Macau market growth has been outstanding but MGM continues to underperform. What will this mean for the timing of the MGM Macau IPO? 



We think MGM may have to delay its planned IPO.  As of MGM's last conference call, management had expected to price the IPO in late Q3/early Q4.  While the timing may seem good given that growth in the Macau market has been off the charts and investor sentiment is pretty positive, MGM Macau has been a laggard.  See the market share chart below.  The trend in MGM's market share doesn't look good on its own given the property's size and lately, has been significantly below its share of table games.  Fair share is not where it should be. 


MGM IPO, WHEN? - mgm3


MGM needs to sell this deal on a future level of EBITDA significantly higher than the trailing four quarters tally of $205 million. One way to do that would be to increase market share.  We believe they have taken a step in that direction with the hiring of Mr. Kwong to run the VIP business.  As we pointed out last week in our note "MGM LOOKING TO BOOST VIP SHARE, " Mr. Kwong is a top line focused operator with significant junket connections.  He should bring over a big book of business.   He's not afraid of sacrificing the bottom line to help the top line but MGM may not be interested in near-term profits.  The problem is that Kwong doesn't start until September and will need a few months to prove his mettle. 


The second timing issue MGM faces concerns Grant Bowie.  His contract runs out this year and we're not sure Pansy Ho nor MGM may be keen to renew the contract.  Thus, the new GM would need time to implement his plan and show results.  These hurdles may push the timing at least into Q1 2011, maybe later.

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