MGM China and Wynn Macau Ltd provided quite the surprise last week by declaring dividends for the first time in over four years, but fellow Macau concessionaires Melco Resorts and SJM Resorts are unlikely to follow suit anytime soon, according to investment bank JP Morgan.
In a Friday note, analysts DS Kim, Mufan Shi and Selina Li observed that three out of the six concessionaires are now paying dividends – Galaxy Entertainment Group being the first to do so last year. They also predict Sands China to join the party by way of a FY2024 dividend to be paid in 2025, but Melco and SJM “may prioritize deleveraging for some time.”
The decision by MGM and Wynn to resume payments came a year earlier than expected, JP Morgan added, and although the amount was small, the fact that they are to be paid out of FY23 earnings – essentially half a year worth of proper profits – “bodes very well for more meaningful and sustainable cash returns in the coming year(s) when profit flow-through accelerates from continued demand recovery.”
As reported by IAG, MGM China explained its reasoning for paying a Special Dividend of HK$0.104 per share for FY23, stating, “The Board has resolved to declare the Special Dividend and recommend the payment of the Final Dividend after reviewing the Group’s general financial position as at 21 March 2024, its capital requirements going forward and other factors that the Board considered relevant, and determined that the Group has sufficient resources, after the payment of the Special Dividend and subject to the Shareholders’ approval, [to pay] the Final Dividend, to finance its operations and expansion of its business.”
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