MGM China Resurgence Tops Macau Rivals, Says Analyst

• MGM China runs two Macau casino hotels
• Operator benefiting from addition of more table game capacity

Macau’s gross gaming revenue (GGR) remains below the heights notched before the coronavirus pandemic, but recent data indicate a rebound could be materializing in the special administrative region (SAR) — one led in part by MGM China.

The operator of MGM Cotai and MGM Macau is adding market share in the world’s largest casino markets while some rivals dither on that front. In a recent report, Morningstar analyst Jennifer Song says Pansy Ho’s company is benefiting from the addition of more 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.”

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.

MGM China Has Financial Strength

Operating casinos is a cost-intensive endeavor and doing so in Macau is no exception. If anything, operators’ expenditures there are amplified because the government has been insistent on the expansion of nongaming offerings, which means significant spending in the years ahead.

“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 strength is material to investors in MGM Resorts International (NYSE: MGM) because the Las Vegas-based casino behemoth owns about 56% of the Macau concessionaire. MGM China is also the entity through which the parent company will pursue expansion in Thailand.

MGM China Can Notch Modest Margin Growth

On forecast net revenue and earnings before interest, taxes, depreciation, and amortization (EBITDA) growth of 3% and 2%, respectively, through 2029, MGM China can modestly boost margins over the next several 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 points out that Macau’s penetration of 2% is far below Las Vegas’ 12%, indicating there’s a runway for long-term growth in the Chinese casino hub.