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MGM Mirage stock drops
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LAS VEGAS REVIEW-JOURNAL
Updated: Apr. 16, 2010 | 7:04 a.m.
Shares of MGM Mirage fell almost 6 percent Thursday on the New York Stock Exchange, the day after the company told investors it expected to report a $96.7 million loss in the first quarter. The casino operator also said it would report a $255 million operating loss at CityCenter.
MGM Mirage's share price, up some 60 percent from a year ago, closed the day at $14.57, down 84 cents or 5.45 percent.
Wall Street wasn't surprised. Many analysts predicted the company would have a challenging first quarter this year as the Strip tries to recover from the recession.
"MGM Mirage's preliminary results support our view that the Las Vegas market should remain pressured due to the inflow of supply from the recently opened CityCenter," Oppenheimer gaming analyst David Katz told investors Thursday. "While initial results for Aria were modestly positive, they were below expectations, as were results from some of the wholly owned Strip properties."
Aria, CityCenter's centerpiece 4,004-room hotel-casino, is expected to report an operating loss of $66 million. The hotel ran at just 63 percent room occupancy in the quarter.
MGM Mirage also said CityCenter would take a $171 million noncash impairment charge related to the development's 2,400 residential units.
Stifel Nicolaus gaming analyst Steven Wieczynski said investors were probably disappointed by the preliminary quarterly results. Las Vegas gaming revenues grew 33 percent in February, which helped drive up the company's stock price.
"After strong Las Vegas February results were released, we believe expectations for a quicker recovery were starting to get baked into MGM shares," Wieczynski said. "MGM Mirage's preliminary results suggest March trends did not improve and February was an anomaly. Investors looking for a quick recovery in Las Vegas have to realize a large chunk of supply still needs to be absorbed, which will likely weigh on room rates."
Janney Montgomery Scott gaming analyst Brian McGill said that although the Strip might be a drag on the company's results, strong numbers coming from MGM Mirage's casinos in Detroit and Biloxi, Miss., could buoy results.
"The Las Vegas Strip results were well below our low expectations for the quarter," McGill said. "The surprise to us came at the higher-end properties, which saw a drastic drop from year ago levels. The negative leverage in the model continues to manifest itself, as the properties cannot cut enough costs to match the lower level of revenues."
However, Union Gaming Group principal Bill Lerner told his firm's clients he maintains a positive view toward MGM Mirage despite the down quarter. He sees potential in the company's long-term prospects.
"We suspect Aria's room pricing dynamics caused some cannibalization of MGM Mirage's midmarket properties on the Strip," Lerner said. "At the same time it is clear to us that other elements of the MGM Mirage model are reflecting favorably, such as the strength of high-end volume at CityCenter and Bellagio in totality. We are optimistic about further balance sheet improvement and feel strongly that MGM Mirage can disproportionately capture a recovery in Las Vegas."
Contact reporter Howard Stutz at hstutz@reviewjournal.com or 702-477-3871.
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NO BIG SURPRISE / WHAT ELSE IS NEW....
competing against yourselves? You own half the strip. People are reading between the lines about the odds of gambling here in Vegas. The corruption in this state is thru the moon. and Vegas could be a ghost town someday.
Correction to below post:
Bill Lerner (not Jim). Apologies.
RE: Dahn
It is not uncommon for there to be a "team effort" from executives, investors and friends in NYC banking towards pumping up stock values for various reasons. Kerkorian is a master of buy-sell with deep pockets to stay in the game a long-long time, with long-time friendly investors-customers.
Kerkorian can just set up a corporation and buy high yield paper to extend debt. Perhaps some long time friends will assist.
The yellow flag is attaching more properties as collateral to that paper, as age-life for some company properties is approaching mid-life, and with current cost saving measures internally there may be accruing deferred maintenance and upgrades customary in the Vegas market to be competitive that will require higher costs to cure in the future. In short, any property(s) that gets sold off or offered up in the event future commitments are not made to debt down the road might very well be the properties(s) not getting ongoing attention for 4-5 years, including now.
Union Gaming was formed by Jim Lerner, former D-B analyst, and someone who has known MGMM Chairman Jim Murren for some time, as Murren was a long-time DB analyst.
Shill, no. But many have a stake in the game. Yes, DB is on the hook with The Cosmopolitan.
Occupancy for Aria singularly is not the key concern, the concern is a decline in Revpar for company properties overall, and the numbers at the best properties despite a strong Chinese New Year.
The front line problem for labor in lower occupancy numbers is equitable staffing, such as one station being busy and another slow. A house is not a house in Vegas unless it's full everywhere with good friends and busy, smiling faces.
Corporatists models have over-reached.
With limited quarterly disclosures at this time, it's difficult to assess a more complete picture.
Union Gaming Group sounds like a shill for MGM. I see UGG execs were former Deutsche Bank employees. DB by the way, owns the yet-to-be-opened Cosmopolitan--by default.
And are GF and JPM, with positive quotes in a previous article, trying to pump and dump MGM as they did with oil futures?
http://www.bloomberg.com/apps/news?pid=20601085&sid=apdCk2i8v.tI
http://www.marketoracle.co.uk/Article6826.html