Macau-based casino operator MGM China Holdings Ltd recorded net revenue of US$561.4 million for the second quarter of 2018, an increase of 32.4 percent compared to the same period last year.
Operating income remained flat in the second quarter compared to the prior-year period at US$46.4 million, according to data included in the second quarter results announcement by parent firm MGM Resorts International on Thursday.
Adjusted property earnings before interest, taxation, depreciation and amortisation (EBITDA) went up 0.8 percent to nearly US$119.9 million compared to US$118.9 million in the prior-year quarter. Adjusted property EBITDA margin was 21.4 percent in the April to June period compared to 28.0 percent in the prior-year quarter, “due primarily to the ramp-up phase of operations at MGM Cotai, and lower win percentages for both main floor and VIP table games compared to the prior-year quarter,” stated MGM China in a separate filing to the Hong Kong Stock Exchange on Thursday.
The April to June period was the firm’s first full quarter of operations following the opening of its second Macau property – MGM Cotai in the city’s Cotai district – on February 13. The new property contributed approximately US$185 million of net revenues for MGM China in the second quarter.
The Hong Kong-listed firm confirmed it planned to have MGM Cotai’s first junket rooms in operation before the Golden Week period. That was a reference to a peak period for the Macau casino market, connected to a weeklong break in mainland China associated with the country’s national day on October 1.
“We have signed the agreements with the operators that will be opening [VIP rooms at MGM Cotai],” MGM China’s chief executive Grant Bowie said during a conference call with investment analysts following the results announcement by MGM Resorts.
“It looks like we will be opening in two tranches to balance it out… starting in early September, to give them an operating period [before the Golden Week peak],” Mr Bowie added.
The opening of the VIP rooms at MGM Cotai would be followed by the launch of a facility called President’s Club, presented by MGM China as “an ultimate exclusive gaming area” for the firm’s premium mass customers. MGM Cotai’s resident theatre show “Destiny” will also be launched later this year, Jim Murren, chairman and chief executive of MGM Resorts, said during the conference call.
MGM Cotai ramping
“Second quarter volume metrics [at MGM China] tell a good story,” Union Gaming Securities Asia Ltd analyst Grant Govertsen said in a Thursday note. “When we look at the volume metrics, especially on a portfolio wide basis, the picture looks a lot better and suggests that Cotai, lack of VIP and Mansions notwithstanding, is ramping in a material way and is broadly in line with the peer group ramp trajectory.”
MGM Cotai generated HKD1.39 billion (US$177.1 million) gross gaming revenue in the second quarter and HKD196.3 million property EBITDA. EBITDA margin improved to 13.5 percent from 9.7 percent in the first quarter.
Main floor table games win at MGM China increased 42 percent compared to the prior-year quarter due to the opening of MGM Cotai, MGM China said. VIP table games win decreased by about 7 percent year-on-year due primarily to a decrease in the VIP win percentage to 2.3 percent in the current quarter partially offset by a 19.1 percent increase in turnover to US$10.30 billion predominantly at the MGM Macau property.
Commenting on MGM China’s first quarter results, brokerage Sanford C. Bernstein Ltd said the firm had missed market estimates. “The good news is that MGM [Resorts’ management] has seen robust growth in July – gross gaming revenue is up 20 percent year-on-year (+40 percent month-on-month) for MGM Macau,” analysts Vitaly Umansky, Zhen Gong and Kelsey Zhu added.
MGM China paid a previously announced US$47 million final 2017 dividend in June, of which US$26 million was received by MGM Resorts.
Mr Murren also talked about MGM Resorts’ interest in Japan, as local authorities move to establish a casino industry in that country. “The recent passage of Japan’s Integrated Resort (IR) Implementation [Bill] is another historic milestone, and we believe we are well positioned in that market,” he said in a prepared statement included in MGM Resorts’ second quarter results announcement.
Japan’s parliament passed on July 20 the long-awaited IR Implementation Bill, a second of two pieces of legislation that will lead to the establishment of a domestic casino in Japan. MGM Resorts has previously declared itself a contender for a casino licence in Japan.
At the parent level, MGM Resorts said net revenues increased by about 2.7 percent over the prior-year quarter at the company’s U.S resorts to US$2.16 billion. Net income for the period however declined by 69.5 percent year-on-year, to US$123.8 million.
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”Many investors cite Golden Week as a catalyst to significant, sustainable visitation increases and a showcase for profitability for many casinos [in Macau]... However… we are concerned recovery estimates may again be pushed back”
Analyst at Roth Capital Partners