MGM China Earnings: Solid Recovery but Smallest Room Share May Limit Long-Term Growth Outlook

MGM China delivered solid third-quarter results, with adjusted EBITDA of HKD 1,885 million, 23% above its 2019 level. The performance continued to lead the growth of its Macao peers, and is also slightly ahead of our expectation. We expect MGM China to continue to benefit from the increase in table allocation, successful remodeling and renovation of gaming floors and suite products, and utilization of data analytics and efficient marketing strategies—all these would help it to attract more quality customers. We raise our 2023-25 net revenue forecasts by 10%-12% and adjusted EBITDA by 12%-22%, to reflect a stronger-than-expected growth outlook. Accordingly, we raise our fair value estimate to HKD 10.20 per share from HKD 9.80. However, we think the limited room supply remains a key constraint, which would slow the company’s earnings growth and lead to a gradual fall in market share eventually. Hence, we think the shares are fairly valued currently.