The investment bank CLSA has lowered its earnings forecasts for MGM China by more than 6 percent for both 2026 and 2027, citing the impact of higher license fees payable to its US parent, even as the brokerage maintained its Outperform rating on the Hong Kong-listed casino operator.
In a research note dated December 29th, CLSA said it had reduced its adjusted EBITDA and net profit projections for MGM China by between 6.3 percent and 6.7 percent for 2026 and 2027, following the company’s announcement of a sharp increase in license fees payable to MGM Resorts from 2026 onwards. Under the revised arrangement, the license fee will rise from 1.75 to 3.5 percent of monthly net revenues, capped at $188.3 million for 2026.
‘Following MGM China’s recently announced higher license fees payable to MGM Resorts, investors’ interests have centred on the impact on earnings as well as dividends,’ CLSA noted in the report. While the higher fees will not affect property-level EBITDA, the brokerage said the increase would weigh on corporate adjusted earnings and dividend capacity over the medium term.
Reflecting the earnings downgrade, CLSA cut its target price for MGM China to HK$20.9 ($2.68) from HK$22.6 ($2.90), while reiterating its Outperform rating. The brokerage said MGM China continues to pay the highest license fee to its parent among Macau concessionaires ‘in percentage terms versus revenue’, following the hike.
The downgrade triggered a sharp sell-off in MGM China shares. The stock plunged more than 17 percent on Monday, closing at HK$12.91 ($1.65), its lowest level in nearly six months.
The decline extended into trading on Tuesday, with shares falling a further 2.09 percent to HK$12.64 ($1.62), underscoring persistent investor concerns over rising cost pressures and the company’s medium-term earnings outlook.
CLSA’s stance contrasts with a more cautious tone from other brokers. Morgan Stanley analysts downgraded MGM China to Equal Weight (EW) in a note issued on Monday, citing the earnings drag from higher license fees and limited near-term catalysts following the recent share price volatility.
In its analysis, CLSA compared MGM China’s revised license fee structure with those of its peers. Wynn Macau pays a 3 percent license fee to Wynn Resorts, subject to a monthly minimum, while Sands China will pay 1.5 percent of annual gross revenue to Las Vegas Sands, with caps set through 2028. Post-hike, CLSA said MGM China’s license fee as a percentage of revenue will exceed that of both Wynn Macau and Sands China.
Despite the downgrade, CLSA said it continues to assume a 50 percent dividend payout ratio for MGM China, projecting dividend per share of HK$0.71 ($0.09) in 2026 and HK$0.81 ($0.10) in 2027, adding that ‘risks on dividend forecast remain on the upside’ as concessionaires gradually raise payout ratios at their discretion.
