Analysts: Happy New Year, MGM

The global casino company, which is developing megaresorts in Macau and the Northeastern U.S., is earning high marks from gaming analysts.

Debt down, profits up, business booming

In the first weeks of 2014, J.P. Morgan gaming analyst Joe Greff said MGM Resorts has “the top gaming investment idea,” reflected by an 85 percent boost in its stock price over the past 12 months, along with new developments brewing in the Northeastern U.S. and on the Cotai Strip of Macau.

Credit Suisse gaming analyst Joel Simkins added that MGM “remains the best-positioned operator to capitalize on the continued recovery of Las Vegas as the U.S. economy recovers.”

MGM has invested almost $3 billion in new developments to become “the most-watched casino company on Wall Street,” reported the Las Vegas Review-Journal. The company plans an $800 million hotel-casino in Springfield, Massachusetts and a $925 million resort in National Harbor, Maryland, outside Washington, DC. It is also under way with a $2.6 billion hotel-casino on the Cotai Strip, which is scheduled to open in early 2016.

In addition, the company has lavished $100 million on an outdoor retail, dining and entertainment corridor on the Vegas Strip, and will follow it up with a planned $350 million sports and entertainment arena.

MGM may also regain a stake in Atlantic City. The company awaits a ruling from New Jersey gaming regulators on whether it can reclaim its 50 percent ownership stake in the Borgata, the city’s most profitable resort.

MGM’s share of the Borgata’s profits, now at more than $110 million, have been held in trust since 2010, when New Jersey forced the company to sever ties with its Macau casino partner Pansy Ho or leave the Garden State. Pansy Ho’s father, gaming titan Stanley Ho, has often been linked to Asian organized crime, though no charges have ever been filed.

MGM is also going great guns in its home base of Las Vegas. It has already sold 88 percent of its convention room nights at its 10 Strip properties.

Analysts once thought MGM was uncomfortably overextended after it opened the $8.5 billion CityCenter complex in 2009, at the bottom of the recession. The company has since reduced its long-term debt to a “manageable $13 billion,” reports the Review-Journal, and also has extended its maturity dates for several years.

Like his competitors in the world of gaming’s corporate elite, Murren has high hopes for his company’s prospects in Japan, where a long-awaited bill to legalize the industry in Asia’s second-largest economy is expected to pass this year.

“Japan will be bigger than Las Vegas,” said the chairman and CEO of MGM Resorts International in a recent interview on CNBC.

MGM along with the likes of Las Vegas Sands, Caesars Entertainment, Melco Crown Entertainment, Wynn Resorts, SJM and Galaxy Entertainment have been laying the groundwork in Tokyo and Osaka to win the lucrative licenses once the Japanese government issues them.

“Everyone’s going to say they have an inside track,” Murren said. “No one has an inside track.”

And with the company’s huge profits in Macau, Murren is bullish about the Chinese SAR.

“Domestically, the story in 2013 was a good but not great year,” he said. “Internationally, it was another great year. Going into ’14, I would expect domestically to be a bit better than ’13, and I think the international business will be great again.”

“These are just some of the reasons MGM Resorts Chairman and CEO Jim Murren walks around with a big smile,” reported R-J columnist Howard Stutz.