Mass, slots drive MGM China 17Q1 results

Casino operator MGM China reported operating income of $73 million, up 55.3 percent from $47 million in the prior year quarter, driven by mass and slots growth.

17Q1 net revenue rose 7 percent year-on-year to $502 million, while adjusted EBITDA increased 25 percent to $143 million.

“Management is clearly focused on mass, which grew 17 percent year-on-year,” noted analysts from Union Gaming on Friday. “Slot GGR grew 6 percent year-on-year resulting in combined mass/slots GGR growth of 15 percent year-on-year, which we estimate was ~300-400bps better than market-wide growth.”

“Following the opening of Cotai we expect MGM to enjoy significant upside given what will be an exceptional uptick in room supply for the company, as well as the largest percentage increase in table supply for any of the Big 6,” they added.

While results in the quarter were strong, Bernstein analysts noted the company may face difficulties defending its position over the next few quarters.

"While we agree that MGM Macau can capture greater than fair share, we remain concerned about the company's ability to fully defend its position over the next few quarters until the opening of MGM Cotai in Q4. With respect to Cotai, management guided to a Q4 opening, after the Golden Week period," noted the analysts. 

VIP volume however declined 16 percent in the quarter, down significantly from the market which was around 14 percent. Union Gaming noted the company may increase its focus on VIP in the coming quarters “in order to take advantage of the ongoing market-wide resurgence.”

Morgan Stanley analysts said that the the company mentioned additional junkets are in the pipeline for its Peninsula property.

The strong results from Macau helped to drive a nearly twofold increase in net income for parent company MGM Resorts International in the quarter.

The casino operator in a Thursday filing said net income rose to $207 million in 17Q1.

Net revenue in the quarter rose 29 percent to $2.1 billion, excluding contributions from Borgata and MGM National Harbor.

"MGM Resorts had a strong start to the year, as evidenced by our first quarter diluted earnings per share which tripled last year's results, double digit same-store Adjusted Property EBITDA growth at our domestic resorts, record results at CityCenter and solid performance at MGM China,” said Jim Murren, Chairman & CEO of MGM Resorts.

“MGM National Harbor and Borgata, our newest additions on the East Coast, are leading their respective markets, and we continue to work toward expanding our footprint in Macau with the opening of MGM Cotai later this year… We remain focused on building upon this effort as we continue to execute on our strategies to profitably grow our company and return value to our shareholders,” he added.

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