Photographer: Lam Yik Fei/Bloomberg

MGM China May Delay Cotai Casino Opening Past First Quarter

  • Operator reports revenue slumped 25 percent last quarter
  • Pace of decline slows as Macau industry sales beats estimates

MGM China Holdings Ltd. reported revenue fell 25 percent in the first quarter and said the planned opening of its new casino in Macau’s Cotai area may be delayed beyond the last target of the end of the first quarter next year.

MGM China revenue dropped to HK$3.6 billion ($464 million), the company said in a statement Thursday. The pace of decline slowed from the previous quarter’s 31 percent year-on-year plunge. MGM said in February it would delay opening the $3 billion gambling complex to the first three months of 2017 from a target of by the end of this year. The operator is “roughly slated” to finish construction at the end of October or early November, Chief Executive Officer Grant Bowie said on a teleconference Thursday.

“The last part of this process really resides with the relationship between signoff between ourselves and the government, which pushes into we believe end of first quarter, that may trickle over that,” Bowie said.

The world’s largest gambling hub has seen gaming revenue decline for 23 straight months, as China’s anti-corruption campaign kept the country’s high rollers away from the tables. Operators such as Galaxy Entertainment Group Ltd., Wynn Macau Ltd. and Melco Crown Entertainment Ltd. are now turning to the more profitable mass-market segment of tourists and recreational gamblers with new family-friendly resorts.

Cotai Strip

Analysts and the market have been assuming that MGM’s Cotai resort opening may slide into the second quarter, said Bloomberg Intelligence analyst Tim Craighead. Being among the last to get to the strip is a hurdle for the casino operator, he said. Galaxy opened two Cotai strip resorts May of last year, while Melco Crown’s Hollywood-themed Studio City opened last October.

"MGM China is facing the same challenge that their Macau-peninsula based peers are: Cotai’s new resorts," said Craighead. "Its VIP and mass businesses are both disadvantaged as Galaxy and Melco Crown ramp up. This pressure will build through the year for MGM and SJM as Wynn Macau and Sands China open their next resorts this summer."

MGM China dropped 2.3 percent at 10:49 a.m. local time in Hong Kong trading. Its stock has declined about 31 percent from a year ago.

  • MGM China adjusted earnings before interest, taxes, depreciation and amortization fell 23 percent in the first quarter to HK$995 million.
  • VIP table games revenue dropped 41 percent.
  • Main floor table games revenue fell 8 percent.

The Cotai strip in Macau is home to about a dozen casino resorts. The Macau government has encouraged casino operators to diversify their businesses and forecasts an increase in the proportion of casinos’ non-gaming revenue to 9 percent by 2020 from 6.6 percent in 2014, Teledifusão de Macau reported in April, citing the city’s five-year development plan.

New Resorts

Other casino operators are also looking for new ideas to diversify their business from high-end gambling. The $4.1 billion Wynn Palace will offer air-conditioned cable car rides and Sands China Ltd.’s Parisian will feature a half-size Eiffel Tower replica when they open later this year.

Bloomberg Intelligence’s index of Macau gaming stocks rose 16 percent in the first quarter after about $46 billion of market value was wiped out last year from the city’s six gambling houses.

Still, the industry’s mass market revenue has started to bottom out since last year with narrowing revenue declines. Macau’s April gaming revenue decreased 9.5 percent to 17.3 billion patacas, less than the median estimate by analysts of a 13.5 percent drop in a Bloomberg survey and a 16.3 percent decrease in March.

"We continue to be a little bit more cautious on how the future growth would look because we believe that the recovery that Macau is about to see is a more slow, gradual recovery," said Nomura Holdings Inc. gaming analyst Richard Huang. "While they are increasing visitors going to Macau, the quality of the visitation has been declining: less Chinese and more Hong Kong people going over to Macau."

Chinese visitors tend to spend more in Macau than Hong Kong tourists, he said.

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