Macau casino operator MGM China revenue soars in fourth quarter amid rollback of Covid-19 curbs and a surge in mainland China visitors

Macau casino operator MGM China revenue soars in fourth quarter amid rollback of Covid-19 curbs and a surge in mainland China visitors

Macau casino operator MGM China revenue soars in fourth quarter amid rollback of Covid-19 curbs and a surge in mainland China visitors

Macau casino operator MGM China reported a surge in revenue in the fourth quarter of last year as the Covid-19 restrictions were rolled back and visitor numbers surged in the world’s largest gambling hub.

The company, controlled by New York-listed MGM Resorts International Holdings, reported a net revenue of US$983 million (HK$7.7 billion) in the three months ended December, 2023, compared with US$175 million in the same period in 2022, and an increase of 35 per cent compared with the fourth quarter of 2019, before the pandemic-related travel curbs, according to a filing to the Hong Kong stock exchange on Wednesday morning.

The revenue numbers were ahead of the street’s estimates and triggered a sharp rally in its shares, which rose as much as 10.3 per cent to HK$12.40, a level not seen since June 2021, with analysts expecting a sustained recovery in the company’s business.

“Another record quarterly earnings [which beat consensus] and market share at new high,” said Andrew Lee, equity analyst at Jefferies while upgrading its shares to a “buy” rating from “hold”. “This trend has continued into 2024 with gaming operations through the Lunar New Year period higher than in 2019 so far. China macro concerns remain a headwind, but sector fundamentals continue to be stronger than estimates.”

Artists perform a dragon dance to celebrate the Chinese Lunar New Year in front of the Ruins of St. Paul’s in south China’s Macao on Feb. 10, 2024. On the first day of the Year of the Dragon, touring performances organized by the Macao Government Tourism Office were staged at the Ruins of St. Paul’s and the Senado Square to celebrate the Chinese Lunar New Year. A 238-meter-long “dancing golden dragon” also toured multiple major scenic spots of Macao. Photo: Xinhua

The brokerage said that the casino operator’s business in 2024 is likely to continue the recovery which began in 2023, especially with mainland China travellers preferring short-haul travel, which will benefit Macau. It raised the target price for the company to HK$15.30 per share from HK$9.40, a 24.2 per cent upside from the current levels.

MGM China’s quarterly results were “positively affected by the removal of Covid-19 related entry restrictions in Macau and an increase in visitation compared to the prior year quarter, as well as an increase in authorised tables in 2023,” the casino operator said in the filing, referring to the enhancement of casino floor and room yield.

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Visitor arrivals to Macau last year reached 28.2 million, an increase of 395 per cent compared to the same period of 2022, and a rebound of 72 per cent over the 2019 levels, according to the Macau government tourism office.

MGM China’s adjusted earnings before interest, taxes, depreciation, and amortisation (Ebitda) reached a historical high of HK$7.2 billion for the whole of last year, a turnaround from a HK$1.3 billion loss in 2022, and a 17 per cent increase from 2019 levels.

The casino operator recorded a net revenue of US$3.2 billion for the whole of 2023, compared to US$674 million in the prior year, an increase of 368 per cent, and an increase of 9 per cent compared to 2019.

“We are excited about the recovery in Macau and our outperformance across various business segments,” said Kenneth Feng, president and executive director of MGM China.

“We will continue to innovate our products and services to enhance customer experience. We are also committed to bringing in more unique integrated tourism experiences to attract international visitors.”

MGM China expanded its overseas presence with offices in Kuala Lumpur, Manila, Seoul and Osaka last year. It also held entertainment and gourmet events to draw both local and international visitors.

“We strive to develop MGM as a destination for visitors and customers, along with the diversification development of Macau,” said Feng. “We are devoted to developing Macau into a global and diversified tourist destination through our concession commitments.”

As required by the terms of their concessions, MGM Grand Paradise, Galaxy Casino, Venetian Macau, Melco Resorts Macau, Wynn Resorts Macau and SJM Resorts, Macau’s six casino licence holders, have to diversify into non-gaming businesses, which can include sports, art and cultural events, and health and community tourism. They have unveiled plans to invest a combined amount of more than 100 billion patacas (US$12.37 billion) to help Macau diversify its economy away from gaming.

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