MGM to build New $2.5b Macau Casino

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MGM Resorts International is looking to expand their empire in Macau by building a $2.5 billion (HK$20 billion) casino in the Cotai district. The casino figures to have 500 gaming tables and 2,500 slot machines while the hotel will feature 1,600 rooms. In all, this project is expected to take three years from now to complete.

Interestingly enough, much of MGM’s financial budget will be wrapped up in the 17-acre plot where they’re building the hotel and casino. They’ll pay $161 million up front and $269 million in annual rent; when the casino is actually completed, this rent will rise to $681m.

Nevertheless, this new project figures to be well worth the money because MGM has been looking to gain a foothold in Macau’s increasingly popular Cotai district. MGM China addressed this by stating the, “development of the Cotai land will offer compelling growth opportunities in the future.”

The company is banking on these growth opportunities because MGM currently ranks last in revenue out of Macau’s six major casino operators. Their MGM Grand Macau casino (built in 2007) does alright in the current market, but not quite good enough to keep up with Sands China or Wynn Resorts.

By adding a second Macau casino and resort, Bank of China International analyst Edwin Fan believes it will have a very positive effect for MGM after he said the following:

Getting the approval to build its first casino in Cotai will help to broaden MGM’s customer base, luring the mass market which provides a higher margin. The company has already secured project financing for the development, but there’s a high chance it will cut its dividend payout ratio.

Whenever MGM’s new China project is completed, they’ll certainly be hoping that the region remains stable afterward. The past several months have seen bizarre gang violence spark up, which has turned away potential visitors from Macau. However, the special administrative region of China has been working hard to crack down on criminals to inspire confidence in tourists.

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