As we approach 2024, many speculated that all six Macau concessionaires would postpone the revival of dividends, opting instead to strengthen their fiscal positions and set aside funds for obligatory non-gambling expenses. In an unprecedented turn of events, MGM China and Wynn Macau, the regional subsidiary of MGM Resorts International and Wynn Resorts, delivered an unexpected announcement last Thursday. For the first time since 2019, just a year before the global impact of the coronavirus pandemic, both establishments are issuing dividends.
MGM China revealed that they would distribute a final 2023 dividend of 3.07 cents a share while Wynn Macau announced a per-share dividend of 1.33 cents. Judging from analysis notes from JPMorgan, this imperative decision came a year earlier than what Wall Street predicted.
At the start of 2023, the prevailing sentiment was that the three U.S.-based Macau operators – MGM China, Sands China, and Wynn Macau – were not under any particular pressure from stakeholders or regulatory bodies to recommence their dividend disbursements. However, the recent decisions of MGM China and Wynn Macau could be indicative of their belief in Macau’s resurgence, as well as their ability to maintain their debt levels.
The surprising disclosures from MGM China and Wynn Macau, coupled with Galaxy Entertainment’s recent dividend announcement, mean that half of the six Macau concessionaires have resumed dividend payouts. Resourceful analysts at JPMorgan have suggested that of the remaining three, Sands China may be the next to follow, possibly in the next year. This progression would subsequently leave Melco Resorts & Entertainment and SJM Holdings to concentrate on debt reduction in the medium term.
In compliance with new Macau gambling legislation, each casino corporation must maintain a minimum of $625 million in their reserves and disclose any plans of dispensing dividends to authorities. In the past, Sands China and Wynn Macau were required to secure permission from lenders before reviving dividends. The agreement between operators and lenders included certain stipulations, demanding specific liquidity conditions be met before recommencing payouts.
In the U.S., Wynn and Las Vegas Sands revived their dividends in May and July respectively. On the other hand, MGM has chosen to concentrate on share buybacks as its primary method of returning capital to investors. In an recent update, Sands announced that once renovations are complete, the Londoner Macau could generate Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) between $1.5 billion to $1.7 billion. This marks a significant leap from the property’s current EBITDA range of $700 to 800 million. Sands China has dedicated $3 billion towards upgrading the venue for a high-end clientele. The second phase of renovations is anticipated to be completed by the Chinese New Year in 2025.
Banking analysts at JP Morgan have further predicted that Sands is likely to expand its room count at the Venetian Macau, which is showing to be quite profitable. The bank highlighted the special administrative region (SAR) is undersupplied in terms of guest rooms and table games.
In conclusion, as the tides of 2024 draw close, the resumption of dividends and projected fiscal growth amid rebounding economies could signal a promising future for the Macau gaming landscape.
