BestCraps.com

MGM Resorts Expanding in Asia: Plans Casino Chain in Macau

Posted on August 6th, 2010

News Sponsored by Online Vegas Casino

Rated 5 Stars by BestCraps.com

Read Review

Visit Casino

Download Software

————————————————

MGM Resorts International plans to build a chain of casinos in Macau in line with its expansion plan in Asia. “We are starting to assert ourselves in Macau and we will have more properties in Asia over time”, reveals Jim Murren in an interview with Bloomberg Tuesday. At present, MGM’s market share in the world’s largest gambling hub is small compared to the other five casino operators in Macau. MGM is optimistic about the company’s future performance as it is now starting to show positive signs of recovery from the successive losses in the last two years. “We are now starting to see a recovery. The month of June was a turning point for us”, Murren said. Prompted largely by gains from its luxury resorts, overall revenues from its Las Vegas rooms, which had been on a declining trend since October 2007, were up for the first time this June.

Early this week, MGM reported a $1.12 billion reduction in the value of CityCenter, a joint venture with Dubai World. CityCenter narrowly averted bankruptcy in March 2009 at the height of the construction of the complex and managed to operate the $8.5 billion resort by December. After this major writedown, CityCenter’s present book value now stands at $2.65 billion. “CityCenter’s current operating loss of $128 million will become profitable as Strip room revenue return to growth in the second half as demand for conventions increases room rates and occupancy,” MGM forecasts in a company statement. CityCenter has constructed an additional 6,000 rooms in three hotels in the Las Vegas Strip early this year. Now, the company’s average daily room rate in all 10 resorts is $110 with a 93 percent occupancy rate.

Murren reported that the company’s sales were up 2.9 percent to 1.54 billion in the quarter and predicted a rosy picture in the coming years. “Convention bookings will rise to more than 14 percent next year, from about 13 percent this year. Room prices in 2011 will be 15 percent to 20 percent higher than this year,” he said. Overall, Las Vegas Strip resorts are showing signs of recovery from the recession. Resorts are offering large discount rates to attract more customers.

“MGM has the capability to execute in Macau, but that will require a sophisticated senior management team that knows Asia very well and can help them access Asia’s capital market,” says Jonathan Galaviz, an independent expert on the gambling industry. Wynn and Sheldon Adelson have been successful in their expansion in Asia due to their “versatile and agile” business approach. “The question is can a large corporation like MGM have that same maneuverability?” Janet Brashear, an analyst at Standford C. Bernstein & Co., supported the company’s turnaround story. “The Las Vegas trend is better”, she said in her research note which gave a “market perform” rating on the company’s shares.

However, David Bain, an analyst at Sterne Agee & Leach Inc., still sees MGM as in a risky situation. “We weren’t overly impressed with the results”, he said. In the last three months ending in June, MGM posted a total loss of $883.5 million, or $2 a share. This is higher than the reported loss last year, which was $212.6 million, or 60 cents per share. With 35 cents adjusted loss, MGM failed to meet the 24 cents average estimate loss pegged by 20 analysts in a Bloomberg survey conducted earlier.

The MGM Grand Macau, a joint venture with Pansy Ho, contributed $18.7 million to MGM’s total earnings. MGM and Ho are preparing an initial public offering to raise capital for the establishment of a second casino resort in Macau, Murren said. In addition, the co-owners also agreed on another financing package consisting of HK$4.29 billion ($553 million) term loans and HK$3.12 billion revolving loans.
In the news early this week, Macau reported a 70 percent increase in casino revenues in the month of July against last year’s income.