MGM Can Win New Market Share In Macau, Says Bank

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Posted on: March 6, 2023, 12:48h. 

Last updated on: March 6, 2023, 01:53h.

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.

MGM Macau
The MGM Grand in Macau, seen above. Morgan Stanley sees the operator winning market share there. (Image: CNBC)

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.

Under the new guidelines, regulators limit slots to 12K devices across Macau casinos and 6,000 table games. While those figures align with the levels seen at the end of the second quarter, they’re markedly below those seen before the coronavirus pandemic. In 2019, there were more than 17K gaming machines at Macau gaming venues and 6,739 table games.

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.

Enhancing the stock’s allure is that the admission cost is low when measured against some Macau competitors. Plus, even with recent strength in the group, there’s still room for Macau casino stocks to appreciate because the shares dwell below pre-coronavirus highs.

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.


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