MGM CHINA(02282.HK)：BETTER-THAN-EXPECTED 4Q21 RESULTS

机构：申万宏源研究
研究员：Jia Mengdi

　　MGM China reported 4Q21 net revenue of HK$2.5bn （+4% YoY, +9% QoQ）， and adjusted Ebitda of HK$89m （-76% YoY, -11% QoQ）， higher than our expectation. We raise 22E forecast from HK$0.04 to HK$0.08 in 22E （+111% YoY）， raise 23E forecast from HK$0.21 to HK$0.33 （+307% YoY）， and introduce 24E forecast of HK$0.45 （+34% YoY）。 We raise target price from HK$6.0 to HK$6.8. With 19% upside potential, we upgrade rating from Hold to Outperform. 4Q21 results. The company’s total gross gaming revenue （GGR） improved 7% QoQ and 39% YoY, recovering to 39% of pre-pandemic levels. Mass and Slot GGR increased 18% QoQ and 13% QoQ, respectively. VIP rolling chip volume declined 29% QoQ. By property, MGM Cotai’s adjusted Ebitda was -HK$6m and MGM Macau’s adjusted Ebitda reached HK$95m （-25% QoQ）。 The company mentioned during the earnings call that it reached 85% of the pre-pandemic levels in terms of mass volume during the Chinese New Year and would reallocate resources from VIP business to the mass market in the coming quarters.
　　Clarity on the gaming law would help to ease investor concerns. Macau’s current six gaming licenses are due to expire on June 26th, 2022. On Jan 14th, Macau Government released the details of planned amendments to the gaming law. The revised law will allow for a maximum of six concessions to be granted with a concession length of 10 years, etc. On January 24th, Macau’s Legislative Assembly passed its first reading of the draft bill on amendments to Macau’s gaming law.
　　The bill will be sent to a sub-committee for detailed examination.
　　Upgrade from Hold to Outperform. With more clarities on the gaming law, we expect a valuation rerating in the short term for the gaming sector. The current low recovery also suggests great earnings upside potential. Currently mainland China visitors are required to provide a negative COVID-19 test result obtained within seven days of arrival in Macau, in order to travel here quarantine-free. Key catalysts include the resumption of e-visa processing under the Individual Visit Scheme and the return of package tours. We raise target price from HK$6.0 to HK$6.8. With 19% upside potential, we upgrade rating from Hold to Outperform.
　　Risks: Lower-than-expected revenue recovery