Review of City of Dreams Manila Progressing, According to Melco

Review of City of Dreams Manila Progressing, According to Melco

May 9, 2025, 5:00am

Last updated on: May 9, 2025, 5:00am

Todd Shriber @etfgodfather Read More Financial Gaming Business Mergers and Acquisitions Melco mum on potential suitors for City of Dreams Manila, but disposal process moves forward

Melco Resorts & Entertainment (NASDAQ: MLCO) reported noticeable progress in the ongoing strategic review of its City of Dreams Manila casino hotel. Geoff Davis, the gaming company's CFO, addressed this matter during the first-quarter earnings call, confirming potential buyers are diving into the details and signing NDAs.

Responding to a question from Citi analyst George Choi regarding an update on the Manila strategic review, Davis informed that the process was being handled with the help of advisors. "Potential buyers are entering the virtual data room, going through a series of questions, and we’ll narrow down the group for the bidding process," he said. Still, Davis was tight-lipped about specific timelines or potential buyers.

In February, Melco announced CBRE Capital Advisors, Inc. and Moelis & Company LLC as financial advisors to assist in exploring strategic alternatives for the City of Dreams Manila casino resort. Despite this announcement, Melco refrained from identifying any operators that had signed NDAs, indicating interest in the Philippines integrated resort.

City of Dreams Manila: Pros and Cons for Potential Buyers

City of Dreams Manila presents a mix of appealing and daunting aspects for potential buyers. Its cash flow positivity and profitability may entice prospective buyers, but there are also challenges like increasing competition in the market.

City of Dreams Manila serves as a source of income for the parent company, but its long-term appeal is limited due to the lack of growth drivers and the intensifying competition. Competition might increase further if Thailand approves casino gaming and Japan decides to add more integrated resorts.

First-quarter earnings for the Melco property showed a solid EBITDA, though the numbers declined compared to the year before. According to the statement, "For the quarter ended March 31, 2025, total operating revenues at City of Dreams Manila were US$101.6 million, compared with US$110.7 million in the first quarter of 2024. City of Dreams Manila's Adjusted EBITDA was US$30.1 million in the first quarter of 2025, compared with Adjusted EBITDA of US$37.8 million in the comparable period of 2024." The decrease in Adjusted EBITDA was primarily due to weaker mass market performance.

No Talk of Divesting Cyprus Casino

In January, speculations about Melco divesting its interests in its Cyprus and Philippines properties surfaced, as a potential avenue for raising cash and focusing on Thailand. However, Melco hasn't mentioned the possibility of selling its stake in the Cyprus property (City of Dreams Mediterranean), which has been affected by military conflicts in Europe and Israel. Instead, Ho expressed optimism about the property’s potential for the rest of the year.

With forward bookings for the summer period significantly higher than last year’s levels, the property is expected to perform well in the coming months. "City of Dreams Mediterranean and Cyprus achieved 10% year-over-year growth in property EBITDA for 1Q 2025, despite the continued noise in the region," said Ho during the conference call. "We are optimistic about the results that Cyprus can deliver over the rest of the year."

1. Todd Shriber @etfgodfather shared insights on the financial gaming business, highlighting the ongoing mergers and acquisitions in the industry, specifically the progress of Melco Resorts & Entertainment's strategic review for its City of Dreams Manila casino hotel.
2. Geoff Davis, Melco's CFO, confirmed during the first-quarter earnings call that potential buyers are examining the details and signing NDAs for the City of Dreams Manila property.
3. In the Asia Pacific gaming sector, the financial appeal of City of Dreams Manila lies in its cash flow positivity and profitability, but potential investors must also consider the increasing competition in the market.
4. Despite a decline in City of Dreams Manila's Adjusted EBITDA compared to the previous year, the property's solid EBITDA numbers and promising future bookings signify its potential for growth.
5. Contrary to rumors, Melco has not shown signs of divesting its Cyprus property, City of Dreams Mediterranean, despite the ongoing military conflicts in Europe and Israel, indicating optimism for the property's performance for the rest of the year.

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