Morgan Stanley: Maintains "Overweight" rating on MGM CHINA (02282) and HK$12 target price; third-quarter results better than market concerns

Morgan Stanley issued a research report maintaining its "Overweight" rating on MGM CHINA (02282) and a target price of HK$12. The company's third-quarter results were better than market concerns, with property EBITDA of US$305 million, up 3% quarter-on-quarter and 1% year-on-year, above the bank's expectation of US$294 million, significantly outperforming Sands China (01928) during Macau's low season. The bank noted that after adjusting for VIP win rate, EBITDA was US$291 million, down 4% quarter-on-quarter and up 2% year-on-year, in line with expectations. However, the VIP win rate used in the adjustment was 3.3%, higher than the previous 2.95%, and the bank prefers to reference trailing 12-month EBITDA. MGM CHINA's mass market share rose 60 basis points quarter-on-quarter to 17.5%, driven by a higher win rate at MGM Macau and a 50% quarter-on-quarter increase in slot revenue at MGM Cotai. Higher VIP and mass win rates drove most of the EBITDA improvement; the mass reinvestment rate rose 190 basis points quarter-on-quarter and operating expenses grew 3% quarter-on-quarter, but margins remained stable. The company's net debt fell 20% year-on-year, aiding deleveraging. The bank believes the company's valuation is attractive, with EV/EBITDA at 6.2x on both a third-quarter annualized basis and 2027 market consensus. The company is outperforming peers amid industry headwinds, and further deleveraging is expected to help lift the current 5.6% dividend yield. Market consensus for 2026 corporate EBITDA implies fourth-quarter EBITDA of approximately HK$1.974 billion, up 1% quarter-on-quarter and down 19% year-on-year, a threshold the bank considers low and expects 2026 market forecasts to be revised upward.