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MGM Resorts wows investors with Q1 revenue, profit gains

TAGs: Las Vegas, Macau, MGM China, MGM Resorts

mgm-resorts-casino-profitsCasino operator MGM Resorts International wowed investors on Tuesday by posting profits of $108.2m in Q1, a sixteen-fold improvement on the black ink reported in Q1 2013. Revenue in the first three months of 2014 rose 11.8% to $2.6b while earnings rose 19% to $682m, primarily on the strength of MGM’s operations in Macau. Giddy investors pushed the company’s share price up 8.5% to $24.98.

MGM China, the joint venture in which MGM Resorts holds a 51% stake, reported revenue up 26% to $921m. Earnings rose 33% to a record $241m and operating income rose two-thirds to $165m. Mimicking the overall Macau market trends, MGM’s VIP table games turnover rose 12% year-on-year while mass market table revenue rose a hefty 45%. Slots handle and revenue were up 12% and 15% respectively.

On a post-earnings call with analysts, MGM China boss Grant Bowie said junket operators ferrying VIP gamblers into Macau casinos “will always be very important” but the mass market is where “the focus really now needs to be.” Only about 45% of MGM China’s table mix is currently dedicated to mass gaming, yet mass accounts for 70% of MGM China’s earnings.

MGM CEO Jim Murren also talked up Diaoyutai MGM Hotel Management Co., Ltd., MGM’s joint venture to manage hotel properties on the Chinese mainland. Murren believes the extra exposure generated by this partnership with the Chinese government will help boost MGM’s brand among mass market gamblers when they decide to make the trek to Macau.

MGM Cotai, the company’s second Macau casino property, remains on target for an early-2016 opening. When those doors open, the company will nearly triple its current number of hotel rooms, allowing it to make further claims on the lucrative mass market that Las Vegas Sands currently dominates with its 9k hotel rooms.

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Revenue from MGM’s 12 wholly owned domestic properties rose 5% to $1.57m in Q1, but gambling revenue fell 2% as table game hold fell 1.1 points to 20.8%. While slots revenue rose 1% at MGM’s properties on the Las Vegas Strip, slots fell 5% at its other US properties. The CityCenter project and its Aria casino – in which MGM holds a 50% stake – reported revenue up 2% to $313m but earnings dipped as Aria’s table games hold fell 1.5 points to 26.8%.

MGM has been working hard to burnish Las Vegas’ image as a place known for more than gambling. Fresh off announcing that it was in talks to host an annual Rock In Rio USA music festival on the Strip, this week saw MGM announce plans for an eight-acre pedestrian-friendly outdoor green space it’s calling The Park. The space will feature water-walls, 75 mature trees and other assorted flora on its landscaped grounds and will serve as a hub connecting MGM’s New York-New York and Monte Carlo resorts with MGM’s new 20k-seat sports arena, which is set to open in 2016.

On the digital front, Murren said the company’s myVegas social gaming operation has “vastly exceeded our expectations by providing us with over 850k daily average users.”

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