MGM China Earnings: Another Strong Quarter With Record-High Market Share

Narrow-moat MGM China posted another record-breaking quarter for both earnings and market share, with adjusted EBITDA of HKD 2.5 billion and market share of 17.0% in gross gaming revenue, or GGR, up from 16.3% a quarter ago. Its performance continued to lead the growth of its Macao peers, owing to a seasonally strong VIP segment performance, but we expect its market share to normalize to 15%-16% in the coming quarters. We retain both our earnings forecasts and fair value estimate of HKD 11.80 per share. We think the shares are fairly valued, as we continue to believe its limited room supply remains a constraint, which will slow the company’s earnings growth and lead to a gradual fall in market share. Sands China remains our top pick for the sector, which we think will be the key beneficiary of further demand recovery in Macao, underpinned by its focus on the mass market, well-positioned properties with the largest room counts in Macao, and a successful track record in nongaming activities.