Monday, February 7, 2011

MGM Mirage (NYSE: MGM): Q4 Earnings Preview 2010

MGM Mirage (NYSE: MGM), the biggest casino owner on the Las Vegas Strip, is scheduled to release its fourth-quarter earnings before the opening bell on Monday, February 14, 2011. Analysts, on average, expect the company to post a loss of 22 cents a share on revenue of $1.50 billion. In the year ago period, the company posted a loss of 21 cents per share on revenue of $1.45 billion.

MGM Mirage, through its subsidiaries, owns and operates casino resorts in the United States. The company's resorts offer gaming, hotel, dining, entertainment, retail, and other resort amenities. It also owns and operates golf courses and a golf club.

In the preceding third quarter, the Las Vegas, Nevada-based company posted a net loss of $318 million, or 72 cents a share, from a loss of $750.4 million, or $1.70 a share, in the prior-year quarter. The results include pre-tax impairment charges totaling $357 million, or 51 cents per share, net of tax, including pre-tax impairment charges of $182 million related to the Company's investment in CityCenter, $46 million related to CityCenter's residential real estate inventory, and $128 million related to the Company's Borgata investment. Revenue rose to $1.56 billion from $1.53 billion. Analysts, on average, expected the company to post a loss of 23 cents per share on revenue of $1.55 billion.

The company is ideally positioned to take advantage of both domestic and international opportunities, and is executing well on its business strategy. The company has benefited from continuing growth in Asia and signs of life in Las Vegas. Meanwhile, more positive data in the US, including improved optimism in the gambling hotbed of Nevada, has sent stocks for casino companies with larger America presences up. Macau's gambling revenue in December surged 66% from a year earlier, capping a year in which the territory's revenue from casino gambling soared 58%, well above forecasts made by analysts and officials earlier in 2010. Gambling revenue in December totaled MOP18.88 billion (US$2.36 billion), up sharply from MOP11.35 billion a year earlier, according to data from Macau's Gaming Inspection and Coordination Bureau.

Recently, MGM Resorts International's CEO James Murren said in an interview that hotel room revenue, convention business and gaming revenue are "starting to come back." Murren added that he expects conventional business to be up over 30% this year.

Meanwhile, the CityCenter property appears to be making progress. Indeed, several gaming metrics showed momentum on a sequential basis during the third quarter. An elevated level of activity was particularly notable during big events (conventions, concerts, and holidays).

The firm has taken several steps to improve its financial position. On 21 Jan 2011, CityCenter Holdings, LLC announced it had issued $900 miilion aggregate principal amount of its 7.625% senior secured first lien notes due 2016 and $600 million aggregate principal amount of its 10.75% senior secured second lien PIK toggle notes due 2017. Net proceeds from offering were used to reduce the outstanding principal balance of the Company's senior secured credit facilities from approximately $.185 billion to $500 million, to establish an interest escrow for the Company's first lien notes and remaining senior credit facilities balance for approximately 18 months, and to pay fees and expenses associated with the transactions. The remaining $500 million balance of senior secured credit facilities was also extended to 21 Jan 2015.

Recently, Casino operator MGM Resorts International agreed to license and operate a non-gambling MGM Grand resort in the Indian city of New Delhi. The casino operator announced a signed agreement Tuesday with Silver Resort Hotel India Private Ltd. to build a 480-room hotel with Skylofts suites and serviced apartments. MGM Resorts officials say the first project for the MGM Resorts Hospitality arm in India is part of a company effort to expand its brand in Asia and the Middle East. The project is slated to start in March this year and is expected to be operational in early 2014.MGM Resorts Hospitality is a subdivision of the larger casino company. It has made about 17 deals with developers in various countries to build and operate branded resorts. Development partners provide land and capital. MGM Resorts operates and brands the resorts for a fee.

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