Gaming insights Gaming

Short term tough, long term strong for MGM: analysts

Written by Ben Blaschke

The outlook for MGM Resorts, both locally and internationally, remains strong despite last week’s disappointing earnings announcement.

MGM China’s revenue for Q4 2016 came in at HK$3.88 billion on the back of strong VIP hold, which made amends for a significant fall of 8 percent in VIP rolling chip volume and a 10 percent fall in mass market gross gaming revenue.

“We remain concerned about the company’s ability to fully defend their share until the opening of MGM Cotai, the opening of which is now delayed until Q4 (with some cost increase),” said Vitaly Umansky, Zhen Gong and Yang Xie from brokerage Bernstein. “The MGM Macau property may still face pressure until at least Q4, prior the MGM Cotai’s opening.

“While the expansion to Cotai (with its 1600 rooms and increased gaming capacity) will give the company a major competitive advantage in the Mass segment once the property begins to ramp up after opening, until that happens MGM continues to face headwinds on defending its market share in both VIP and Mass.”

Nevertheless, analysts are generally predicting better days ahead once MGM Cotai does open its doors at the end of the year. The long-term outlook also remains positive for the company on a global basis with indications of a strong 12 months ahead for MGM Resorts in Las Vegas.

“We remain comfortable with the 2017-18 outlooks,” said Union Gaming’s John DeCree. “Management cited that about 90 percent of its target convention business for 2017 is already on the books. We also look to other catalysts such as a full year of contribution from the new Park Theater and T-Mobile Arena, as well as the start of the NHL in Las Vegas coming in the fall of 2017 just to name a few.

“This, coupled with the favorable market dynamics in Las Vegas, including growing visitation and limited supply growth, give us confidence that the trajectory of the business is still heading in the right direction.”