MGM Resorts losing $1.5m per day due to Macau virus shutdown


mgm-resorts-coronavirus-macau-casino-shutdownCasino operator MGM Resorts performed below expectations in the final quarter of 2019 and is warning that the coronavirus is already doing a number on its current quarter operations.

On Wednesday, MGM reported that its revenue hit $3.2b in the final three months of 2019, up 4% from Q4 2018. Operating income came in at $3b, a nearly tenfold rise over Q418’s $336m, although $2.7b of this most recent quarter’s total came from the recent Bellagio real estate deal. MGM’s quarterly profit was similarly goosed to $2b compared with a $23m net loss in Q418.

MGM’s mainstay Las Vegas Strip casinos reported revenue rising 4% year-on-year to $1.4b despite table game turnover falling 14% and table win dipping nearly one point to 21.1%. Slots turnover rose 2% and slots win was unchanged, while room revenue improved 5%.

MGM’s regional US operations revenue was up 15% to $900m, although all of the gains came via recent casino acquisitions in New York and Ohio, which helped boost slots revenue by 14%.

In Macau, MGM’s share of the MGM China joint venture revenue was up 6% to $727m entirely on the strength of its mass market table games, which saw win shoot up 31% thanks to 25 new tables and a significant rise in mass win rate. VIP turnover was down one-third at MGM Macau, pushing overall VIP win down by one-fifth.

For 2019 as a whole, MGM’s revenue gained 10% to $12.9b, while adjusted earnings rose 6% to $3b and profit quadrupled to $2b, again, largely on the strength of its Bellagio deal cash.

Investors were shocked by Wednesday’s announcement that chairman/CEO Jim Murren would be stepping down “prior to the expiration of his contract.” The company offered no reason for the early exit and Murren played coy on Wednesday’s earnings call, although he suggested he may continue to play a role in the company’s Japanese ambitions.

Asked whether his exit would impact MGM’s pursuit of a Japanese integrated resort license, Murren said he would accompany other MGM execs to Osaka in May to pitch the locals on why MGM is their best casino bet. Murren added that “I’m absolutely sure I’m going to be involved in the Japan project. In fact, I’ll probably be even more involved in the Japan project as time goes by.”

MGM China’s two Macau casinos are currently closed, as part of the sector-wide 15-day shutdown ordered by the local government earlier this month in response to the coronavirus crisis. With speculation rampant that the shutdown may be extended, MGM opted to withdraw its 2020 financial targets.

MGM said it was currently losing around $1.5m per day as a result of its Macau shutdown, which is around $1m better than rival Wynn Resorts recently estimated. MGM execs put a brave face on the matter, saying they expect the long-term impact of the virus to be minimal.

Maybe, maybe not. On Wednesday, China’s Hubei province issued alarming new statistics that showed 15,152 new infections, bringing the total to 52,526. Hubei also announced 254 new deaths, bringing that total to 1,367. China is cautioning that the spikes are due to new diagnosis methodology, but international observers are wary that China may actually be underreporting the situation.

As for MGM’s Roar Digital online gambling/sports betting joint venture with UK-listed operator GVC Holdings, MGM president/COO Bill Hornbuckle said MGM execs “feel a little underappreciated” for the JV’s performance to date and the company remains “extremely bullish” at its prospects.

Hornbuckle said net gaming revenue was “over $100m last year” and active player growth is “up over 126% since June.” However, subsequent comments by Hornbuckle suggested that $100m figure may include MGM’s existing sports betting operations in Nevada.