CICC issued a research report maintaining MELCO INT'L DEV's (00200) 2025 and 2026 adjusted EBITDA forecasts essentially unchanged, sustaining its "outperform" rating while raising the target price by 14% to HK$5.80. Based on the current discount level, this corresponds to a 20% discount to net asset value, representing 7% upside potential from the current share price.

**Q2 2025 Results Exceed Expectations**

Melco Resorts & Entertainment announced its Q2 2025 results on July 31: net revenue of $1.328 billion, up 15% year-over-year and 8% quarter-over-quarter, recovering to 91% of Q2 2019 levels; adjusted property EBITDA of $378 million, up 25% year-over-year and 11% quarter-over-quarter, reaching 84% of Q2 2019 levels, surpassing institutional consensus expectations of $347 million.

The firm believes Melco Resorts' performance was driven by: 1) stable operational cost control, delivering better profit margin performance; 2) the House of Dancing Water show boosting visitor traffic to City of Dreams Macau.

**Key Management Conference Call Highlights**

Management noted that the strong trends in June 2025 continued into July 2025, with expectations for this momentum to persist through Q3 2025, benefiting from record-high visitor volumes at the company's Macau properties, with premium mass gaming continuing to drive performance.

The company will close Kam Long Club and three Mocha Clubs by end-2025, recording approximately $56 million in impairment losses in Q2 2025. Management is optimistic about the cessation of satellite casinos and Mocha Clubs across the industry (including competitors' satellite venues and the company's satellite venue in Taipa), expecting Altira Macau to benefit from this development. While noting that competitors are increasing their reinvestment rates, Melco remains focused on enhancing its offerings to maintain customer retention.

Additionally, enhanced smart gaming table technology helps optimize the company's customer rebate expenditures.

Management believes the House of Dancing Water show has helped City of Dreams Macau re-attract visitors, positively impacting non-gaming revenue. The company will continue efforts to convert visitor traffic into gaming revenue.

Despite disruptions to City of Dreams Mediterranean operations in June 2025 due to conflicts between Israel and Iran, summer room bookings have shown significant growth.

City of Dreams Sri Lanka will open on August 1, 2025, primarily targeting Indian customers. As the first resort of its kind in South Asia, management expects this property may require more time to reach full capacity.

Management indicated that City of Dreams Manila's operations remained stable in July 2025. Melco Resorts repurchased approximately $120 million worth of shares in April and May 2025 at around $5 per ADS.

**Risk Factors:** Recovery pace may be slower than expected; intensified industry competition may lead to market share loss; new property openings may lag behind expectations.