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Howard Stutz

MGM Resorts sees "imminent" approval for Cotai Strip

4 May 2012

MGM Resorts International told investors Thursday that government approval was "imminent" for the company's plans to develop a hotel-casino on Macau's Cotai Strip.

The language used by company executives during a quarterly earnings conference call surprised analysts because MGM Resorts officials have normally been somewhat reserved in their thoughts about Cotai. The company has been awaiting the Special Administrative Region to decide on a land application.

MGM Resorts Chairman and Chief Executive Officer Jim Murren said Tuesday's announcement by Wynn Resorts Ltd. that it had received approval from Macau to build a $3 billion resort on Cotai is a positive sign.

The Macau government earlier this year said it would allow only two Coati land grants in 2012. With Wynn taking one of the spots, MGM Resorts and SJM Holdings Ltd. are competing for the other.

"Our process through this, since 2007, has been deliberate, measured and tracking to that type of outcome," Murren said of MGM's chances.

Grant Bowie, CEO of MGM China Holdings, said executives have been communicating with government officials to understand Macau's position on new development.

"The Wynn announcement has now cleared the air," Bowie said. "Most importantly, we're making sure we get the product that we know will add considerably to the diversification of the industry here in Macau."

Bowie said MGM Resorts is "prepared to commence construction as soon as we are given the green light by the government" on a $2.5 billion, 1,600-room hotel and a casino with 500 table games and 2,500 slot machines. Bowie said construction would take 36 months.

Financial results from the company's 600-room MGM Grand Macau factored heavily into the company's first quarter earnings report, which covered the three months that ended March 31.

The company said it lost $203.3 million in the first quarter, compared with a loss of $89.8 million in the same quarter last year, because of accounting issues and consolidating full results from MGM Grand Macau into its overall financial picture.

The figures translate into a loss per share of 44 cents, compared to 18 cents per share in first-quarter 2011.

With MGM Grand Macau now factored into the company's quarterly earnings, MGM Resorts said revenues grew 51 percent, to $2.3 billion. Without the Macau casino, MGM Resorts said, its overall revenues would have still increased 5 percent.

The MGM Grand Macau earned net revenue of $702 million during the quarter, an 18 percent increase.

Following an initial public offering on the Hong Kong Stock Exchange last year, MGM Resorts gained a 51 percent majority ownership in the property.

MGM Resorts' net loss included provisions for various taxes and loss for debt retirement.

Murren said the focus should be on performance from the company's casinos, especially on the Strip, where MGM Resorts saw its net revenues increase 5.6 percent, to $1.17 billion. At Bellagio, net revenues increased 13 percent.

"Our takeaway is that the fundamentals of the business are getting stronger and the foundation for growth here in Las Vegas is broadening," Murren said. "Looking forward, we're confident we can accomplish many milestones in the quarters ahead."

At CityCenter, which includes Aria, net revenues declined to $234 million from $263 million in the same quarter a year ago, while adjusted cash flow fell to $32 million from $64 million.

MGM Resorts said Aria's table games hold percentage - money the casino collected on wagers versus the money won by gamblers - was significantly below the low end of its normal range, affecting gaming revenues. Aria's hotel occupancy percentage, however, was 86 percent and its average daily room rate was $205, resulting in revenue per available room of $177, a 3 percent increase compared to the prior-year first quarter.
MGM Resorts sees "imminent" approval for Cotai Strip is republished from