GGRAsia – MGM China quarterly loss up in 3Q amid Covid rules

MGM China quarterly loss up in 3Q amid Covid rules

Nov 03, 2022 Newsdesk Latest News, Macau, Top of the deck

Macau casino operator MGM China Holdings Ltd saw a widening on its quarterly loss in terms of adjusted property earnings before interest, taxation, depreciation and amortisation (EBITDA) for the three months to September 30.

Such adjusted EBITDA loss was HKD535.5 million (US$68.2 million), compared to a negative HKD382.4 million in the second quarter, and a positive HKD45.7 million in the first quarter.

In the third quarter of 2021, adjusted EBITDA had been positive by HKD100.5 million.

The information was disclosed by MGM China in a filing to the Hong Kong Stock Exchange on Thursday morning. It was based on the results of its 56-percent parent, United States-based MGM Resorts International, which had issued its own set of third-quarter results overnight.

“Despite moderately better-than-feared EBITDA, stock and earnings implications from MGM [China’s] third quarter are very limited, given the well-documented and dismal business environment, and that management couldn’t provide any colour on licence during the call, due to ongoing negotiation with government,” said DS Kim and Livy Lyu, analysts at JP Morgan Securities (Asia Pacific) Ltd, in a Thursday note. They referred second to Macau’s ongoing public tender process for up to six new, 10-year casino concessions.

Hubert Wang, president and chief operating officer (COO) of MGM China, said on a conference call with analysts that the Macau unit had currently “about US$1.5 million a day” in terms of operational expenditure.

MGM China observed in a press release issued on Thursday morning, that “Macau and Greater China” were still subject to “the adverse impact of the Covid-19 pandemic” during the reporting period.

The firm stated that a local outbreak of Covid-19 that began in the latter part of June had led to “safeguard measures” during the reporting period, including a “12-day suspension of business activities in July and tightened travel and border controls,” which had “severely hampered” visitor volume to Macau.

MGM China reported revenue of HKD686.6 million for third-quarter 2022, down 69.5 percent year-on-year. The operator’s revenue declined by nearly 100 percent sequentially.

MGM China runs two casino resorts in Macau: MGM Macau on the city’s peninsula, and MGM Cotai (pictured), in Macau’s Cotai district. MGM Cotai was recently shuttered for a period and people on site asked to stay in place, after a dealer working in the casino tested ‘positive’ for Covid-19. But by Thursday morning the property had reopened.

Gradual recovery hope on visa news

During the nine months to September 30, MGM China recorded total revenue of just over HKD3.90 billion, compared to nearly HKD6.96 billion a year earlier. For the first three quarters of 2022, the group accumulated negative adjusted EBITDA of HKD872.2 million, versus a positive HKD300.9 million in the same period of 2021.

According to figures from the parent MGM Resorts, issued in U.S. currency, MGM China’s casino revenue for the third quarter this year was down 72.2 percent year-on-year, at US$70 million, versus US$252 million a year earlier.

MGM China’s press release quoted the firm’s president and strategic and chief financial officer, Kenneth Feng Xiaofeng. He made reference to the recently-announced easing measures on electronic application for exit visas for mainlanders to visit Macau, and for resumption of tour group business from the Chinese mainland.

He stated: “We expect the travel relaxation measures will drive a gradual recovery in visitation.”

Bill Hornbuckle, chief executive and president of MGM Resorts, said on the firm’s second-quarter earnings call, the group was “encouraged” by the return of “e-visas” in mainland China.

The mainland authorities announced that procedures for electronic issuance of visas for Macau trips by mainland China residents were resuming on November 1, including for tour groups.

“All of the provinces are now allowed to do e-visas, which is convenient and timely. So, we are encouraged by the signal and what it means for Macau,” stated Mr Hornbuckle.

MGM China’s Mr Wang said he expected the resumption of e-visas to be “a gradual ramp-up process,” maybe “with some fluctuation in between due to the dynamic-zero-Covid policy in place.”

MGM China’s Mr Wang said on the earnings call, he expected the resumption of e-visas to be “a gradual ramp-up process,” maybe “with some fluctuation in between due to the dynamic-zero-Covid policy in place.”

The parent MGM Resorts said that as of September 30, the entire group had cash and cash equivalents of US$5.3 billion, of which MGM China held US$875 million.

MGM Resorts recorded a net loss of US$576.8 million for the third quarter, compared to a profit amounting to US$1.35 billion in the prior-year quarter, on an group-wide operating loss that grew to US$1.05 billion.

Net revenues for the reporting period were US$3.4 billion, compared to US$2.7 billion a year earlier, said MGM Resorts.

Nonetheless, Mr Hornbuckle said in the recovering Nevada market in the U.S., the group had reported “the best quarter in our Las Vegas Strip history, both on a revenue and adjusted property EBITDAR basis”.