Bullish call. One time items held back Q4 (corporate expense). 2012 setup looks very favorable.



“2011 was a year in which we achieved many goals: operationally, strategically, and financially.  Operationally, we enhanced our customer experience through targeted reinvestment in our properties and improved relationships through our M life customer loyalty program. Strategically, we acquired a majority interest in MGM China and began expanding our brand presence in key markets throughout the world, particularly Asia.  Financially, our revenues and margins have improved year over year increasing our cash flow and strengthening our financial profile. Going forward we expect to build off of these strategies to grow our company and maximize shareholder value.”


- Jim Murren, MGM Resorts International Chairman and CEO



  • Better then expected FIT and leisure booking led to better than guided to RevPAR
  • Believes that as MGM improves their balance sheet, great benefit will accrue to shareholders
  • This past week they launched M Life for their non-gaming amenities across their resorts and launched their new website. Thinks that this will be a big driver for their Las Vegas business
  • Excited about their strategic relationship with ASCA, extending their reach into the regional markets. Will have more of these types of relationships to report in the coming quarters
  • Think that MA will be a great potential market for them
  • They are looking at other regional markets where they can invest small sums to increase their database and leverage their brands to the benefit of their Strip properties
  • They will have a Bellagio on the Bund in Shanghai. Have a property opening in Beijing and Chengdu later this year
  • Feel that they are in as good position as anyone if / when online gaming happens in the US
  • Continue to manage their expenses. MGM Grand YoY improvement was largely due to better group mix.  
  • Group mix was 14.7% in the quarter
  • Leisure and FIT segments are up 9% in the 4Q
  • Casino trends continue to improve and international volumes continue to improve
  • 4Q domestic rated play also improved
  • Saw volume and win increases in both tables and slots for the first time since 2007
  • MGM Detriot had its best quarter and year since opening
  • $113MM of capex and $12MM in MGM China this quarter
  • Expect to spend $350MM excluding MGM China in 2012
    • Room remodel at MGM Grand
    • Room remodel at Bellagio
    • Conversion / start of Michael Jackson show
    • Blue Man Group show
  • Corporate expense higher than usual. One time costs regarding outsourcing their IT costs. Expect their corporate expense to moderate and to be in the mid $30MM in the 1Q12
  • 1Q12 Guidance:
    • D&A: $235-240MM
    • Interest: $274MM ($24MM in amortization and $6MM from MGM China)
    • Stock comp: $10MM
  • Lowered interest rate and extended maturity through the refinancing at CC
  • Closing of facility redo in a week or 2, expect a reduction of borrowing costs of roughly 150bps
  • CityCenter:
    • Aria: Casino revenue increased 27%, hotel revenues increased 24%. Slot revenue increased 21% YoY.
      • Benefited by $6MM in high hold
      • Room revenues benefited by higher % of convention room nights
      • 100% of their planned convention room nights are already booked for 2012
      • Negotiating to have the Cirque show to be replaced with Michael Jackson
      • They are updating some of their dining options
      • Will host the Michael Jordan golf tournament in March
    • Crystals: 86% leased. D&B mens and women's stores opened this year. Channel's swimwear store opening soon
    • Total monthly lease revenues of $751,000; 405 units
  • MGM China
    • 2 new Junket operators opened this quarter
    • RC grew 29%
    • Mass drop grew 13%
    • Slot handle grew 35%
    • $45MM of capex in 2011 and $85MM in 2012 ($45MM will build out some undeveloped space on the second floor)
    • Cotai plan: 500 tables, 1600 rooms and costs about $2.5BN
  • Seeing great returns on the room remodel at Bellagio and MGM Grand
  • The event calendar is a big driver of visitation for them
    • Mayweather - May
    • Pacquiao - June
    • Madonna
  • The first quarter will be the toughest ADR comp, but think that RevPAR will be up 2-3% and then improve throughout the year - especially in the 2nd quarter. 



