Melco International Development （0200.HK） GGR Rally Underperformed Sector’s in 2Q24

Investment Rating - The investment rating for Melco International Development is "BUY" with a target price of HKD 5.60 based on a 2025E EV/EBITDA of 7.0x [7][30]. Core Insights - Melco Resorts & Entertainment reported a net income of USD 1,160 million in 2Q24, reflecting a 4.3% quarter-over-quarter increase. The adjusted property EBITDA was USD 303 million, up 1.3% quarter-over-quarter, achieving 68% of the 2Q19 level. The property EBITDA margin stood at 26.2% [2][3]. - The projected GGR for 2025 and 2026 is estimated at HKD 36,991 million and HKD 40,293 million, which corresponds to 79% and 86% of the 2019 levels. The recovery in VIP, mass market, and slot revenue is expected to reach 29%, 123%, and 96% of 2019 levels respectively [2][3]. - The report indicates that Melco's GGR recovery is lagging behind the industry, with mass-market and slot growth showing signs of slowing down [2][3]. Financial Performance - For 2Q24, Melco's GGR was USD 1,223 million, which is 70% of the 2Q19 level, compared to the sector's 77%. VIP revenue decreased by 5% year-over-year but increased by 15% quarter-over-quarter, recovering to 25% of the 2Q19 level [3][4]. - City of Dreams Macau was the largest contributor to net income, accounting for 50% with an EBITDA margin of 29%. Studio City contributed 30% of net income with an EBITDA margin of 23% [4][5]. - In July, inbound tourist trips reached 3,028,000, averaging 98,000 daily, which is 85.8% of the level in the same period of 2019, indicating a potential strengthening of the gaming industry [5][6]. Revenue and Profit Projections - Revenue projections for Melco International Development are as follows: HKD 34,823 million for 2024E, HKD 38,400 million for 2025E, and HKD 42,344 million for 2026E [6][15]. - The net profit attributed to the parent company is expected to be HKD 1,014 million in 2024E, HKD 1,822 million in 2025E, and HKD 1,631 million in 2026E [6][15]. - The diluted EPS is projected to be HKD 0.51 for 2024E, HKD 0.92 for 2025E, and HKD 0.82 for 2026E [6][15].