MGM China is well placed to gain up to 3% of market share from its Macau concession rivals over the next two years, buoyed by the addition of almost 200 new gaming tables under the government’s allocation, according to investment bank Morgan Stanley.
In a note exploring the short-term recovery prospects of MGM China, Morgan Stanley analysts Praveen Choudhary and Gareth Leung single the company out as their top pick in Macau based on current valuations and the addition of 197 new gaming tables as of 1 January.
MGM China saw its table allocation grow from 553 at end-2019 to 750 in 2023, representing 12.5% of all gaming tables in Macau. It also brings the company in line with Melco Resorts’ 750 table allocation and places it ahead of Wynn Macau’s 570 (down from 654 at end-2019).
“We see [MGM China’s] market share in terms of number of gaming tables increasing from 8% in 2019 to 13% in 2023,” the analysts wrote.
“We believe MGM mass market share will increase from 10% in 2019 to 13% in 2024.”
With increased market share, Morgan Stanley sees MGM China becoming a more attractive investment option than its Macau peers based on resulting EBITDA estimates for 2024.
Noting that its MGM estimates for 2024 are 30% higher than the street, the analysts said, “[MGM China] valuation at 8.8x EV/EBITDA on our 2024 forecast is a 35% discount to its long-term average multiple since 2012. We view this level of valuation as attractive.”
They also noted that although MGM China has a relatively high net debt to EBITDA gearing ratio, it s liquidity pathway appears manageable given the backing of its US-based parent, MGM Resorts.
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