Intensified competition among Macau’s concessionaires and the high marketing and commission expenses it demands will likely keep Melco Resorts & Entertainment’s Adjusted EBITDA margin flat through the remainder of 2026, according to latest commentary from S&P Global Ratings.
However, strong cash flow and the company’s commitment to pay down debt should show positive results from early 2027 support both margin and leverage improvement.
In a Tuesday note following release last week of Melco’s 2Q26 earnings, S&P said it expects Melco’s Adjusted EBITDA margin to stay flat at 24.3% in 2026, while its debt-to-EBITDA ratio likely won’t improve to 4.0x – from 5.2x at the end-June 2026 – until the first half of 2027, rather than the end of 2026 as the ratings agency previously anticipated.
This is in part because the Q2 results were negatively impacted by low VIP hold and a reduced gaming volumes thanks to the football World Cup.
“Nevertheless, we expect demand normalization and better operating leverage to support a recovery of Melco’s EBITDA margin in the next six months. This, together with stronger performance in Cyprus and Sri Lanka, should drive EBITDA growth,” S&P said.
The ratings agency also highlighted comments from Melco management during its Q2 earnings call suggesting its focus in the short-term remains the reduction of debt.
“We believe Melco will continue to grow discretionary cash flow and pay down debt over the next 12 months,” S&P said. “The company’s decision to rein in capital expenditure and defer dividend resumption to 2027, alongside the use of trademark sale proceeds to partially pay down debt at Melco International Development Ltd (Melco’s parent) underscores the group’s commitment to debt reduction, in our opinion.”
