[HONG KONG] There's a new gamble worth taking for MGM Resorts International. One of its Asian investors, Snow Lake, wants the US casino operator to sell a fifth of its US$6 billion Macau business to a Chinese partner. Although it would complicate deals at home and elsewhere, the idea has plenty of merit.

Macau plans to entertain bids for casino concessions next year. It will be a pivotal time for MGM Resorts, with plenty at stake.

The world's biggest gambling hub accounted for almost a quarter of its US$12.9 billion of revenue in 2019. As China's economy recovers, the post-pandemic prospects are also tantalising for what was a US$37 billion market just a year ago.

With China and the US at loggerheads, both Beijing and Macau might prefer local ownership. The possibility seems to have dawned on shareholders. Macau's three American operators have been trading at a discount to home-grown companies such as Galaxy Entertainment, SJM and Melco Resorts and Entertainment, in terms of their enterprise value to Ebitda (earnings before interest, taxes, and amortisation) multiples. A partner closer to home might help MGM make a stronger case for a new licence and favourable terms.

Snow Lake founder Sean Ma suggested online travel outfit Trip, food-delivery to bookings giant Meituan, hotel chain Huazhu or tourism group Sunac China as possibilities.

The virus has suppressed casino share price, but an MGM China stake sale would still bring a useful chunk of change. An US$11 billion offer from MGM Resorts for Entain, the owner of British betting shop Ladbrokes, was rejected this week. MGM Resorts is also poised to apply for a licence in Japan, a project that could require a US$10 billion investment.

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Taking on a big Chinese backer would ruffle feathers elsewhere, however. It might deter other potential local partners. The gambling industry in particular is vulnerable to concerns over an owner's so-called "probity", or suitability to hold a gaming licence.

MGM itself endured intense US scrutiny back in 2009 for its connections with Macau's Ho family. That makes the investor proposal something of a roll of the dice. On balance, though, it's probably worth a punt.

Asian investment firm Snow Lake Capital on Jan 6 urged MGM Resorts International to sell 20 per cent of its China business to a strategic partner.

Snow Lake, which owns roughly 7.5 per cent of MGM China Holdings, wrote in a letter to the MGM Resorts board that such a move would give the casino operator financial flexibility; provide it with enough capital for its resort project in Osaka, Japan; bring non-gaming resources to both MGM China and Macau; and help it pursue acquisitions related to online sports betting and gaming.

Ladbrokes owner Entain said on Jan 4 that an US$11 billion takeover approach from MGM Resorts significantly undervalued its business.

MGM China shares gained 5 per cent to HK$12.90 by 10am (GMT 0200) on the morning of Jan 7.

REUTERS