MGM China Hit Record Quarter And Improve Market Share

MGM China reported record-breaking earnings before interest, taxation, depreciation, and amortization (EBITDA) for the first quarter of 2024. The company’s adjusted EBITDA reached just above HKD2.50 billion (US$319.6 million), representing a 77.3 percent increase compared to the same quarter last year.

MGM China attributes its financial results to the success of its mass-focused business strategy and continuous operational improvements. The company has been able to effectively cater to the preferences of its diverse customer base, resulting in increased revenue and improved operational efficiency. The first quarter of 2024 saw a net revenue increase of 70.6 percent year-on-year, reaching nearly HKD8.26 billion. Furthermore, the company’s adjusted EBITDA margin for the period stood at an impressive 30.3 percent, the highest quarterly margin since the onset of the COVID-19 pandemic.

MGM China’s strong performance is reflected in its growing market share in Macau’s gross gaming revenue (GGR). The company’s market share in the first quarter of 2024 further climbed to 17 percent, compared to 15.2 percent during the same period the previous year and 9.5 percent in 2019. This significant increase in market share demonstrates MGM China’s ability to attract and retain a substantial portion of Macau’s gaming enthusiasts, solidifying its position as a key player in the industry.

Analysts have praised MGM China’s financial performance, with the company consistently surpassing consensus estimates. Andrew Lee, an analyst at Jefferies Hong Kong Ltd, noted that MGM China’s management remains optimistic, especially with the recent visa reforms in China and the gradual recovery of Macau’s gaming industry. These factors, coupled with the company’s exceptional results, have bolstered confidence in MGM China’s future prospects and its ability to deliver value to shareholders.

MGM China operates two prominent resorts in Macau: MGM Macau, located in the Macau peninsula, and MGM Cotai, situated in the city’s Cotai district. Both properties have demonstrated strong financial performance in the first quarter of 2024. MGM Macau recorded revenue of HKD3.50 billion, marking a 49.2 percent increase year-on-year and a 14.5 percent increase quarter-on-quarter. The property’s adjusted EBITDA stood at HKD1.13 billion, representing a significant 37.5 percent sequential increase. Similarly, MGM Cotai reported revenue of HKD4.76 billion, a 90.7 percent year-on-year increase, and an incremental 3.0 percent increase from the previous quarter. The property’s adjusted EBITDA reached HKD1.37 billion, reflecting a remarkable 90.9 percent year-on-year increase.

Investment bank JP Morgan highlighted MGM China’s notable improvement in its property EBITDA margin, which increased by 180 basis points quarter-on-quarter to reach 30.3 percent. Despite unfavorable luck, the company managed to achieve its highest EBITDA margin in over six years, surpassing the margin recorded in the first quarter of 2019 by 220 basis points. This impressive margin expansion can be attributed to a quarter-on-quarter decline in operational expenditure (opex) of approximately 10 percent. Analysts suggest that the decline in opex can be viewed as a run-rate for the rest of the year, with adjustments made for seasonal factors such as annual salary hikes and fourth-quarter event expenses.

MGM China’s strong financial performance during the first quarter of 2024 demonstrates the company’s resilience and ability to outperform the broader market recovery. The number of visitors to MGM China’s properties represented 151 percent of the 2019 levels, indicating a robust rebound in Macau’s tourism sector. Additionally, the company’s daily gross gaming revenue (GGR) generated by MGM Cotai and MGM Macau reached 136 percent of the first quarter of 2019. The strong recovery in the mass-market segment, including slot machines, contributed to the overall success, with mass-market GGR reaching 189 percent of pre-COVID levels.