Key Takeaways:
Citigroup reiterated its “Buy” rating on MGM China Holdings Ltd. (02282.HK) after the casino operator’s first-quarter earnings beat estimates on effective cost management, keeping its price target unchanged at HKD 17.3.
“Management emphasized that the current scale of operating expenses is aligned with business growth and that margins are sustainable,” Citi said in a research report. The bank expects new gaming and non-gaming facilities to help the company defend its market share in 2026.
MGM China reported property EBITDA of HKD 2.5 billion ($313.6 million) for the first quarter, a 4 percent increase from the prior-year period and 5 to 6 percent above market consensus. The result came despite a VIP win rate at its MGM Macau property of just 0.6 percent, well below normal levels, showing the company’s ability to control expenses. The property EBITDA margin remained stable at 28 percent.
The operator’s net revenue grew 10 percent year-over-year to HKD 8.8 billion ($1.12 billion), driven by a 19 percent surge in daily mass-market gross gaming revenue to a record high. However, the company’s adjusted EBITDAR as reported by its U.S. parent, MGM Resorts International, declined 4.2 percent to $273.5 million. The drop reflects a doubling of branding license fees paid to the parent company, which increased from 1.75 percent to 3.5 percent of net revenue starting January 1.
On a property basis, the company’s flagship MGM Cotai resort saw revenue climb 10.1 percent year-over-year to HKD 5.33 billion, with adjusted EBITDA rising 11 percent to HKD 1.63 billion. In contrast, the older MGM Macau property on the peninsula recorded a revenue increase to HKD 3.44 billion, but its adjusted EBITDA fell 7.9 percent to HKD 831.5 million. The company is planning to renovate 100 suites at MGM Macau.
The earnings beat from its China subsidiary comes as parent company MGM Resorts International (MGM) reported mixed first-quarter results. The Las Vegas-based giant posted revenue of $4.45 billion, beating estimates, but its earnings per share of $0.49 missed analyst expectations by $0.04.
The results show MGM China’s continued strength in the premium mass market, though the higher intercompany fees will weigh on bottom-line growth. Investors will watch for the completion of the MGM Macau suite renovations and whether the new facilities can maintain the company’s 15.4 percent market share in the competitive Macau landscape.
This article is for informational purposes only and does not constitute investment advice.
