MGM China reported 1Q23 net revenue of HK$4.8bn and adjusted Ebitda of HK$1.4bn, higher than our expectation. Considering the higher-than-expected visitation and revenue recovery, we raise EPS forecast from -HK$0.34 to HK$0.30 in 23E, raise from HK$0.25 to HK$0.47 (+56% YoY) in 24E, and introduce 25E forecast of HK$0.67 (+41% YoY). We raise target price from HK$4.5 to HK$10.5. With 16% upside potential, we maintain Outperform rating.
　　1Q23 results. The company’s total gross gaming revenue (GGR) increased 79% YoY and 255% QoQ, recovering to 77% of pre-pandemic levels. Mass revenue and VIP rolling chip volume recovered to 111% and 24%, respectively. By property, MGM Cotai’s adjusted Ebitda was HK$718m and MGM Macau’s adjusted Ebitda was HK$695m.
　　Solid recovery during the Labour Day holiday. During the holiday, there were 492,000 visitors to Macau, increased by 261% YoY and reached 68% of the pre-pandemic level. Visitors mainly came from mainland China, with a total of 380,000 arrivals, accounting for 76%, followed by Hong Kong (China) and Taiwan (China) with 90,000 and 5,000 respectively.
　　Maintain Outperform. The current low recovery also suggests great earnings upside potential. We raise target price from HK$4.5 to HK$10.5. With 16% upside potential, we maintain Outperform rating.
　　Risks: Lower-than-expected revenue recovery.