MGM China Can Add Market Share Via Table Games

MGM China can pilfer market share from rivals in Macau on the back of the special administrative region’s (SAR) altered guidelines about table games allotment.

Under Macau’s recently revised gaming laws, concessionaires face limits on how many slot machines and table games they can offer at each venue. However, some operators, such as MGM China, can add table games because they were operating below the new limits before the regulations were passed.

Morgan Stanley estimates the MGM Cotai operator has added 197 table games since late 2019 through the start of this year. The company’s other venue in the SAR is MGM Grand Macau.

“We see [MGM China’s] market share in terms of number of gaming tables increasing from 8% in 2019 to 13% in 2023,” according to the bank. “We believe MGM mass market share will increase from 10% in 2019 to 13% in 2024.”

MGM China’s 750 table games across its two Macau venues ties it with rival Melco Resorts on that metric and places it ahead of some competitors, including Wynn Macau. MGM Resorts International (NYSE: MGM) owns 56% of MGM China.

MGM China Compelling Investment Idea

Based on the potential to wrest market share from competitors, MGM China is an attractive investment idea in the eyes of Morgan Stanley.

MGM China’s “valuation at 8.8x EV/EBITDA on our 2024 forecast is a 35% discount to its long-term average multiple since 2012. We view this valuation level as attractive,” added Morgan Stanley.

Commanding additional attention from mass-market visitors could be pivotal for MGM China because mass and premium mass bettors are driving more of Macau’s recovery than VIPs.

Other MGM China Perks

MGM China’s debt-to-earnings before interest, taxes, depreciation and amortization (EBITDA) is on the higher end of its peer group. But Morgan Stanley believes that’s not a major cause for concern due to the strong cash position of parent MGM Resorts.

The Las Vegas-based operator recently forecasted it could spend up to $150 million this year enhancing its two Macau venues. That’s part of broader expenditures required by Macau law due to the recently renewed concessions.