Borgata deal, big gains at Las Vegas properties help MGM to strong quarter

MGM Resorts International’s acquisition of the Borgata in Atlantic City and big gains at its Las Vegas properties offset still-slumping Macau results as the state’s largest employer reported third-quarter earnings on Monday.

Weeks away from opening its new National Harbor property near Washington, D.C., and a new theater at the Monte Carlo in Las Vegas, MGM’s top executive said the company’s domestic properties had their best net revenue and cash flow since 2007 as the recession began.

“Boy, we’ve been waiting for this call,” said an exuberant MGM Chairman and CEO Jim Murren at the beginning of a conference call with investors Monday morning.

Murren praised his team for the “pristine execution” of the company’s business plan and the “epic results” that included the sixth consecutive quarter of double-digit percentage cash flow growth.

“We have executed on numerous opportunities this year, strengthening our organization, improving our balance sheet and positioning the company for growth,” Murren said.

“These results demonstrate the broad-based commitment and contributions of the MGM Resorts team in executing the company’s strategic plan and delivering value to our shareholders,” he said of results from the quarter that ended Sept. 30.

MGM reported $561.3 million in net income, 93 cents a share on revenue of $2.73 billion compared with $94.7 million, 12 cents a share, on revenue of $2.46 billion for the same quarter a year earlier.

The company attributed 60 cents of those earnings per share to a $430 million gain it received in the acquisition of the Borgata, Atlantic City’s market leader, which MGM bought out its 50-50 partner Boyd Gaming for $900 million on Aug. 1.

The Borgata acquisition also was partially responsible for a 23 percent jump in casino revenue although same-store revenue in other domestic properties improved 7 percent compared with the third quarter of 2015. In addition, room revenue increased 14 percent from the prior quarter.

Joe Greff, a gaming analyst with J.P. Morgan, said better-than-expected gaming hold on the Strip enabled the company to exceed Wall Street expectations for the quarter.

For the quarter, Strip resorts also showed a 97 percent occupancy rate and an average daily room rate of $154 compared with 96 percent and $141 a year ago.

Murren noted that the company had record convention business last year and that it’s finalizing a five-year deal with a five-year option for a convention for a Fortune 50 company that will bring thousands of people to Las Vegas in future years. He did not identify the company but said it is new to Las Vegas and details would come in the next few weeks.

He also said the company’s new T-Mobile Arena was the highest grossing arena in the world in September.

The domestic picture overshadowed results from China, where the company has a resort on the Macau peninsula, but will open a new property in the flourishing Cotai Strip area next spring.

In Macau, the company reported net revenue of $500 million, a 6 percent decline from 2015’s third quarter, mostly due to a 26 percent drop in VIP table-game play.

On Sept. 1, the company increased its holdings in MGM China Holdings Ltd., the Macau holding company, acquiring an additional 188.1 million shares, 4.95 percent of outstanding shares, from its partner Pansy Ho’s Grand Paradise Macau entity to raise its stake to 56 percent.

MGM’s parade of openings and opportunities are the keys to the company’s long-term success, he said. The company will open the $1.4 billion National Harbor on Dec. 8 and the Park Theater at Monte Carlo Dec. 17. The company also will devote casino floor space in the MGM Grand next month to millennial guests. Using a committee of millennial employees to generate ideas for the space, the area will have games, music and a vibe that is expected to appeal to that demographic.

“We’re excited about the future, excited about Las Vegas, excited about National Harbor, excited about MGM Cotai and we’re excited about MGM Springfield (the company’s under-construction project in Massachusetts),” Murren said. “These properties represent the present and future of the gaming industry.”

Openings in Massachusetts and Maryland in addition to the continued operation of existing properties on the Mississippi Gulf Coast and in Detroit will provide a number of new cross-marketing opportunities for MGM in the future.

Share of MGM Resorts International gained 77 cents, or 2.92 percent, to close at $27.18 on Monday.

Contact Richard N. Velotta at rvelotta@reviewjournal.com or 702-477-3893. Follow @RickVelotta on Twitter.