Las Vegas, Nev.-based casino operator MGM Resorts International (MGM) posted solid fourth-quarter results with higher earnings and revenues. The company’s fourth-quarter 2013 adjusted earnings of 11 cents per share comprehensively beat the Zacks Consensus Estimate of a loss of a penny as well as the prior-year quarter loss of 23 cents per share.
The better-than-expected bottom-line performance can be attributed to higher top line and increased adjusted earnings before interests, taxes, depreciation and amortization (EBITDA).
On a reported basis, MGM Resorts posted a loss of 8 cents per share compared with a net loss of $2.50 per share in the prior-year quarter.
In the fourth quarter, total revenue increased 10% year over year to $2.51 billon, which surpassed the Zacks Consensus Estimate of $2.45 billion by 2.4%. Quarterly revenues benefited from decent performance in China and improving Las Vegas business.
Domestic Operations
The company’s owns and operates several properties, spread across Las Vegas, Nevada. Apart from this the company also boasts several assets in Mississippi and Michigan.
Casino revenues from wholly owned domestic resorts declined 2% due to 170 basis points (bps) fall in the overall table games hold percentage. Slot revenues were up 3% mainly driven by continued impressive performances at the Las Vegas Strip properties.
Room revenues increased 3.0%, primarily attributable to a 1.0% rise in revenue per available room (RevPAR) at the Las Vegas Strip properties. A higher average daily rate led to the rise.
Adjusted EBITDA of the company's wholly owned domestic resorts was $356 million, up 6% year over year.
CityCenter Holdings
MGM’s urban complex CityCenter operates through two segments — resort and residential. Under the resort operations, the company boasts four properties — Aria, Crystals, Vdara and Mandarin Oriental. Although CItyCenter’s resort operations posted solid results during the quarter, its residential business was weak.
Net revenue from CityCenter dropped 21% year over year to $313.8 million due to dismal performance in the residential division. Net revenue from resort operations grew 11% year over year to $301.0 million with the rise in sales across two properties — Aria and Crystal. Aria's table games hold percentage was 26% in the quarter versus 23.9% in the prior-year quarter. Crystals, Vdara and Mandarin Oriental also put up a decent show. Residential sales in the quarter were $0.12 million lower than the year-ago quarter’s level of $122.7 million.
City Center’s adjusted EBITDA improved 36% year over year to $93 million primarily benefiting from higher table games hold percentage.
MGM China
MGM China’s net revenue was up 27% year over year to $926.0 million due to increases in main floor table games and VIP revenues. Main floor table games and slot revenues went up 18% and 4% year over year, respectively. VIP table games turnover increased a significant 32%.
Adjusted EBITDA grew 35% to $238.0 million due to higher contribution from the main floor business.
Full-Year 2013 Highlights
In full-year 2013, adjusted earnings per share were 24 cents which compared favorably with the Zacks Consensus Estimate of earnings of 10 cents per share and year-ago quarter’s loss of 69 cents per share. Revenues were $9.81 billion, up 7% year over year and also above the Zacks Consensus Estimate of $9.60 million by 3%.
Dividend
Recently, the company’s subsidiary, MGM China, declared a special dividend worth $500 million to be paid to shareholders of record as of Mar 10, 2014.
Outlook
MGM Resorts expects its Las Vegas business to grow further in 2014 gaining from solid convention booking and other sales-building initiatives. The company also expects its Macau business to perform well in 2014. MGM Resorts plans to increase its coverage by twofold in Macao — the only Chinese city where gambling is legal — with the launch of MGM Cotai in 2016 in Cotai Strip, Macau.
Our Take
We believe strong revenue generation in the China market will help it to further boost its business. Limited supply, a moderate increase in visits in the Las Vegas market and improving trends at its urban complex CityCenter should bode well in the domestic arena.
Other Stocks to Consider
MGMM Resorts sports a Zacks Rank #2 (Buy). Some other casino operators that are worth considering at the current level include Bally Technologies, Inc. (BYI), Melco Crown Entertainment Limited (MPEL) and Las Vegas Sands Corp. (LVS). While Bally Technologies sports a Zacks Rank #1 (Strong Buy), Melco Crown and Las Vegas Sands carry the same Zacks Rank as MGM Resorts.
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