MGM China Sees Positive Cash Flow and Enhanced Leverage Metrics

MGM China Holdings Ltd, a prominent casino operator in Macau, has demonstrated a resilient financial performance in the second quarter of 2023. According to a report by CreditSights Inc, the company maintained positive free cash flow, and its leverage metrics surpassed those seen in the pre-pandemic year of 2019. This commentary comes on the heels of MGM China's recently disclosed second-quarter results. The latest data reveals a notable reduction in MGM China's total debt, which was streamlined to US$2.8 billion by the end of June, from US$3.0 billion at the close of March. CreditSights analysts Nicholas Chen and David Bussey documented this achievement, emphasizing the company's capacity to manage its liabilities effectively. In addressing its financial commitments, the company accessed a new five-year HKD23.40-billion (approximately US$3.02 billion) revolving credit facility during the second quarter. This strategic move allowed MGM China to refinance an existing US$527-million credit line and partly repay a US$500-million, 5.25-percent interest bond due by 2025. The remaining balance was settled with internal liquidity, a testament to MGM China's robust cash management strategy.

Leverage and Cash Flow Improvements

MGM China's financial performance was further highlighted by its adjusted earnings before interest, taxation, depreciation, amortisation, and rent (EBITDA), which reached US$301.3 million in the second quarter, marking a 2.5 percent increase from the previous year. The firm's gross and net leverage ratios improved significantly to 2.4x and 1.8x respectively, as of June 2023. These figures are measured by dividing the company's total and net debt by its last-twelve-month earnings, an illustration of the company's efficient management of its leverage. Notably, these metrics were stronger than in 2019, where they stood at 2.7x and 2.2x, respectively. CreditSights underscored that despite increased capital expenditure, which was reported to be US$52 million in the second quarter, MGM China's free cash flow remained in positive territory, estimated to be around US$200 million. This reflects the company's resilience in maintaining financial health even amid substantial investment activities.

Prospects for Growth and Industry Challenges

Looking forward, analysts express optimism for MGM China's performance in the upcoming quarters. There is an anticipation of a marginal uptick in the company's topline and EBITDA, buoyed by strategic expansions at its properties, including new luxury accommodations and the high-end "Alpha Club" gaming area. The firm is set to benefit from the completion of 18 new villas which were formerly areas designated for VIP junket operations, alongside the official opening of Alpha Club at MGM Macau before the upcoming Golden Week—a peak period for Chinese tourism. However, competition remains a concern, with Seaport Research Partners noting potential market share erosion due to aggressive marketing strategies and capacity expansions by rivals. Despite this, MGM China's gaming revenue market share was recorded at 16.6 percent in the second quarter, significantly higher than the 9.5 percent in 2019. The company maintains confidence in holding a mid-teens percentage of market share moving forward. In conclusion, while facing challenges, MGM China's financial health appears robust, leveraging innovative facility transformations and prudent financial strategies to sustain growth and maintain competitive market positioning.

Source: MGM China free cash flow positive in 2Q, leverage metrics stronger than 2019: CreditSights, GGRAsia, August 1, 2025.

Posted by Wizard
Aug 04 2025