MGM China Holdings Ltd. (2282), a Macau casino operator, reported third-quarter profit that missed analyst estimates as rising competition drew some gamblers away from its sole casino in the world’s largest gambling market.
Adjusted earnings before interest, taxes, depreciation and amortization, or Ebitda, excluding a branding license fee, rose 26 percent to $198.8 million, from $157.5 million a year ago, according to today’s filing from MGM Resorts International (MGM:US), the company’s U.S.-based parent. That lagged the average estimate of $202 million from nine analysts compiled by Bloomberg.
MGM faces rising competition from bigger rivals such as Sands China Ltd. and Galaxy Entertainment Group Ltd. (27) which already have projects on the increasingly popular Cotai Strip in Macau, a piece of reclaimed land that is Asia’s equivalent of the Las Vegas Strip. MGM has a casino on the peninsula and is building its second resort in Cotai.
“As we continue to see capacity constraints in Macau, MGM’s growth will be limited before its Cotai project becomes operational,” Grant Govertsen, a Macau-based analyst at Union Gaming Group, said by phone before the earnings announcement. “We still rank MGM higher than its peers in the peninsula because of its meaningful revamping of the casino.”
Sands China Ltd. (1928), Galaxy Entertainment Group Ltd. and Melco Crown Entertainment Ltd. (6883) are adding new attractions to their casino resorts in Cotai to lure mainland Chinese gamblers, who make up two-thirds of gambling revenue in the former Portuguese colony.
Shares of MGM China fell 3.8 percent to close at HK$26.70 in Hong Kong trading before the earnings release. The stock has gained 90 percent this year, compared with the benchmark Hang Seng Index’s 2.4 percent gain.
Net revenue at MGM China climbed 22 percent to $808.5 million, mainly because of VIP revenue and main-floor table games, according to the filing. Macau casino mogul Stanley Ho’s daughter Pansy Ho holds a 27 percent stake in the company.
Turnover at MGM China’s VIP-room gambling tables rose 28 percent from a year earlier, and wins increased 31 percent for main-floor tables and 4 percent for slot machines, MGM said.
Gambling revenue in Macau, the only place in China where casinos are legal, gained 17 percent to $33 billion in the first nine months of this year, after raking in $38 billion in 2012.
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