However, it should be noted that Q2 2013’s bottom line suffered from $82m in impairment charges due to MGM’s Las Vegas arena project and its Grand Victoria riverboat casino joint venture in Illinois. By comparison, this year’s Q2 incurred just $29m in similar charges and included a $31m gain stemming from a favorable tax settlement over IRS audits for 2005-2009.
In the US, gaming revenue at MGM’s wholly owned resorts rose 6%. Slots revenue declined 1% but the day was saved by a 3.2 point gain in table game hold percentage to 21.3%.
MGM China reported a 1% decline in revenue to $828m, blame for which goes to the Macau market’s much-publicized VIP slowdown. MGM’s high-roller table game turnover in Macau fell 10% year-on-year and VIP hold dipped 0.2 points to 2.7%, which combined to push VIP table revenue down 18% — three times the 5.8% decline in the overall Macau VIP market. In stark contrast, MGM’s mass market table revenue rose 41%. MGM China’s adjusted earnings rose 3% to $210m while operating income came to $134m, up $8m year-on-year. MGM China announced a $136m dividend payable Sept. 1, of which MGM Resorts shareholders can expect to receive $69m, reflecting the company’s 51% stake in the joint venture with Pansy Ho.
Despite the positive numbers, analysts have expressed concerns over MGM’s $12.6b debt, which is second only to Caesars Entertainment in the casino sector. Specifically, Fitch Ratings points to debt maturities of $2.4b in 2015 and $1.6b in 2016, which matches timelines with MGM’s peak expenditure on its $2.9b investment in the MGM Cotai project in Macau and another $2b in its domestic expansion, including MGM Springfield in Massachusetts. Fitch isn’t worried about any near-term default but warns that a “sharp negative turnaround” in operating environment or any deterioration in capital market conditions around that 2015-16 timeline “could stress liquidity.”