event Flash - Proposing USD 500 Mn 8NC3 Notes Issuance - Lucror Analytics

Melco Resorts and Entertainment (MLCO) announced yesterday that it is planning to issue USD 500 mn in 8NC3 notes. In addition, subsidiary Studio...

Lucror Analytics

Melco Resorts - Earnings Flash - FY 2023 Results - Lucror Analytics

Melco Resorts' (MLCO) results remained soft in Q4 and FY 2023. GGR from the company's Macau properties improved sequentially in Q4, but continued...

Lucror Analytics

Morning Views Asia: Country Garden Holdings Co, Melco Resorts & Entertainment

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region,...

Lucror Analytics

Melco Resorts - ESG Report - Lucror Analytics

Lucror Analytics' ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable). We assess Melco Resorts' ESG as...

Lucror Analytics

Melco Resorts - Earnings Flash - H1 FY 2023 Results - Lucror Analytics

Melco Resorts (MLCO)'s H1/23 results were soft, mainly as its Macau properties underperformed in Q1. That said, the company regained some market...

Lucror Analytics