GGRAsia – MGM China adjusted EBITDA down 13pct q-o-q

MGM China adjusted EBITDA down 13pct q-o-q

Nov 04, 2021 Newsdesk Latest News, Macau, Top of the deck

Macau casino operator MGM China Holdings Ltd said its third-quarter adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) fell circa 13.3 percent quarter-on-quarter to about HKD100.5 million (US$13.0 million).

Hong Kong-listed MGM China recorded total quarterly revenue of approximately HKD2.25 billion, down by 6.8 percent from the second quarter. That is according to selected unaudited information released in Hong Kong on Thursday after the parent MGM Resorts International issued its results in the United States on Wednesday.

MGM China had recorded “slightly better profit than feared,” but the quarter was “still a non-event,” said a Thursday note from JP Morgan Securities (Asia Pacific) Ltd.

“Operational metrics have little implication on forward estimates given uneven trends amid border controls,” wrote analysts DS Kim, Amanda Cheng and Livy Lyu.

MGM Resorts, which owns approximately 56 percent of MGM China, said in its own filings on Wednesday – referring to Covid-19 alerts in Macau during the reporting quarter, that saw a tightening of travel rules between Macau and mainland China – that the parent could not guarantee that future steps including “the closure of our properties, or travel restrictions to Macau will be implemented if additional local Covid-19 cases are identified”.

A Thursday note from Andrew Lee at brokerage Jefferies LLC, said the institution was “cautious” on the outlook for MGM China and Macau as a whole, as “China local infections” of Covid-19 “remain relatively high with the number of China medium-risk areas increasing”.

MGM China said in its Thursday press release that on a property basis, MGM Macau (pictured) on the city’s peninsula, recorded revenue of approximately HKD1.22 billion in the third quarter, versus HKD1.34 billion in the second quarter, and adjusted EBITDA of approximately HKD126.8 million, compared to HKD171.4 million in the prior quarter.

Hotel occupancy at the property was 71.3 percent, versus 85.9 percent in the second quarter.

MGM Cotai recorded revenue of just above HKD1.03 billion, versus HKD1.07 billion in the previous quarter.

The property continued to have negative adjusted EBITDA, but it was narrowed to approximately HKD26.3 million, compared to negative HKD55.4 million in the three months to June 30.

Hotel occupancy at MGM Cotai was 41.8 percent compared to 56.6 percent in the previous quarter.

Vaccination key: MGM China CFO

“The group believes the pace of Macau’s recovery will continue to hinge on broader sentiment as well as the pace of vaccination rollouts throughout the region, which will ultimately lead to sustainable easing of travel restrictions,” said Kenneth Feng, president, strategic and chief financial officer of MGM China as cited in the unit’s press release.

MGM China claimed that during the third quarter it “outperformed” the market with gross gaming revenue (GGR) market share of approximately 13.8 percent, versus 11.2 percent in the prior quarter. The parent said in an investor presentation, that MGM China’s recent GGR market share low was 7.4 percent in the third quarter of 2020.

Brokerage Sanford C. Bernstein Ltd said MGM China’s third-quarter performance had been assisted by “high VIP hold”.

As of September 30, MGM China had total liquidity of approximately HKD13.4 billion, comprised of cash and cash equivalent, and undrawn revolver facilities.

The parent MGM Resorts reported net income of US$1.35 billion in the third quarter, versus a net loss of US$534.7 million in the prior-year quarter.

That was supported by its Las Vegas Strip resorts and U.S. regional operations generating adjusted property EBITDAR – i.e., EBITDA, plus restructuring and rent costs – up 21 percent and 29 percent, respectively, compared to the third quarter of 2019.

MGM Resorts announced on Wednesday plans to sell the casino and resort operations of its Mirage property on the Las Vegas Strip.

In a letter to MGM employees with Wednesday’s date, MGM Resorts chief executive and president Bill Hornbuckle said the sale would be “best for the long-term success of both the property and MGM Resorts.”