Banking group Morgan Stanley forecasts the under-construction MGM Cotai casino resort (pictured), in Macau’s Cotai district, will achieve adjusted property earnings before interest, taxation, depreciation and amortisation (EBITDA) of US$233 million in full-year 2018.
Macau casino operator MGM China Holdings Ltd is currently building the HKD26-billion (US$3.3-billion) MGM Cotai, targeting for a fourth-quarter opening. The firm currently operates a single property, MGM Macau, in the city’s traditional downtown casino district.
“MGM [China] could see the highest EBITDA growth among [Macau market] peers in 2018, and thus drive outperformance versus peers,” analysts Praveen Choudhary, Alex Poon and Thomas Allen said in a note on Sunday. “We also expect MGM [China] to see the highest EBITDA growth among peers between 2017 and 2019,” they added.
Morgan Stanley forecasts that MGM Cotai will generate EBITDA of US$233 million in 2018 and US$395 million in 2019. “This translates into 35 percent and 22 percent overall EBITDA growth in 2018 and 2019, respectively,” it said.
The institution said it expects MGM Cotai’s casino to focus on the mass-market segment. The property is expected to grab a mass-market share of 4.4 percent and 5.1 percent in 2018 and 2019, respectively, based on the assumption of 200 mass-market live gaming tables, said the Morgan Stanley analysts.
MGM China management had previously indicated that MGM Cotai would not focus on VIP play.
Morgan Stanley expects the casino operator to add 30 VIP tables in mid-2018 at a per-table table yield of US$30,000 to US$37,000 per day in 2018 and 2019.
Morgan Stanley’s EBITDA forecast assumes the Cotai property to have operating expenses of US$1.05mn per day, excluding gaming tax, rebates, junkets’ commissions and promotional allowances.
The investment bank also upgraded MGM China’s stock to overweight, citing the expected strong EBITDA growth and the increase in dividends after the end of the capital expenditure cycle. “Dividend yield should exceed 5 percent in 2019 and grow sustainably,” said the institution.
Morgan Stanley nonetheless highlights some concerns regarding MGM China’s performance, including a “potential market share loss before Cotai opens and potentially slow ramp-up of Cotai casino due to the absence of junket VIP business in first half 2018”.
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"I am not going to speculate on what the [casino licence refreshment] tender requirements would be. I have full confidence and faith in the Macau government to treat everyone fairly"
Wilfred Wong Ying Wai
President and chief operating officer of Macau-based casino operator Sands China