\nBy Howard Stutz, Las Vegas Business Press<\/p>\n
\tA few years ago, when the recession had a firm chokehold on the casino industry, MGM Resorts International was a mess.<\/p>\n
\tCityCenter opened in December 2009 to cost overruns and a depressed consumer market. MGM Resorts\u2019 stock price was trading in single digits, and the company was looking to unload several hotel-casinos to bolster its sagging balance sheet.<\/p>\n
\tMGM Resorts\u2019 survival was actually in doubt.<\/p>\n
\tToday, it\u2019s a whole new story.<\/p>\n
\tFollowing the company\u2019s release of second-quarter earnings this month \u2014 a profit of $105.5 million on revenue of $2.6 billion \u2014 the investment community praised the company and lauded expansion opportunities in the U.S. and Macau.<\/p>\n
\t\u201cMGM remains the most compelling way for investors to play a Vegas recovery paired with growth in Macau,\u201d Credit Suisse gaming analyst Joel Simkins said in a research note. \u201cWith Las Vegas back in vogue, investors should turn to MGM as the best way to play this theme.\u201d<\/p>\n
\tWells Fargo Securities gaming analyst Cameron McKnight wrote, \u201cLas Vegas trends clearly remain strong, and we remain positive on the potential upside from MGM China\u2019s Cotai project and its strong dividend profile (which is up 25 percent year-to-date).\u201d<\/p>\n
\tStifel Nicolaus Capital Markets gaming analyst Steven Wieczynski said MGM Resorts\u2019 stock price \u2014 which has been trading in the mid-$20s much of August \u2014 has \u201cwidely outperformed the broader market\u201d over the past 12 months.<\/p>\n
\tThe company\u2019s Las Vegas story \u2014 where its 10 Strip operations include MGM Grand, Bellagio, The Mirage, Mandalay Bay and CityCenter \u2014 was key to the investment upside.<\/p>\n
\t\u201cThe early innings of the Strip recovery was directly tied to a resurgence in group and convention travel,\u201d Wieczynski said. \u201cRecent results suggest the group strength has started to trickle down into the midtier and value segments.\u201d<\/p>\n
\tClearly, there are smiles in the MGM boardroom.<\/p>\n
\tNo one \u2014 analysts or company executives \u2014 are mentioning asset sales. In fact, two properties that were on the market in 2009 \u2014 Beau Rivage in Mississippi and MGM Grand Detroit \u2014 had healthy revenue and cash flow increases in the second quarter.<\/p>\n
\tThe company\u2019s long-term debt, which was at $13.4 billion at the end of 2013, was down to $12.6 billion as of June 30.<\/p>\n
\t\u201cWe think this quarter is a really good example of the power of being a leading operator here in Las Vegas,\u201d MGM Resorts Chairman Jim Murren bullishly told analysts during the company\u2019s conference call. \u201cOur key markets are continuing to grow, and we continue to invest and focus where we see opportunity.\u201d<\/p>\n
\t\u2018SECONDArY\u2019 CASINOS SURPRISE<\/p>\n
\tLike its rivals \u2014 Wynn Resorts Ltd. and Las Vegas Sands Corp. \u2014 MGM Resorts relied on its single casino in Macau, the MGM Macau, to help boost the company endeavors while Las Vegas recovered.<\/p>\n
\tIn the second quarter, MGM Resorts\u2019 Strip revenue increased 7.7 percent. CityCenter, which the company manages and owns in a 50-50 partnership with Dubai World, increased revenue 9 percent in the quarter.<\/p>\n
\tMacau revenue fell less than 1 percent.<\/p>\n
\tSimkins said returns from Bellagio and Mandalay Bay were expected.<\/p>\n
\tWhat he found \u201cnotable\u201d was \u201ccontinued improvement\u201d at the company\u2019s \u201csecondary\u201d Strip resorts, such as New York-New York, Luxor and Monte Carlo.<\/p>\n
\tMGM Resorts Chief Financial Officer Dan D\u2019Arrigo said the company\u2019s cash flow on the Strip was up for the seventh consecutive quarter and results were fueled by baccarat.<\/p>\n
\t\u201cClearly, the customer relationships we have developed in Asia are benefiting MGM Resorts in Las Vegas, and we expect this trend to continue,\u201d he said.<\/p>\n
\tMeanwhile, MGM Resorts is expanding its footprint in Las Vegas by enhancing its nongaming amenities.<\/p>\n
\tA 33-acre open-air concert venue between Circus Circus and Sahara Avenue is being designed. New York-New York unveiled its 13,000-square-foot Hershey\u2019s Chocolate World in June, and two new restaurants, Tom\u2019s Urban and Shake Shack, open in December.<\/p>\n
\tAlso underway is The Park, a dining and retail district, anchored by a $350 million sports arena-events center on 23 acres between New York-New York and the Monte Carlo.<\/p>\n
