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Forward looking commentary was typically bullish, although we didn't come away necessarily feeling bullish. Here are our "notes" from the release and conference call.

 

“We see signs of improvement in the Las Vegas market and expect those to accelerate in the second half of the year and into 2011.  Our forward bookings continue to improve as our convention bookings continue to gain traction." 

- Jim Murren, Chairman and CEO of MGM MIRAGE

HIGHLIGHTS FROM THE RELEASE

  • "CityCenter’s first quarter results were particularly affected by the weakness in the Las Vegas convention market.  We expect Las Vegas visitation to be strong for the balance of 2010 and Aria’s conference calendar is strengthening; therefore, we expect Aria’s occupancy to improve over the balance of the year.  We are unveiling a comprehensive new marketing effort for Aria in the coming weeks with new TV and direct marketing elements.  Now that CityCenter is complete, we are able to use its architecturally unique and highly visual assets in a coordinated global advertising push.” 
    • Well, it's hard to get worse than 63% occupancy.... I'll believe the leverage in this architectural marvel when I see it.
  • "Casino revenue decreased 5%, partially offset by strong baccarat results during the quarter with baccarat volume up 17%."
  • "Las Vegas Strip RevPAR decreased 8% and room revenues decreased 6% y-o-y."
  • MGM Grand Macau reported EBITDA of $71M, since MGM provides no information on this property, below are some of our details
    • Slot win: $24MM
    • Mass win: $97MM
    • VIP win: $322MM … we think that hold was around 3.0%-3.1% assuming 15-20% direct VIP play
    • Unfortunately for MGM, luck has a way of reversing itself and April wasn't so great for them ( for details, see our note "STRONG APRIL, VIP HOLD CONTRIBUTES" published on 5/4/2010)
  • City Center lost $28MM of EBITDA (see our note "CITYCENTER OF DISASTER" from 4/15/2010 for more detail)

 

MANAGEMENT COMMENTARY:

  • Las Vegas market-- "stabilizing and improving, convention business critical"
    • Locally, still rugged market.
    • Yielded up room rates half of the time in Q; in April, 70% of the time.
    • Back half of 2010 and into 2011-- we see visitation up; still expect 38MM visitors for 2010.
    • Slot handle strong
    • Gained market share in baccarat in drop and win
    • Market share up (with Aria and without Aria)
    • Entertainment revenues are up YoY
    • Convention room rates: 14.5% of total room mix (flat YoY)
      • Citywide convention business down 5% YoY
      • Attrition rates back to normalized levels
      • Las Vegas: premier destination for conventions
      • Would like normalized convention business mix to be 16%
      • Convention ADR:  $140; leisure ADR:  $80
      • As convention business comes back, should positively impact REVPOR and REVPAR
    • REVPAR in 2Q will be down "mid-to-low single digits"- expect REVPAR in the black for 2H of 2010.
    • Convention bookings in 2011: "very strong"
      • Excluding Aria and Vdara: "highest we ever had"... +20% YoY;
      • Room rates also trending higher
  • MGM Resorts International name change:
    • Coincide with launch of new loyalty program; it will be tiered
    • "We have the best assets in industry"-- deliver this message through loyalty program
  • In-house marketing team have grown
  • Building market share in gaming business in LV, Detroit, and Mississippi.
  • City Center
    • Trends moving sequentially in right direction;
    • Occupancy in 1Q disappointing relative to other established resorts
    • Customer awareness improving dramatically
    • Seeing occupancy improve on sequential basis

OTHER COMMENTS:

