Melco Resorts & Entertainment Limited has secured market entry in Sri Lanka through a partnership with John Keells Holdings, the largest publicly traded conglomerate on the Colombo Stock Exchange.
In a collaboration announced on Tuesday, Hong Kong-based Melco, one of the six casino operators in China’s Macau that also owns and operates integrated resorts in the Philippines and Cyprus, was confirmed as the casino operator of John Keells’ $1 billion integrated resort in central Colombo.
Melco is also lending its global resort brand — City of Dreams — to the Sri Lanka development that’s set to be completed and commence resort operations in the third quarter of 2024. Melco is paying John Keells $125 million for the 20-year casino rights and has secured a gaming license from the Sri Lankan government. Melco and John Keells will share in the net gaming revenue.
Founded in 1870 by its namesake, John Keells Holdings is today one of the largest companies in Sri Lanka, the island nation off the southeastern tip of India. In addition to its hospitality portfolio, the conglomerate has holdings in information technology, food and beverage products, supermarkets, tea brokering, life insurance, and financial services.
Melco Resorts’ $125 million investment additionally affords the casino company an allotment of premier guestrooms at the resort that was named Cinnamon Life Integrated Resort amid construction.
Melco will run the top five floors of the hotel under its Nuwa hotel brand. Melco’s hotel allotment will total 113 guestrooms. The overall resort features 800 occupancies. The remaining 687 keys will operate as the Cinnamon Hotel managed by John Keells.
Melco did not specify the number of slots and table game positions it plans to incorporate. Sri Lanka is home to several small casinos, but none are competitive or comparable to the City of Dreams integrated resort.
Melco Resorts shares traded on the Nasdaq remain greatly below their pre-pandemic price. Melco shares, as of this afternoon, were at $6.60, or more than 70% below the $25 that they were trading at in early May 2019.
Melco on Tuesday revealed its first quarter 2024 earnings that showed total operating revenues increased 55% to $1.11 billion. The revenue comeback was primarily driven by the continued recovery in inbound tourism in Macau where Melco is most exposed with City of Dreams, Studio City, Altira, and Mocha Clubs.
John DeCree, a gaming analyst at CBRE Equity Research, issued a buy note on Melco today with a price target of $13. DeCree cited a strong first quarter, operational improvements in Macau, and Melco being in the early stages of trying to regain lost market share in the Chinese gaming enclave.
DeCree also thinks Sri Lanka will pay dividends on the relatively low cost of market entry.
