MGM Mirage (NYSE: MGM): An Excellent Long-Term Opportunity

MGM Resorts International (NYSE: MGM), the biggest casino owner on the Las Vegas Strip, operates a peerless portfolio of destination resort brands, including Bellagio, MGM Grand, Mandalay Bay and The Mirage with a market cap of $5.78 billion. The Company has significant holdings in gaming, hospitality and entertainment, owns and operates 15 properties located in Nevada, Mississippi and Michigan, and has 50% investments in three other properties in Nevada and Illinois. In addition to its 51% interest in MGM China Holdings, Limited, which owns the MGM Macau resort and casino and is in the process of developing a gaming resort in Cotai, Macau.

MGM continues to benefit from resurgence in gambling in Asia and in Las Vegas. 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. Gambling revenue in Nevada rose 1.9% to $978.8 million in October, the state's Gaming Control Board reported Friday. On the Las Vegas Strip, which accounts for more than half the total, the take was up 3.6% to $580.7 million. Similarly, Macau Gaming Inspection and Coordination Bureau reported on December 3 that gambling revenue in November grew 8 percent to $3.5 billion, the highest single-month revenue figure ever recorded.

Macau is the only place in China where people can legally gamble at casinos. Though the VIP segment, which traditionally accounts for 70% of Macau’s gaming revenue has suffered in terms of growth, the mass market has remained strong as emerging Chinese middle class have continued to flock across the border into the southern Chinese enclave.

MGM China had a record third quarter with EBITDA growth of 5% year-over-year before branding fees, and CityCenter continues to show progress as well with record third quarter EBITDA from resort operations of $59 million, up 18% year-over-year. At ARIA, third quarter EBITDA was $47 million, a 17% increase over 2011. This was also the highest third quarter EBITDA since opening. Total casino revenue exceeded last year with net table games revenue up 4% and net slot revenue up 3%. ARIA benefited from a favorable table games hold impact of $8 million year-over-year, with gross table games hold percentage of 29.3 versus 25.5 last year.

During a conference call in October, Chief Executive Jim Murren said that qarly fourth-quarter trends were improving at it domestic resorts and forward convention booking pace is showing growth in 2013 and is further accelerating into 2014.

The company is ideally positioned to take advantage of both domestic and international opportunities, and is executing well on its business strategy. MGM has been working on a handful of key strategic development and expansion opportunities, including Cotai, Maryland, Massachusetts and Toronto. The company's Cotai project will have up to 500 tables, 2,500 slots, 1,600 rooms and a budget of approximately $2.5 billion to be spent over a timeframe of 30 to 36 months. 

The firm has taken several steps to improve its financial position. The transaction will significantly reduce MGM’s interest expense burden by trimming high-coupon debt and improve its ability to generate cash. MGM Resorts, which has more than $13 billion in long-term debt, recently entered into a $4 billion amended credit agreement, issued $1.25 billion in new debt and retired older debt. The company has raised more than $8 billion in long-term financing during 2012. MGM anticipates saving approximately $230 million annually in reduced interest expense from this refinancing, which will allowing it to improve free cash flow and further enhance it balance sheet.

Full Disclosure: None.

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.

Full Disclosure: None.

MGM Mirage (NYSE: MGM): Q4 Earnings Preview 2009

MGM Mirage (NYSE: MGM), the world's second-largest gambling company by revenue, is scheduled to release its fiscal fourth-quarter 2009 financial results before the opening bell on Thursday, February 18, 2010. Analysts, on average, expect the company to report a loss of 13 cents a share on revenue of $1.46 billion. In the year ago period, the company posted a loss of 11 cents per share on revenue of $1.62 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 $750.39 million or $1.70 per share, compared to a net profit of $61.28 million or $0.22 per share in the year-ago quarter. Revenue slipped 9% to $1.53 billion from $1.78 billion last year. Analysts, on average, expected the company to report a loss of $0.08 per share on revenue of $1.47 billion.

Like many gaming companies, the firm's casino operations has been hit hard by the recession, due to lower traffic, shorter stay and decreased spending by the visitors.However, the financial outlook for Las Vegas Sands Corp. has improved amid a rebound in consumer spending and global economic revovery. Recently, Nevada’s Gaming Control Board said that the Las Vegas Strip gambling revenue rose 5.9 percent in December, the second straight monthly gain. Strip proceeds climbed to $502.2 million in December from a year earlier.

Yet another bright spot is Macau's outlook. The company is poised to benefit from more friendly gaming policies from the local government, limited supply of new gaming tables in the near term, and expectation of no further stringent enforcement by the Chinese government over tourist visitations to the enclave support stable growth for the sector's revenues. The casino operator is also expected to get a boost from Chinese New Year celebration. According to Portuguese news agency Lusa, casino revenue in Macau jumped almost 65 percent to a monthly record of 14 billion patacas ($1.75 billion) in January from a year ago, beating the 12.6 billion patacas recorded for October 2009. A new daily record of more than 800 million patacas was also reached in January, Lusa said, citing data from the casino operators.

MGM Mirage's CityCenter resort complex opened its door to the public just before Christmas to critical acclaim. CityCenter, an unprecedented urban metropolis on the Las Vegas Strip, is a joint venture between MGM Mirage and Infinity World Development Corp, a subsidiary of Dubai World.

The firm has taken several steps to improve its financial position. It is seeking amendments to credit agreements that would extend the maturity for a substantial portion of $5.55 billion of senior debt. Recently, MGM Mirage said it was looking to extend the maturities to Feb. 21, 2014, from Oct. 3, 2011, and has asked lenders to approve the change by later this month. In a statement, the company cited "strong initial support" from leading lenders for the proposed accord and said it was working with the rest of its lender syndicate. The company is also planning a Hong Kong IPO that could raise a billion dollars. Meanwhile, according to media reports, MGM Mirage is planning to sell its 50% stake in the Borgata casino resort in Atlantic City, New Jersey. MGM, which partners with Boyd Gaming to manage the Borgata property, is reportedly asking for between $700 million and $850 million for its half.

Shares of the casino operators have spiked ahead of earnings reports. In terms of stock performance, MGM Mirage shares have rallied 130 percent over the past year.

Full Disclosure: None.


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