MGM Resorts International posted strong third quarter results, bolstered by the company’s acquisition of the Borgata in Atlantic City and continued robustness in its core Las Vegas market.
Total net revenue company-wide increased 23 percent over the same period a year ago to $2.73 billion as gains in the gaming giant’s domestic business offset weak results at MGM Macau. Revenue from the U.S. resorts was up 16 percent over Q3 2015 and 8 percent on a same-store basis.
“We have executed on numerous opportunities this year, strengthening our organization, improving our balance sheet and positioning the company for growth,” Chairman and CEO James Murren said.
New openings and growth in existing and emerging markets will drive the company’s long-term success, he said.
These include Maryland’s $1.4 billion MGM National Harbor, set to open on December 8 near Washington D.C., the $950 million MGM Springfield, expected to open in central Massachusetts in September 2018, and MGM Cotai, slated for a Q2 2017 opening in Macau.
The Park Theater at Monte Carlo on the Las Vegas Strip is scheduled to debut December 17, and plans are under way to redesign sections of the casino floor at the company’s flagship MGM Grand to cater to millennials.
Room revenue, a key element of MGM’s resort-centric business model, increased 14 percent in the quarter as Strip occupancy hit 97 percent, versus 96 percent in Q3 2015. Average daily room rate rose to $154 compared with $141 a year ago.
The company reported a $430 million gain on the acquisition of 100 percent of the Borgata, boosting net income to $561.3 million, or 93 cents a share, compared with $94.7 million, or 12 cents a share in last year’s third quarter.
MGM bought out its Borgata partner, Boyd Gaming, for $900 million on August 1.
Macau revenue was down 6 percent year on year to US$500 million, due mostly to softness in the junket market, the company said, which resulted in a 26 percent drop in VIP play.
According to the Buckingham Research Group, “The combination of MGM’s profit growth program (PGP) running ahead of expectations and continued growth in the group and convention business in Las Vegas, should drive further margin expansion into FY17.”
MGM’s management attributes the excellent numbers to “a better mix of group and convention business along with a better than expected contribution from non-gaming amenities such as the T-Mobile arena,” according to Buckingham.
Buckingham expects that MGM will sell MGM National Harbor and with its partner Dubai World sell CityCenter, releasing capital that will probably be concentrated on the Aria.
In recommending that investors continue to buy MGM, Union Gaming Group added, “That MGM China reported significant mass growth is 1) a testament to management in the face of significant new supply and 2) evidence that boutique-style properties (like MGM Macau) can also benefit from the inflecting mass story – it isn’t just big box operators – when allocating and utilizing resources (i.e. rooms, promotions, data analytics) effectively.” It also wrote, “MGM China continues to outperform as a peninsula-focused operator, and we would expect these trends to continue over the next two quarters prior to the opening of MGM Cotai.”
