MGM China reported 2Q23 net revenue of HK$5.8bn and adjusted Ebitda of HK$1.7bn, higher than our expectation, thanks to the incremental gaming tables and more marketing efforts. Considering the higher-than-expected recovery, we raise EPS forecast from HK$0.30 to HK$0.52 in 23E, from
　　HK$0.47 to HK$0.69 （+32% YoY） in 24E, and from HK$0.67 to HK$0.83 （+20% YoY） in 25E. We raise target price from HK$10.5 to HK$13. With 28% upside potential, we raise rating from Outperform to Buy.
　　2Q23 results. The company’s total gross gaming revenue （GGR） increased 186% YoY and 24% QoQ, representing 1% growth over pre-pandemic levels. Mass GGR surpassed 2Q19 by 37%, slot GGR surpassed 2Q19 by 1%, and VIP GGR recovered to 50% of 2Q19 level. By property, MGM Cotai’s adjusted Ebitda was HK$771m and MGM Macau’s adjusted Ebitda was HK$976m. MGM China’s future key priorities include optimizing the additional 198 gaming tables, making optimistic changes to the casino floor to maximize yield, focusing on premium mass customers and driving international customers through its global branch office network.
　　Strong recovery in July. In July, Macau gross gaming revenue recorded MOP16.7bn, recovering to 68% of pre-pandemic levels, and was the highest single month revenue since the pandemic. We expect the recovery momentum to continue as there is upside potential especially from non- Guangdong provinces. During 2Q23, mainland China visitation to Macau recovered at c.63% of 2Q19 level, in which visitation from Guangdong province recovered 80% and non-Guangdong provinces 　recovered 51%.
　　Raise rating from Outperform to Buy. We raise target price from HK$10.5 to HK$13. With 28% upside potential, we raise rating from Outperform to Buy.
　　Risks: Lower-than-expected revenue recovery.