GGRAsia – MGM China reports 22-pct slip in 4Q net revenue

MGM China reports 22-pct slip in 4Q net revenue

Feb 18, 2015 Newsdesk Latest News, Macau, Top of the deck, World

Macau casino operator MGM China Holdings Ltd reported net revenue of US$718.7 million for the final quarter of 2014, a 22-percent decrease compared to the prior-year quarter, according to a filing on Tuesday by parent company MGM Resorts International.

According to the filing, revenue at main floor table games at MGM Macau (pictured) increased 19 percent year-on-year, even though volume declined by 4 percent from a year earlier.

Revenue at VIP tables however dropped by 39 percent year-on-year in the fourth quarter “due to lower VIP table games turnover of 32 percent compared to the prior-year quarter”.

MGM China’s adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) was US$185 million in the three months to December 31, a 22-percent decrease compared to a year earlier.

Group wide, MGM Resorts reported a net loss of US$342.3 million for the final quarter of 2014, worse than the US$56.8 million loss reported a year earlier. Diluted loss per share for the final quarter of 2014 was US$0.70 compared to a loss per share of US$0.12 in the prior-year fourth quarter.

Adjusted property EBITDA for MGM Resorts fell by 8.9 percent year-on-year to US$555.3 million in the final three months of 2014.

For the full year 2014, the group’s global net revenues were US$10.1 billion, a 3-percent increase over 2013, while adjusted property EBITDA increased by 5 percent year-on-year to US$2.5 billion.

MGM China’s net revenue was US$3.3 billion for full-2014, a 1-percent decrease from 2013. Adjusted EBITDA was US$850 million compared to US$814 million in the prior year.

David Bain of U.S.-based brokerage Sterne Agee, said in a note on Tuesday: “Overall, we find [MGM Resorts] results to be solid and are encouraged especially by upward results (revenue/margins) for its lower-tier [Las Vegas] Strip properties.”

MGM Resorts reported a 5.5 percent increase in adjusted property EBITDA from the firm’s Strip resorts in the quarter to December 31.

“MGM Resorts reported its best fourth quarter EBITDA since the peak in 2007 and its best full year in six years at its wholly owned domestic resorts,” Jim Murren, chairman and chief executive of MGM Resorts, said in a statement.

Dividend above expectations

In Tuesday’s filing, MGM Resorts said a final dividend for 2014 of US$120 million will be awarded to MGM China shareholders. The parent company will receive US$61 million, based on its 51 percent ownership stake.

In addition, MGM China announced a special dividend of HKD3.1 billion (US$400 million), with MGM Resorts entitled to receive US$204 million.

Investment analysts said the special dividend was larger than expected.

“Total DPS [dividend per share] for full-2014 at HKD1.34 a share (7 percent yield at current price) represents 90 percent payout, higher than our/consensus forecast of [about] 70 percent,” said a note from Anthony Wong and Angus Chan of UBS Securities Asia Ltd.

In a separate press statement, MGM China said EBITDA margin improved by 170 basis points to 27.5 percent in 2014, “as a result of growth in the main floor business and cost control”.

The firm’s net profit for full-2014 increased by 7 percent to HKD5.7 billion, the firm said.

The casino operator said that was a result of the reallocation of tables to the main floor. Mass business contributed to approximately 75 percent of MGM China’s EBITDA in the fourth quarter, up from 60 percent a year earlier.

“We are certainly not immune to the challenges confronting the Macau market, but we do believe we have robust and responsive strategies that will allow us create opportunities for future growth,” said Grant Bowie, chief executive of MGM China.

The company said that MGM Cotai construction is moving along and management still targets a fall 2016 opening. The total estimated project budget is HKD23 billion, “excluding development fees eliminated in consolidation, capitalised interest and land related costs,” the firm said.

“We are keen to get our Cotai property opened as MGM China has the greatest potential for growth in the market with the addition of our second property in Cotai,” said MGM China’s CEO.

“MGM Cotai will nearly quadruple our room base and triple our gross floor area, which will allow us to expand our product offerings into retail and entertainment; these all will create opportunities for earnings and margin improvement,” added Mr Bowie.