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MGM performs below expectations

Wed, Feb 19, 9:38am by Noah Taylor

Casino operator MGM Resorts performed below expectations in the final quarter of 2019 and is warning that the coronavirus is already doing a number on its current quarter operations.

Calvin Ayre reports that last Wednesday its revenue hit $3.2 billion in the final three months of 2019, up four per cent from the fourth quarter of 2018.

Operating income came in at $3 billion, a nearly tenfold rise over the fourth quarter of last year, which netted $336 million, although $2.7 billion of this most recent quarter’s total came from the recent Bellagio real estate deal.

MGM’s quarterly profit was similarly goosed to $2 billion compared with a $23 million net loss in quarter four of 2018.

MGM’s mainstay Las Vegas Strip casinos reported revenue rising four per cent year-on-year to $1.4 billion despite table game turnover falling 14 per cent and table win dipping nearly one point to 21.1 per cent.

Slots turnover also rose two per cent and slots win was unchanged, while room revenue improved five per cent.

MGM’s regional US operations revenue was up 15 per cent to $900 million, although all of the gains came via recent casino acquisitions in New York and Ohio, which helped boost slots revenue by 14 per cent.

In Macau, MGM’s share of the MGM China joint venture revenue was up six per cent to $727 million entirely on the strength of its mass market table games, which saw win shoot up 31 per cent thank to 25 new tables and a significant rise in mass win rate.

VIP turnover was down one-third at MGM Macau, pushing overall VIP win down by one-fifth.

CEO Murren to step down before contract expiry

For 2019 as a whole, MGM’s revenue gained 10 per cent to $12.9 billion, while adjusted earnings rose six per cent to $3 billion and profit quadrupled to $2 billion again, largely on the strength of its Bellagio deal cash.

Investors were shocked by Wednesday’s announcement that chairman Jim Murren would be stepping down “prior to the expiration of his contract.”

The company offered no reason for the early exit and Murren played coy on Wednesday’s earnings call, although he suggested he may continue to play a role in the company’s Japanese ambitions.

Asked whether his exit would impact MGM’s pursuit of a Japanese integrated resort licence, Murren said he would accompany other MGM execs to Osaka in May to pitch the locals on why MGM is their best casino bet.

Murren added that “I’m absolutely sure I’m going to be involved in the Japan project. In fact, I’ll probably be even more involved in the Japan project as time goes by.”

MGM Resorts offloads more properties

Casino giant MGM Resorts International has offloaded two more Las Vegas properties as part of its strategy to become an asset-light company as it seeks to strengthen its balance sheet.

Casino News Daily reports the gambling company said this week that its real estate investment trust, MGM Growth Properties, has entered into a definitive agreement with Blackstone Real Estate Income Trust to form a joint venture and acquire the real estate assets of MGM Grand and Mandalay Bay.

MGP spun off from MGM in 2015, while BREIT is an entity of New York financial giant The Blackstone Group.

Under the terms of the recently agreed acquisition, MGP and BREITs joint venture will take over the real estate assets of premier Las Vegas Strip resorts MGM Grand and Mandalay Bay in a deal that values the two properties at $4.6 billion.

MGP will own 50.1 per cent of the joint venture, while BREIT will own the remaining 49.9 per cent.

The transaction is expected to close by the end of this quarter, subject to certain customary conditions.

Once the deal is finalised, MGM will enter into a long-term triple net master lease for the two major casino resorts and will remain responsible for their day-to-day operations and provide their new owners with annual rent payments.

The initial annual rent will be $292 million.


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