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Revenue down but mass market improvement provides MGM China upside

Thursday, 09 November 2017 05:21
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MGM China has seen revenues fall 6% year-on-year to US$471 million (HK$3.7 billion) in 3Q17, including an 11% decline in main floor table games.

With the company anxiously awaiting the launch of its new Macau integrated resort, MGM Cotai, on 29 January 2018, operating income fell to US$35 million compared to US$84 million 12 months earlier, with Adjusted EBITDA down 21% to US$118 million.

VIP table game revenue decreased 3% year-on-year due to a 6% decline in turnover, partially offset by an increase in hold percentage to 3.3% compared with 3.0% in 3Q16.

However, the results represented an improvement over the previous sequential quarter – rising 5% from US$449 million (HK$3.5 billion) in the second quarter.

Adjusted EBITDA grew 3% quarter-on-quarter to US$134.7 million (HK$1.05 billion) with an Adjusted EBITDA margin of 28.5%.

MGM China also noted sequential improvement in all gaming segments across the three months, with around 80% of profit contributed by the main floor. Main floor table games win increased by 2% while drop increased by 7% sequentially. Slot win grew by 14% and VIP table games win increased by 9% sequentially.

“MGM Macau saw market share improve each month within the period,” it said. “The group sees this as a reflection of stability and resilience in the Peninsula market which attracts quality players.

“We continue to invest and remodel the main floor at MGM Macau with additional retail space to create further diversified experiences for our visitors.”

Morgan Stanley analysts said the results were better than expected driven by improved mass, however Cotai remains the key for MGM China moving forward.

“MGM is our top pick for 2018 with over 20% upside, as we expect MGM Cotai to drive the highest EBITDA growth for MGM China among peers of 33% in 2018,” explained analysts Praveen Choudhary, Alex Poon and Thomas Allen.

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