Published on: January 23, 2026, at 10:40 AM.
Updated on: January 23, 2026, at 10:40 AM.
- Melco’s Lawrence Ho recently announced the company is evaluating alternatives for City of Dreams Manila.
- If analysts predict a $600 million sale, it would account for approximately 25% of Melco’s overall market capitalization.
- Experts believe the stock is undervalued, asserting that the recent decline is exaggerated.
Melco Resorts (NASDAQ: MLCO), led by Lawrence Ho, stands to gain significantly if it proceeds with the sale of its City of Dreams Manila integrated resort.
Today, Texas Capital analyst David Bain commenced coverage of Melco’s stock with a “buy” recommendation and a price target of $11.50, indicating a potential upside of 84% from current levels. In his analysis, Bain suggests that Melco could reach approximately $600 million through the sale of its Philippines resort.
“We project that MLCO could achieve nearly $600M if it divests its Manila operations, consequently lowering net leverage close to 3.5x by 2026,” the analyst states. “While the Manila market has become increasingly competitive, we believe it has stabilized. Should MLCO proceed with a strategic review leading to a sale, this could reduce leverage by about half a turn.”
In February 2025, Melco engaged CBRE Capital Advisors, Inc. and Moelis & Company LLC to consider strategic options for City of Dreams Manila. Three months later, the operator confirmed that the review is ongoing, although no transaction has yet been finalized. If Melco were to sell the Manila casino hotel for $600 million, it would represent nearly 25% of the company’s market capitalization, which stands at $2.48 billion.
Melco Stock at a Discount Despite Bear Market
Melco’s stock has dropped 35% since December 1, entering a significant bear market. This decline reinforces the perception that the stock is undervalued when compared to its Macau-centric competitors, with the special administrative region (SAR) contributing 85% to the operator’s business.
Bain highlights that Melco trades at a 31% discount in terms of enterprise value/earnings before interest, taxes, depreciation, and amortization (EBITDA) compared to Macau rivals. This is notable, given that even with recent improvements in the sector, Macau casino shares are considered undervalued. Factors like elevated leverage and the absence of a US headquarters, while listed in New York, are obstacles that impact the stock.
If Melco proceeds with selling City of Dreams Manila, it could utilize the proceeds to reduce its debt, potentially making the firm more appealing to investors. Furthermore, the company’s exposure to Macau may serve as a catalyst for its stock performance.
“Based on our discussions with industry contacts and operators, we observe that the visitor demographic in Macau has diversified post-COVID, with more individuals seeking non-gaming experiences alongside traditional gaming options,” Bain notes. “Given its multiple offerings, we anticipate that MLCO is well-positioned to capitalize on its premium room inventory of over 4,500 located in Cotai, Macau for enhancing overnight visits.”
Melco’s Non-Macau Ventures Present Opportunities
Apart from its operations in Macau and Manila, Melco has a presence in Cyprus and Sri Lanka. City of Dreams Mediterranean in Cyprus represents the operator’s casino hotel there. Although some analysts have previously proposed that Melco divest this property as well, Bain disagrees.
He highlights that this venue, in which Melco holds a 75% stake, achieved its highest EBITDA results in Q3 2025 and might benefit from a rise in Russian tourism if the conflict in Ukraine resolves positively.
“We consider that Cyprus and Sri Lanka provide asset-light value, with Cyprus showing positive EBITDA momentum,” concludes Bain.