Macau-based casino operator MGM China Holdings Ltd recorded net revenue of US$606.0 million for the third quarter of 2018, an increase of 37.1 percent compared to the same period last year.
Operating income stood at US$52.3 million for the three months to September 30, up 38.7 percent compared to the prior-year period, according to data included in the third quarter results announcement on Tuesday by parent firm MGM Resorts International.
MGM China’s adjusted property earnings before interest, taxation, depreciation and amortisation (EBITDA) went up 7.4 percent to approximately US$130.0 million compared to US$121.1 million in the prior-year quarter. Adjusted property EBITDA margin was 21.5 percent in the July to September period compared to 27.4 percent in the prior-year quarter, “due primarily to the ramp-up of operations at MGM Cotai,” stated MGM China in a separate filing to the Hong Kong Stock Exchange on Wednesday.
The July to September period was the firm’s second full quarter of operations following the opening of its second Macau property – MGM Cotai (pictured) in the city’s Cotai district – on February 13. The new property contributed approximately US$172 million of net revenues for MGM China in the third quarter, with all gaming segments recording sequential growth in volume albeit at lower hold rates.
Net revenue at MGM Macau however fell by a modest 1.8 percent year-on-year, to approximately US$434.3 million.
“We are excited to see a substantial growth of customer database since we opened the second integrated resort in Macau,” MGM China’s chief executive Grant Bowie said in a prepared statement included in a separate press release.
MGM Cotai generated third quarter adjusted property EBITDA of US$11.8 million. MGM Macau, on the peninsula, recorded adjusted EBITDA of US$118.2 million, down 2.4 percent from the prior-year period.
“We look forward to maximise the opportunities to drive profitability and efficiency,” Mr Bowie added.
Group-wide, MGM China reported VIP table games turnover of US$9.4 billion, up 14.3 percent from a year earlier. Main floor table games drop rose by 45.8 percent, to nearly US$1.9 billion.
The Hong Kong-listed firm confirmed junket operations at MGM Cotai had officially commenced in September, with the opening of two VIP rooms, as reported by GGRAsia. “The rooms were well received and we look forward to further expanding our presence in this segment,” MGM China stated.
VIP gross table games win at MGM Cotai stood at HKD65.2 million, MGM China stated in its filing to the Hong Kong stock exchange.
Mr Bowie mentioned to media in August that the casino operator expected to see a total of five junket operators establish VIP rooms at MGM Cotai between September and early 2019.
Tak Chun Group, another major Macau junket investor, said in September it expected to open a club at MGM Cotai – its 17th in the Macau market – in the final quarter of this year.
MGM China plans to launch MGM Cotai’s President’s Club – an exclusive premium mass gaming area – in December. The launch of the Mansion villas – a high-end accommodation product also at MGM Cotai – is scheduled for “early 2019”, added the firm. Mr Bowie confirmed on Tuesday that MGM China aimed to have some of the Mansion villas ready in time for the upcoming Chinese New Year period. He was speaking on a conference call with analysts after the announcement of MGM Resorts’ third quarter results.
Chinese New Year is traditionally a peak period for Macau’s casino industry. In 2019, it falls on February 5.
No VIP slowdown concerns
In the same conference call, Mr Bowie also dismissed concerns about a potential slowdown in the VIP gaming segment in Macau. He admitted market conditions in mainland China were currently a “little more volatile” than earlier this year but said there was still a lot of liquidity available among junket operators.
“What this seems to be is much more of a controlled pause rather than the effect of running out of liquidity,” said Mr Bowie. “What we’re all expecting is a little softness for a little while until … we stabilise”.
MGM China had plans to introduce a resident theatre show – called “Destiny” – later this year to MGM Cotai. The firm recently decided the entertainment offering would not be going ahead, at least according to the original schedule.
During the conference call with analysts, Mr Bowie said the MGM group was “in dialogue” with the Macau government on the eventual refreshment of its existing gaming concession. “We are obviously specifically working through it, and we are quietly confident – probably more than that – that we will be in position to do that,” he added.
Mr Bowie admitted there “may be some expectation that we need to work through, but those discussions are still ongoing with the government, and it’s really going to be up to the government to make that final decision.”
The concessions of the six current Macau operators expire on various dates in either 2020 or 2022, with the licence of MGM China set to expire in 2020.
The looming concession expiry date however was not a worry for MGM Resorts chairman Jim Murren. “The discussions [on the matter with the Macau government] are ongoing and prompt and timely,” he stated during the same conference call.
MGM Resorts said on Tuesday that its net revenues declined by about 1.6 percent over the prior-year quarter at the company’s U.S resorts to US$2.23 billion. Net income for the period shrank by 3.7 percent year-on-year, to US$142.9 million.
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Analyst at Roth Capital Partners