MGM Resorts beats estimates on Macau boom

Net income was us$ 3.44 billion, boosted by a us$ 3.5 billion gain from consolidating Macau on its books. That compares to a loss of us$ 883.5 million, a year earlier when earnings were hit by CityCenter development writedowns, the company said in a statement. Excluding items such as the Macau-booked gain, the loss was 5 cents, smaller than the 13-cent loss average of 23 analysts’ estimates compiled by Bloomberg.

Macau is booming while Las Vegas stages a broad-based recovery from its steepest gambling and convention decline. Room rates have increased at most of MGM’s 10 Las Vegas Strip resorts and visitors are spending more on food and entertainment as tourists and conventions return. MGM took a controlling stake in its Macau joint venture in the quarter, consolidating onto its books a resort in the world’s biggest gambling market, where casino betting surged 58 % last year and 45 % in the six months ended June 30.
Spending by tourists who book their vacations independently or online is strengthening faster than anticipated, adding to improved conventions and meetings where prices are higher and the pace of reservations has risen since last year, Chairman and CEO Jim Murren said today in a phone interview.  “If you’re getting growth in the Luxors and Monte Carlos and New York New Yorks, that’s telling you that the US customer is spending more money,” Murren said. “That’s encouraging to us.”

Revenue rose 17 % to us$ 1.81 billion, beating the us$ 1.61 billion analysts expected. Second-quarter cash flow at wholly owned casinos -- measured as adjusted earnings before interest, taxes, depreciation and amortization, or Ebitda - rose 7 percent to us$ 331 million.

MGM plans to redo its Macau credit facility in the fall, and will seek to also “take another look” at the Las Vegas parent’s credit facility within the next six months, seeking improved terms, Murren said in a phone interview. Otherwise the companies have no need to tap capital markets this year, he said.

Ebitda from MGM’s Macau joint venture rose to us$ 170 million from us$ 61 million a year earlier as sales more than doubled, the company said. MGM took 51 % control of the venture, MGM China Holdings, in June when partner Pansy Ho sold part of her stake in a us$ 1.5 billion Hong Kong initial public offering. The IPO priced at the high end of the range sought.

The company is working with the Macau government to secure a land grant to build a new casino resort in Cotai, which will take about three years to open once approvals are received, Murren said on today’s call.

Resort Ebitda at the us$ 8.5 billion CityCenter joint venture of hotels, condominiums, a casino and mall on the Las Vegas Strip was us$ 64 million in the second quarter, on revenue of us$ 275 million. MGM and partner Dubai World opened CityCenter in December 2009.

MGM fell 8.9 % to $11.54 in New York Stock Exchange composite trading today, while the Standard & Poor’s 500 Index lost 6.7 %, as investors retreat from riskier assets on concern the global economy will continue to slow. MGM China Holdings Ltd. rose 26 Hong Kong cents, or 1.7 % before the earnings announcement.