MGM CHINA(02282) 华泰证券·2024-08-01 13:03Investment Rating and Target Price - Maintain Buy rating with a target price of HKD 16.1, corresponding to a 25-year EV/EBITDA of 7.5x [2] - The target price was revised down from HKD 18.0 due to potential peaking growth in Macau operations [9] Core Views - Macau operations (MGM China) reported Q2 2024 net revenue of USD 1.02 billion, up 37% YoY but down 4% QoQ [2] - Adjusted EBITDA for Q2 2024 was USD 310 million, up 40% YoY and down 2% QoQ, recovering to 168% of 2019 levels [2] - MGM China's Q2 2024 EBITDA margin was 30.7%, compared to 24.5% in Q2 2019 and 30.3% in Q1 2024 [2] - VIP revenue recovery is expected to reach 46%/48%/48% of 2019 levels in 2024/2025/2026, while mass market revenue is projected to recover to 170%/187%/196% [2] - MGM China's market share in Q2 2024 was approximately 15%, with expectations to maintain this level [4] Operational Performance - Q2 2024 gross gaming revenue (GGR) in Macau was USD 1.127 billion, recovering to 137% of Q2 2019 levels, outperforming the industry average of 77% [3] - VIP GGR in Q2 2024 was USD 113 million, recovering to 39% of Q2 2019 levels, while mass market GGR was USD 941 million, recovering to 205% [3] - Slot machine GGR in Q2 2024 was USD 74 million, recovering to 103% of Q2 2019 levels [3] - MGM Cotai reported Q2 2024 net revenue of USD 602 million with an EBITDA margin of 31.0%, while Macau MGM reported net revenue of USD 418 million with an EBITDA margin of 30.2% [3] Market and Industry Trends - Macau's total GGR in H1 2024 reached MOP 113.8 billion, exceeding half of the government's full-year target of MOP 216 billion [5] - Visitor arrivals to Macau in H1 2024 reached 16.72 million, recovering to 82.4% of 2019 levels, with mainland tourists being the primary driver [5] - Industry GGR is expected to recover to 79%/86% of 2019 levels in 2024/2025, reaching MOP 231 billion and MOP 252.1 billion respectively [5] Strategic Initiatives - MGM China is exploring the expansion of non-gaming services, including health and wellness offerings, to attract new and returning visitors [4] - The company plans to increase room capacity and enhance attractions such as the "MGM 2049" show by director Zhang Yimou [4] Financial Projections - Forecasted gaming revenue for 2024/2025/2026 is HKD 31.77 billion, HKD 34.65 billion, and HKD 36.22 billion, recovering to 118%/129%/135% of 2019 levels [2] - EBITDA for 2024/2025/2026 is projected at HKD 8.21 billion, HKD 8.97 billion, and HKD 9.38 billion, recovering to 81%/88%/92% of 2019 levels [9] - EPS for 2024/2025/2026 is forecasted at HKD 1.28, HKD 1.33, and HKD 1.36 [6]