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MGM Resorts boosted by Chinese growth in Q3

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North American gaming giant MGM Resorts saw a 9% rise in revenue in Q3 as it benefitted from growth across its casino properties in the US and China.

In its third quarter financial and operational results for the three months to 30 September, MGM reported net revenue of $3.3bn (£2.5bn/$3.0bn). It said net revenues at its Las Vegas Strip properties increased 4% year-on-year to $1.5bn.

In its regional operations across the US, net revenue increased by 20% to $935m. Those figures included $52m from Empire City Casino, which it acquired in January 29, and $64m from MGM Northfield Park’s operations, which was acquired in April. It also benefitted from a full quarter of operations at MGM Springfield, which opened in August last year.

MGM China’s net revenues were up 22% year-on-year to $738m, in part thanks to a 19% increase in VIP Table Games hold to $699m at its MGM Cotai and MGM Macau properties.

“I am excited about the prospects for our business as we enter 2020,” said Jim Murren, chairman and CEO of MGM Resorts.

“We expect the combination of a healthy Las Vegas market and successful implementation of MGM 2020 to drive EBITDA and free cash flow growth. Simultaneously our asset light transition will generate significant proceeds from real estate monetisation that can be used to strengthen our balance sheet, meaningfully reduce our shares outstanding, and invest in select growth initiatives.

“Our increased profits spread across fewer shares outstanding will result in enhanced free cash flow per share and generate meaningful value for our shareholders.”

While revenue was up, operating profit decreased 42% compared to the prior year quarter to $238m. However, excluding a non-cash impairment charge of $219m in the current quarter related to Circus Circus Las Vegas and adjacent land, included within property transactions, net, consolidated operating income increased 11% compared to the prior year quarter.

Las Vegas adjusted property EBITDA was up 5% to $420m, with Regional up 27% to $264m and China up 40% to $182m.

Expenses grew by 19.2% to $3.1bn, including an 11.7% increase in casino outgoings. Property transactions of $250.0m were also significant, while the group benefitted from a huge dip in start-up expenses following the costs of development at MGM Springfield a year ago.

Looking ahead, MGM Resorts said it is working toward a deal to sell another Las Vegas Strip casino, the MGM Grand, before the end of the year, part of a continuing strategy to pull cash out of its real estate.

Earlier this month, the company agreed to a sale-leaseback of the Bellagio and an outright sale of Circus Circus on the Strip, separate deals through which the company expects to generate a combined $4.3bn in net cash.

“We remain focused on achieving our 2020 targets of $3.6bn to $3.9bn in consolidated adjusted EBITDA and significant growth in free cash flow per share,” said Corey Sanders, chief financial officer of MGM Resorts.

“The key drivers remain the benefits of our MGM 2020 plan, which is currently tracking ahead of expectations; healthy market conditions in Las Vegas and regional markets; and the ongoing ramp up of newly opened properties, especially MGM Cotai. We are also targeting consolidated net financial leverage of 3-4x and approximately 1x net domestic financial leverage (excluding MGP) by the end of 2020.”