MGM Resorts Receive Approval for Macau Resort
MGM Resorts International has received formal government approval to build its second casino resort in Macau.
The company will pay a land premium of $162 million to build the 1,600 room hotel complete with a casino containing 500 tables and 2,500 slot machines on the Cotai strip.
It is expected that the new resort will open sometime in 2017 and will cost $2.5 billion to build.
By working backwards from a projected EBITDA (earnings before interest payments, taxes, depreciation and amortisation) of $400 million in 2017.
It has been calculated by Deutsche Bank that the development will add about $665 million to the equity value of MGM Resorts.
However, some analysts are saying that the new resort’s value is less important than improvements in MGM Resorts International’s balance sheet and any recovery in the Las Vegas market.
Last year MGM Resorts managed to raise $8 billion in long-term capital with longer maturities and lower interest rates than the debt it replaced. This will save the company $230 million in interest each year help push free cash flow up to $476 million in the coming year.