MGM China Holdings Ltd. (2282), a venture between Pansy Ho and MGM Resorts International, won a land grant to develop a second casino resort in Macau.
MGM China has made an initial payment of 450 million patacas ($56 million) to the Macau government for the HK$20 billion ($2.6 billion) project which will be funded by loans and internal resources, the casino operator said in a statement to Hong Kong’s stock exchange yesterday.
The approval allows MGM China to build on the city’s increasingly popular Cotai strip, where the operator doesn’t have a presence. Sands China Ltd. and Galaxy Entertainment Group Ltd. (27) are also expanding Cotai facilities that combine hotels and casinos to draw so-called mass-market gamblers, who provide wider margins.
“Getting the approval to build its first casino in Cotai will help to broaden MGM’s customer base,” said Edwin Fan, a Hong Kong-based analyst at Bank of China International.
MGM China jumped 4.3 percent to HK$14.24 at the close in Hong Kong trading, the highest gain since Sept. 7. MGM Resorts rose 2.3 percent to $11.17 in New York trading on Oct. 18, the highest close since Sept. 17.
The casino, with a lease term of 25 years and a total land premium of 1.29 billion patacas, will include 1,600 hotel rooms, 500 gaming tables and 2,500 slots built on a 71,833 square meter site, it said.
The project, which will take as long as 36 months to build, will be MGM’s first on the Cotai strip, a piece of reclaimed land that is Asia’s equivalent to the Las Vegas Strip.
“The company has already secured project financing for the development,” Fan said. “But there’s a high chance it will cut its dividend payout ratio.”
MGM China is the fourth company to receive a go-ahead this year to expand on the Cotai Strip in Macau, the only place in China where casino gambling is legal. Wynn Macau Ltd. (1128), Melco Crown Entertainment Ltd. (6883) and Galaxy have already won approvals to step up their presence in the world’s biggest gambling hub.
Macau gambling revenue rose 12 percent to 23.9 billion patacas in September.
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