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Melco says daily Macau operating costs ex-Studio City down to US$1.5 million a day in 2Q20

Melco Resorts Finance Ltd, the wholly-owned subsidiary of Melco Resorts & Entertainment that operates City of Dreams Macau, Altira Macau and Mocha Clubs, says it managed to reduce daily operating costs at its Macau properties to around US$1.5 million per day in 2Q20.

The figure, which formed part of a performance update as part of the company’s proposed US$500 million senior notes offer announced earlier this week, represents a significant reduction compared with the first quarter, the subsidiary said.

Melco had previously cited group-wide running costs of US$2.5 million during the early days of COVID-19, although that figure included Studio City, which is operated by another of its subsidiaries – Studio City International Holdings Ltd (SCIHL).

SCIHL revealed last week that its daily operating costs through 2Q20 have been around US$700,000.

“We have taken various mitigating measures to manage through the current Covid-19 outbreak challenges, such as implementing a cost reduction program to minimize cash outflow of non-essential items and rationalizing our capital expenditure program with deferrals and reductions which benefits our balance sheet,” Melco Resorts Finance said in this week’s update.

“During the second quarter of 2020, our average daily operating costs were approximately US$1.5 million, reflecting a decrease from the run-rate levels in the first quarter of 2020.”

Those costs look likely to be significantly offset from this week following the long-awaited news that mandatory quarantine measures for people returning to neighboring Guangdong Province from Macau have been lifted. Analysts estimate this will result in Macau’s gross gaming revenue rebounding to around 25% of 2019 levels.

Melco saw group-wide GGR fall 40% to US$964 million and Adjusted Property EBITDA decline 82% to US$75 million in 1Q20, with Melco Resorts Finance stating in its performance update that it expects to achieve break-even Adjusted EBITDA upon reaching approximately 35% to 40% of its historical GGR run-rate at City of Dreams, Altira and Mocha Clubs.

SCIHL last week pointed to similar break-even EBITDA requirements at Studio City.

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