MGM China Profit Beats Estimate on Gains From VIP BettorsVinicy Chan and Christopher Palmeri
MGM China Holdings Ltd., the Macau casino operator, boosted the budget for its new resort in the city as fourth-quarter profit rose 35 percent, beating analyst estimates. The stock gained in Hong Kong.
Adjusted earnings before interest, taxes, depreciation and amortization, or Ebitda, rose to $238 million from $176 million a year earlier, according to a statement yesterday from MGM Resorts International, the company’s Las Vegas-based parent. That surpassed the $230.7 million average of 10 analyst estimates compiled by Bloomberg.
MGM China drew more high-stakes gamblers in the world’s biggest gaming hub, where it has one casino and is building another resort set to open in 2016. MGM raised the budget for the second resort, on the popular Cotai Strip, to $2.9 billion from $2.6 billion, it said today, citing rising labor costs. MGM’s larger rivals Sands China Ltd. and Galaxy Entertainment Group Ltd. already operate resorts on the Cotai Strip, a piece of reclaimed land that is Asia’s equivalent of the Las Vegas Strip.
“Strong VIP rolling was the key driver for the fourth quarter,” Karen Tang, a Hong Kong-based analyst at Deutsche Bank AG, wrote in a research note today.
MGM China rose 4.3 percent to HK$31.45 in Hong Kong, the highest close since Jan. 24. The city’s benchmark Hang Seng Index dropped 1.2 percent.
MGM China proposed a special dividend of HK$1.02 a share, or $500 million, and a final dividend of 26 Hong Kong cents a share, or $128 million.
Labor costs at the company rose 10-12 percent last year as the number of employees increased 5 percent, Chief Financial Officer Hubert Wang said at a press conference in Macau today.
MGM Resorts International, which owns 51 percent of Macau-based MGM China, said yesterday its fourth-quarter net loss narrowed to $38.3 million from $1.2 billion on gains in Nevada and Macau and fewer writedowns.
“Las Vegas is truly recovering; MGM China continues to grow,” Chairman and Chief Executive Officer Jim Murren said on a conference call.
Murren and MGM Resorts President Bill Hornbuckle were in Japan this week where they said legislation allowing for Las Vegas-style resorts may be passed in April or May. MGM is looking for partners for cities including Tokyo and Osaka, Hornbuckle said.
Macau may shorten the length of casino licenses to 5 years from 10 years, the Hong Kong Economic Journal reported yesterday, citing unidentified people. The city’s Secretary of Economy and Finance Francis Tam said later Macau doesn’t hold a position on renewal before a scheduled review in 2015 and 2016.
MGM China CEO Grant Bowie said in a conference call yesterday that changes were unlikely. “The Macau government continues to reaffirm that they’re very comfortable with the system in place,” he said.
Net revenue at MGM China climbed 27 percent to $926 million, while turnover at MGM China’s VIP-room gambling tables rose 32 percent from a year earlier and revenue increased 18 percent for main-floor tables, MGM said.
For the full year, adjusted Ebitda rose to HK$6.37 billion ($821 million) from HK$5.31 billion in 2012, according to a separate exchange filing yesterday. That compared with the HK$6.31 billion average of 16 analysts’ estimates.
Net income increased to HK$5.33 billion last year from HK$4.53 billion in 2012 as casino revenue gained to HK$25.4 billion from HK$21.5 billion, MGM China said.
Macau casino mogul Stanley Ho’s daughter Pansy Ho holds a 27 percent stake MGM China. Ho is Hong Kong’s richest woman with a net worth of $5.2 billion, according to the Bloomberg Billionaires Index.
Gambling revenue in Macau, the only place in China where casinos are legal, jumped 19 percent last year to $45.2 billion, or about seven times that of the Las Vegas Strip.