Rebuilding the Desert Oasis...



Prepared Remarks:

  • In Las Vegas continue to make target investments in properties to differentiate properties and thus drive/increase visitation - viz., New Strip Frontage at Monte Carlo; NYNY Hershey's, Tom's Urban & Shake Shack - later two opening in Dec 2014; AEG Arena, 20,000 seat arena; about to break ground also The Park.
  • Mandalay:  The Hotel conversion into The Delano should complete in September and will drive significant RevPAR growth
  • Plans to expand Mandalay Bay Convention Center... increase Convention mix to increase rate and spend
  • CY 2014 total room nights will be 16% from convention mix
  • Convention & Trade Show business will solidify and drive high margin corporate business
  • Music Festivals:  Festival lot near Luxor, new plan for 33 acres near Circus Circus to host Rock in Rio. 
  • MGM National Harbor MD expect to open summer 2016
  • Springfield, MA: go before Commission in June 2014, monitoring referendum
  • Japan: been often, significant potential for tourism, if Japan pursues "integrated resort" option
  • M-Life: effective customer acquistion tool
  • "My Vegas" social gaming site provides >850,000 ADU, new partnership with PNK (was AmeriStar).
  • MGM Hospitality, joined forces with Hakkasan...growing to develop hotels around the World.
  • Sixth quarter of EBITDA growth and margin improvement
  • Flow through was 55% vs. 50-60% expectation
  • Luxury Properties: EBITDA +17%
  • Value/Mid Properties: EBITDA +15%
  • Casino: domestic rated play "improving" 
  • Strip RevPAR 14% based on +200 bps occupancy and +12% ADR
  • Convention room nights during Q1 reocrd
  • Q2:  Expect RevPAR +5% (not indicated if Strip or Portfolio)
  • City Center record results, resort operations +2%
  • Aria EBITDA down slightly due to -150 bps hold comp, RevPAR +14%
  • Vdara record quarter with 89.5% occ +400 bps, ADR +16% to $185, RevPAR +21%
  • Crystals EBITDA +30%
  • Balance Sheet: $1.2b of liquidity under revolver, while MGM China $1.5b available at the end of Q1
  • Cash:  $1.1b at MGM of which $555m at MGM China
  •  City Center cash balance $345m including $72m restricted cash
  • CapEx $72m in Q1 and MGM China $121m with $14m spend at MGM Macau and $107m on Cotai development
  •  MGM China:
    • Rev $941.
    • EBITDA +33% pre branding fee $16.5m
    • 130 bps margin improvement, due to mass and VIP Hold
    • Main floor table game
    • Focused on yield optimization looking at VIP / Mass table yields and product upgrades
    • Building customer base for Cotai opening in 2016
    • Cotai: 3x rooms and 2x gross gaming floor area
    • MGM Cotai: well underway
  • Marketing: Robust spend, social media
  • Las Vegas #1 trade show destination for past 20 years, key to growing market is growing corporate and trade show business


Q & A

  • Expansion at Mandalay how will mix change:  mix always highest in Q1, good in Q2, but Q3 is weakest, and flat/up in Q4.   Fortune 100 Tech firm booked in Q3 for 17,000 attendees (ITYFTY is a friend in 2014)
  • Noise around Macau market and junkets - Grant Bowie "just that, noise...steady but quieter month.   Mass market is now anchoring EBITDA performance"
  • MGM China 70% EBITDA from Mass segment from 45% of mass table mix.
  • How drive Mass with current 70% at MGM China - solid team, customer flow and supply of customers are strong, lots of new mass players.  Redeploy tables and working with junkets to improve yields and casino box growth.  Need to expand market penetration prior to Cotai opening.
  • Domestic CapEx spend - $425 million, includes MGM contribution to AEG Arena
  • Corporate customer call volumes - 55% Corp Mix in 2013, and 2014 mix is higher
  • How solid are 2015, 2016 booking trends - great Citywide in Q1 2014, but January RevPAR +9%, February RevPAR +10% versus Q1 results.   Up double digit pace in 2014 vs. 2013 and 2015 vs. 2014.
  • Strip & RevPAR growth and gaming 40% of revenue, how view gaming outlook for 2014 and beyond - US business improving as seen in slot handle and slot win (non Bacc table revenues and market share both increasing), not predict gaming revenue but more people coming to LV.
  • Arena business very strong for remainder of 2014
  • Independent properties for sale along LV Strip, update on thoughts of buying/selling City Center or Strip properties - love owning on Strip, did not chose to sell a partial interest in Crystals in 2013 because NOI still increasing.   Not actively pursuing any acquisitions or divestitures on Strip.
  • Dispositions - large delta to high-end and value properties, how think about narrowing gap in valuations -- MGM looked to invest in luxury properties with 80% of capex in luxury since the crisis and today luxury is 18-20% below 2007 peak cash floor.   "Core" is down >30% off peak (other half of portfolio). 
  • Couple of properties on the market, given availability of capital, and interest expect more interest in asset purchases.
  • Bellagio margins - no singular event or item, power of building   
  • Mandalay: benefited from strong conventions
  • MGM Grand: despite difficult hold comp, improved due to non-casino component
  • FTEs flat YoY
  • Regional development:  
    • MD on track, break ground in a few months, working with County, focused on design, development and programming, no change to the $1 billion budget, most profitable non Las Vegas casino development in the US
    • Springfield - waiting for appeal referendum; Supreme Court must rule before July 9th to make November ballot; awaiting Commission license award. However, gaming is polling favorable across MA with voters
    • Anton will oversee Detroit, MD, and MA.
    • no change in budgets nor timetables
  • M-Life Tiering - movement up levels and thus better profitability?  Seeing double digit 11%-12% growth in Platinum level due to growth in non-gaming spend
  • Confidence in MD property and growth vs. MD tax rate - 3 airports within easy drive and Southwest Airlines is a big driver of traffic; strong Int'l visitation; confident in highly affluent, diverse, high gaming propensity of local population base.  Look at results of MarylandLive.  Vehicle circulation of I-95 Interstate traffic.
  • Looking to Q2 for RevPAR seeing strength in May and June and 3Q - any color... April was challenged with Easter, May looks good, very strong similar to first quarter months outside of ConExpo, June is usual month, some decent rates but between Father's Day and Graduations difficult.

