MGM Q1 2014 REPORT CARD

Consensus estimates, management guidance and commentary, and questions for management in preparation for the earnings release/call tomorrow.

 

 

OVERALL:

  • BETTER - Strong Q1 2014 results slightly exceeded our Consensus high projection slightly. We're less optimistic about the rest of the year but trends should remain positive on the Strip and especially in Macau. 

 

REVPAR/bookings:

  • BETTER:
    • Q1 RevPAR Strip RevPAR 14% based on +200 bps occupancy and +12% ADR, but expect Q2 RevPAR +5%.  Q2 Aria RevPAR +14%, Vdara RevPAR +21%.
    • January RevPAR +9%, February RevPAR +10% versus Q1 results.  
    • ITYFTY is a friend in 2014
  • PREVIOUSLY:  1Q REVPAR expected to be up ~10% YoY, feel good about the remainder of the year, most of the REVPAR growth will come from rate.

Slot business:

  • SAME: U.S. business improving as seen in slot handle and slot win (non Bacc table revenues and market share both increasing)
  • PREVIOUSLY: Slot business here in Las Vegas is actually up when the market has been actually down.  Overall slot numbers are down because of the regional properties

Strip development:

  • BETTER:
    • The Park, AEG Arena, Delano targeted Sept completion, NYNY retail reconfiguration targeted for December completion, Mandalay Bay Convention Center expansion, "City of Rock" music venue.
    • More projects aimed at stimulating demand and improving the guest experience and thus driving incremental interest and demand by corporate groups, leisure and FIT sectors.
  • PREVIOUSLY: Strip frontage at New York-New York and Monte Carlo will be completed in the first half of this year.  New park will be completed in 2016.  Remodel of THEhotel into the Delano will begin in April and expected to be completed by September.

MGM Cotai:

  • SAME: MGM Cotai - well underway, 2016 opening.
  • PREVIOUSLY: Increased project cost from $2.6b to $2.9b, open in early 2016

MGM National Harbor:

  • SAME: break ground in a few months, focused on design, development and programming, no change to the $1 billion budget, most profitable non Las Vegas casino development in the US and expect to open summer 2016
  • PREVIOUSLY: Ground break in the summer and opening in 2016

Springfield:

  • SAME: go before Commission in June 2014, monitoring referendum while also 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
  • PREVIOUSLY: Remain very excited about the opportunity for a downtown revitalization project in Springfield.  Await a decision and awarding of that license this year.

Convention market:

  • SAME: CY 2014 total room nights will be 16% from convention mix
  • PREVIOUSLY: Strong convention market in Las Vegas in 2014 with improving corporate business.  Expect 1Q convention mix to be ~22%, near peak levels for any 1Q prior  FY 2014:  expect convention mix to increase to 15.5-16%, which is beginning to approach prior peak levels.
  • SAME: Up double digit pace in 2014 vs. 2013 and 2015 vs. 2014.
  • PREVIOUSLY: Convention pace for 2015, 2016, 2017, all look above where they were prior year for the previous years.

Strip flowthrough:

  • SAME: Flow through was 55% vs. 50-60% expectation
  • Flow through was a bit better than expectations due to strong collection efforts which have been consistent throughout the year, continued refinements to our M life program, and a change to the employee vacation policy and accrual.  As a result, Strip flow through was approximately 70% in 4Q, above 50% to 60% target.

Crystals:

  • BETTER: EBITDA +30%
  • PREVIOUSLY: Added a few more tenants and look forward to bring on a few more in current calendar year

Luxury vs Core

  • SAME: Luxury is 18-20% below 2007 peak cash floor.   "Core" is down >30% off peak (other half of portfolio).
  • PREVIOUSLY:  Luxury properties continue to see a pretty good customer and continue to hope to see them improve their spending. By comparison core properties, they continue to be challenged on consumer spend.  The correlation between the ADR and spend is definitely there.

2014 non-operating guidance

  • SAME:
    • Domestic CapEx spend - $425 million, includes MGM contribution to AEG Arena
    • During Q1: 
      • US CapEx $72m
      • MGM China $121m with
      • $14m spend at MGM Macau and
      • $107m on Cotai development
  • PREVIOUSLY:
    • Capex at wholly owned domestic resorts:  $350m
    • JV LV arena: $75m on MGM's share of investment
    • National Harbor: $170m on development costs
    • MGM Macau: $70m
    • MGM Cotai: $500m

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