On Friday, MGM Mirage (NYSE:MGM) was the third most popular of the stocks listed on NYSE. It was also the most popular gaming stock on the bourse. 100,707,646 MGM shares changed hands lifting the stock up $0.6 or 5.34% to end the day at $11.84. Just in the past week alone, MGM stock has risen from $8.74, to $11.84. That is a gain of almost three dollars a share.
Whatz moving MGM?
Improving Macau market
In the first seven months of 2009, Macau's gambling revenue dropped 10% in the first seven months of this year in part because of the visa restrictions. However, in August, casinos in Macao raked in over 10.6 billion patacas ($1.34 billion), topping the previous high of 10.4 billion patacas ($1.32 billion) registered in January 2009. Gaming growth came despite a downturn in the local economy. Gaming operators in Macau are unveiling a slew of new casinos which is an indication of the market's growth potential. City of Dreams, a large casino hotel complex run by Melco Crown Entertainment Ltd, and Hotel Lan Kwai Fung Macau with a gaming floor were opened respectively on June and August, bringing the city's total number of casinos to over 30 so far. Another casino hotel run by local gaming operator SJM is scheduled to be opened in coming months.
Las Vegas Sands (LVS), which runs three casino complex in Macau including the largest Venetian Macau casino resort, informed local labor authorities that it has decided to suspend its earlier plan to layoff 4,000 employees by this autumn, an indication of likely pickup in near term demand. The growth of local gaming revenues is expected to continue in the near future given the broadening economic pick-up in the Chinese mainland, Macao's major source market, and the diminishing impact of the global financial crisis. Macau being a major market for MGM, the company is likely to benefit from the likely upturn.
CityCenter opening likely to drive up earnings
MGM Mirage is getting close to completing their CityCenter project in Las Vegas. CityCenter is proceeding on schedule and will open in phases beginning on Dec. 1, according to the CityCenter President and CEO Bobby Baldwin. About 48% of CityCenter's Crystals Retail District will open in December, Baldwin said, with about 84% available by "at least" April of next year. Opening of CityCenter should lift the company's business run-rate.
Debt burden easing off
In August, MGM announced that it is extending to bondholders the offer to exchange a portion of its $782 million notes due 2010 for up to $500 million due 2016. For each $1,000 of the 2010 notes, holders will receive $1,175 in new notes, which includes an additional $50 as an early participation incentive for investors. Now, all bondholders who tender their existing notes will receive the bonus. It appears that the credit markets have loosened a bit, allowing for deals like this to be possible, but extending the maturity of the company's debt comes at a cost; the new notes pay higher interest: 10% compared to 8.5%. This does alleviate some immediate liquidity concerns, as debt coming due in 2010 would be reduced to around $581 million (assuming all $500 million is tendered), compared with $1 billion before the swap. The opening of CityCenter project and improving Macau market should help the company to partially pay-off and rollover the remaining debt that comes due in 2011. Currently the stock is trading at $11.84 and looks poised to breach $13 soon.
