Dividends surprise from MGM China, Wynn Macau Ltd: JPM

In what a brokerage described as “a surprise”, two Macau casino operators respectively announced on Thursday annual dividends for the first time since the 2019 trading year preceding the Covid-19 pandemic.

The dividend move was “a year earlier than… the Street [investment community] had expected,” said JP Morgan Securities (Asia Pacific) Ltd in a Friday note.

“This means three out of six [Macau] operators are now paying dividends, including Galaxy [Entertainment Group Ltd] and we expect Sands [China Ltd] to follow suit next year… while Melco [Resorts & Entertainment Ltd] and SJM [Holdings Ltd] may prioritise deleveraging for some time,” wrote analysts DS Kim, Mufan Shi, and Selina Li.

MGM China Holdings Ltd flagged a final dividend for 2023 of HKD0.243 (US$0.0307) per ordinary share, payable on June 20, subject to approval by its annual meeting.

The company – which runs the MGM Macau and MGM Cotai properties – also declared a special dividend of HKD 0.104 per share, payable on April 12.

The two dividends combined represented 50 percent of the 2023 profit attributable to the owners of the firm, said MGM China.

Wynn Macau Ltd – operator of the Wynn Macau and Wynn Cotai casino resorts – announced a 2023 final dividend of HKD0.075 per share, payable on June 19.

JP Morgan stated Wynn Macau Ltd’s announcement “implies a 34 percent payout on financial year 2023 earnings per share”.

MGM China said in a Thursday filing to the Hong Kong Stock Exchange, that the 2023 final dividend amounted to circa HKD923.4 million, “representing approximately 35 percent of the group’s profit attributable to owners of the company” for the year ended December 31.

The company added that the special dividend amounted to HKD395.2 million in aggregate, or circa 15 percent of the group’s 2023 profit attributable to the owners.

GGRAsia’s review of MGM China and Wynn Macau Ltd’s annual reports for 2020, 2021 and 2022, showed that neither paid a dividend for those trading years, coinciding with Covid-related travel restrictions affecting Macau and its main tourism feeder markets, mainland China and Hong Kong. Restrictions were largely lifted in January last year.

As recently as early February this year, Craig Billings, chief executive of Wynn Macau Ltd and its parent Wynn Resorts Ltd, had said the group would need to take into account its “leverage profile in Macau” before being able to make any commitment on timing for Wynn Macau Ltd to return to paying dividends.

For full-year 2023, Wynn Macau Ltd recorded operating revenue of US$3.10 billion, compared to US$721.5 million in the previous year.

MGM China’s 2023 total revenue grew to HKD24.68 billion, an increase of 368.5 percent on 2022, and 108.4 percent of pre-pandemic trading year 2019’s HKD22.77 billion.

On Wednesday MGM China said it was terminating a US$750-million revolving loan facility made available by its majority owner MGM Resorts International, amid the Covid-19 pandemic, as it is “not commercially necessary” now.

JP Morgan stated in its Friday memo, that MGM China and Wynn Macau Ltd’s dividends were being paid from “essentially half a year worth of proper profits,” in terms of the Macau market’s 2023 recovery pace.

The brokerage suggested that this “bodes very well for more meaningful and sustainable cash returns in the coming year(s) when profit flow-through accelerates from continued demand recovery.”

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