MGM China on Pace to Reach Pre-COVID Mass GGR Before Macau Rivals

MGM China is on pace to see its mass-market gross gaming revenue (GGR) reach pre-coronavirus levels, perhaps as soon as the current quarter. That would make it the first Macau operator to accomplish the feat.

MGM China
MGM Cotai in Macau. MGM China could reach 100% of Q1 2019 mass market revenue this quarter. (Image: YouTube)

In a note to clients on Wednesday, Morgan Stanley analysts Praveen Choudhary, Gareth Leung, and Stephen Grambling observe that trends among mass bettors for MGM China are heading in the right direction to start 2023. The operator of two Macau integrated resorts and its rival, Wynn Macau, are the top gainers among the six concessionaires in terms of mass-market share gains this year, and the duo is leading on the earnings before interest, taxes, depreciation, and amortization (EBITDA) front, according to Morgan Stanley.

Of those two operators, MGM China is experiencing a more rapid rebound in the early stages of 2023 due to the addition of more table games at its MGM Cotai and MGM Grand Macau venues.

Better mass market share translates into better EBITDA recovery. We expect MGM China and Wynn property EBITDA at US$97 million (47% of 1Q19) and US$148 million (38% of 1Q19) respectively,” wrote the Morgan Stanley analysts.

The bank estimates MGM China will notch first-quarter mass-market GGR of $522 million, or 101% of the total in the comparable period of 2019.

US-Based Operators Leading Macau Rebound

Combine the aforementioned optimism surrounding MGM China and Wynn Macau with recent data confirming that Sands China was the concessionaire that gained the most market share across all three segments — mass, premium mass, and VIP — in 2022, and one thing is clear: Macau concessionaires tied to US-based parents are leading this year’s gaming rebound in the special administrative region (SAR).

MGM Resorts International (NYSE: MGM) owns about 56% of the Macau entity while Wynn Resorts (NASDAQ: WYNN) controls 65.8% of its Macau unit, down from 71.6% previously due to the recent issue of $600 million in convertible debt. Las Vegas Sands is the parent company of Sands China, which is the largest Macau operator.

Still, the other concessionaires shouldn’t be counted as contributors to this year’s recovery. Morgan Stanley estimates that, on a percentage basis, the biggest EBITDA rebound will be experienced by Galaxy Entertainment. The bank forecasts the operator will reach half its first-quarter 2019 EBITDA in the current quarter.

Mass-Market Players Helping MGM China, Rivals

In theory, casino operators are dependent on big spenders to drive recoveries when emerging from dark periods, which is certainly how the span between 2020 and 2022 can be described in Macau. That’s not the case in the SAR this year, however. Rather, it’s mass and premium mass bettors who are doing the heavy lifting.

The bank estimates that mass GGR across the SAR will reach $3.4 billion this quarter, or 63% of what was seen in the first three months of 2019. Should that projection prove accurate, it will be impressive because the analysts say it could happen on just 43% of first-quarter 2019 visitation levels.

“At this level of mass revenue, the industry should be making positive EBITDA and FCF (free cash flow), in our view,” concluded the Morgan Stanley analyst team.

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