Full-year profit at Macau casino operator MGM China Holdings Ltd fell 2.4 percent year-on-year, on lower casino revenue.
On an International Financial Reporting Standards (IFRS) basis, as used for Hong Kong-listed company reports, annual profit at MGM China was just under HKD3.04 billion (US391.8 million), compared to HKD3.11 billion in the prior year, the firm announced on Thursday.
Casino revenue at MGM China – which currently operates a single property, MGM Macau, in the city’s traditional downtown casino district – slipped 13.3 percent in 2016, to approximately HKD14.61 billion, from HKD16.84 billion in 2015.
Investment analysts have previously expressed concerns about the risk of cannibalisation of earnings in the Macau casino market, in the face of moderating gaming revenue and an increased supply of venues.
Grant Bowie, chief executive of MGM China, said on MGM Resorts International’s fourth-quarter earnings call: “It’s not feasible to simply grow off the back of taking share from others.” MGM Resorts is the parent of MGM China.
He added: “It’s not about marketing to China, it’s about targeting certain population centres… which have certain consumer characteristics.”
Macau welcomed more than 20 million visitors from mainland China last year, with approximately 44 percent of them coming from Guangdong province, according to preliminary data released by Macao Government Tourism Office on January 18.
On Thursday’s earnings conference call, James Murren, chairman of MGM Resorts, said January’s announcement that the opening of a second Macau property – MGM Cotai – would be put back to the second half of 2017 was “still an accurate and good statement”.
Mr Bowie said on the call that “nearly 40 percent of the team” at MGM Macau would be moved to the Cotai property, in order to ensure “equal levels of commitment to MGM’s service excellence” at MGM Cotai as existed at MGM Macau.
MGM China’s annual unaudited adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) fell 3.8 percent year-on-year, to HKD4.49 billion, from nearly HKD4.67 billion.
Earnings per share – basic and diluted – were HKD0.80 in 2016, compared to HKD0.82 in the prior year.
MGM China’s board nonetheless recommended a final dividend of HKD0.160 per share, or approximately HKD608 million in aggregate, for the year ended December 31. The unit said it represented approximately 20 percent of the group’s profit attributable to owners of the company for that year.
As of December 31, MGM China had bank and cash balances of HKD3.55 billion.
MGM Resorts said in its Nasdaq filing it would receive a 56 percent share of MGM China’s dividend based on its equity holding in the company.
MGM China 4Q
On a U.S. Generally Accepted Accounting Principles (GAAP) basis, used for Nasdaq-listed firms, net revenues at MGM China in the fourth quarter were US$499.7 million, up approximately US$1 million compared to the prior-year quarter, said parent MGM Resorts.
MGM China’s main-floor table games revenue decreased 2 percent compared to the prior year quarter.
Fourth-quarter VIP table games revenue increased 7 percent, which the group said was due to an increase in hold percentage; partially offset by a decrease in turnover of 16 percent compared to the prior year quarter.
MGM China’s operating income in the fourth quarter was US$72 million compared to an operating loss of US$1.4-billion in the prior-year quarter, which included the US$1.5 billion non-cash impairment charge on goodwill recognised for the 2011 MGM China acquisition, said the parent.
In the three months to December 31, adjusted EBITDA increased 5 percent to US$137.5 million, compared to approximately US$131 million in the prior year quarter.
Fourth-quarter 2016 operating margin was 14.4 percent, and adjusted EBITDA margin was 27.5 percent, an increase of 127 basis points compared to the prior year quarter.
“Property-level EBITDA of US$137.5 million was up 5.0 percent year over year and was above our estimate of US$125.2 million and consensus… of US$133.5 million,” said a note from Christopher Jones of the Buckingham Research Group Inc.
“The beat was entirely driven by high VIP hold, which was partially offset by low mass hold, as the net hold benefit added US$17-million of EBITDA,” he added.
MGM Resorts results
MGM Resorts International swung to a profit of US$25 million in the fourth quarter, compared to a loss of US$781 million in the prior year quarter.
For the full year, group profit reached US$1.1 billion, compared to a loss of US$448 million in the prior year.
MGM Resorts increased diluted earnings per share in the fourth quarter, to US$0.04 from a loss per share of US$1.38 in the prior year quarter.
In full year 2016, the group increased diluted earnings per share to US$1.92 from a loss per share of US$0.82 in 2015.
The group also initiated a quarterly dividend programme. A dividend of US$0.11 per share will be payable on March 15, to stockholders of record at the close of business on March 10, and will equate to approximately US$63 million in aggregate.
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VIP share of Macau's gross gaming revenue in the third quarter of 2021