GGRAsia – MGM China 2Q EBITDA up 37pct q-o-q as revenue recovers

MGM China 2Q EBITDA up 37pct q-o-q as revenue recovers

Aug 05, 2021 Newsdesk Latest News, Macau, Top of the deck

Macau casino operator MGM China Holdings Ltd saw its adjusted property earnings before interest, taxation, depreciation and amortisation (EBITDA) for the second quarter of 2021 rise by 37.4 percent sequentially to HKD116.0 million (US$14.9 million), according to a quarterly earnings filing of the parent company, United States-based MGM Resorts International.

It was the third consecutive quarter of positive EBITDA, after three quarters of losses, according to Wednesday’s filing. The Hong Kong-listed company had reported negative adjusted property EBITDA to the tune of HKD885.7 million a year earlier.

According to analyst Andrew Lee from brokerage Jefferies Hong Kong Ltd, MGM China’s second-quarter EBITDA result “was broadly in line consensus”.

MGM China runs two casino resorts in Macau: MGM Macau (pictured in a file photo) on the city’s peninsula, and MGM Cotai, in Macau’s Cotai district.

The firm reported revenue of HKD2.41 billion for second-quarter 2021, up by more than nine-fold year-on-year. The operator’s net revenue was also up 4.9 percent sequentially.

In a press release issued alongside the results, MGM China said it had “outperformed” the local market, with its second-quarter average daily gross gaming revenue (GGR) recovering to about 42 percent of pre-pandemic levels (i.e., fourth quarter 2019) compared to a market rebound of 36 percent.

The recovery was mostly felt in the main floor table games, where drop rose one fifth sequentially to US$1.3 billion – 62 percent of the levels recorded in the same quarter of 2019, according to parent MGM Resorts. Revenue in the segment was approximately US$252 million, up 10 percent sequentially.

VIP table games turnover at MGM China grew 9 percent sequentially to US$2.6 billion, just 24 percent of pre-pandemic levels. The operator’s VIP revenue fell by 9 percent from the first quarter of 2021 to US$71 million: MGM Resorts stated the decline was related to a win rate of 2.7 percent, at the lower end of the normal range.

The parent company said it was expecting a “steady recovery led by the premium mass segment, with continued relaxation of restrictions and sentiment uplift over time”.

Macau’s Chief Executive, Ho Iat Seng, affirmed on Wednesday that the local government was not ordering the closure of the city’s casinos, after a local family of four was confirmed as having caught the highly-infectious Delta variant of Covid-19. The city’s leader said it was hoped the local Covid-19 situation could be controlled within 14 days.

According to Wednesday’s presentation, the MGM Macau property recorded positive EBITDA of HKD171.4 million for the second quarter of 2021, up slightly sequentially. It was nonetheless a major improvement from the negative EBITDA of HKD391.0 million in the prior-year period.

The casino firm said the MGM Cotai casino resort posted negative EBITDA of HKD55.4 million in second-quarter 2021. That was down from negative EBITDA of HKD85.6 million in the first three months of the year.

As of June 30, MGM China had total liquidity of approximately HKD13.7 billion, said the company.

Parent MGM Resorts recorded consolidated net revenue of US$2.27 billion in the second quarter of 2021, a 682.1 percent increase from the prior-year quarter. The U.S.-based operator went back to black with net income of US$105 million, compared to a net loss of US$332 million in the first three months this year.

MGM Resorts separately announced on Wednesday it had reached an agreement with VICI Properties Inc for the latter to acquire MGM Growth Properties LLC in a stock-for-stock transaction. Under the deal, MGM Growth Properties was valued at US$17.2 billion. MGM Resorts is to receive cash proceeds of approximately US$4.4 billion from the transaction, according to a company announcement.

MGM Growth Properties is a publicly traded real estate investment trust (REIT) specialised in casino properties. It is controlled by MGM Resorts. VICI Properties is a rival REIT, originally formed in 2017 as a spin-off from U.S.-based casino operator Caesars Entertainment Corp.