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' (MLCO) Q2/24 results were soft, but in line with expectations. The company’s earnings improved sequentially in Q2, though the pace of its earnings recovery (relative to pre-pandemic levels) and debt reduction have continued to lag peers. During H1/24, MLCO’s net gross debt was down by just 1% from FYE 2023. Hence, the company’s leverage remained weaker than peers, with Net Debt/LTM Adjusted Property EBITDA of 5.1x (vs. 3.9x for Wynn Macau, 2.5x for Sands China and an estimated 2.1x for MGM China). Going forward, we expect MLCO to continue generating small positive FCF and deleverage gradually, with the extent of its FCF generation likely tempered by ongoing share repurchases.

  Melco Resorts' (MLCO) Q2/24 results were soft, but in line with expectations. The company’s earnings improved sequentially in Q2, though the pace of its earnings recovery (relative to pre-pandemic levels) and debt reduction have continued to lag peers.   During H1/24, MLCO’s net gross debt was down by just 1% from FYE 2023. Hence, the company’s leverage remained weaker than peers, with Net Debt/LTM Adjusted Property EBITDA of 5.1x (vs. 3.9x for Wynn Macau, 2.5x for Sands China and an estimated 2.1x for MGM China).   Going forward, we expect MLCO to continue generating small positive FCF and deleverage gradually, with the extent of its FCF generation likely tempered by ongoing share repurchases. 

Melco Resorts - Earnings Flash - H1 FY 2024 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-1776'>Indika Energy</a></li><li><a href='#lucror-entity-5293'>Melco Resorts and Entertainment (Philippines)</a></li><li><a href='#lucror-entity-35862'>PT Pertamina (Persero)</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.Indika EnergyMelco Resorts and Entertainment (Philippines)PT Pertamina (Persero)

Morning Views Asia: Indika Energy, Melco Resorts and Entertainment (Philippines)

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

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/didi-chuxing-inc" target="_blank" data-smartkarma-citation="entities:27467:1" rel="noopener">DiDi Global (DIDI US)</a> had serious data problems. It still listed itself, against the wishes of the regulators. Then it got in serious hot water. And it's been getting hotter. </li>
<li>
<a href="https://www.smartkarma.com/entities/ramsay-health-care-ltd" target="_blank" data-smartkarma-citation="entities:673:1" rel="noopener">Ramsay Health Care (RHC AU)</a> announced an unsolicited, non-binding Offer from KKR (and HISTA), at A$88.00/share, a 36.7% premium to last close, however, earnings have been left bedridden by the pandemic.</li>
<li>Post-Deal, <a href="https://www.smartkarma.com/entities/keppel-corp-ltd" target="_blank" data-smartkarma-citation="entities:12:1" rel="noopener">Keppel Corp (KEP SP)</a> will look more like <a href="https://www.smartkarma.com/entities/sembcorp-industries-ltd" target="_blank" data-smartkarma-citation="entities:1087:1" rel="noopener">Sembcorp Industries (SCI SP)</a>. More engineering, less power generation infra assets, more other infra assets and more data centres. </li>
</ul>



DiDi Global (DIDI US) had serious data problems. It still listed itself, against the wishes of the regulators. Then it got in serious hot water. And it's been getting hotter. 

Ramsay Health Care (RHC AU) announced an unsolicited, non-binding Offer from KKR (and HISTA), at A$88.00/share, a 36.7% premium to last close, however, earnings have been left bedridden by the pandemic.
Post-Deal, Keppel Corp (KEP SP) will look more like Sembcorp Industries (SCI SP). More engineering, less power generation infra assets, more other infra assets and more data centres. 


Last Week in Event SPACE: Didi Global, Ramsay Health, Keppel Corp, Melco, Toshiba, Twitter

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.

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Melco Resorts & Entertainment (MLCO US)

Melco Resorts - Earnings Flash - H1 FY 2024 Results - Lucror Analytics

Melco Resorts' (MLCO) Q2/24 results were soft, but in line with expectations. The company’s earnings improved sequentially in Q2, though the pace...

Lucror Analytics

Morning Views Asia: Indika Energy, Melco Resorts and Entertainment (Philippines)

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

Lucror Analytics

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

Last Week in Event SPACE: Didi Global, Ramsay Health, Keppel Corp, Melco, Toshiba, Twitter

The weekend is here! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed...

David Blennerhassett

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