Posted on: May 4, 2026, 01:41h.
Last updated on: May 4, 2026, 01:41h.
- Shares of Melco Resorts are down 27.54% year-to-date
- Analyst says company has multiple avenues for creating shareholder value
- Those include a possible acquisition by the Hong Kong-listed parent
Melco Resorts & Entertainment (NASDAQ: MLCO) shares are down 27.54% this year, but the Macau casino operator has plenty of options at its disposal to potentially create shareholder value.
In a new report to clients, Texas Capital analyst David Bain posits multiple scenarios through which the City of Dreams operator could realize “corporate led value creation optionality,” including a possible acquisition by Melco’s Hong Kong-listed parent – Melco International Development (200:HK) — which is controlled by CEO Lawrence Ho. The analyst points out that the ensuing debt profile would be more attractive than what’s like to emerge if Caesars Entertainment (NASDAQ: CZR) is acquired.
MLCO is ~56% owned by parent 200 HK (controlled by MLCO CEO and Chairman Lawrence Ho),” observes Bain. “Assuming Mr. Ho would roll additional direct MLCO ownership into a 200 HK led buyout, we calculate 200 HK could purchase MLCO’s float at a 56% premium to Friday’s closing price for ~one turn of leverage. 2026E traditional net leverage would then be ~5.3x vs pre-buyout of 4.3x, well-below CZR’s speculated 5.8x post transaction level.”
The analyst notes he’s not privy to anything happening with Melco over the near-term, but the company’s “unique corporate optionality” probably isn’t lost on management.
Melco Could Consider Shareholder Rewards
Melco has previously examined value-creating opportunities, namely the sale of City of Dreams Manila, but nothing came of those efforts. Should the company again look to enhance shareholder value, it could put more emphasis on returning capital to investors.
That could include initiating a dividend. For $200 million a year, Melco could pay a dividend of 49 cents a share, according to Bain. Based on last Friday’s closing price, that would give the stock a 9%, or more than double the average dividend yield on Macau casino stocks. The analyst adds a dividend of that magnitude would expand Melco’s investor base while putting a floor under the shares.
Bain also notes the casino operator could engage in an aggressive share repurchase (ASR), effectively exhausting what’s left on a $710 million buyback plan in rapid fashion.
“MLCO could exhaust its $710M repurchase authorization in an ASR or aggressive buyback. Doing so at $6 per share would increase 200 HK’s ownership to nearly ~80%. If share prices do not respond, 200 HK could then purchase MLCO’s float at a 56% premium to Friday’s closing price for a ~half turn of leverage,” notes the analyst.
Melco Shares Are Cheap
Shares of Melco Resorts are inexpensive and not just because the stock trades around $5.50 at this writing. Using more important valuation metrics, the stock is deeply discounted relative to its Macau peer group.
Melco shares trade at an estimated 6.2x enterprise value/earnings before interest, taxes, depreciation and amortization (EV/EBITDA), well below the 8.7x average on Macau rivals. Bain says that Melco traded at 8.7x, the stock would be worth 133% more than its May 1 closing price.
“Gaming showcases multiple recent go-private/M&A gaming transactions demonstrating intrinsic values exceeding public equity ones,” concludes the analyst. “While we argue MLCO’s valuation should naturally re-rate higher. Further, however, MLCO’s capital structure and FCF generation also offer unique corporate optionality for value creation.”
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