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MGM Resorts posts best quarterly operating performance since 2008

30 April 2014

LAS VEGAS -- MGM Resorts International on Tuesday reported its best quarterly operating performance in six years.

Now, the casino company, whose Strip holdings include Bellagio, MGM Grand Las Vegas, Mandalay Bay Resort & Casino and the CityCenter development, is looking to better that performance.

The Las Vegas-based casino giant said its net income for the quarter that ended March 31 was $108.2 million, or 21 cents per share. In the same quarter a year ago, MGM Resorts earned $6.5 million, or 1 cent per share. Analysts polled by FactSet predicted earnings of 8 cents per share.

The company’s overall revenue grew 11.8 percent to $2.63 billion.

MGM Resorts credited the company’s performance in Macau for helping the results

Net revenue from the 600-room MGM Macau was $941 million, a 26 percent increase. The company’s publicly traded Chinese subsidiary paid MGM China paid a $499 million dividend in March, of which $254 million was distributed to MGM Resorts and $245 million was distributed to noncontrolling interests.

On a conference call with analysts to discuss earnings, MGM Resorts Chairman Jim Murren said the Macau results came despite having the smallest footprint of any of the competition in the Chinese market, including Las Vegas Sands Corp. and Wynn Resorts Ltd.

MGM Resorts is building a second Macau casino, a $2.9 billion property on the Cotai Strip that is expected to open in 2016. Murren said MGM Resorts will dramatically grow its casino space in the market and is looking at other expansion opportunities beyond the Cotai property.

“The smallest presence in Macau will no longer be the smallest presence,” Murren said.

The company’s primary focus is Las Vegas.

Murren said MGM Resorts has been focused on improving its luxury properties since 2010, focusing 83 percent of its capital expenditures on the segment. The enhancements included room upgrades at Bellagio, MGM Grand and other resorts, along with upgrades to nongaming areas.

The new focus is on attractions and other amenities to increase visitation to Las Vegas.

MGM Resorts will break ground Thursday on a $350 million, 20,000-seat sports arena and events center behind New York-New York and announced Monday designs for The Park, a $100 million outdoor dining, retail and entertainment district between New York-New York and Monte Carlo. The two resorts have undergone remodelings as part of the development.

Earlier his month, MGM Resorts announced a partnership with Cirque du Soleil and investment firm The Yucaipa Cos. to build City of Rock, a permanent, 33-acre, open-air concert venue with a capacity of 80,000 at the southwest corner of Sahara Avenue and Las Vegas Boulevard.

Murren said the site will host the Rock in Rio music festival in 2015, 2017 and 2019, but could hold four or five events a year. He predicted new nongaming amenities could help Las Vegas attract between 45 million and 50 million visitors annually in five years.

“It accrues to the home team,” Murren said. “We’re obviously the home team.”

Stifel Nicolaus Capital Markets gaming analyst Steve Wieczynski said MGM Resorts’ planned improvements to its mid-level properties will give the company a large swath of the Las Vegas tourism market.

“While the Strip’s gross gaming revenue recovery continues to proceed at a graduated pace, we believe an encouraging 2014 group and convention outlook, strong events calendar, and MGM’s ability to command its fair share of the high-end baccarat business should accelerate property-level cash flows for the company,” he said.

CityCenter reported net revenue $313 million, a 2 percent increase while the centerpiece Aria resort said it hotel occupancy ran at 92 percent with an average daily room rate of $229. Aria’s revenue per available room, a non-traditional reporting figure, was $211, a 14 percent increase compared to the 2013 first quarter.

Murren was also asked if MGM Resorts might seek to sell one of its Strip properties or purchase another Strip casino. He said the company looked at selling the retail component of CityCenter last year, but dismissed the idea.

“We have no interest in leveraging up the company nor do we have interest in diluting shareholder value,” Murren said.

Investors apparently liked what they heard in the report. Shares of MGM rose $1.96, or 8.51 percent, to close at $24.98 on the New York Stock Exchange. Volume was more than 21 million shares, slightly more than twice average volume.
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