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MGM China does well to shift to mass


Wells Fargo said MGM China’s 15Q2 results were in line with its estimates, but likely above bearish investor expectations. However, the operator has done well to shift from VIP to mass.

Analyst Cameron McKnight said considerable weakness in the Macau market has meaningfully reduced the size of the dividend MGM is being paid by MGM China, however, “MGM China’s management has done a very good job of shifting exposure from VIP to Mass.”

MGM’s diluted earnings per share for the second quarter of 2015 were $0.17 compared to diluted earnings per share of $0.22 in the prior year quarter.

Revenue fell to $2.38 billion, down from $2.58 billion, narrowly beating the $2.37 billion analysts had been looking for.

Approximately 80 percent of MGM China’s profitability is now derived from the mass market versus 60 percent in 2013.

MGM shifted an additional 49 tables to its mass floor versus the prior year, and management expects to continue to shift VIP tables to mass, given continued softness in the VIP market, McKnight added.

Grant Govertson, an analyst at Union Gaming, said MGM Macau outperformed the market as it relates to the high-margin mass market business.

“We would attribute this to not only the continued reallocation of resources (hotel room and table games) to mass market, but to the property's stance as an aspirational property. Simply put, we continue to look for players to flock towards quality when it becomes available.”

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