Morningstar

Morningstar, Inc.

Equity Bottom-Up

As one of six casino licence holders in Macau, MGM China benefits from the Chinese people’s strong demand for gaming, underpinned by our forecast of a more than 10% rise in per capita disposable income in China from 2015 to 2020. Macau has a penetration rate of less than 2%, compared with Las Vegas’ 12%. Excluding the neighboring Guangdong province, where only 7.5% of China’s 1.39 billion population resides, the penetration rate is merely 1%. The new hotel rooms by major operators in the next…

MGM China’s first-quarter revenue and adjusted EBITDA are tracking in line with our estimates. We are leaving our estimates unchanged and raise our fair value estimate by HKD 1-HKD 21 per share due to time value of money. We continue to find MGM China undervalued. Thanks to new VIP junket rooms at MGM Cotai, MGM China’s VIP gaming revenue was up 3% in the quarter, outperforming a 13% decline for the wider Macau market, as reported by DICJ. The group’s VIP rolling chip volume was up 1% year over…

<p>Narrow-moat MGM China is undervalued with an unchanged fair value estimate of HKD 20 per share. MGM China’s adjusted EBITDA margin improved to 26.3% from 23.5% in the third quarter as MGM Cotai ramped up faster. Adjusted EBTIDA was up 26% sequentially and 9% year over year. In the quarter, MGM China gained shares in VIP and mass segment, both year over year and sequentially. MGM China’s overall VIP revenue was up 18% year over year (up 3% for the market), up 19% sequentially (5% for the market)…</p>

<p>We are maintaining narrow-moat MGM China’s fair value estimate of HKD 21.5 and think shares are undervalued. Our fair value estimate incorporates a downturn and license renewal risks in the form of higher gaming taxes in the next few years. We think total social financing growth will slow down, and export and business confidence will weaken because of the trade war between the United States and China. We believe that will certainly put pressure on MGM China’s earnings in the near term…</p>

Hong Kong

MGM China Holdings Ltd. owns a luxury resort, hotel, and casino located in Macau. The Company is also exploring other casino gaming development opportunities in Macau.

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