MGM: Japanese Resort Approval Paves the Way for a 2029 Opening, Providing a Future Growth Driver

On April 14, 2023, Japan’s government approved the MGM/Orix plan to develop an integrated resort in the city of Osaka. The news comes nearly a year after the Osaka government submitted the bid to the national government. In our view, the resort will be the country’s only urban gaming license, providing a rich opportunity for MGM. In fact, we estimate that the property (40% owned by MGM, 40% by Orix, and 20% by a consortium of 20 companies) will generate around $4 billion in total sales in 2029 (its first year of operation) with EBITDA margins in the 20s around the end of the decade, generating a return on invested capital in the teens. In total, we see the property generating a high-single-digit percentage of company EBITDA by the end of our 10-year forecast. Having a Japan integrated resort already in our prognosis, we don’t envision any material change to our $50 fair value estimate but will reevaluate after MGM’s first-quarter earnings results on May 1. We see shares as slightly undervalued.