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Melco Resorts posts loss, reports Rs 5b City of Dreams Sri Lanka casino licence fee
View(s):By Kapila Bandara
Hong Kong-based casino owner and operator Melco Resorts & Entertainment Limited, which will operate the John Keells Holdings’ multibillion-rupee integrated resort, City of Dreams Sri Lanka, has paid Rs 5 billion for a 20-year licence it secured, annual financial filings show.
In line with accounting treatments, Melco Resorts has recognised it as an intangible asset (non-monetary asset) which will be amortised on a straight-line basis (equal depreciation expense annually) until the casino licence expires.
Melco Resorts reported a loss of HK$780 million for the year ended 31 December, 2024 compared with HK$1.74 billion for 2023.
The City of Dreams Sri Lanka licence is effective April 1, 2024 and the fee is equivalent to about HK$129.880 million.
The then Sri Lanka Government gave the licence to Melco Resorts subsidiary Bluehaven Services (Private) Limited.
Melco’s City of Dreams in Macau, offering 430 gambling tables and 613 gambling machines, is its flagship integrated resort, attracting high-end high rollers.
A standout at the casino is the Cantonese fine dining restaurant, Jade Dragon, decorated with three Michelin Stars. Another stunning experience is its aquatic show ‘House of Dancing Water’, a highlight for visitors.
Melco’s strategic partner, conglomerate John Keells Holdings Plc, said early February when it reported third quarter 2024-2025 earnings that JKH will have a fixed and variable rental stemming from the economics of the gambling operations.
JKH Chairman Krishan Balendra told an investor webinar that Melco “is investing US$125m in fitting out and equipping’’ the casino.
Separately, he said Cinnamon Grand and Cinnamon Lakeside will benefit when City of Dreams is fully operational.
“At the right time, we may even look at refurbishing one or both properties’’.
Gihan Cooray, deputy chairman and group finance director of JKH told the investor webinar the casino rental has been structured as a landlord-tenant relationship and JKH will have a fixed and variable rental stemming from the economics of the gambling operations.
“What we stand to get is a fixed rental and a variable rent linked to the EBITDA (earnings before interest, taxes, depreciation, and amortisation) of the gambling operations of Melco. So, about 50% of the EBITDA would be something we stand to benefit from and the total rental range we expect is around 50% to 55% of the total economics of the gambling venture,’’ he explained.
“If we are looking at a US$250m gross gaming revenue, at a 40% EBITDA margin of what we said is EBITDA could be — this is not guidance — but US$100m and we would get around US$50m to US$55m as a possible rental.
There are other components, like hotel management fees from Nüwa (a luxury hotel brand of Melco first launched in Macau) and branding fees, but in the context of the numbers, those are not very material, and we stand to benefit from other aspects of the relationship as well.’’
Melco Resorts Chairman and Chief Executive Officer Lawrence Ho Yau-lung, reported in the annual filings the company looks forward to the opening of the casino at City of Dreams Sri Lanka, “which is on track to open in the third quarter of 2025’’. He describes it as a capital-light investment with an attractive return profile.
Melco Resorts (Macau) casino revenues are liable to the Macau special gaming tax and other levies. Melco Resorts (Macau) has a 10-year concession from 1 January 2023 to 31 December 2032 to operate casinos in tiny Macau island, the once-Portuguese colony.
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