Melco International Development Limited, the parent company of Macau concessionaire Melco Resorts & Entertainment, says it will record an impairment of between HK$838 million and HK$1.02 billion (US$105 million and US$128 million) on certain assets for the year ended 31 December 2024, related to the slower than anticipated ramp of its Studio City Phase 2 development in Macau.
In a Hong Kong Stock Exchange filing, the company explained that the impairment will increase the group’s FY24 net loss by up to HK$956 million (US$120 million), with net loss expected to be in the range of HK$1.59 billion to HK$1.78 billion (US$199 million to US$223 million).
The impairment will be non-cash in nature while the company’s net loss will still be narrowed from a loss of HK$3.49 billion (US$437 million) in FY23.
Melco said the impairment results primarily from the long-term discounted cash flow valuation method required under Hong Kong Financial Reporting Standards given the longer than expected ramp up of operations following the opening of Studio City Phase 2. No such impairment has been recorded by Melco Resorts – which is listed on the NASDAQ – as it is not required under US accounting principles.
The impairment comes despite Studio City reporting a 9% year-on-year increase in GGR to US$322 million in the December quarter, powered by 10% growth in mass GGR to US$287 million and 19% growth in slots GGR to US$29 million.
In its recent earnings call, Melco noted that it was continuing with substantial improvements to Studio City that has seen hoarding covering the majority of the front of the property and work on new check-in and dining areas underway.
