Citi expects strong 1Q24 performance by SJM Holdings, MGM China

Jenny Ortiz April 12, 2024

SiGMA news

Citi expects strong 1Q24 performance by SJM Holdings, MGM China

Citi, a leading brokerage firm, foresees that SJM Holdings and MGM China will lead the pack in operational performance during the first quarter of 2024 in Macau’s gaming sector. The brokerage firm said particularly noteworthy is MGM’s edge in utilizing radio frequency identification (RFID) technology in gaming tables, positioning it for significant growth.

Despite a 6 percent quarter-on-quarter (QoQ) increase in Macau’s gross gaming revenue (GGR) for the first quarter of 2024, Citi anticipates only a 2 percent quarter-to-quarter growth in industry earnings before interest, taxes, depreciation, and amortization (EBITDA). This subdued growth is attributed to negative operating leverage stemming from unfavorable hold rates, notably observed in February.

Bright spots: SJM Holdings and MGM China

In contrast to the industry trend, Citi expects SJM Holdings and MGM China to demonstrate more robust EBITDA improvements for the first quarter. The brokerage firm highlights MGM China’s technological prowess, particularly its early adoption of smart gaming tables, as a key driver of its anticipated success.

Investment outlook: Favorable targets

The brokerage firm has raised its target price for MGM China from HK$16 (€1.86) to HK$17 (€1.96) and positioned it at the forefront of its ranking among Macau’s casino operators. This bullish outlook reflects confidence in MGM China’s ability to maintain its competitive edge throughout 2024.

Earnings preview: Unfavorable hold rates impact GGR, EBITDA

Citi’s earnings preview for the first quarter of 2024 underscores the impact of unfavorable hold rates on both GGR and EBITDA, with the industry’s EBITDA projected to grow by only 2 percent QoQ to $2 billion.

Market dynamics

The report also identifies Wynn Macau, MGM China, and SJM Holdings as potential market share gainers, while Sands China and Galaxy Entertainment Group are expected to face challenges due to unfavorable hold rates and renovation-related disruptions, respectively.

Continued advantage for MGM China

Citi maintains that MGM China’s successful market share gains, facilitated by its innovative use of smart gaming tables and RFID chips, position it for continued success in 2024. The concessionaire is expected to maintain its technological advantage over competitors, contributing to its sustained growth trajectory.

Upcoming SiGMA event: BIS SiGMA Americas 2024, find all the details here.