Did the US Economy Just “Collapse”? "Worst Personal Spending Since 2009"?

This is a brief note written by Hedgeye U.S. Macro analyst Christian Drake on 4/28 dispelling media reporting that “US GDP collapses to 0.7%, the lowest number in three years with the worst personal spending since 2009.”

read more

7 Tweets Summing Up What You Need to Know About Today's GDP Report

"There's a tremendous opportunity to educate people in our profession on how GDP is stated and projected," Hedgeye CEO Keith McCullough wrote today. Here's everything you need to know about today's GDP report.

read more

Cartoon of the Day: Crash Test Bear

In the past six months, U.S. stock indices are up between +12% and +18%.

read more

GOLD: A Deep Dive on What’s Next with a Top Commodities Strategist

“If you saved in gold over the past 20 to 25 years rather than any currency anywhere in the world, gold has outperformed all these currencies,” says Stefan Wieler, Vice President of Goldmoney in this edition of Real Conversations.

read more

Exact Sciences Up +24% This Week... What's Next? | $EXAS

We remain long Exact Sciences in the Hedgeye Healthcare Position Monitor.

read more

Inside the Atlanta Fed's Flawed GDP Tracker

"The Atlanta Fed’s GDPNowcast model, while useful at amalgamating investor consensus on one singular GDP estimate for any given quarter, is certainly not the end-all-be-all of forecasting U.S. GDP," writes Hedgeye Senior Macro analyst Darius Dale.

read more

Cartoon of the Day: Acrophobia

"Most people who are making a ton of money right now are focused on growth companies seeing accelerations," Hedgeye CEO Keith McCullough wrote in today's Early Look. "That’s what happens in Quad 1."

read more

People's Bank of China Spins China’s Bad-Loan Data

PBoC Deputy Governor Yi says China's non-performing loan problem has “pretty much stabilized." "Yi is spinning. China’s bad-debt problem remains serious," write Benn Steil and Emma Smith, Council on Foreign Relations.

read more

UnderArmour: 'I Am Much More Bearish Than I Was 3 Hours Ago'

“The consumer has a short memory.” Yes, Plank actually said this," writes Hedgeye Retail analyst Brian McGough. "Last time I heard such arrogance was Ron Johnson."

read more

Buffalo Wild Wings: Complacency & Lack of Leadership (by Howard Penney)

"Buffalo Wild Wings has been plagued by complacency and a continued lack of adequate leadership," writes Hedgeye Restaurants analyst Howard Penney.

read more

Todd Jordan on Las Vegas Sands Earnings

"The quarter actually beat lowered expectations. Overall, the mass segment performed well although base mass lagging is a concern," writes Hedgeye Gaming, Lodging & Leisure analyst Todd Jordan on Las Vegas Sands.

read more

An Update on Defense Spending by Lt. Gen Emo Gardner

"Congress' FY17 omnibus appropriation will fully fund the Pentagon's original budget request plus $15B of its $30B supplemental request," writes Hedgeye Potomac Defense Policy analyst Lt. Gen Emerson "Emo" Gardner USMC Ret.

read more