Hedgeye - MGM YOUTUBE

In preparation for MGM's FQ1 2012 earnings release Thursday morning, we’ve put together the recent pertinent forward looking company commentary.

MGM abandons plans for casino in Mass. town (March 27)

"The unique nature of MGM's plans for an all-inclusive world-class resort of the Brimfield site, and our growing understanding of the needed scope for its infrastructure, simply do not allow us to pursue the comprehensive MGM resort originally envisioned here."
MGM would pursue "other potential development sites" in the western part of the state

MGM Q4 Conference Call (February 22)

"In 2012, we expect to spend approximately $350 million in capital excluding MGM China: included in those capital plans for this year is the continuation of the room remodel project at MGM Grand; the room remodel of the Spa Tower later on this year here at Bellagio; the conversion and investment in the Michael Jackson show with Cirque du Soleil at Mandalay coming online late 2012, early 2013; and the Blue Man Group show at Monte Carlo coming on this year."
"We expect our corporate expense to moderate and be in the mid $30 millionish area in 1Q before stock compensation expense. Our stock compensation expense in 1Q is estimated to be approximately $10 million. Our depreciation expense in the quarter, we estimate to be approximately $235 million to $240 million, and our interest expense in the fourth quarter was $274 million, including approximately $6 million from MGM China and about $24 million in amortization expense."
"We estimate that our interest expense in the first quarter will be approximately $285 million, including roughly about the same amount, $6 million, for MGM China, and about the same amount of $24 million in amortization expense."
"And as we pointed out in the release, we've received preliminary approval from roughly 62% of the lenders on our Amend and Extend transaction of our credit facility, we expect to initially achieve roughly about 150 basis points in rate improvement on the extending portion of that facility."
"As a reminder, our average borrowing cost is – on our outstanding debt – approximately 8%, so for every 1% improvement in rate that we can achieve, that's an incremental $125 million in interest rate and incremental free cash flow to our company."
"For 2012 we have over 100% of our planned convention room nights already booked [at Aria]. Aria's leisure segment business is also improving; our production numbers in domestic leisure are on par with Bellagio's as awareness in United States continues to build. We are making progress in the international leisure market as well and see an opportunity for further improvements in that market."
[MGM Macau] "We opened our new MGM VIP in-house area in mid-December and while it's still very early, we have seen initially strong increases in volume. CapEx was $45 million in 2011 and will be approximately $80 million in 2012. Of this, $45 million is allocated to build out the undeveloped space on our second floor with the balance being applied to rejuvenating capital works."
"We have plans to open a Hakkasan. Hakkasan is going to spend a tremendous amount of money at the MGM to replace Studio 54 that's been there for over 10 years."
"On the ADR side, we mentioned this a few times last year, we said the first quarter would be the toughest comp, because there was a big, big convention here last year and we have to overcome that, but even still because of recent bookings, we believe our RevPAR will be up in the first quarter, up a couple of percent, 2%, 3%, but growing. In fact the second quarter looks particularly strong and we think our RevPAR is going to grow nicely throughout the year, even on top of the good growth that we had in 2011."
"Just to mention a few coming up, we have Floyd Mayweather fighting in May at the MGM and then Manny Pacquiao the next month in June. Madonna is coming back; she's going to be here in October and we have several of these type of events throughout the year, which we know has a material impact on ADR and casino revenue."
"We're seeing very strong pace throughout the year, and our convention base is extremely solid and when you combine that to the growing FIT and leisure bookings, we're seeing a broad-based retail improvement in rooms revenue."
"Can you achieve mid to high single-digit growth there [FY 2012 REVPAR]? Yes."
[Sands Cotai Central impact] "We will be able to sustain and maintain our position as we've continued to do as we just keep on executing on our strategies."
"We're up over a 50% for the overall year in 2011 and I think that's a good way to kind of model the incremental flow through going forward."
[I-poker] "It's hard to say exactly when or if. I do believe it will be passed at the federal level, and I do believe it will be passed this year."
"We still have roughly about $180 million sitting in a trust account in New Jersey and are continuing to work through that process and are working on the sale of our interest in Borgata as well on top of that $180 million. So that's clearly another lever that will go to reduce debt and provide that additional lever."
"It's unlikely that we would sell any of our operating assets."
"We're projecting for 2012 kind of the same convention room mix as we kind of finished up 2011 with. And I think what it will come down to is the in-the-year for-the-year of bookings which in 2011 were exceptionally strong. And if we can come anywhere close to that, we think we can drive better rates in 2012 than 2011; 2013 and 2014 pace right now looks exceptionally strong both in terms of rate and room nights booked and we still have more work to do there as well, but we're gratified by what we see this early on, and 2013 and 2014 looks very strong....the 2013 rate is strong and 2014 is even stronger."
[International hotel mgmt contracts] "Branco which is the company that has, for a fee, lent the name MGM to MGM China goes in cash flow from $15 million last year to $30 million this year."
"There's no added first class room inventory on the horizon in Las Vegas for quite some time."