MGM China profit drops 20% on higher licensing fee

Casino operator MGM China Holdings Ltd. (2282.HK) on Thursday reported its revenue rose 4.4% year-on-year to HK$17.39 billion ($2.23 billion) in the first half of the year, but its profit slid 20% to HK$1.9 billion.

Its casino revenue totaled HK$15.1 billion in the first half of the year, up 3.4% from HK$14.6 billion in the prior-year period. Its main floor gross table games win increased nearly 10% year-over-year to HK$16.55 billion, and its slot machine gross win jumped 23% to HK$1.34 billion. But its VIP table gross table games win took a hit, tumbling 30% to HK$1.7 billion.

The company did not specify why its profit fell despite the gaming revenue uptick. But its financial statements suggest the drag stems from a hefty increase in licensing fees. Those costs skyrocketed 119%, jumping to HK$637 million in the first half of this year from HK$291 million a year ago.

Late last year, MGM China’s parent, MGM Resorts (MGM.US) unexpectedly doubled its branding agreement fee from 1.75% of monthly consolidated net revenue to 3.5%, with the hike taking effect this year. The abrupt maneuver triggered a 17% single-day plunge in MGM China’s shares, wiping out HK$10 billion in market value.

Shares of MGM China opened flat at HK$11.08 on Friday. The stock is down 30% from its 52-week high.

By Lau Chi Hang

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