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MGM Resorts International MGM

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Government Regulators Deal Macao Operators a Good Hand; Las Vegas Sands and Wynn Shares Attractive

Dan Wasiolek Senior Equity Analyst

Analyst Note

| Dan Wasiolek |

Our long-held view that all six existing Macao gaming licenses would be renewed by the June 22 expiration date was confirmed by the Chinese government on Jan. 14, removing an overhang for Las Vegas Sands and Wynn, whose shares were up by low double digits and high single digits, respectively. Additionally, no additional licenses will be awarded, matching our ongoing stance. The gaming licenses will be renewed for a 10-year period (with the possibility for a three-year extension), also in line with our thinking. While operators will need to notify the government of any capital distributions, there is no restriction on the activity (as modeled), which had been a concern in the market. Overall, this supports the regulatory intangible asset advantage--the source of their narrow moats--for Las Vegas Sands and Wynn.

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Company Profile

Business Description

MGM Resorts is the largest resort operator on the Las Vegas Strip with 35,000 guest rooms and suites, representing about one fourth of all units in the market. The company's Vegas properties include MGM Grand, Mandalay Bay, Mirage, Luxor, New York-New York, and CityCenter. The Strip contributed approximately 49% of total EBITDAR in the prepandemic year of 2019. MGM also owns U.S. regional assets, which represented 29% of 2019 EBITDAR. We estimate MGM's U.S. sports and iGaming operations will be a mid-single-digit percentage of its total revenue by 2024. The company also operates the 56%-owned MGM Macau casinos with a new property that opened on the Cotai Strip in early 2018. Further, we estimate MGM will open a resort in Japan in 2027.

3600 Las Vegas Boulevard South
Las Vegas, NV, 89109
T +1 702 693-7120
Sector Consumer Cyclical
Industry Resorts & Casinos
Most Recent Earnings Sep 30, 2021
Fiscal Year End Dec 31, 2021
Stock Type Cyclical
Employees 42,000