A move by Melco Resorts and Entertainment (Philippines) to delist from the main board of the Philippine Stock Exchange and conduct a tender offer for outstanding public shares is a positive for the company, reducing complexity around its ownership structure and paving the way for further expansion, according to Bernstein analysts.
Melco, which currently holds a 72.77% interest in its Philippines arm, announced early Monday its intention to delist and conduct the tender offer for more than 1.5 billion shares at an offer price of Php7.25 per share. The tender offer will be filed on or around 17 September 2018.
Addressing the announcement in a note, Bernstein’s Vitaly Umansky, Zhen Gong and Kelsey Zhu said the transaction should be viewed favorably “as it will reduce some of the complexity in Melco by eliminating a publicly traded affiliate with limited liquidity and allow Melco more flexibility in further growing the Philippines business.”
If fully executed, the tender will cost Melco around Php11.2 billion (US$208 million), equating to 5.6x EV on 2019 estimates.
“We view this as a very favorable price,” Bernstein added. “While the tender price is at a premium to recent trading (as would be necessary to facilitate the tender), it is a 21% discount to the highest price reached in 2019.
“The valuation is also a substantial discount to MRP’s closest competitor in Manila, Bloomberry, which currently trades at 8.5x EV/2019E.”
Bernstein said it expects the tender offer to last for around 20 days at which time Melco may extend or modify its offer.
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