Wynn Macau (SEHK: 1128) and MGM China (SEHK: 2282) are both casino companies in the gambling capital of Asia: Macau. Both get their names from their Western parent firms, which helped build Las Vegas and which have transported much of their casino know-how into Macau.
Although they might share similarities, MGM China and Wynn Macau also have differences. MGM China gets more of its business from the mass market for example; 62% of MGM China’s gross gaming revenue (GGR) came from the mass market for the first half of 2019.
Meanwhile, Wynn Macau derived 47% of its GGR from the mass market in terms of the trailing 12 months ending the first quarter of 2019. MGM China and Wynn Macau also have different profit and growth potentials. But which is the better buy for investors?
Current profitability
MGM China owns the premium integrated resorts MGM Macau and MGM Cotai. MGM Macau has around 582 hotel rooms, 291 casino tables, and features some stunning architecture such as the Grande Praca as well as an award-winning spa. Having launched in February of 2018, MGM Cotai is the company’s newest casino resort, with around 1,400 hotel rooms, impressive luxury architecture as well as numerous Asian artwork and Qing antique carpets.
Due to the opening of MGM Cotai, MGM China’s overall gaming market share rose from around 7.6% for the first half of 2018 to 9.3% for the first half of 2019. MGM China also reported growing sales and profits.
For the six months ended 30 June, MGM China reported operating revenue of HK$11.30 billion (US$1.44 billion), 24.5% higher year-on-year. Profit increased to HK$1.02 billion for the first half of 2019, up 45.1% year-on-year.
By comparison, Wynn Macau has two resorts in Macau, the 1,008-room Wynn Macau, and the 1,706-room Wynn Palace. For the six months ended 30 June 2019, Wynn Macau reported operating profits of HK$3.49 billion, down from HK$3.77 billion for the first half of 2018. Wynn Macau’s numbers were lower due to the softness in Macau’s GGR as a result of the weak macroeconomic conditions in Greater China.
Winner: MGM China
Future growth outlook
Given that both MGM China and Wynn Macau are limited in the number of gaming tables the government allows in their casinos, the two companies’ differentiating factors in the future might depend on how the two appeal to the middle-class for entertainment, meetings, and sight-seeing.
Although forecasting demand years ahead can be a fool’s errand, the mass market in Macau will likely continue to grow due to the growth of China’s middle class. China’s middle class is expected to reach almost 800 million sometime in the next decade, up from around 430 million in 2018.
Given that it has been more popular with the mass crowd, MGM China arguably has greater growth potential. Both companies will benefit from the opening of the Hong Kong-Zhuhai-Macau bridge as well as the expansion of the Macau Airport – both of which could bring more tourists to the region.
Winner: MGM China
Dividends
For 2018, MGM China paid an interim dividend of HK$0.064 per share, and a final dividend of HK$0.034 per share subject to shareholder approval, giving it a total dividend per share (DPS) of HK$0.098 per share. At MGM China’s current price, that’s less a 1% dividend yield.
For 2018, Wynn Macau reported an interim dividend of HK$0.32 per share and a final dividend of HK$0.45 per share, subject to shareholder approval. The company also paid a special dividend of HK$0.43 per share. At its current share price, Wynn Macau’s interim and final dividends (ex-special dividend) would give investors a yield of around 5.2%.
Winner: Wynn Macau
Foolish conclusion
Although both MGM China and Wynn Macau depend on the macroeconomic fortunes of Greater China and the China government’s policymaking with regards to Macau gaming, MGM China is arguably the better buy given its appeal to the mass market and the recent opening of MGM Cotai.
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本文所提供的信息僅供一般參考之用，並不構成任何個人化的投資勸誘或建議。作者沒持有以上提及的股票。
HK MoneyClub (www.hkmoneyclub.com)