Melco Resorts says it will buyback US$500 million worth of its own shares

The gaming firm made the announcement in a Form 6-K filling with the Securities and Exchange Commission. The new buyback plan replaces one set to expire in November and goes into immediate effect.

According to the filing, “the new program permits the company to purchase up to $500 million of its ordinary shares and/or its American depositary shares over a three year period commencing June 2, 2021… Purchases under this authorization may be made from time to time on open market at prevailing market prices.”

Melco stock’s primary listing is on the Hong Kong Stock Exchange. Its Nasdaq listing represents the aforementioned American depositary shares. It doesn’t overtly say as much in the regulatory document, but Melco could be sensing value in its shares.

The company has seen its US-listed stock tumble nearly 28% from its early March highs. The name is off 11.24% over the past month. Those figures could indicate the operator sees value in its equity, and that it’s looking to scoop up shares ahead of Macau recovering.

Basically, companies across all industries are criticized for announcing buyback when share prices are high and eschewing those plans when stock prices are depressed. Obviously, Melco is doing the opposite, and it could work in favor of patient investors.

It will be interesting to see how much of the $500 million the casino operator spends on repurchasing its shares, because no company is obligated to exhaust the entire amount of a proposed buyback plan.

Additionally, some research firms are concerned about Melco’s debt burden. But the company’s balance sheet is in decent shape, with almost $2 billion in cash.

As for potential looming catalysts for Melco, those would include a credible recovery in Macau taking hold in the second half of this year. It also hopes for favorable news emerging from Yokohama.

Editing by Rachel Hu