Goldman Sachs released a research report stating that Wynn Macau (01128) and MGM China (02282) have resumed dividend payments one after another. The bank believes that Sands China (01928) may be one of the next operators to resume dividend payments and is expected to resume dividends within the 2024 fiscal year. After considering resuming dividend payments, the bank slightly adjusted Wynn Macau and MGM China's 2024-2026 EBITDA estimates. The target price for Wynn Macau dropped slightly from HK$8.5 to HK$8.4, while MGM China's target price rose from HK$13.6 to HK$14.4, giving each of the two companies a “neutral” rating.
According to the report, given the drastic improvement in financial conditions, some gaming operators may resume dividends later this year or early next year, so the time is earlier than expected. The bank is also surprised by Wynn Macau's decision to resume dividends because its net debt-to-EBITDA ratio at the end of fiscal year 2023 is still quite high, 4.5 times. Management recently mentioned that the group's considerations include the speed of market recovery, additional costs arising from operating rights, and debt maturity dates.
The bank believes that the resumption of dividend payments by Wynn Macau and MGM China is a positive sign for the market, indicating that gaming revenue has been recovering healthily for 4 to 5 consecutive quarters after customs clearance, making the management of the two companies more confident about the sustainability of their cash flow. As far as debt maturity is concerned, Wynn Macau and MGM China had no maturing debts last year, but this year they had 600 million and 750 million US dollars of debt due respectively. As of the end of fiscal year 2023, the two companies had cash of US$2 billion and US$542 million respectively, in addition to unspent financing amounts of US$500 million and US$1.5 billion. In addition to the bank's forecast that the free cash flow of the two companies will each reach 400 million to 600 million US dollars this year, the two companies should have sufficient working capital to repay the debts due this year and pay dividends.