Published on: May 4, 2026, 01:41h.
Updated on: May 4, 2026, 01:41h.
- Melco Resorts shares have decreased by 27.54% this year
- An analyst suggests the firm has various pathways to enhance shareholder value
- This includes a potential acquisition from its Hong Kong-listed parent company
Melco Resorts & Entertainment (NASDAQ: MLCO) has seen its share price decline by 27.54% year-to-date. Despite this downturn, the Macau-based casino operator has numerous strategies available to potentially increase shareholder value.
In a recent analysis for clients, Texas Capital analyst David Bain highlights several opportunities for the City of Dreams operator to achieve “corporate-led value creation optionality.” This includes the potential for acquisition by Melco’s Hong Kong-listed parent company, Melco International Development (200:HK), which is overseen by CEO Lawrence Ho. Bain noted that the resulting debt profile would be more appealing than what might result from a potential acquisition by Caesars Entertainment (NASDAQ: CZR).
“MLCO is approximately 56% owned by its parent 200 HK, which is managed by CEO and Chairman Lawrence Ho,” Bain remarks. “If Mr. Ho were to increase his direct MLCO stake as part of a 200 HK-led buyout, we estimate that 200 HK could acquire MLCO’s public shares at a 56% premium to last Friday’s closing price with roughly one turn of leverage. Post-buyout, the traditional net leverage for 2026 is projected to be about 5.3x compared to 4.3x pre-acquisition, significantly lower than the speculated 5.8x level for CZR after their transaction.”
While Bain states he lacks insider knowledge on immediate developments within Melco, the company’s “distinctive corporate flexibility” is likely appreciated by its management.
Exploring Shareholder Rewards
Melco has looked at value-enhancing initiatives in the past, such as the sale of City of Dreams Manila, although those efforts did not result in significant outcomes. If the company decides to pursue shareholder value enhancement again, it might focus more on returning capital to its investors.
This could involve the initiation of a dividend payout. Bain calculates that Melco could sustain a $200 million annual dividend, equating to 49 cents per share. Based on last Friday’s closing price, this dividend would yield 9%, more than double the average dividend yield in Macau’s casino sector. Such a payout could broaden Melco’s investor base while providing a safety net for the stock price.
Bain further points out that the casino operator might consider an aggressive share repurchase plan (ASR) to quickly utilize its remaining $710 million buyback authorization.
“MLCO could fully utilize its $710 million repurchase authority through an ASR or a fast buyback. Executing this at $6 per share would increase 200 HK’s ownership to nearly 80%. If share prices remain stagnant, 200 HK could then acquire MLCO’s remaining shares at a 56% premium to last Friday’s close for a half turn of leverage,” the analyst explains.
Melco Shares Are Undervalued
The shares of Melco Resorts are considered undervalued, not just because the stock is trading around $5.50 at present. Applying more significant valuation metrics reveals that the stock is substantially discounted compared to its peers in Macau.
Melco shares currently trade at an estimated 6.2x enterprise value/earnings before interest, taxes, depreciation, and amortization (EV/EBITDA), notably lower than the average of 8.7x among its Macau competitors. Bain points out that if Melco were to trade at the same 8.7x multiple, its stock would be valued at 133% above its closing price on May 1.
“The gaming sector has seen numerous recent go-private or M&A transactions indicating intrinsic values that surpass those of public equities,” concludes the analyst. “We maintain that MLCO’s valuation is positioned for a recalibration upward. Furthermore, MLCO’s financial structure and free cash flow generation provide unique corporate options for value enhancement.”