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Takeaway: We remain negative on a Strip recovery

Weaker than expected quarter - even after the negative revisions

"Our third quarter operating results are reflective of a challenging consumer environment, but we had some bright spots with strong results from MGM Grand Las Vegas and The Mirage and record third quarters from MGM China and CityCenter. Meanwhile, early fourth quarter trends are improving at our domestic resorts and forward convention booking pace is showing growth in 2013 and is further accelerating into 2014."

-  Jim Murren, Chairman and CEO of MGM Resorts International


  • Results in Vegas were in-line with their expectations.
  • They had tough comps in Las Vegas but have indications of a recovery.  August was very rugged but end of September was better and that carried into October. 
  • They are controlling costs where they can, with FTE's down 2% in LV
  • In MD, they continue to support their efforts to support Question 7
  • Toronto represents an exciting opportunity for MGM and they intend to participate
  • 50% of their database have opted to become M Life members
  • Expanding their strategic M-Life partners.  Announced RCL addition yesterday
  • My Vegas, their social game, have 350k average monthly users and many of these users have redeemed points at their LV properties
  • Bellagio low hold was 13% this Q, offset by high hold at other luxury strip properties
  • Maintained rate but lost occupancy in Vegas.  Had a 2% YoY decrease in convention mix this Q.  Mostly impacted Mandalay Bay.
  • F&B, retail, and entertainment was impacted by lower occupancies, remodels, and transitions, but they expect that to improve as remodels are completed
  • MD election is next week, so 4Q corporate expense will be higher - mid $60MM range before stock comp expense
  • Capex for FY 2012: $350-360 for US, ($80MM at MGM Macau and $80MM for MGM Cotai)
  • Stock comp: 10-11MM in 4Q
  • 230-235 for D&A in 4Q
  • Interest expense: gross interest 285MM in 4Q
  • City Center details:
    • Net table up 4% and 3% increase in slot volume
    • Elvis ended its run on August 31st and Zarkana is opening on November 9th - think that it will help their business when it opens
    • Crystals - executed lease for 8.3k of luxury space
  • MGM Macau:
    • EBITDA was negatively impacted by the low hold on their in-house business and RC program 
    • Completed Level Two VIP space
    • Main floor table win was up 27%. Had improved yields on mass floor by 300bps
    • Slot win increased 44%.  50% margin in the Q, up 50bps YoY
    • Paid $56MM for Cotai land contract in October.  Refining and enhancing their design and getting their construction team together.
      • $2.5BN (30-36 months of construction); up to 500 tables, 2500 slots, 1600 rooms
  • Going into the 4Q, improved LV trends are continuing:
    • Zarkana
    • Blue Man group (Monte Carlo mid Nov)
    • All rooms back online at MGM Grand (completed late Sept)
    • Bellagio Spa Tower remodel done in mid-Dec
    • Seeing a somewhat better RevPAR environment and expect that 4Q RevPAR will be flat to slightly up (depending on Sandy impact)
    • Convention bookings are pacing up 10% in 2013 and even better for 2014


  • MGM Macau hold impact:
    • RevShare had good hold - 87% of their business
    • Bad run on the RC operators: mid-teens MM's impact caused margin impact
  • They are open to JV partnerships on new projects. They will know on MD next week. If they win, they still need to win an RFP.  Same thing with MA.  If they win in Toronto, they will seek a capital partner. 
  • LV:  Internationally, they were down 12% on win... they got hit by 7 customers.  October is good for them. China visitation is up slightly, SE Asia is going well, South America and Japan are down.
  • Macau:  VIP business has been steady. Mass market still strong. Probably future growth, particularly VIP, will go in-line with the rate of China GDP.
  • Convention:  Sept/Oct--pretty good shape.  Group bookings were strong in 3Q and in 2013, 2014, and 2015.  
  • LV visitation vs spend per visitor:  fragile customer out there; overall, saw improvement in underlying metrics (REVPOR and visitation); more reliant on leisure customer (which is a lower spending customer); going forward, they see an increase in international visitors due to improvements at McCarran airport.
  • Case/Shiller housing prices and slot handle: 97% R^2 correlation
  • Sandy impact:  lost 4,000 room nights, about $1MM lost in revenue
  • Labor costs in Macau may increase (5.4% of total costs in Macau)
  • Net hold impact on STRIP EBITDA:  1% higher YoY in overall hold; net net positive $10 million impact to EBITDA
  • 91% for the year in the year booked for 2013 vs 80% last year at the same time.  Aria is almost sold out.  Better shape today than in 2Q.
  • Sees $100MM in future interest savings given good control of debt
  • Confident that as long as approval process goes through, they will get enough labor for Cotai
  • Post China election, resurgence in VIP? 
    • Unsure when VIP will ramp up.  Believes VIP is going through a consolidation phase. Expect a 8-10% long-term growth rate for VIP


  • "Consolidated casino revenue increased 4%, representing a 7% increase at MGM China and a 2% increase at the Company's wholly owned domestic resorts"
  • "The overall table games hold percentage in the third quarter of 2012 was 20.4% compared to 19.5% for the prior year third quarter. 
    • Table games hold at the Bellagio was significantly below normal but was offset by other Las Vegas Strip resorts." 
  • "Slots revenue increased 1% compared to the prior year quarter."
  • "Rooms revenue decreased 3% with Las Vegas Strip REVPAR down 2%."

  • MGM China EBITDA of $152MM, including a $5MM branding fee
    • Net revenue: $665MM
    • Mass table volume increased 10% and slot volume grew 37%
    • VIP turnover fell 5%; hold was 3%
  • "In October 2012, MGM China and MGM Grand Paradise, as co-borrowers, entered into an amended and restated credit facility agreement which consists of $550 million of term loans and a $1.45 billion revolving credit facility due October 2017.  The interest rate on the facility will fluctuate based on HIBOR plus a margin, set at 2.5% for the first six months and ranging between 1.75% and 2.5% thereafter based on MGM China's leverage ratio. The credit facility will be used for general corporate purposes and for the development of the proposed Cotai development."
  • CC EBITDA of $59MM and net revenue of $263MM
    • Aria table hold was 29.3% vs. 25.5% in 3Q11. Estimated benefit from high hold was $8MM on Adjusted EBITDA
    • Aria's occupancy was 88% and ADR of $192
    • "CityCenter recorded approximately $36 million for a residential impairment charge related to the Mandarin Oriental and $32 million for accrued costs related to the future demolition of the Harmon within "Property transactions, net.""
  • "Corporate expense increased by approximately $19 million during the current quarter, largely as a result of approximately $17 million of costs associated with the ongoing referendum in Maryland and development efforts in Massachusetts and Toronto."
  • Cash at 9/30/12: $2.4BN (including $936MM at MGM China)
  • Debt at 9/30/12: $13.9BN, "including $1.3 billion of borrowings outstanding under its senior credit facility and $539 million related to the MGM China credit facility."
    • In September, the Company issued $1.0 billion of 6.75% senior notes due 2020, for net proceeds to the Company of approximately $986 million.
  • "We have opportunistically accessed the capital markets enabling us to extend maturities at lower borrowing rates. Our most recent senior notes issuance was done at the lowest interest rate we have achieved since 2006.  We remain focused on executing additional transactions to further reduce our interest expense and improve free cash flow"