Mixed Second Quarter Results for MGM
Last Tuesday MGM Resorts International posted a second-quarter loss which was double that predicted by Wall Street. However, investors did not seem to shaken and instead have focused on the casino and resort operator’s rising revenue driven by good results in China and higher revenue for hotel rooms.
According to executives, who were discussing the results in a conference call, they do expect hotel room revenue to drop in the third quarter as worries about the economy over the last few months has led to people cancelling their travel plans. According to MGM, visitors in the last quarter spent more at casinos and paid higher hotel rates, but cut back on shows, food and shopping.
Over the last few years results for MGM have been extremely confusing. Revenue has grown steadily, but losses have been posted in nearly every quarter as it tried to deal with massive debts and declining property values.
At the end of June MGM had $13.4 billion in debt, and said it is trying to refinance much of it at lower interest rates. Between April and June MGM dropped 30 cents per share, this compares with a $6.22 profit per share during the same time last year. Last year’s second quarter also saw a $6.30 share gain on consolidation of MGM China. They run a casino in Macau which when public in Hong Kong last June.
The CEO of MGM, Jim Murren, has recently told Reuters that he expects the Macau government to approve MGM’s plan to build a new $2.5 billion casino in Macau. He says that he expects to be “in the ground starting this year and keeping to our timetable to open this resort in late 2015.”
While MGM’s fortunes do appear to be mixed, they are out-performing others in the sector so perhaps investors are right not to be phased by the last quarter’s losses.