Waiting on Cotai

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Analysts at Bernstein called the second quarter ‘disappointing’ for local operator MGM China, with ‘share loss in both VIP and mass and increased costs’. Net revenue reached HK$3.49 billion for the quarter, which was flat year-on-year, and a 10 per cent drop quarter-to-quarter, the analysts note. Mass gross gaming revenue for table and slots fell 14 per cent quarter-to-quarter and 1 per cent year-on-year, reaching HK$2.14 billion. Gross gaming revenue came in at HK4.1 billion, note the analysts.
‘VIP gross gaming revenue showed weakness at MGM Macau on lower hold rate (through rolling chip was up 3 per cent year-on-year and 9 per cent quarter-to-quarter),’ note the analysts. VIP gross gaming revenue was HK$1.96 billion, down 2 per cent year-on-year and 5 per cent quarter-to-quarter.
Bernstein analysts ‘remain concerned about the company’s ability to fully defend its position […] until the opening of MGM Cotai in the fourth quarter,’ pointing out information that places the opening in ‘late October or November,’ depending partly on government approvals.
Despite the slight reduction in the second quarter, the analysts note that its arrival to Cotai ‘will give the company a major competitive advantage in the mass segment once the property ramps up’, watching out for the company’s peninsula property to potentially ‘face pressure and share loss’ prior to the opening and ramp up.
Mass during the quarter accounted for 52 per cent of total gross gaming revenue, flat from the same quarter last year and a 3 per cent downtick from the first quarter.
The analysts note that the operator’s hotel occupancy grew to 96.5 per cent during the quarter, up both quarterly and yearly.