GGRAsia – MGM China posts record quarterly EBITDA, market share

MGM China posts record quarterly EBITDA, market share

May 02, 2024 Newsdesk Latest News, Macau, Top of the deck

Macau casino operator MGM China Holdings Ltd reported first-quarter adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) of just above HKD2.50 billion (US$319.6 million), which it said was a quarterly “record high” performance. The figure rose by 77.3 percent from same quarter last year, and represented circa 155 percent of first-quarter 2019, the company said in a Thursday filing to the Hong Kong Stock Exchange.

Judged on quarter-on-quarter terms, the company’s EBITDA grew by 13.6 percent.

Adjusted EBITDA margin for the January to March period was 30.3 percent, the “highest” quarterly margin post-Covid, stated MGM China.

The firm said such result was attributed to the group’s “mass-focused business and continuous improvement in operational efficiency”.

First-quarter net revenue was up 70.6 percent year-on-year, at nearly HKD8.26 billion. Revenue rose by 7.6 percent sequentially, and reached 143 percent of the first quarter of the pre-pandemic trading year of 2019, stated the company.

Andrew Lee, an analyst at Jefferies Hong Kong Ltd, stated in a Thursday note that MGM China “again” reported results “higher than consensus estimates”.

“[MGM China] management reiterated their optimistic outlook especially with April GGR only 80 percent of pre-pandemic levels and China recent visa reforms to drive visitation,” wrote the analyst.

MGM China runs the resorts MGM Macau (pictured), in the Macau peninsula, and MGM Cotai in the city’s Cotai district.

The casino firm said its market share in terms of Macau gross gaming revenue (GGR) “further climbed” to 17 percent in the three months to March 31, compared to 15.2 percent a year earlier, and 9.5 percent in 2019.

During the reporting period, MGM Cotai’s market share was 10.1 percent and MGM Macau’s was 6.9 percent, said the company.

Opex decline

According to investment bank JP Morgan, MGM China’s property EBITDA margin “improved 180 basis points quarter-on-quarter to 30.3 percent – based on net revenue – despite unfavourable luck, printing the highest level in over six years, 220 basis points above first-quarter 2019”.

“This was led by circa 10 percent quarter-on-quarter decline in opex [operational expenditure], which was a nice surprise,” wrote analysts DS Kim, Mufan Shi and Selina Li.

The analysts suggested that fourth-quarter 2023 “had an uneven base for opex due to heavy event spends, which seems like a new seasonality post-reopening, and annual staff incentives, primarily due to strong performance that beat its [MGM China’s] annual budget significantly”.

“So, we feel first-quarter 2024 opex can be viewed as a run-rate for the rest of year, plus seasonal adjustment, e.g., annual salary hike from March, fourth-quarter event opex, etc.,” they added.

In Thursday’s filing, MGM China said it “outperformed” the Macau’s industry recovery, with the number of visitors to its two properties representing 151 percent of 2019, and daily GGR generated by MGM Cotai and MGM Macau at 136 percent of first-quarter 2019. Mass-market GGR, including slots, produced by its casinos was “189 percent of pre-Covid levels”.

On a property basis, MGM Macau had a banner quarter. The complex recorded revenue of HKD3.50 billion in the opening three months of 2024, up 49.2 percent from a year ago, and 14.5-percent higher quarter-on-quarter. The property’s adjusted EBITDA stood at HKD1.13 billion, up from HKD694.8 million in the prior-year period, and up 37.5 percent sequentially.

MGM Cotai saw revenue of HKD4.76 billion in the first quarter of 2024, a 90.7-percent increase year-on-year, and up 3.0 percent from fourth-quarter 2023. Adjusted EBITDA reached HKD1.37 billion, up 90.9 percent from a year ago, and flat sequentially.

Kenneth Feng, president and executive director of MGM China, said in prepared remarks: “Our outstanding performance demonstrates our deep understanding of customers with continued improvements in service levels.”

He added: “The resumption of dividend demonstrates our confidence in the future of Macau and MGM China, along with our commitment on bringing return on investment to shareholders.”

MGM China announced during the period special and final dividends related to financial year 2023.

The company said it maintained a “healthy financial position”. As of March 31, the group had total liquidity of about HKD16.9 billion, comprised of cash and cash equivalents and available undrawn credit facilities.

The company announced in March the cancellation of the whole US$750 million commitment under a facility agreement with parent MGM Resorts International, after seeing a substantial increase of revenue in 2023.