  • Borgata contributed 7MM operating income in 1Q
  • Cash: $441 MM as of 3/31/2010
  • Convertible bond offering: 1.12 billion
  • Stock compensation: 9-10MM for Q2
  • Depreciation expense: 165-175MM for Q2
  • Gross interest expense: 264MM (250 MM cash interest, no captialized interest); 280-290MM (no capaitlized interest ) for Q2.
  • City Center EBITDA: Vdra - 4.1MM, Mandarin 6MM, Crystals gained 1MM
  • Aria acquired 8.2% of LV gaming market; table drop on par with Bellagio; non casino rev: 84.1MM; January 56%, February 63%, March 70% occupancy; combined occupancy 64%, 194 ADR (199 ADR for Bellagio); booking trends improved for transit and convention customers; May occupancy should be 80%; Convention % of total bookings: 23,000 room nights (21,000 peak for Bellagio); lead volume increased by 300% YoY; 160,000 room nights in 1Q; for 2011, 46,000 room nights convention - 174% YoY; amortizing expense: 8.2MM... FTE down to 6,000; 2.5MM amortization of small equipment and start-up supplies
  • Vdara - in March, property lost ~2.5 MM....  lost 300K in April.
  • Crystals - 56% in 1Q occupied by tenants for business use.  65% occupancy for Q2. 82% should be occupied by year-end.  Expect Veer Tower closings in May 2010.

 

Q/A:

  • Cost-cuts on labor side were permanent: FTEs down 4% in YoY; occupancies were relatively high; does not expect labor to move up materially; FT component - flat to down for rest of year.
  • 1.2 billion of debt maturing in October that was not extended.
  • Aria room nights available: 358k in 1Q; mid-week occupancy--mid-70s; low 90s for weekend occupancy.
  • For Aria, occupancy or rate improvements?
    • Have been able to hold the rate in 1Q
    • right now, ramping up occupancy; for May, expect 80%; can't achieve 100% because of mix issue.
    • lack of convention business in 1Q--but starting to build.
  • Hired a bank to put toward offering documents for Borgata; document gone out to qualified buyers; process is professionally managed by Boyd; not in a fire-sale.
  • Aria Occupancy rate for April: 69%
  • MGM Macau IPO: late 3Q, early 4Q
  • Hospitality business: 11 Management agreements/ 6 letters of intent: 17 hotels, 6000 hotel rooms/resort (e.g. Egypt, India, Chinese JV); should achieve 100MM in revenues annualized in 5 years.
  • Vietnam: 50 year agreement there; evaluating that market further.
  • Receivables up 50% YoY: receivables due from City-Center (residential component); up to 244 condo proceeds - 200 MM condo proceeds element of completion guaranteed; nothing gaming oriented.
  • Macau: "pretty solid 1Q"; lowered marketing costs; competitors have opened up....increased traffic as a benefit; 60,000-70,000 sq ft of space for further development--want to enhance main gaming floor;
  • Macau net rev: 412 MM in 1Q, (262 MM 1Q 2009)
  • Perini suit: 150MM at low end, 300 MM at high end of legal impact;
  • Vdara rooms in inventory: 864 rooms (out of 1,525) are operated as hotels; remaining apartments are under contracts; by mid-summer, 175 units will close as residences.
  • No future developments in Macau before table cap restriction. 
  • Convention nights booked:  at end of 1Q, 865,000 rooms booked for 2011 (compares to 700k booked for 2010), excludes city center ; Q3--should expect positive YoY rooms booked Q4--may be down YoY rooms booked; Q2--room revenue and room nights should be up YoY.
    • Room rates for conventions: for 2010, similar to 2004-2005 room rates; room rates for 2011, similar to 2007 room rates.
  • Don't expect CC 1Q results as run rate going forward.
  • For CC: Are not pushing rates higher until occupancy gets to 90s; right now, ADR 180-190 at Aria--little bit more at Mandarin--little less at Vdara.
  • Vdara should turn the corner - had been dragging down results at CC EBITDA.
  • All components of CC should be making money by end of Q2.
  • CC starts to make money at 75% occupancy.
  • Baccarat: gaming mix is higher; market share in LV bacc is 38% (with Aria, 46-47%), year ago, market share is 37.5%.