JP Morgan downgrades MGM China to neutral on weak earnings, mediocre dividend

JP Morgan has downgraded MGM China Holdings Ltd (02282.HK) to “neutral” from overweight after the casino operator reported weaker-than-expected 2025 earnings and a disappointing dividend last week.

MGM China, which operates MGM Macau and MGM Cotai resorts – and is distinct from U.S.-listed parent MGM Resorts International – posted full-year net revenue up 10.9% to USD4.46 billion for the period ended Dec. 31, 2025.

That growth was driven by a 21.4% fourth-quarter surge to nearly $1.24 billion, with adjusted EBITDAR in the quarter rising 30.5% year-over-year.

The company also declared a final dividend of HKD0.353 per share, scheduled for board ratification on May 20 and payment on June 3. Paired with its August interim dividend of HK 0.313, the total marks a 50% payout of HKD5.07 billion in profit attributable to owners, yielding 5.5% on earnings per share of HKD1.335.

Analysts DS Kim, Selina Li, and Lindsey Qian called the dividend “mediocre,” noting it missed JP Morgan and consensus estimates by about 10% due to soft earnings.

“With peers now lifting payouts to approximately 70% on average, the bar was set for a positive surprise. We didn’t get one,” they wrote in a Thursday note.

The downgrade highlights looming headwinds, including a doubling of branding-related royalty fees to MGM Resorts International, which JP Morgan forecasts will reduce 2026 earnings per share by 11%. The bank cut its 2026–2027 earnings estimates by about 14% and now projects a 2026 dividend of HKD0.59 per share, down from HKD0.70.

“Operationally solid, but below-the-line pressures hit shareholder returns,” the analysts said.

Year-to-date, MGM China shares have dropped 13.8%, trailing the broader casino sector’s 8.8% decline.