MGM Resorts International Chairman Jim Murren told investors Tuesday that the casino operator is in its strongest financial position at any point in the past three years, and operating trends are continuing to improve.
The timing of that comment might seem odd: MGM said it lost $145.5 million in the second quarter, and reported a loss per share that was twice the amount that had been estimated by Wall Street analysts.
So how did investors react to the news?
Shares of MGM Resorts had their largest increase in more than nine months.
In an interview after a conference call with analysts, Murren said the company’s “over-arching mission” since 2009 was to rebuild a balance sheet ravaged by the recession and construction of CityCenter.
Murren said MGM Resorts, which had a cash balance of $1.7 billion at the end of June – plus long-term debt of $13.4 billion – was in a “favorable place” in the company’s history.
“We were clear with investors in the teeth of the recession that we would use all means available to use to deliver on that promise,” Murren said. The effort included cost-cutting and debt restructuring.
MGM Resorts Chief Financial Officer Dan D’Arrigo said the company expects to refinance more debt “at progressively lower rates.”
The improved balance sheet, Murren said, has positioned MGM Resorts to capitalize on expansion opportunities in emerging gaming markets. The company is exploring casino development in Toronto and New York City, continues to have an interest in having a gaming license in Western Massachusetts, and awaits results of a special legislative session in Maryland to see whether a $700 million hotel-casino complex is feasible near Washington, D.C.
And, MGM Resorts continues to improve its position in Las Vegas, where the company operates Strip casinos and the CityCenter complex.
“We have a commanding position in Las Vegas,” Murren said. “We’re in the driver’s seat because there are not going to be any major hotel products built here for many years; and with the economy improving, we can take advantage of the market conditions.”
MGM Resorts is spending $160 million to renovate guest rooms and casino area of its flagship MGM Grand Las Vegas. In addition, London-based Hakkasan Ltd. and its partners will spend an undisclosed amount of money to remodel 75,000 square-feet at the front of the casino as a restaurant and nightclub.
On Monday, MGM Resorts announced The Hotel, a 1,100-room all-suite resort attached to Mandalay Bay, will become the Delano Las Vegas under a partnership with the Morgans Hotel Group. MGM will renovate the property, but Murren didn’t disclose the price.
MGM Resorts, which owns Mandalay Bay, will manage the renamed property under a licensing agreement.
Also, Morgans will cover the costs to renovate several restaurants at Mandalay Bay, including replacing Red Square and adding a new nightclub to space long ago vacated by Rumjungle. Murren said the company would continue exploring options at its other Strip resorts.
MGM Resorts told investors its second quarter loss came in spite of “record” three-month results from its casino in Macau and from CityCenter.
The net loss translated into a decline of 30 cents per share for the quarter that ended June 30. A year ago, MGM Resorts had net income of $3.44 billion, or $6.22 a share, which was primarily because of proceeds from placing a portion of its Macau casino holdings on the Hong Kong Stock Exchange.
Companywide revenue in the second quarter, however, was $2.32 billion, a 29 percent increase compared with $1.81 billion in the same quarter last year.
Analysts surveyed by FactSet Research expected a second-quarter loss of 15 cents a share.
MGM Resorts said the second-quarter loss included one-time costs for tax provisions and a noncash impairment charge of $85 million related to the company’s joint venture investment in the Grand Victoria in Illinois.
Analysts said Tuesday they weren’t surprised by MGM Resorts’ quarterly results, which followed similar down results reported by competitors, such as Caesars Entertainment, Las Vegas Sands Corp. and Wynn Resorts Ltd.
“While the soft Las Vegas consumer and slowing growth in Macau are well known at this point, we still think the prevailing sentiment was very negative going into the quarter,” Cantor Fitzgerald gaming analyst Robert LaFleur told investors. “The numbers weren’t that bad, and the shares rallied sharply.”
MGM Resorts closed at $10.08 on the New York Stock Exchange, up 70 cents or 7.46 percent.
Murren said the company’s cash flow grew a combined 4 percent at its U.S. resorts, which includes its Strip and regional casinos. MGM Grand Macau grew revenue 6 percent, to $709 million, because of increases in volume for main floor table games and slot machines.
Results from CityCenter, which includes Aria, show a 3 percent increase in net revenues, to $282 million. Aria had 93 percent occupancy during the quarter with an average daily room rate of $201. Revenue per available room, a nontraditional figure of profitability, grew 3 percent, to $187.
“Although Las Vegas Strip results were somewhat underwhelming, we believe better than expected Macau results will be well received by investors, particularly given the recent disappointing reports from MGM’s Macau competitors,” Stifel Nicolaus Capital Markets gaming analyst Steven Wieczynski told investors.
Contact reporter Howard Stutz at hstutz@reviewjournal.
com or 702-477-3871. Follow @howardstutz on Twitter.