MGM Resorts International
's (
MGM
) third quarter 2012 adjusted loss of 23 cents per share
deteriorated from the Zacks Consensus Estimate of a loss of 16
cents per share. Loss per share was also wider than the
prior-year quarter's loss of 14 cents per share.
However, on GAAP basis, MGM Resorts posted net loss of 37 cents
per share compared with net loss of 25 cents per share in the
prior-year quarter.
Total revenue nudged up 0.9% year over year to $2,255.0 million
but fell short of the Zacks Consensus Estimate of $2,257.0
million. Total revenue reflected growth in revenue of MGM China
revenue partially offset by decline in domestic revenue.
MGM China generated net revenues of $665.0 million, up 7.0% year
over year. A solid 10% year-over-year increase in the main floor
table games and a whopping 37% gain in slots led to the upside in
MGM China.
Net revenues related to wholly-owned domestic resorts fell 2% to
$1.5 billion. Similar to the prior quarter, CityCenter continued
to perform better in the third quarter as well, with net revenue
from resort operations growing 3.0% year over year to $263.0
million.
Inside the Headline Numbers
Consolidated casino revenue grew 4% driven by a 7% increase at
MGM China and a 2% rise at the company's wholly-owned domestic
resorts. The overall table games hold percentage at casinos of
wholly-owned domestic resorts was 20.4%, higher than the year-ago
level of 19.5%. Revenues from slots inched up 1% in the quarter.
Table games hold at the Bellagio was substantially lower than the
normal level, compensated by the performance at other Las Vegas
Strip resorts.
Room revenue declined 3.0% primarily attributable to a 2.0% dip
in RevPAR (revenue per available room) in the Las Vegas Strip
properties. A lower occupancy rate combined with flat average
daily rate led to the decline in RevPAR at these resorts.
Operating income for the wholly-owned domestic resorts in the
third quarter of 2012 was $195.0 million, up 50% year over year.
MGM Resorts reported total operating income of $137.4 million
compared with $112.6 million in the year-ago quarter.
Liquidity
At quarter end, MGM Resorts' total cash balance was $2.44
billion. Long-term debt outstanding was $13.8 billion.
Our Take
The key takeaways from MGM's third quarter earnings results are a
slowdown in the company's U.S. business, strong revenue
generation at MGM China and an improving trend at CityCenter.
The company's convention bookings for 2013 and 2014 appear
strong. MGM also remains hopeful about its progress in China with
the official signing of the land concession contract at Cotai.
Hence, we believe that MGM Resorts is ideally positioned to take
advantage of both domestic and international opportunities and is
executing well on its business strategy.
However, a huge portion of debt in its balance sheet remains a
cause of concern. The company which competes with
Las Vegas Sands Corp.
(
LVS
) currently holds a Zacks #3 Rank (short-term Hold rating). Our
long-term recommendation remains 'Neutral'.
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