UPDATE 2-MGM Macau casino gets government OK

Wed Jan 9, 2013 4:13pm EST

* Government gives go ahead for MGM casino

* MGM will initially pay $56.4 mln for land lease

* Project still needs various construction OKs

HONG KONG/LOS ANGELES, Jan 9 (Reuters) - A $2.5 billion Macau casino planned by MGM China Holdings Ltd, the Chinese arm of MGM Resorts International, received government approval on Wednesday, sending MGM China shares up sharply and boosting other casino companies with operations in the enclave.

The announcement in Macau's official gazette comes after MGM said in October it would pay the government 450 million patacas ($56.4 million) as an initial installment to lease the land. The project still requires various construction approvals before building can start.

MGM competes in Macau, the world's largest gambling destination, against other U.S. rivals such as Sands China Ltd and Wynn Macau Ltd.

Cotai, a stretch of reclaimed land that connects to Macau's crammed peninsula where MGM already has one casino, has been a key focus for Macau casino operators looking to expand in the enclave.

The shares of the parent firms in the United States initially rose on Wednesday on renewed growth expectations by analysts.

MGM Resorts shares traded as high as $13.18 earlier in the day before closing down 5 cents at $12.90 a share. Las Vegas Sands Corp shares rose 0.6 percent to close at $52.41 a share, while Wynn Resorts Ltd shares closed up nearly 0.4 percent at $121.52.

"We continue to like the Macau-centric stocks heading into 2013, and while the stocks have had a strong move over the last month, we still see attractive upside ahead with earnings momentum in the high margin mass segment and emerging signs of a recovery in the VIP segment," said Joseph Greff, an analyst with JP Morgan Securities in a note on Wednesday.

"As the Macau gaming market continues to expand beyond current investor expectations for market-wide growth and co-specific consensus estimates move upwardly, we see the potential for the stocks to move up on positive estimate revisions, higher valuations for existing cash flows and valuations to embrace future Cotai development projects, all providing for more upside."

MGM is expected to open in 2016 on Macau's Cotai strip at the same time as other new properties by the six licensed operators. MGM's land concession contract will have an initial term of 25 years, the group said in a statement to the Hong Kong stock exchange on Wednesday.

MGM China shares closed at $15.82, up 7.02 percent on the Hong Kong Exchange, ahead of casino peers SJM Holdings Ltd , which was up 3.5 percent, and Galaxy Entertainment Group Ltd, which closed 1.7 percent higher.

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