The Las Vegas-based gaming giant is more focused its own portfolio, which is the subject of the company’s much discussed ad-hoc board committee that since January, has been looking at ways to unlock value in the company’s real estate holdings.

During a conference call with analysts Thursday to discuss MGM’s second quarter results, Chairman and CEO Jim Murren shot down speculation about adding another casino or two.

“We didn’t look at Caesars (properties) before the Eldorado Resorts deal, and we’re not looking at them now,” Murren said. “We like what we own.”
Bloomberg News reported last week MGM is considering a sale-and-leaseback of the Bellagio and the MGM Grand Las Vegas as part of the committee’s effort.

Murren didn’t address specifics but said the committee “is exploring all options with very clear guideposts.” He said the goals include enhancing cash flow and creating value. “We have a lot of options in front of us, and it’s clear our real estate is mis-valued in the marketplace,” Murren said. “I am increasingly optimistic that the committee’s work will achieve these goals and (we) anticipate sharing their results in early fall.”

Murren called the second quarter results “straight forward.” Total revenues companywide grew almost 13 percent to $3.22 billion for the three months ending June 30. Net income declined 65 percent to $43.4 million. Earnings per share fell 15.5 percent to 23 cents per share. Consolidated cash flow grew 11.7 percent to $742.1 million.

Shares of MGM Resorts closed at $29.37 on the New York Stock Exchange Thursday, down 34 cents or 1.14 percent. But the market had a positive reaction to MGM’s results, with shares climbing more than 6 percent in after-hours trading.

Analysts said the reaction was based on results from the company’s Las Vegas Strip resorts. Total revenues on the Strip grew 1 percent to $1.47 billion, despite a 12 percent decline in gaming revenues, which the company blamed on lower table games hold and lower baccarat volumes.

A 5 percent increase in revenues from nongaming helped offset declines from the casino side. Las Vegas Strip revenue per available room at MGM properties was a 2.3 percent increase to $154.

Total revenue declines at the company’s marquee Las Vegas Strip resorts – including Bellagio, MGM Grand Las Vegas and Mandalay Bay – were offset by a 138.7 percent increase in revenues at Park MGM. The property was the focus of a massive renovation last year to rebrand from its previous name as Monte Carlo.

The fundamental backdrop in Las Vegas remains sound and we see robust demand in nearly all of our business segments,” Murren said. “We feel comfortable with Strip consensus estimates for the full year.”

MGM’s two resorts in Macau grew revenues 26 percent and the company’s growing regional property segment had a 10 percent increase.

MGM 2020

Murren said the company moved into the second phase of the MGM 2020 corporate restructuring plan, which he said would achieve $100 million in increased cash flow this year, up by $30 million from previous predictions.
MGM Resorts said the initiative would lead to a more centralized organization and a digital transformation.

“MGM 2020 is not just a cost-cutting exercise,” Murren said. “We are laying the groundwork to position the company for future growth, creating efficiencies and giving our properties the ability to scale key initiatives and best practices.”

Murren said the company “reduced headcount” by 1,070 positions – a 12 percent reduction from a base of 8,700 positions. He said the reductions were primarily managerial and supervisory roles and resulted in approximately $100 million in annual savings.

MGM real estate

MGM Resorts owns 70 percent of real estate investment trust MGM Growth Properties, which currently owns the land and buildings of 15 casinos and developments operated by MGM Resorts. Earlier this year, MGM Growth acquired the land and buildings associated with Northfield Park in Ohio and Empire Casino-Yonkers Raceway in New York and leased the properties to MGM Resorts.

On the Strip, MGM Growth owns six casinos and The Park entertainment and dining district. MGM Grand and Bellagio are the most notable properties not part of the REIT. MGM’s real estate includes vacant parcels on both the north and south ends of Las Vegas Boulevard.

Murren told analysts the company’s major development projects are complete and its capital expenditure program “is dramatically lower.” He added MGM isn’t interested to an out-and-out sale of any of it properties. “We won’t sell assets and diminish the value of MGM Resorts,” Murren said.

Las Vegas Stadium

Murren was upbeat about the under-construction $1.9 billion Las Vegas Stadium, which will be the home of the relocated Oakland Raiders. The 65,000-seat domed stadium, which is across Interstate 15 from Mandalay Bay, is expected to house college football bowl games, concerts and other special events when it opens in a year.

“People will conjugate around our properties and walk to and from the stadium,” Murren said. “We expect it to be a catalyst for our south Strip resorts, especially Mandalay Bay, as we will take full advantage of its location by hosting the most awesome tailgating experience before and after events.”