Aug. 6 (Bloomberg) -- MGM Resorts International, the largest casino operator on the Las Vegas Strip, reported a quarterly profit that beat analysts’ estimates, as the company drew more gamblers in Nevada. The shares rose.
Excluding items, profit was 4 cents a share, the Las Vegas-based company said today in a statement. Analysts on average projected a profit of 1 cent, according to data compiled by Bloomberg. Sales climbed 6.8 percent to $2.5 billion, compared to the average analyst projection of $2.42 billion.
While Las Vegas casinos have struggled to return to pre-recession growth as consumer spending has remained weak, MGM Resorts reported gains in its operations there during the quarter. Strip earnings before interest, taxes, depreciation and amortization rose 15 percent, as casino revenue climbed 7 percent, and hotel sales added 5 percent.
Investment in hotel room remodeling, restaurants and entertainment has attracted more leisure travelers to the city, Chief Executive Officer Jim Murren said in an interview.
“Having a show like ‘One,’ the Michael Jackson show at Mandalay Bay,” Murren said, referring to one of the company’s Strip casinos. “Mandalay hadn’t had a show for two years and now it’s got one of the best shows I’ve ever seen. It’s driving tremendous traffic.”
The company more aggressively marketed its slot machine business to frequent gamblers and signed marketing partnerships with Southwest Airlines Co. and Hyatt Hotels Corp. that increased business, Murren said.
MGM’s shares rose 2.2 percent to $16.91 at the close in New York, their highest price since October 2008. The stock is up 45 percent this year compared with a 19 percent advance in the Standard & Poor’s 500 Index.
The company posted a net loss of $92.9 million, or 19 cents a share, in the three months ending in June, compared with a loss of $145.5 million, or 30 cents, a year earlier. Items affecting earnings in the quarter included a $45 million impairment charge on corporate buildings in Las Vegas that are being torn down to build an arena which the company will jointly own.
Adjusted property Ebitda rose 9 percent to $596 million, ahead of the average analysts’ estimate of $576.6 million.
Properties on the Strip generated total gaming revenue of $1.39 billion in the second quarter, down 2.1 percent from last year, while baccarat revenue, a growth area in recent years, declined 15 percent, according to Bloomberg Industries. In contrast, gaming revenue at casinos in Macau, where MGM owns a property, rose 16 percent.
MGM China reported revenue of $835 million, a gain of 18 percent from a year earlier. Adjusted Ebitda rose 10 percent to to $205 million, its highest ever quarterly amount, according to the statement.
The company focused on the slot machine business there and marketed to more provinces in mainland China than competitors did, Murren said. The business has also benefited from the MGM name.
“People still think we make movies, it’s easy to say, it’s a brand well known in China,” he said.
MGM China declared a dividend of $113 million, to be paid on or about Sept. 2 to shareholders of record as of Aug. 26. MGM Resorts will receive $57 million, representing its 51 percent share, according to the statement.
MGM has received three or four inquiries to purchase the Crystals mall at its CityCenter resort in Las Vegas and will consider its options there, the company said. MGM is also considering refinancing CityCenter’s $1.85 billion in debt, Chief Financial Officer Daniel D’Arrigo said on a conference call.
The company had total long-term debt of $13.1 billion at the end of the second quarter, down from $13.6 billion on Dec. 31. Murren said his goal is to reduce the company’s total borrowing to below $10 billion over the next couple of years.
Credit-default swaps tied to the company’s debt, which typically fall as investor confidence improves, decreased 9.6 basis points to a mid-price of 358.6 basis points as of 4:07 p.m. in New York, according to Bloomberg prices.
Credit-default swaps pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. Investors and traders use the contracts to hedge against losses on corporate debt or to speculate on creditworthiness.
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