Hong Kong company reporting season

MGM China reports better than expected income as premium mass market gamblers splurge

PUBLISHED : Thursday, 04 August, 2016, 9:47pm
UPDATED : Thursday, 04 August, 2016, 10:58pm

MGM China Holdings, a Macau gaming operator co-chaired by casino tsar Stanley Ho’s daughter Pansy Ho, reported a better-than-expected net income for the first half of the year, boosted by premium mass-market gamblers and cost cutting measures, though management warned of fierce competition ahead.

Adjusted earnings before interest, taxes, depreciation and amortisation, or ebitda, dipped 16.7 per cent to HK$2.03 billion, the company said in an exchange statement on Thursday night, beating average analyst estimates of HK$1.93 billion in a poll conducted by the South China Morning Post, while its revenue fell 22.3 per cent to HK$7.15 billion year on year.

Underscoring the latest sign of recovery in the world’s largest gambling hub, the company – a venture between Pansy Ho and Las Vegas gaming giant MGM Resorts – saw the decline of its main floor businesses stabilise at 5.35 per cent year on year as its premium mass-market gamblers splurged larger amounts on casino bets.

“Due to market share migration from Macau Peninsula to Cotai, our overall gaming market share has declined to 8.3 per cent as at June 30, 2016 [from 9.7 per cent in 2015],” the company said in a statement. “Competitive pressures in the Macau market will continue to exist in the future especially as more capacity is brought on line with the new property openings.”

“Looking ahead into the second half, we expect MGM to face intensifying competition with its two peers Wynn Macau and Sands China both set to open their new casino resorts over the period,”CIMB analyst Michael Ting told the Post before MGM reported its earnings. “MGM and SJM, as two operators still based in the peninsula, could see their businesses affected.”

We expect MGM to face intensifying competition with its two peers Wynn Macau and Sands China both set to open their new casino resorts over the period
Michael Ting, CIMB analyst

Before the announcement Thursday evening, MGM China stock rose 2.64 per cent to settle at HK$10.88. The shares have risen 19.6 per cent in the past six months.

The company proposed an interim dividend of 11.9 HK cents per share, compared with 15.6 HK cents last year .

The company’s turnover at VIP-room gambling tables declined 31.15 per cent year on year, while main-floor tables netted HK$3.71 billion in revenue, down 5.35 per cent from a year ago.

One bright spot in the earnings results was that it managed to cut its operating costs and expenses by 22.0 per cent.

MGM China said earlier this year that it planned to delay the launch of its new casino resort in Macau’s Cotai, previously scheduled to open during the first quarter of next year, while rivals Galaxy Entertainment and Melco Crown have been hosting visitors to the area since 2015 with new attractions such as Studio City.

Another two of MGM’s rivals, Sands China and Wynn Macau, plan to open the doors to their Cotai casino resorts Wynn Palace and Parisian this summer.

“MGM’s late expansion into Cotai may, on the other hand, leave the casino operator more time to come up with better offerings for its new resorts,” said Aaron Fischer, head of consumer and gaming research with CLSA Asia Pacific Markets.

Pansy Ho, co-chairperson of MGM China, is Hong Kong’s third richest woman with a net worth of about US$3.7 billion, according to Forbes. Her father, Stanley Ho, owns Macau’s largest gambling empire