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MGM Resorts shrinks fourth quarter net loss

24 Feb 2012

By Howard Stutz
LAS VEGAS, Nevada -- At the conclusion of his company's fourth-quarter earnings conference call Wednesday, MGM Resorts International Chairman Jim Murren made some remarks Las Vegas tourism officials might want to bottle and use in their next promotional campaign.

"Gaming is coming back in Las Vegas," Murren told analysts and investors.

The proof, he said, is showing up in the drop boxes at the company's 10 Strip resorts.

Murren said several properties had seen increased table game play and slot machine wagering in the fourth quarter and throughout 2011, which bodes well when accompanied by marked increases in revenue per available room on the Strip, a nontraditional reporting figure analysts use to gage profitability.

He also predicted that Las Vegas, which drew 38.9 million visitors in 2011, would hit a single-year record for tourists in 2012.

"We've said for Las Vegas to come back, convention business must lead the way," Murren said. "We are seeing tourism come back, and that's a good sign."

MGM Resorts reduced its net loss in the fourth quarter, telling investors that revenues improved at the company's Strip resorts.

The casino operator said its net loss was $113.7 million, or 23 cents per share, for the quarter ended Dec. 31. A year earlier, MGM Resorts lost $139.2 million, or 29 cents per share. Analysts polled by FactSet Research expected a loss of 20 cents per share.

Companywide, MGM Resorts said its revenues grew 55.4 percent in the quarter to $2.3 billion, up from $1.48 billion last year.

The company's overall results were also helped by the MGM Grand Macau, in which the company acquired majority ownership last year. The resort on the Macau peninsula collected net revenue of $719 million, compared with $570 million a year ago.

On the Strip, where the company's casinos include Bellagio, MGM Grand Las Vegas and The Mirage, net revenues during the quarter were $1.185 billion. Revenue per available room on the Strip increased during the quarter to $111 from $98.

"These solid Las Vegas Strip results reflect solid room trends, in which (revenue per available room) was up 13 percent and room revenues (were) up 10 percent year over year, and (there was) higher year-over-year table games hold percentage," JP Morgan gaming analyst Joe Greff told investors.

Murren told analysts that the company looks to continue boosting revenues from areas beyond the casino through an expansion of the company's M life players reward program. Guests will now earn points and rewards for spending on hotel rooms, restaurants, shopping, and entertainment, as well as gaming.

"We're rewarding our customers for virtually every dollar they spend at our properties," Murren said. He told analysts that average daily room rates at the company's Strip resorts would continue to increase in 2012 and convention bookings continue to improve.

Stifel Nicolaus Capital Markets gaming analyst Steven Wieczynski said three of MGM Resorts' Strip casinos posted cash flow figures that surpassed his estimates.

"We believe MGM shares can continue to move higher over the next couple of months as the health of the Strip continues to improve, paced by further improvements in convention room mix," Wieczynski said.

Shares of MGM Resorts closed Wednesday at $13.77 on the New York Stock Exchange, down 42 cents, or 2.96 percent.

Wieczynski said the company's market share and profitability in Macau needs to strengthen and CityCenter's cash flow contributions must continue to grow.

At CityCenter Aria Resort & Casino , which MGM Resorts owns in a 50-50 joint venture with Dubai World, net revenue increased to $265 million compared with $231 million a year earlier. Aria, CityCenter's centerpiece 4,000-room hotel-casino, saw casino revenues increase 27 percent in the fourth quarter and hotel revenues jump 24 percent in that time period.

"Financially, our revenues and margins have improved year over year, increasing our cash flow and strengthening our financial profile," Murren said.

For the full year, MGM Resorts said its net revenues were $7.8 billion, which included $1.5 billion of net revenue related to the MGM Grand Macau. Excluding the Macau property, net revenue increased 4 percent for the year.

MGM Grand Macau had net revenues of $2.6 billion, an increase of 66 percent.

CityCenter reported year-over-year operating improvement with net revenue from resort operations of $1.1 billion.

MGM China, which is publicly traded on the Hong Kong Stock Exchange, said Wednesday that its board declared a dividend of about $400 million, which will be paid March 20. MGM Resorts, which owns 51 percent of MGM China, will receive about $204 million.

Murren said the proceeds would be used to reinvest in the company's Strip resorts and improve the balance sheet.

In its quarterly earnings release, MGM Resorts said it had $13.6 billion of debt at year's end. MGM Chief Financial Officer Dan D'Arrigo said in a statement that the company is trying to improve its balance sheet and cut its debt.

MGM Resorts has a deal in place with British-based Party Poker to operate an American-based Internet poker website if Congress legalizes online gaming. Murren expressed optimism a bill would pass this year, but didn't give any reasons.

"I don't opine on politics like others do," Murren said, referring to rival gaming executives.

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