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MGM Resorts narrows losses, gains revenues in third quarter

1 November 2013

LAS VEGAS -- MGM Resorts International reduced its net loss in the third quarter as the casino giant was helped by increased results from its Strip gaming operations, which officials said are seeing the benefits of hotel room renovations and amenity enhancements.

During a conference call with analysts and investors Thursday, MGM Resorts Chairman Jim Murren said he expects to see additional improvements in upcoming quarters.

MGM Resorts, which operates 10 hotel-casinos on the Strip, said its net loss for the quarter that ended Sept. 30 was $31.8 million, or 7 cents per share. A year ago, MGM Resorts lost $181.2 million, or 37 cents per share.

MGM Resorts said its net revenue grew 9 percent to $2.46 billion while casino revenue throughout the company increased 13 percent.

“Las Vegas continues to trend in the right direction, as the portfolio is generating slow and steady supply growth,” Credit Suisse gaming analyst Joel Simkins told investors. “With a fresh asset base and a number of key amenities, we believe MGM remains positioned to capitalize on increased demand in 2014.”

On the Strip, where MGM Resorts operates resorts such as the MGM Grand Las Vegas, Bellagio, The Mirage and Mandalay Bay Resort & Casino, the company reported net revenue of $1.25 billion while revenue per available room — a nontraditional reporting figure that indicates profitability — grew 2.6 percent.

At the company’s Strip properties, occupancy improved to 93 percent from 92 percent a year earlier with an average daily room rate increasing 2.4 percent to $127.

Murren said hotel room renovations at MGM Grand and Bellagio helped boost the properties’ revenue, as did the addition of new restaurants and nightclubs at Mandalay Bay. The company’s $100 million investment in an outdoor retail, dining and entertainment district between New York-New York and Monte Carlo is expected to help spur business at the two resorts when the development opens next spring.

“As we have highlighted in the past, the higher average daily rates and average guest spend associated with convention travelers generally allows MGM to reap the operating leverage benefits derived from its outsized Strip bed base,” Stifel Nicolaus Capital Markets gaming analyst Steven Wieczynski said.

At CityCenter, MGM Resorts said the company’s net revenue from resort operations grew 2 percent to $268 million. MGM Resorts owns 50 percent of CityCenter and Murren said the company would be interested in acquiring the other half from its partner, Dubai World. However, Dubai World has never approached MGM Resorts to propose the idea.

Murren updated investors on the company’s progress in markets outside of Nevada. MGM Resorts is moving forward with obtaining the rights to build an $800 million hotel-casino in Springfield, Mass., and a $925 million resort in Prince George’s County, Md.

In an interview, Murren said the projects “would be significant providers of job creation” in the Northeast and would provide MGM Resorts with an opportunity to grow its business in other markets.

Murren said MGM Resorts is working with New Jersey gaming regulators in hopes of being relicensed in Atlantic City, where the company still owns 50 percent of the Borgata. MGM has $110 million sitting in a trust account that represents its revenue from Borgata.

MGM Resorts CFO Dan D’Arrigo said the trust will be the “economic beneficiary” when the Borgata launches online gaming later this month.

In Macau, where MGM Resorts operates the MGM Macau and is building a $2.6 billion resort on the Cotai Strip, company revenue increased 22 percent to $808 million.

Various charges, including noncash charges of $26 million related to land holdings in Jean and Sloan, played a role in the company’s net loss during the quarter. MGM Resorts has $13 billion of long-term debt, which is second-highest in the casino industry.

MGM Resorts shares were down $1.25 or 6.16 percent to close at $19.04 Thursday on the New York Stock Exchange.

RBC Capital Markets gaming analyst John Kempf told investors MGM Resorts’ quarterly results lacked any surprise, positive or negative.

“MGM remains a play on a moderate 2014 recovery in Las Vegas driven by a stronger convention calendar and continued margin improvement in Macau,” Kempf said. “In addition, continued strength out of CityCenter bodes well for the eventual monetization of parts of that asset.”
MGM Resorts narrows losses, gains revenues in third quarter is republished from