\tBy fall, the transition of The Hotel into the Delano Las Vegas, will be complete. The 1,100-room nongaming hotel attached to Mandalay Bay is undergoing $80 million in upgrades.<\/p>\n
\tFREE CASH FLOW GROWTH POTENTIAL SEEN<\/p>\n
\tCityCenter is drawing increased interest from Wall Street.<\/p>\n
\tGoldman Sachs gaming analyst Stephen Kent asked Murren if MGM Resorts was still considering selling Crystals, the retail and entertainment component of the complex. Or, would the company buy back Dubai World\u2019s 50 percent in all of CityCenter.<\/p>\n
\t\u201cAs it relates to buying out our partners, I think we both like owning half of it,\u201d Murren said. \u201cI\u2019d like to own 100 percent of it, but you have to have somebody that wants to sell when you want to buy. And our partners don\u2019t want to sell.\u201d<\/p>\n
\tMurren said MGM and Dubai World like the free cash flow growth potential at CityCenter.<\/p>\n
\t\u201c(Dubai World) likes that Aria is becoming even more profitable than it is today,\u201d Murren said. \u201cThey like the fact that Mandarin Oriental and Vdara are making money and Crystals having a big growth path.\u201d<\/p>\n
\tMurren said MGM Resorts looked into selling Crystals more than a year ago, but that idea has passed. He said the complex was always intended to be a separate component from CityCenter.<\/p>\n
\t\u201cWe believe that Crystals is a very valuable asset,\u201d Murren said. \u201cThe question for us will become, do you sell Crystals for $1 billion today, or do you wait and grow it and see how you can expand it further. Which has more potential?\u201d<\/p>\n
\tMORE VALUE TO COMPANY SEEN<\/p>\n
\t2016 could be a pivotal year for MGM Resorts.<\/p>\n
\tIn those 12 months the company is expected to open the $2.9 billion MGM Cotai in Macau, the $1.2 billion MGM National Harbor in Maryland and the Strip arena.<\/p>\n
\tBoth the 1,500-room Cotai project and National Harbor have been targeted for increases in size and scope.<\/p>\n
\tOn Cotai, Murren said architect David Rockwell, who designed Crystals, will create the Spectacle, an entertainment and retail complex. A Sky Loft component of luxury hotel suites will be added.<\/p>\n
\tPlans are being developed for the second phase of MGM Cotai, which will include 700 hotel rooms and nongaming amenities.<\/p>\n
\tMGM National Harbor is increasing its presence by 475,000 square feet in the future public space.<\/p>\n
\tAnalaysts believe both projects benefit the company.<\/p>\n
\t\u201cWe think CityCenter, MGM Cotai and MGM National Harbor are overlooked and should create value for the company,\u201d Buckingham Research Group gaming analyst Brian McGill said. \u201cThe balance sheet has also improved and leverage should decline going forward.\u201d<\/p>\n
Posted by:<\/strong> Jim T on August 20, 2014, 10:03 pm<\/p>\n Posted by:<\/strong> Dr Crapology on August 20, 2014, 11:05 pm<\/p>\n \tDoc<\/p><\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":" By Howard Stutz, Las Vegas Business Press A few years ago, when the recession had a firm chokehold on the casino industry, MGM Resorts International was a mess. CityCenter opened in December 2009 to cost overruns and a depressed consumer…<\/p>\n","protected":false},"author":36,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[10],"tags":[],"class_list":["post-7867","post","type-post","status-publish","format-standard","hentry","category-latest-casino-news"],"_links":{"self":[{"href":"https:\/\/forumarchives.tmsites.net\/index.php\/wp-json\/wp\/v2\/posts\/7867","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumarchives.tmsites.net\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumarchives.tmsites.net\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumarchives.tmsites.net\/index.php\/wp-json\/wp\/v2\/users\/36"}],"replies":[{"embeddable":true,"href":"https:\/\/forumarchives.tmsites.net\/index.php\/wp-json\/wp\/v2\/comments?post=7867"}],"version-history":[{"count":0,"href":"https:\/\/forumarchives.tmsites.net\/index.php\/wp-json\/wp\/v2\/posts\/7867\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumarchives.tmsites.net\/index.php\/wp-json\/wp\/v2\/media?parent=7867"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumarchives.tmsites.net\/index.php\/wp-json\/wp\/v2\/categories?post=7867"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumarchives.tmsites.net\/index.php\/wp-json\/wp\/v2\/tags?post=7867"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}