The expected slower recovery pace in the market has prompted Deutsche Bank to revise its 2024 MGM China property EBITDAR forecast, reflecting a 4 percent decrease from their previous estimate.
Deutsche Bank issued a new investment memo ahead of MGM Resorts’ 3Q23 earnings, while MGM will report 3Q23 results on November 8th, post-market close.
Regarding Macau, analysts expect a ‘steady share’ and ‘modest margin improvement’ in 3Q23 in Macau.
‘MGM has benefited incrementally from considerable share gains, with 2Q23 share coming in at 14.6 percent, up 560 basis points from 2Q19 levels.’
‘MGM has noted that it can maintain current market share levels, and based on checks for 3Q23, it appears likely the share held firm in the period.’
MGM’s management previously noted that they are focusing on four key priorities to maintain market share gains: 1) activating the incremental 200 tables, 2) casino floor remodels to maximize yield, 3) incremental mass and premium mass-focused tables, and 4) direct marketing to global customers.
According to Deutsche Bank research, MGM China’s margins are expected to expand modestly quarter-to-quarter due to the increased mix of mass revenue on a market-wide basis.
‘Recall, in 2Q23, while not calling it out specifically, we believe MGM China garnered an EBITDA benefit of $3-4 million from higher than normal VIP hold. As such, while our current estimate for 3Q23 (28.5 percent property margin) is up 20 basis points quarter-to-quarter, the hold-adjusted improvement is likely to be greater.’
In group-wide metrics, analysts have adjusted forecasts for 3Q23 to embed the stated impact from the cybersecurity issues, which management noted would total $100 million in adjusted EBITDAR, of which $80 million was in Las Vegas.
At the same time, the report mentions that ‘the impact from one-time expenses related to the breach is expected to be less than $10 million in 3Q23, and we do not believe these expenses will be reflected in adjusted EBITDAR, as they are expected to be covered by insurance.’
‘MGM believes its cybersecurity insurance will be sufficient to cover the operational and one-time expenses related to the incident.’
‘We expect there to be plenty of room for interpretation in the results, though we have revised our forecasts to account for the impact, as detailed by management.’
