Investors are now scrutinizing whether MGM China Holdings will increase its dividend payout ratio to counter the earnings hit from a recent hike in license and branding fees, says CLSA.
The brokerage firm maintains that such an adjustment is achievable, positioning the company as undervalued despite market concerns.
The shift in focus follows commentary from MGM Resorts International during its fourth-quarter 2025 earnings call, where it justified doubling the revenue-sharing percentage for fees paid by its Macau subsidiary. These fees are directed to MGM Branding and Development Holdings, a 50-50 joint venture between MGM Resorts and Pansy Ho.
CLSA analyst Jeffrey Kiang noted that the fee increase aligns with MGM China’s expanded market presence, largely due to adding 250 gaming tables under the current concession. However, he highlighted communication shortcomings, stating: ‘Connecting the dots backwards makes sense, but no one saw it coming.’ Kiang stressed that the transaction did not require formal shareholder approval at MGM China, which points to the necessity of improved transparency regarding fee structures.
On dividends, the research note suggests investors anticipate a rise from the current 50 percent payout ratio to offset the fee’s impact, potentially to 53 percent or more. ‘We do not think this is a high expectation bar to cross’, Kiang wrote, adding that MGM China paid two special dividends in 2024 and some peers are expanding payouts. For 2025, CLSA forecasts a 50 percent interim payout, comparable to competitors like Galaxy Entertainment Group at 50 percent and higher than Sands China Ltd. at 36 percent and Wynn Macau at 43 percent.
Financially, MGM China delivered very strong 2025 results, with revenue of HK$34.68 billion ($4.43 billion), up 10.4 percent year-over-year, net profit of HK$5.47 billion ($703 million), and EBITDA of HK$8.8 billion ($1.13 billion).
CLSA retains an ‘Outperform’ rating on MGM China. It remains a top pick alongside Galaxy, citing resilient cash flow and potential EBITDA normalization in 2026.
The company’s market cap stands at $6.4 billion, with major shareholders including MGM Resorts at 56 percent and Pansy Ho at 22.5 percent.
