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China – Government sign off could delay opening of MGM Cotai

By - 9 May 2016

MGM China has warned that opening of MGM Cotai could be delayed beyond the target date of the first quarter of 2017.

The news came as the group announced its first quarter earnings where it recorded total revenue of HK$3.6bn, representing a decrease of 25 per cent from a year ago, although this narrowed from the 31 per cent year-on-year decline in the quarter in prior.

VIP table games revenue fell by 41 per cent whilst main floor table games revenue dropped by eight per cent.

Adjusted EBITDA was HK$995m, down 23 per cent from a year ago. MGM said its business in the quarter was negatively affected by low hold in both mass table games and in-house VIP operations. Luck-adjusted EBITDA for the quarter was HK$1.1bn.

Grant Bowie, Chief Executive Officer and Executive Director of MGM China said: “We are excited to finally see our new resort becoming a reality. MGM COTAI is a first of its kind integrated resort with never been seen before technology and entertainment offerings and we believe it will be very well received by the market. With the expansion of room base, we intend to continue targeting quality customers who spend longer periods of time at our property. We remain focused on bringing a world class offering to the market in the first quarter of 2017.”

“While we have seen some revenue volatility we have been driving improvement in our operating margins, as our cost management and business reengineering efforts continue to deliver as well as more of our revenue is generated from the mass segment. Our main floor business accounted for approximately 86 per cent of our EBITDA in the first quarter, a trend that has been emerging for the last eight quarters,” the group added. “We are monitoring the market and are encouraged by the trends in the mass space. Macau mass GGR has shown improvement for three consecutive quarters now, and we are seeing signs of stabilization. Our market share in mass segment has been largely stable. Our mass table games theoretical win in the first quarter was the highest we have achieved in the past five quarters. We continue to focus on player acquisition and retention of players, while we also aim at increasing share of wallet.

In terms of the delayed opening Mr. Bowie said: “Construction is progressing at MGM Coati, with expectations that major building’s works will be completed by the end of the year. We are confident our resort design and product offerings will provide us a unique competitive advantage in the non-gaming entertainment market. 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,” he added.

Bloomberg Intelligence analyst Tim Craighead added: “MGM China is facing the same challenge that their Macau-peninsula based peers are: Cotai’s new resorts. 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.”

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