Macau casino operator MGM China’s 2017 profit narrowly misses analysts expectations
The company is betting big on its newly opened MGM Cotai to lure premium mass market consumers
MGM China Holdings, one of Macau’s six major casino operators, posted net profits of HK$2.3 billion (US$294 million) for 2017, down 23 per cent from 2016, narrowly missing analysts estimates of HK$2.4 billion in a Reuters poll.
“Profit decreased … due to the recognition of a deferred tax liability of HK$317.1 million pertaining to the distributable profit of MGM Grand Paradise during the year,” the company said in a statement on Tuesday.
Revenue hit HK$15.4 billion, up 3 per cent from HK$14.9 billion from the previous financial year. MGM China also proposed a final dividend of HK$0.097 per share.
MGM China’s operating profit decreased 15.3 per cent to HK$2.6 billion, primarily due to the “acceleration of pre-opening costs” of HK$459 million in preparation for MGM China’s new property MGM Cotai, which opened last week.
MGM Cotai is the company’s first project in Macau’s Cotai area – a strip crowded by a number of established casinos and resort operators including Sands China, Galaxy Entertainment Group and Wynn Macau.
The company is betting big on its new property, which features more than 1,300 rooms, 177 gaming tables and 1,200 slot machines. The casino operator, together with its other rivals, has been trying to lure the premium mass market consumers – consumers who play high-stakes games but at mass market tables, rather than at VIP tables.
Macau has been slowly recovering since August 2016, when it began to emerge from a gloomy period that began more than two years earlier when casino takings were severely dented by Chinese President Xi Jinping’s crackdown on corruption.
Back then, a number of affluent VIP gamblers, many of them Chinese government officials, decided to give the gaming hub a miss for fear of being reported for their lavish lifestyle, which included splashing out on gambling activities.
Things started to pick up as more casual – or “mom and pop” – gamblers started flocking to the city, which is the only legal place for gambling in China. As such, January extended Macau’s winning streak to an 18th straight month.
MGM China is a joint venture between MGM Resorts and billionaire Pansy Ho Chiu-king, Hong Kong’s third-richest woman and daughter of gaming magnate Stanley Ho. It opened MGM Cotai on February 13, after at least four delays dating back to 2016.
Casino operators have shifted their focus to Cotai along with the Macau government’s efforts to transform the enclave famous for gambling into a comprehensive tourism hub.
Cotai now has around 10 major hotel and casino resort complexes, including the Venetian Macau and Sands Cotai Central, both run by Sands China; Melco Group’s City of Dreams; the Galaxy Macau operated by Galaxy Entertainment Group and new additions Wynn Palace; the Parisian Macao and now MGM Cotai.