Constant hold at wholly owned properties yields flattish EBITDA YoY while MGM Macau missed. Did we detect a softening tone regarding Macau business levels?
CONF CALL
- Wholly-owned Strip EBITDA up 12%
- CityCenter EBITDA up 20%
- Increase in mix from high-end main floor business.
- May: broke ground on Arena. Will open in mid-2016.
- June: CityCenter veiled Hershey store to great success. Tom Urban/ Shake Shack will open in December.
- Mandalay Bay: half of rooms of Delano are complete. Sept 1 grand opening. Delano brand will attract higher rates and higher margin customers.
- MGM Harbor Maryland: have begun construction; mid-Atlantic market is thriving. Expanding from 2.8m sq ft to 3.2m sq ft. If demand warrants, can even expand 2nd floor. Increased budget to US$1.2 bn, up from US$1bn previously, due to this new expansion plan.
- Remain optimistic on Japan (Tokyo/Osaka); met with several local companies
- MGM Cotai: completed basement and now moving up to hotel tower. On budget and on schedule to open in 2016 (no date or month offered).
- MGM: 7th consecutive YoY growth in EBITDA and margin improvement on LV Strip
- Luxury Strip properties EBITDA grew 13% YoY
- Core Strip properties EBITDA grew 8% YoY
- Core Strip outperformed on REVPAR growth
- Strip Bacc win: 64% YoY; non-bacc win: +10% YoY
- Grew convention mix by 1% in the quarter
- FY convention mix to be up 16% - above prior peak levels
- Expect REVPAR growth of 5% in 3Q
- CityCenter:
- Aria: increased table game volume and higher hold
- Vdara: +10% in REVPAR; occupancy just inside of 95%
- Crystals: +12% YoY in EBITDA
- Cash: $1.4 bn ($658m cash at MGM China);
- $1.2bn available under RC. MGM China - $1.4bn available under RC
- CityCenter prepaid $150m outstanding debt, lowering debt to $1.5 bn; leverage at end of quarter was 4.5x.
- 2Q capex: $114m (domestic operations), $64m (MGM China) - $4m MGM Macau, $60m MGM Cotai
- MGM China
- Branding fees: $4.5m
- Lower VIP hold and turnover
- EBITDA margins increased 90bps, due to higher mass revenues
- Low VIP hold affected EBITDA by $14m YoY
- Mass: 2nd consecutive quarter of outperformance, relative to market growth; 77% mass contribution to EBITDA (1Q contribution was 70%)
- Slot revenue: +11%, lower hold but higher volumes
- Continue to see more opportunities to improve table operations
- Best mass win per day in the market
- MGM Cotai: $2.9bn budget; have 50% of contracts complete
- 2nd phase: all non-gaming; will add 700 guest rooms; in 3Q, they will release preliminary budget
- Govt process has changed in the past year
- Wants to submit a perfect document on 2nd phase
- Tremendously capacity constrained on hotel rooms in Macau
- MGM Macau: highest EBITDA per room in the Macau market
- 2 hotels open in Mainland China; more under construction
Q & A
- Macau: Backlog of construction projects; operators don't know exactly when they will open. Labor will always be an inhibiting factor. Have received superstructure/ MEP permits. Will open in 2016 but don't know when. Will not give a precise timeline.
- MGM China 2Q EBITDA margins: nothing exceptional there. No adverse effect from 14th month payments. Low hold did have some impact but was offset by strong mass revenues. Clean comparison.
- 37% flowthrough in 2Q; Monte Carlo had a bad quarter there
- Delano also affected flowthrough due to construction disruptions
- Still believe in 50-60% flowthrough going forward
- Gained market share in convention business and REVPAR
- Monte Carlo/Mandalay flowthrough will be below 50-60% in 3Q but once Delano opens in September, flowthrough will improve.
- FTEs up slightly from 2013
- Continue to maintain costs and expand margins
- 2015 group convention pace: pace up double digits (+16k rooms) and higher rate, despite tough comp with ConAgg.
- 2015: Low single digit rate growth, suggesting low single digit REVPAR
- 2015 corporate business: increasing from 55% to 60% of bookings
- More high-end business in LV Vegas as a result of increased visibility in Macau - didn't say that LV is up because Macau is down
- Mayweather fight in May increased baccarat volumes
- Another Mayweather fight in Sept 2014
- 2 hotels (Sanya, Chengdu); Sanya benefited from MGM Macau
- MGM Macau: Slot volumes - very strong in premium area but unlucky; however, have seen high hold in July
- Macau: junket business still consolidating/stabilizing. Mass business continues to be strong - Grant Bowie did caveat the commentary by talking about summer being slower now similar to other markets
- Mass in Macau is competitive - this question was in response to a question about whether there is margin pressure on the mass business and Grant seemed to concede there is
- Flowthrough color: YTD, 45%. Continue to expect 50-60% for the full year.
- Convention business strong in 4Q 2014
- 2015 renovation projects: Standard room tower at Mandalay Bay
- Adding 300k sq ft of convention space to Mandalay Bay; will break ground in 1-1.5 months; will open in 3Q 2015.
- Crown transaction in LV: $9m per acre; certainly a bullish sign for investors; will stimulate the start of the Genting project
- CityCenter: generating significant amount of free cash
- Did explore Crystals sale in 2013 (sub 5 cap rate); $45M NOI on TTM; thinks it can go to $50Ms.
- Want to own 100% CityCenter but Dubai World doesn't want to sell
