Deutsche Bank has adjusted its 2024 forecast for MGM China due to the gaming industry slowdown in Macau. The new estimate reflects a substantial 4% decrease. This revision is based on expectations of a slower market recovery, leading to uncertainty about the industry’s performance in the coming year.

Analysts look to MGM Resorts’ third-quarter earnings report on November 8 with cautious optimism for the immediate future of the industry. They anticipate a “steady share” and “modest margin improvement” in Macau for this quarter.

MGM Resorts has experienced significant growth, with a market share of 14.6% in Q2 2023 – a 560 basis point increase from Q2 2019. Maintaining this market share is a top priority for MGM, and early indicators suggest they have been successful during the third quarter.

To achieve market share gains, MGM Resorts has outlined four key priorities: activating 200 additional tables, maximizing casino floor yield through remodeling, introducing more mass and premium mass-focused tables, and employing direct marketing strategies.

Deutsche Bank research predicts modest margin expansion for MGM China, primarily driven by the increasing mix of mass revenue. In Q2 2023, MGM China experienced an EBITDA boost of $3-4 million, largely due to higher VIP hold rates. The current estimate for Q3 2023 is a 28.5% property margin, up 20 basis points quarter-to-quarter, with expected significant hold-adjusted improvement.

The report also addresses the impact of cybersecurity issues on MGM Resorts’ overall metrics. Analysts have adjusted their forecasts for Q3 2023 to account for a $100 million impact on adjusted EBITDAR, as reported by MGM Resorts. A majority of this impact, $80 million, is attributed to Las Vegas operations.

However, one-time expenses related to the cybersecurity breach are expected to be less than $10 million in Q3 2023 and will not be reflected in adjusted EBITDAR, as insurance coverage is anticipated.

MGM Resorts is confident that their cybersecurity insurance will be sufficient to cover both operational and one-time expenses related to the incident. While there may be room for interpretation in the upcoming results, Deutsche Bank has revised its forecasts based on the impact as detailed by MGM Resorts’ management.

In conclusion, the gaming industry in Macau is facing challenges, but MGM Resorts is focused on sustaining its market gains. The impact of cybersecurity issues on the company’s financial metrics will also play a significant role in shaping the industry’s future. Investors and analysts will closely analyze MGM Resorts’ Q3 earnings report for insights into the company’s path forward.

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