The coronavirus won’t have a long-term impact on MGM, chairman and CEO Jim Murren said Wednesday.
Macao was showing some improvements in early 2020 before the virus hit, Murren said in a fourth-quarter earnings call with investors.
Despite closures affecting the 41 casinos in the Macao market, Chairman and CEO Jim Murren — who stunned the industry with an announcement that he would be stepping down soon from both roles — is optimistic about the company’s future.
Murren cited a wave of positive indicators in Las Vegas, the early economic success of the company’s controversial MGM 2020 cost-reduction strategy and its plans to press ahead on nationwide sports wagering and developing an integrated resort in Japan.
“We are focused on the impacts of the coronavirus,” Murren said at the conclusion of his call. “We’re absolutely prioritizing the safety of our customers and our employees, but we feel that situation will be managed and the company is well positioned given our diversification as a global company and our balance-sheet strength.”
Murren listed several factors making him optimistic about Las Vegas’ future — a strong convention calendar; the anticipation of the National Football League Draft in April in which MGM’s Bellagio will have a major role; the record passenger count at McCarran International Airport; the arrival of the Raiders to Allegiant Stadium “in Mandalay Bay’s backyard;” and expansions by rivals Wynn Resorts, Caesars Entertainment and Las Vegas Sands with their Wynn meeting facility, Caesars Forum and MSG Sphere projects.
Meaningful real estate deals
“We’ve made a lot of meaningful progress with our real-estate transaction result in the $8.2 billion of net cash proceeds,” he said. “We’re using that dramatically reduced leverage to invest in Japan and in sports. We’re firmly on track to continue to announce additional real estate transactions this year,.”
“Our domestic business is very solid and we are very focused on these cost reductions that we know will support growth in cash flow and free cash flow per share.”
Earlier Wednesday, the company reported earnings of $2.012 billion, $3.91 a share, on revenue of $3.185 billion for the quarter that ended Dec. 31. That compares with a fourth-quarter 2018 loss of $23.3 million, 6 cents a share, on revenue of $3.053 billion. The high net income for the quarter was a result of gains MGM received with the sale of Bellagio in a $4.25 billion leaseback deal with the Blackstone Group.
Of the three Las Vegas companies with resorts in Macao, MGM is the least exposed because it partners on them with businesswoman Pansy Ho. Also, MGM has a more diverse network of casino properties domestically than rivals Las Vegas Sands Corp. and Wynn Resorts Ltd. Through 2019, Sands and Wynn have received more than 60 percent of their revenue from their Macao properties while MGM generates around 30 percent of its revenue from MGM Macao — on the enclave’s main peninsula — and MGM Cotai, just off the Cotai Strip on an offshore island.
Sands has six properties on the mainland and Cotai and Wynn has a Wynn Macao-Encore resort on the peninsula and Wynn Palace on Cotai.
Macao Chief Executive Ho Iat-seng last week ordered Macao’s 41 casinos closed in an effort to stem the spread of the deadly COVID-19 virus, which has now killed 1,118 with 45,210 confirmed cases, 10 in Macao, according to medical experts at Johns Hopkins University in Baltimore. Most of the confirmed cases are centered around Wuhan, in the Hubei district of central mainland China.
15-day casino closures
Ho indicated the 15-day casino closure could be extended, depending on developments toward stopping the spread of the disease.
Gaming industry analysts say the closure of all the Macao casinos in the market are costing their respective companies combined a total $100 million a day.
Investors boosted MGM stock during the trading day, but retreated after hours.
With volume twice the normal daily average, shares climbed 95 cents, 2.9 percent to $33.66 a share on Wall Street. After hours, gains were erased with the issue falling $1.28, 3.8 percent, to end at $32.37 a share, still near the stock’s 52-week high.
The Review-Journal is owned by the family of Las Vegas Sands Corp. Chairman and CEO Sheldon Adelson. Las Vegas Sands operates six properties in Macao and one in Singapore.
MGM Resorts International
Fourth-quarter revenue and earnings for Las Vegas-based MGM Resorts International, operators of the MGM Grand, Bellagio, The Mirage, Aria and Mandalay Bay among other Strip properties. (NYSE: MGM)
4Q 2019: $3.185 billion
4Q 2018: $3.053 billion
4Q 2019: $2.012 billion
4Q 2018: ($23.3 million)
Earnings/(loss) per share
4Q 2019: $3.91
4Q 2018: (6 cents)