Macau-based casino operator MGM China Holdings Ltd says its adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) grew by 38.6 percent to about HKD1.55 billion (US$197.6 million) in the third quarter compared to the corresponding period last year.
MGM China reported its results in Hong Kong this morning after its parent company, MGM Resorts International, announced group-wide data in Las Vegas, Nevada, following the market close in New York on Wednesday.
MGM China said total revenue at its two Macau properties grew by 21.5 percent to about HKD5.78 billion in the third quarter. The company said the increase was due to the continued ramp up of operations at MGM Cotai (pictured). At MGM Macau, the firm’s original property on the city’s peninsula, revenue actually declined by 14.0 percent in year-on-year terms in the three months to September 30.
Jim Murren, MGM Resorts’ chief executive and chairman, said during a conference call with investment analysts after the third-quarter results announcement: “[The MGM China result] represents – we believe – excellent performance given the various disruptions in that marketplace.”
Mr Murren added: “The VIP segment continues to have some challenges but does not represent a significant portion of our cash flows there and we gained market share in mass market, which remains very resilient.”
For the first nine months of this year, MGM China’s adjusted EBITDA was up 35.1 percent in year-on-year terms to about HKD3.08 billion. Revenue was up 23.5 percent, to about HKD17.07 billion, in year-on-year terms for the same period.
MGM China opened its Cotai casino resort in February last year and in March this year added The Mansion, a high-end accommodation cluster aimed at VIP players. During the conference call, Mr Murren said the Mansion product – featuring a total of 27 villas – was “ramping up very nicely”.
Sanford C. Bernstein Ltd said in a note on Thursday that MGM China’s third quarter results “were helped by high hold in VIP segment from both its peninsula property (3.3 percent) and Cotai (4.2 percent). Headline EBITDA number of HKD1.55 billion was 3 percent above Bernstein and consensus estimates.”
The brokerage however pointed out that performance at MGM Macau “was much weaker than expected”.
Analysts Vitaly Umansky, Kelsey Zhu and Eunice Lee added: “MGM China had gained share in both mass and VIP for the quarter both year-on-year and quarter-on-quarter. Overall, the company has 10.2 percent market share in the third quarter of 2019, according to our estimates (up from 9.0 percent in the second quarter of 2019).
Brokerage Jefferies Hong Kong Ltd pointed out that MGM China’s management remained “more positive” about the outlook for its mass gaming segment than for the VIP segment. Analysts Andrew Lee and Lois Zhou added: “Ongoing stronger group earnings continue to be driven by MGM Cotai turnaround with third quarter 2019′s MGM Cotai HKD693 million adjusted EBITDA the highest quarterly level since [the property’s] February 2018 opening.”
According to J.P. Morgan Securities (Asia Pacific) Ltd, “net-net, we’d characterise MGM China’s third quarter as mixed, and we didn’t find anything that would materially move our/consensus estimates up or down.”
No impact from HK protests
The chief executive of MGM China, Grant Bowie – in commentary during the third-quarter earnings call of parent company MGM Resorts – dismissed analyst concern regarding potential negative impacts on the performance of the Macau-based casino operator stemming from months of street protests in neighbouring Hong Kong.
“The Hong Kong situation is somewhat independent of us,” Mr Bowie said. “We haven’t seen any direct impact.”
He added: “Visitors are starting to change their travel strategies. We just [have] got to keep… our things valuable and make sure we promote Macau as – unfortunately – a separate destination, and make sure that we can allow those customers to come in and get in and out of Macau effectively. So, nothing [no impact] really there.”
Research suggests many visitors to Hong Kong make a side trip to Macau. That has been made easier and cheaper since the opening in October last year of the Hong Kong-Zhuhai-Macau Bridge. But a number of travel authorities overseas has issued safety advisory warnings for Hong Kong in the light of the recent street scenes in Macau’s neighbouring Special Administrative Region.
Tourists make up for the majority of gamblers in Macau. A number of them use Hong Kong International Airport – one of the world’s busiest air hubs and now linked directly to the Hong Kong-Zhuhai-Macau Bridge Bridge – to access Macau.
Several recent memos to investors, issued by analysts, have suggested that the anti-government protests in Hong Kong have not had a major impact on Macau’s casino gross gaming revenue.
MGM Macau, Cotai breakdown
In the detail of its third-quarter results, MGM China said there had been an 8.2-percent decrease in the VIP turnover at its two Macau casinos.
VIP table games turnover at MGM Cotai was about HKD28.35 billion in the three-month period ended September 30, up significantly from HKD8.10 billion at the corresponding period last year. VIP table games win stood at HKD1.19 billion compared to HKD65.2 million a year before.
The win on “main-floor” – i.e., mass-market – table games at MGM Cotai was up 84.4 percent in year-on-year terms, to about HKD1.94 billion in the third quarter; slot machine gross win was up 56.3 percent to about HKD275.6 million, from HKD176.3 million in the prior-year period.
The MGM Macau property reported VIP turnover of about HKD39.33 billion for the third quarter, down from HKD65.80 billion in the corresponding period last year. VIP table games win stood at HKD1.30 billion, a decline of 40.0 percent in year-on-year terms.
As of September 30, the MGM Macau property had 290 tables and 1,083 slot machines and the newer MGM Cotai property had 262 tables with 1,186 slots.
At a parent level, MGM Resorts announced on Wednesday its next quarterly dividend of US$0.13 per common share would be paid on December 16 to shareholders of record at December 10.
MGM Resorts, with extensive interests in the United States aside from its Macau operation, said it posted a group-wide net loss attributable to shareholders of US$37.1 million in the third quarter compared to a profit of US$142.9 million in the same period last year. The loss included a US$219 million non-cash impairment charge related to the sale of the Circus Circus Las Vegas venue and adjacent land.
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Proportion of mass-market GGR in the aggregate casino revenue for 2019 in the Macau market