MGM: The lion meows; GLPI: Still hungry

MGM Resorts International needed to increase net revenue this past quarter by 2% to meet Wall Street forecasts and offset inflation. Instead, revenue stayed flat and the Leo the MGM Grand MacauLion came in $33 million on cash-flow forecasts and down $12 million on MGM Macau net revenues. Among the bright spots were MGM’s low-end Las Vegas Strip properties, whose revenue per available room rose 4%. Not so good were “weak” table hold on the Strip and Macao cash flow that didn’t even match the most recently adjusted forecasts. VIP player volume in the Chinese enclave was off by a staggering 51%.

While Deutsche Bank had expected Strip net revenue of $1.33 billion, it had to settle for $1.29 billion, or a 1% miss. Not even the infusion of a $160 million lawsuit settlement on CityCenter could diffuse Wall Street’s disappointment. While MGM had hoped for as much as 3% RevPAR growth on the Strip, it had to settle for 1%. The softness was mostly felt at the high-end hotels. “On today’s … conference call, we’d expect MGM to guide to 3 to 5% RevPAR growth, highlight that its lower-end segment is improving, the domestic player is coming back (to a degree),” wrote J.P. Morgan‘s Joseph Greff. Macao cash flow was a particular disappointment, being $44 million off Greff’s forecast.

And, oh yes, there was gambling. Table hold was a bit lower than normal but slot win was up 5%. It’s nice to know that the bread-and-butter players came through for MGM in the crunch.

* The talks of a REIT takeover of Pinnacle Entertainment by Gaming & Leisure Properties may be going better than previously thought. A statement released today by GLPI reads, “They [Pinnacle] have provided tax basis information on their assets which we pinnacle_logo_lrhave analyzed although there has been no independent review or diligence on this information. We have been in very productive, substantive discussions with them in an effort to come to agreement on terms for the transaction we have proposed. We are pleased with the progress of those discussions and will update everyone as soon as we have something definitive to report.”

GLPI management patted “very cordial and professional” Pinnacle on the head, complimenting its “excellent job over the last several years with its operations … we are impressed with the results they continue to achieve.”

Deutsche Bank’s Carlo Santarelli is bullish on GLPI, citing “relatively stable cash flows,” healthy dividends, growth opportunities and a management focused on ROI. He added that GLPI leadership “has not given a lot of thought to non-gaming opportunities despite having looked at a couple.” Also, contrary to Penn National Gaming‘s assertions, GLPI wants to get in on the Tropicana Las Vegas acquisition, despite low cash-flow levels.

Operating results at L’Auberge Baton Rouge and Hollywood Casino Perryville were characterized as stable. GLPI has the cash on hand to pay a dividend but won’t do so until next quarter, when the Pinnacle business is expected to no longer be hanging fire.

This entry was posted in CityCenter, Economy, GLPI, Louisiana, Macau, Maryland, MGM Mirage, Penn National, Pinnacle Entertainment, The Strip, Wall Street. Bookmark the permalink.