  • Resort fee helped them by a few percent in 4Q, but that's largely anniversaried at this point going forward.  Excluding resort fees, they would have been up just over 10%. Cash ADR was up 8.6% in the quarter.
  • MGM Grand margins - flat year over year? Impacted by room renovations
  • Bellagio hold was up YoY but held well.  Was hitting on all cylinders
  • MGM China - impact of SCC opening?
    • Feel like they will be able to sustain their positions. Will be interesting to see how the other properties on Cotai will do.
  • Flow through worse in 4Q?
    • Due to seasonality 4Q is never as good as 3Q. 48% flowthrough is one of the best flow-through levels that they've had.  Part of that is lower occupied room nights in the 4Q than other quarters.
  • I-poker?
    • Several options at the Federal level - there are still several pieces of key legislation that need to be passed
    • Murren thinks it will be passed at the Federal level this year
    • States are also "fervently" working on their own legislation and they are prepared for that scenario although they prefer Federal legislation
    • They will be one of the first horses out of the gate when something passed
    • Champions for Federal approval in the House?  No comment - but he does think that there is broad based support in the House as well as the Senate, which views this as a key law enforcement issue.
  • Additional levers to reduce leverage? 
    • More FCF as property improves
    • Cash from trust in NJ with the sale of Borgata ($180MM)
    • Additional dividends from MGM China
    • CC will also be a deleveraging JV
  • Projecting same convention room mix as what they ended in 2011 for 2012 with better in the year for the year bookings.  2013 and 2014 looks incredible strong so far.  Same bodes for Aria. 
  • When will they get some meaningful contribution from international hotel management hotel contracts?
    • They are already starting to make money in China - MGM Grand in Sanya just opened. Get $1000/night over CNY
    • They also have Brandco - getting $30MM from fees from MGM China vs. just $12MM last year
  • Think that their high end properties will continue to perform well through out the year
  • Gaming is coming back in Vegas.  Table play is coming back and slot business is strong.
  • Think that 2012 will see a more broad based recovery at their properties not just on the RevPAR side. 



  • Wholly owned resorts:  "The overall table games hold percentage in the fourth quarter of 2011 was near the high end of the Company’s normal range of 19% to 23% and was near the low end of the Company’s range in the prior year quarter.  Slots revenue increased 3% compared to the prior year quarter."
  • MGM China's Board announced a $400MM dividend which will be paid to shareholders of record on 3/9/12 and distributed on 3/20/12. MGM will receive $204MM of the dividend
  • MGM China:  "The increase was driven by year-over-year increases in volume for VIP table games, main floor table games, and slots of 29%, 13% and 35%, respectively. VIP table games hold percentage was slightly above our expected range of 2.7% to 3.0% in the current and prior year periods"
  • CityCenter: "Aria’s table games hold percentage was approximately 240 basis points higher in the current year quarter compared to the prior year quarter"
  • "In December 2011, the Company borrowed an additional $778 million under its senior credit facility to increase its capacity for issuing additional secured indebtedness. As a result, the Company had a higher than normal cash balance at December 31, 2011 of $1.9 billion, which also included approximately $720 million of cash and cash equivalents related to MGM China."
  • Debt: $13.6BN including $3.3BN drawn on the R/C. In January they repaid the $778MM borrowed in Dec of the R/C and had $957MM of available borrowing capacity
  • "As previously announced, the Company is seeking amendments to its aggregate $3.5 billion senior credit facility to, among other things, extend the maturity of loans held by consenting lenders from February 21, 2014 to February 23, 2015. Lenders holding approximately 62% or $2.2 billion aggregate principal amount of the credit facility have elected to extend the maturity dates of their commitments. Extending lenders will receive a 20% reduction of their previous credit exposures, unless waived by such lenders. In addition, extending lenders’ loans will be subject to a pricing grid that decreases the LIBOR spread by as much as 250 basis points based upon collateral coverage levels and the LIBOR floor on extended loans would be reduced from 200 basis points to 100 basis points.  The closing of the amendment is subject to customary closing conditions and is expected to occur by the end of this month."

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