Ge Long Hui·2025-11-08 04:50Core Viewpoint - The performance of Melco Resorts in Q3 2025 exceeded consensus expectations, driven by stable operational cost control despite a decline in market share for gaming revenue [1][2] Financial Performance - Melco reported net revenue of $1.31 billion in Q3 2025, an 11% year-on-year increase but a 1% quarter-on-quarter decline, recovering to 91% of Q3 2019 levels [1] - Adjusted property EBITDA was $380 million, up 18% year-on-year and 1% quarter-on-quarter, also recovering to 91% of Q3 2019 levels, surpassing Bloomberg's consensus estimate of $348 million [1] Development Trends - The company noted a weak performance during the Golden Week in October 2025 due to typhoon disruptions, but demand accelerated post-holiday with a 30% year-on-year growth in the following 21 days, achieving the highest monthly total gaming revenue in history at City of Dreams [1] - Management observed that new clients from other countries have been driving growth in direct VIP business in Macau [1] - Following the closure of the Junlong Hotel and Mocha Club in Q3 2025, the company relocated 15 gaming tables to City of Dreams and 90 slot machines to Studio City [1] Strategic Initiatives - A new gaming area was established at the southeast entrance near the Macau light rail station to attract more visitors [2] - Despite intense competition in the Macau gaming industry, Melco believes the long-term trend for high-end mass gaming remains healthy, with no concerns about profit margin erosion [2] Earnings Forecast and Valuation - The company maintains its adjusted EBITDA forecasts for 2025 and 2026, with the current stock price corresponding to 6 times the 2026 estimated EV/adjusted EBITDA, suggesting a 1% upside potential to the target price of $8.50 [2] - For Melco International Development, the adjusted EBITDA forecasts for 2025 and 2026 remain unchanged, with a target price of HKD 5.80, indicating a 20% upside potential based on a 20% discount to net asset value [2]