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31 October 2014
By Howard Stutz
LAS VEGAS -- MGM Resorts International narrowed its third-quarter net loss, but said the company’s results on the Strip were somewhat tempered by construction activity related to its various renovation projects.
MGM’s Strip properties as a whole suffered from a lower year-over-year table games hold on wagers.
“We made some customers very happy in the quarter,” MGM Resorts Chairman and CEO Jim Murren said on a conference call with analysts and investors.
The casino operator, which owns 10 Strip hotel-casinos and the CityCenter development, said Thursday its net loss of $20.3 million for the quarter that ended Sept. 30 was an improvement over the company’s net loss of $22.3 million a year ago. MGM Resorts lost 4 cents per share in the quarter, compared to a loss of 5 cents per share in 2013.
Analysts surveyed by Zacks Investment Research had expected the company to report earnings of 6 cents per share.
MGM Resorts posted revenue of $2.49 billion in the quarter, an increase of 1 percent.
Murren said margins in the quarter were hurt by disruption related to the renovation of the Delano Las Vegas and construction of the Park development between New York-New York and Monte Carlo.
Analysts wrote off the quarter but hoped the disruption was a one-time event.
“With continued consumer pressures, we don’t believe MGM can afford to miss too many quarters, particularly given the investments that it’s making with the cash,” said Macquarie Securities gaming analyst Chad Beynon.
On the conference call, Murren touted MGM’s development pipeline, including the $350 million arena project on the Strip, the $1.2 billion MGM National Harbor in Maryland and the $2.9 billion MGM Cotai in Macau. He said the developments are all expected to open in 2016.
“MGM Cotai… will have a profound impact on MGM China’s footprint, and MGM National Harbor will have a profound impact on our company,” Murren said.
MGM’s Strip resorts experienced a net revenue increase of 2.9 percent in the quarter, but the MGM Grand Detroit saw revenue fall 4.5 percent.
MGM Macau saw net revenue decline 2 percent to $794 million in the quarter, but the company said both operating income and cash flow increased “despite a difficult market.”
At CityCenter, revenue from resort operations increased 5 percent to $280 million.
“Better than expected Macau results were not enough to offset Strip margin softness,” Stifel Nicolaus Capital Markets gaming analyst Steven Wieczynski said of MGM’s quarterly results. “MGM Macau results were particularly encouraging.”
MGM Resorts said its Chinese subsidiary, which is publicly traded on the Hong Kong Stock Exchange, paid a $137 million divided in September, of which $70 million was distributed to MGM Resorts. The company also received $83 million from a trust arrangement after being re-licensed in New Jersey for the Borgata.
MGM also said it reduced its long-term debt to $11.7 billion. The company had $13.4 billion in long-term debt a year ago.
Murren said the company’s single Macau property grew gaming revenue from its mass market business 34 percent in the quarter, well about the market as a whole, which saw a 16 percent decline. Analysts said MGM Resorts wasn’t as reliant on high-end play in Macau as other casino operators.
“We continue to believe MGM will benefit from strong trends in Las Vegas and exposure to the mass market in Macau,” said Buckingham Research Group gaming analyst Brian McGill.
MGM Resorts is investing in nongaming attractions on the Strip. In addition to the arena project and The Park retail, dining and entertainment development, the company building a 33-acre outdoor festival attraction on the Strip’s northern end.
In response to an analyst’s question, Murren said he’s hopeful the $4 billion Resorts World Las Vegas and an announced project by Australian billionaire James Packer and former Wynn Resorts executive Andrew Pascal come to fruition.
He’s unsure what will happen to the halted Fontainebleau project, which is owned by financier Carl Icahn and has sat untouched since 2009.
“The Fontainebleau remains a haven for wild animals,” Murren said. “It doesn’t seem like there’s any activity going on there whatsoever.”
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