
Macau's gross gaming revenue (GGR) is still lower than the peaks reached before the coronavirus outbreak, but recent statistics suggest a recovery may be emerging in the special administrative region (SAR) — partly driven by MGM China.
The operator of MGM Cotai and MGM Macau is increasing its market share in the largest casino markets globally while some competitors hesitate in that area. A recent report by Morningstar analyst Jennifer Song indicates that Pansy Ho’s company is gaining from the increase in table games capacity.
"MGM China also received an additional 200 gaming tables in the 10-year concession period of 2023-32, representing a 36% increase in its table capacity, compared with a 11% reduction for Macao casinos as a whole,” notes the analyst. “This, along with successful remodeling and renovation of gaming floors and suite products, as well as utilization of data analytics and efficient marketing strategies, help the firm to attract more quality customers and give MGM China a strong market position and profitability.”
Macau’s newly updated gaming regulations impose restrictions on the number of slot machines and table games that concessionaires may have at each location. Nevertheless, certain operators like MGM China are allowed to introduce table games since they were functioning beneath the new thresholds prior to the regulations being enacted.
MGM China possesses financial robustness.
Running casinos is an expensive undertaking, and this is also true in Macau. Operators' costs there are increased since the government has been determined to broaden nongaming options, indicating considerable expenses in the coming years.
MGM China can fulfill those requirements without jeopardizing investors due to its robust balance sheet. By the end of last year, the company reported having $685 million available in cash and access to a $1.5 billion revolving credit line, showing that its liquidity position is strong and it isn’t constrained by the reinstatement of its dividend.
“With the firm’s profitability and cash flow surpassing its 2019 levels, MGM China resumed its dividend program from 2023 with a dividend payout ratio of 50% in 2023-24. We expect the firm to maintain a 50% payout ratio in 2025, amid continued improvement in financial strength,” adds Song.
MGM China’s financial power is significant to investors in MGM Resorts International (NYSE: MGM) since the Las Vegas casino giant holds approximately 56% of the Macau concessionaire. MGM China is the vehicle through which the parent company will seek growth in Thailand.
MGM China Can Achieve Modest Margin Growth
Based on projections of net revenue and EBITDA growth at 3% and 2%, respectively, until 2029, MGM China has the potential to slightly enhance margins in the coming years.
"We expect adjusted EBITDA margins to average 28% between 2025 and 2029, compared with 27% in 2019, driven by improving operating efficiency and a favorable revenue shift toward the higher-margin mass segment,” observes Song.
The analyst notes that Macau’s penetration rate of 2% is significantly lower than Las Vegas’ 12%, suggesting there is potential for sustained growth in the Chinese casino center.