MGM Cotai in Macau is nearing its first birthday, MGM Springfield in Massachusetts is putting up “solid results” and Park MGM in Las Vegas has made everyone forget its former existence as the Monte Carlo.
With the company’s 2018 projects in the review mirror, MGM Resorts International Chairman and CEO Jim Murren said Wednesday the casino giant is looking internally as its next development strategy.
Murren discussed both MGM 2020 – a cost reduction and margin improvement plan – and a recently-announced “ad-hoc” board committee that is evaluating the company’s real estate portfolio during conference call with analysts to talk about fourth quarter and year-end results.
“The goal is unlocking long-term value for our shareholders,” Murren said. “We, as a company, have some of the best real estate in the U.S. and we need to put a greater focus that value. It’s exciting, but it’s complicated and we have to make sure we get it right.”
The committee includes Keith Meister, managing partner of activist hedge fund Corvex Management, who was appointed to the MGM board in January. Corvex acquired 3 percent of MGM. No mention was made during the hour-long call about activist investment interest in the company.
Murren said the committee was created on Jan. 24th and has met just a few times.
“No time table has been formed,” he said.
Some of the focus is expected to include MGM Growth Properties, a real estate investment that owns the land buildings associated with the bulk of MGM Resorts’ casinos. MGM Resorts owns 70 percent of the REIT. In 2018, MGM Resorts paid the REIT $767 million in rent payments. But the casino operator received $333 million in distributions for its ownership.
MGM Resorts still owns real estate associated with the Bellagio, MGM Grand and Circus Circus in Las Vegas and MGM Springfield in Massachusetts.
“The reason we created the committee was to create a real focus in evaluating complex decisions around our real estate.” Murren said.
Meanwhile, the MGM 2020 plan, which he said would lead to an additional $300 million in cash flow by 2021, calls for a range of company-wide cost-cutting and efficiency measures, including $100 million in reduced labor costs.
“It will be rolled out in phases to complete a comprehensive organizational change,” Murren said. The goal is also to reduce the company’s long-term debt, which was $15.3 billion at the end of December.
Fourth quarter
A non-recurring, non-cash income tax expense of $92 million sent MGM Resorts to a fourth quarter net loss, despite increases in revenues and operating income.
The company, which operates nine Las Vegas Strip resorts, said its net loss of $23 million in the quarter that ended Dec. 31, or a loss of 6 cents per share, compared with net income of $1.4 billion, or $2.39 a share, a year ago.
Total revenues grew 18 percent to $3.1 billion, helped in part by the openings last year of MGM Cotai and MGM Springfield.
On the Las Vegas Strip, net revenues increased 6 percent to $1.4 billion while revenue per available room (RevPar) grew 8.2 percent. Some of the increase was due to Park MGM, which fully-opened during the quarter.
In MGM’s regional markets, revenues grew 18 percent to $782 million in the quarter, helped by the August opening of MGM Springfield. In Macau, net revenues from MGM Macau and MGM Cotai grew 33 percent to $687 million.
“We had a strong finish to the year, driving growth across all Las Vegas segments in the fourth quarter,” Murren said in statement. “Our Las Vegas Strip resorts achieved the best fourth quarter adjusted property (cash flow) since 2007. We also continued to gain share within our regional markets.”
Full year
For all of 2018, MGM Resorts said the company’s net revenues of $11.8 billion marked a 9 percent increase from a year ago. Las Vegas Strip net revenues fell less than 1 percent to $5.7 billion while regional operations climbed 8 percent to $2.9 billion. MGM China revenues grew 32 percent to $2.4 billion.
CityCenter in Las Vegas, which MGM Resorts operates and owns in a 50-50 partnership with the Dubai World, saw net revenues increase 4 percent to $1.3 billion.
Shares of MGM closed at $29.23 on the New York Stock Exchange Wednesday, up 36 cents or 1.25 percent. After the earnings release, shares initially grew 2 percent in after-hours trading, but were down almost 3 percent late in the day.
Japan
Murren said MGM Resorts made “a lot of progress” in Japan, where the government is looking to award three integrated resort licenses. MGM has offices in Tokyo and Osaka, but Murren said the company is “fully committed to Osaka as first strategy.”
Murren said Osaka could select an operator by 2020, but it could take the Japanese government another 12-to-19-months to make a final ruling.
“Osaka would like the (integrated resort) open by 2025. It’s going to be highly competitive, but I like MGM’s chances,” he said.
Howard Stutz is the executive editor of CDC Gaming. He can be reached at hstutz@cdcgamingreports.com. Follow @howardstutz on Twitter.
