The purchase for US$375.0 million of the “Melco” and other related trademarks by a unit of United States-listed Melco Resorts & Entertainment Ltd from a subsidiary of its Hong Kong-listed parent Melco International Development Ltd, was hailed on Thursday by Melco Resorts’ chairman and chief executive Lawrence Ho Yau Lung (pictured in a file photo). He said it was giving the casino firm “full control of the IP [intellectual property],” providing the flexibility for the group to expand its brand “without any incremental costs”.
Melco and some associated marks are now global, with properties in the Philippines, the Republic of Cyprus and Sri Lanka, as well as in Macau.
Mr Ho was speaking on Melco Resorts’ conference call to discuss the firm’s first-quarter earnings.
The trademarks deal – with Melco International unit, MI IP Licensing Services 1 Ltd – was announced in a Hong Kong filing, and completion is due on May 8.
Geoffrey Davis, chief financial officer of Melco Resorts, stated on the call: “Trademark licence fee for the first quarter of 2026 was approximately US$13.4 million, implying a purchase price [on the IP unit] of just under seven times the annualised first quarter fee.”
He stated: “As a result of the purchase, we have an immediate increase in EBITDA [earnings before interest, taxation, depreciation and amortisation] and cash flow.”
The CFO noted: “The purchase will be funded by a combination of a drawdown from our credit facility and internal funds, but the additional debt is immaterial to our credit profile.”
Mr Davis added that Melco Resorts’ debt to EBITDA profile post-transaction “is expected to increase by less than half a turn, and we expect to leverage our return back down to first quarter 2026 levels before the end of 2026”.
Upon completion, the target company will become a wholly-owned subsidiary of Melco Resorts. Melco International currently holds approximately 56.32 percent of the total issued shares of Melco Resorts.
Dividends, May holiday season
Mr Ho was asked on the call whether the outlay on the trademark purchase might push back the resumption of dividends at Melco Resorts.
He stated: “I think our goal is still to resume the dividend at the end of this year.” Mr Davis added that “the balance sheet should be in shape for that by the end of this year”.
The Melco Resorts’ CEO was bullish on the business prospects for Macau’s Labour Day holiday season starting on Friday.
“I think with the conflict in the Middle East, we’re seeing people travel shorter distances. I read somewhere that there’s 10 percent cancellation of flights from China to international markets,” Mr Ho said.
“If anything, that has really benefitted us. So, I think so far for May Golden Week, we’re seeing both occupancy and player quality improve on a year-on-year basis.”
For the Chinese mainland, the public holiday runs from Friday (May 1) to May 5 inclusive, and the season is sometimes referred to one of Macau’s “Golden Week” peak-demand times.
REM hotel, retail rejig
Mr Ho also mentioned on the call that the planned phased opening of a hotel tower at City of Dreams Macau, that is being newly-branded and revamped as “REM”, was “on track” for early in the third quarter.
“We expect REM to represent a meaningful enhancement to the City of Dreams product portfolio and to redefine contemporary luxury across Macau,” he added.
The firm’s CFO said the third-quarter opening with 149 hotel rooms, would coincide with a US$30,000 to US$40,000 per day increase in operating expenses.
Evan Winkler, Melco Resorts’ president, said on the call that REM would be “heavily weighted towards one-bedroom suite product with some flexibility in terms of combining suites and combining rooms”.
He added: “We’re going to be hitting the market with a very good product going into the third quarter and we’ll have some slight expense from that, but should receive obviously a pretty big revenue uplift as that ramps.”
Mr Ho mentioned on the call that the company had started “a refresh of the retail areas at City of Dreams” in Macau, and has plans to “enhance” the property’s “food and beverage offerings”.
The Melco boss added, referring to luxury retailer DFS Group and City of Dreams: “We’ve always felt that with our partnership with DFS ending, that was always an area of weakness.”
In January, it was announced that DFS Group was to be acquired by China Tourism Group Duty Free Corp Ltd.
Mr Ho noted: “Starting next year, we’re going to have some exciting new brands that we’re dealing directly, where we think we’ll really complement the luxury proposition of City of Dreams.”
Mr Winkler said that the firm had a “very good phasing plan” to minimise disruption at City of Dreams for the retail revamp, which would take “10 to 12 months”. He mentioned it had already started, with the “northern retail arc” at the property already with hoardings.
Mr Winkler added: “During this next three to four quarters we’re working with them [existing retail tenants] and at various times – as they’re disrupted – providing relief to those tenants as they are committed to us and sticking with us during this transformational period.”
