MGM Resorts International, the biggest casino operator on the Vegas strip recently released results of its second quarter which outperformed analyst’s estimated. The strong performance of its Las Vegas casinos helped make up for the continued slump in its Macau gambling operations.
Bloomberg analysts had expected MGM Resorts to earn an average of around 19 cents per share but MGM earnings were at 26 cents per share for the second quarter. Total sales for MGM Resorts dropped by 4.8 percent to reach $2.27 billion against predictions of a $2.33 billion decline. The company’s earnings before interest, taxes, depreciation and amortization (EBITDA) went up by 12 percent. MGM Resorts is also expecting to do better in Atlantic City and capture more market share as the Trump Taj Mahal casino is expected to wind up operations after Labor day.
In a statement, James Murren, CEO of MGM Resorts International said “We had a very good second quarter and we just had the best July as a company we’ve ever had.” Murren also remains hopeful that MGM’s Macau operations will pick up during the next quarter as the Macau market has shown signs of recovery.
MGM has been forced on three separate occasions to delay the opening of its proposed $3.1 billion MGM Cotai casino. The new casino is expected to target mass market gamers but will face still competition in the Cotai district as Wynn Resorts Ltd will open their $4.2 billion Wynn Palace on August 22 and Las Vegas Sands Corp will is expected to open their $2.9 billion Parisian Macao casino on September 13.
Macau’s casino industry has witnessed a steep decline in gambling revenues for twenty five consecutive months due to the anti-corruption crackdown launched by Beijing which targeted VIP gamblers, money launders and corrupt officials. As a result, Macau’s VIP gambling sector has collapsed and all six major gambling operators in Macau have targeted mass market gamblers. Gaming analysts are now keeping a close watch on Macau’s casino industry as they expect the opening of the three new billion dollar casino resorts in the Cotai district to turn the fortunes of Macau’s gambling industry.
Murren told investors during the second quarter earnings calls that he believes the gambling market in Macau has now stabilized and is slowly improving. He however expects the VIP market segment to take another three years to show signs of a turnaround. MGM’s Macau operations recorded a 4.5 percent drop in revenues which was also lesser than what analysts had expected.
Aaron Fischer, head of consumer and gaming research for CLSA Asia Pacific Markets stated that the delay of the MGM Cotai casino might be a blessing in disguise as it will give MGM Resorts the time to customize its offerings based on how the Wynn Palace and Parisian Macao perform.