MGM China Sees Solid 2023 Recovery; Market Has Digested Q4 Loss

MGM China’s fourth-quarter EBITDA loss was well anticipated by the market, but management’s comments on strong January performance were encouraging: The casino operator saw a record-high market share, with volume of both mass segment and direct VIP well above 2019 levels. In addition, management indicated that postholiday demand has been more resilient than typically seen. We think these positive data points reaffirm our view that a solid recovery of Macao gaming demand is underway. We maintain our assumption of industry gross gaming revenue returning to 50% of 2019's level in 2023, up from 14.4% in 2022. We raise our fair value estimate for MGM China to HKD 7.80 per share from HKD 7.50 after rolling our model one year forward. Our earnings forecast tweaks are minor. We expect adjusted EBITDA of HKD 2.4 billion in 2023, compared with negative HKD 1.3 billion in 2022. The stock price has almost doubled over the past three months, and we think the shares are slightly overvalued as of the Feb. 10 market close.