CICC: Raises MELCO INT'L DEV (00200) target price to HKD 5.80, maintains "outperform" rating.

China Gold released a research report stating that it maintains MELCO INT'L DEV (00200) 2025 and 2026 adjusted EBITDA unchanged, maintains an outperform industry rating, and raises the target price by 14% to 5.80 Hong Kong dollars, based on the current discount level, corresponding to a 20% Net asset discount rate, with 7% upside potential compared to the current stock price. The main points of China Gold are as follows: 2Q25 performance better than expected Melco International Development announced 2Q25 performance on July 31: net revenue of 1.328 billion US dollars, an increase of 15% year-on-year, an increase of 8% quarter-on-quarter, and a recovery to 91% of 2Q19; Adjusted property EBITDA was US$378 million, up 25% year-on-year, up 11% quarter-on-quarter, and recovered to 84% of 2Q19, better than the consensus expectation of US$347 million. The bank believes that Melco International Development's performance is mainly due to: 1) stable operating cost control, leading to better profit margin performance; 2) The performance of the water dance show driving visitor volume at City of Dreams in Macau. Key points of management performance Management pointed out that the strong trend in June 2025 continued into July 2025, and it is expected that this trend will continue into 3Q25. Benefiting from a historic high in visitor volume at the company's Macau properties, the continuing performance of the high-end market is driving performance. The company will close the Jumbo Dragon Casino and three Mocha slot clubs by the end of 2025, and booked an impairment loss of approximately US$56 million in 2Q25. Management is optimistic about the closure of industry satellite entertainment venues and Mocha slot clubs (including satellite venues owned by competitors and owned by the company in Taipa), and expects Studio City is expected to benefit from this, while noting that competitors are raising reinvestment rates, Melco remains focused on enhancing its products to maintain customer retention. In addition, the strengthening of intelligence gaming table information technology helps optimize the company's rebate expenses for customers. Management believes that the water dance show helped City of Dreams in Macau to attract visitors again, playing a positive role in its non-gaming revenue. The company will continue to work on converting visitor volume into gaming revenue. Although the Israel-Iran conflict in June 2025 affected the business of City of Dreams Cyprus, the summer room bookings increased significantly. City of Dreams Sri Lanka will open on August 1, 2025, mainly targeting Indian customers. As the first resort of its kind in South Asia, management expects this property to take longer to ramp up. Management pointed out that City of Dreams Manila showed stable performance in July 2025, and Melco International Development repurchased shares totaling approximately $120 million at a price of around USD 5 per ADS in April and May 2025. Risk warning: The pace of recovery may be slower than expected; industry competition may intensify, resulting in market share loss; new property openings may lag behind expectations.