MGM 4Q11 PREVIEW

February 22nd is a great date for birthdays and should be for earnings too.  MGM is probably a beat and while that is probably expected, 2012 should be a good year on the LV Strip.

For the first time since Q1 2011, MGM may produce EBITDA solidly ahead of expectations.  We are above the Street, mostly driven by Macau.  Our recent favorable view on the stock has been predicated on a hearty recovery in Vegas, however.  MGM has been and should continue to be the best way to play that recovery.  While Strip RevPAR has been strong for some time and expectations are for continued strength, we think the real delta going forward will be growing slot volume.

MGM will report Q4 earnings on February 22nd.  We estimate $2.3BN of net revenue and $502MM of consolidated property level EBITDA.  We also look at wholly-owned EBITDA plus MGM’s pro-rata share of MGM China and City Center, less corporate expense which produces EBITDA of $416MM.  Our net revenue estimate is 5% above the street while our comparable EBITDA is 6% above consensus. 

DETAIL

MGM’s Strip properties should produce net revenue of $1,166MM and EBITDA of $265MM, a little ahead of Street numbers. We mostly assume teens to low 20’s RevPAR growth (which includes resort fees), low single digit casino and other growth, and low single digit expense increases.

• Bellagio: $286MM of net revenue and $84MM of EBITDA
  • 17% increase in RevPAR
  • 4% growth in casino & other
  • 5% expense growth
• MGM Grand: $234MM of net revenue and $39MM of EBITDA
  • 23% increase in RevPAR (Paquio fight and 2 Eagles show)
  • 5% growth in casino & other
  • 5% expense growth
• Mandalay Bay: $186MM of net revenue and $38MM of EBITDA
  • 19% increase in RevPAR
  • 2% growth in casino & other
  • 2% expense growth
• Mirage: $137MM of net revenue and $24MM of EBITDA
  • RevPAR: $134; 18% increase in RevPAR or 9% adjusted for resort fees
  • 3% decline in casino & other
  • Flat expenses

Other US

• MGM Grand net revenue of $140MM and EBITDA of $38MM
• Mississippi net revenue of $116MM and EBITDA of $21MM

MGM Macau should report $738MM of net revenue and $172MM of EBITDA.  Our assumptions in HK$MM’s are:

• Net casino revenue of $5.7BN and total revenue of $5.8BN
  • Net VIP win of $4,144MM
    • VIP Turnover: 201,750 assuming 8% direct play
    • Hold of 3.16%
    • Rebate rate of 35% or 1.11%
• Mass table win of $1,154MM
• Slot win of $406MM
• Variable expenses of $3,657MM
  • $3,125MM of taxes and gaming premiums
  • $500MM of commissions to junkets
• Fixed expenses of $625MM
• $101MM of branding fees

We estimate that City Center will report $63MM of EBITDA on $278MM of net revenues.

• Aria: $231MM of net revenue and $57MM of EBITDA
• Mandarin Oriental: $10MM of revenue and ($1MM) of EBITDA loss
• Crystals: $12MM of revenue and $7MM of EBITDA
• Vdara: $20MM of revenue and $4MM of EBITDA
• $4MM of development and administrative expenses

Other stuff

• D&A: $247MM
• Net interest expense: $274MM
• Income from unconsolidated affiliates & non-operating items from unconsolidated affiliates of ($27MM)
• $34MM of tax credits
• Minority interest of $39MM