MGM Resorts International (MGM), the largest casino and hotel operator on the Las Vegas Strip, is looking for a rebound in the famed gambling resort.
MGM’s Vegas properties include the Bellagio, MGM Grand, Mandalay Bay, and The Mirage. The Strip accounts for 74 percent of the company’s revenue, and both convention business and consumer travel to Las Vegas suffered during the recession. MGM would greatly benefit, of course, from a sustained U.S. recovery.
About 20 percent of the company’s cash flow now comes from Macau, a special administrative region of China, and the casino business there is going gangbusters, Morningstar reports. Betting in Macau surged 45 percent in the first 10 months of 2011.
In June, MGM gained a majority stake in a joint venture MGM China Holdings that owns the MGM Macau, a casino and resort. Earnings before interest, taxes, and depreciation (EBITDA) for MGM China soared 65 percent in the third quarter to $139 million, compared to a year earlier.
Standard & Poor’s analyst Esther Kwon sees MGM Resorts revenue rising 19 percent in 2012, the first full year that will include results from MGM China.
Revenue soared 38 percent in the third quarter to $2.2 billion from a year earlier, figures which don’t include MGM China. The company posted a net loss of $123.8 million in the quarter, narrowing from $318 million a year earlier.
Kwon has a hold rating on MGM shares. “We see Las Vegas trends improving on an increase in higher margin convention business, and we see improved liquidity at MGM,” she writes.
The improved liquidity stems from the company’s 2010 move to extend the maturity of much of its $4.7 billion in senior debt to February 2014 from October 2011. MGM issued 41 million common shares in October 2010.
“We expect asset sales to provide further balance sheet improvement,” Kwon writes. MGM has placed its 50 percent interest in the Borgata Hotel Casino and Spa, in Atlantic City, N.J., in a divestiture trust and says it plans to exit the state.
MGM shares dropped 29.8 percent last year.
The company next reports earnings Feb. 13.