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MGM China’s profit soars, eyes Cotai
Local gaming operator MGM China has seen both its revenue and operating profit soar in the last quarter, fuelled by a booming VIP business. The company will soon be debt-free and is ready to announce its plans for Cotai by the end of the year.
MGM China’s sales climbed 72 percent from the third quarter of 2010 to USD 623.1 million (MOP 5 billion), far above market average. In the same period Macau’s gaming revenue rose by 48.2 percent, which means the company grew its market share.
The increase was driven mostly by high-rollers, which bet a total of USD 23.1 billion (MOP 184.8 billion), up by 83 percent year-on-year. The VIP business routinely accounts for more than 70 percent of local casinos’ revenue.
Betting volume on mass-market table games also increased but much less, by just 13 percent. Slot machines continue to improve with a 52 percent growth in bets.
In addition, MGM China’s operating profit rose 65 percent to USD 139 million (MOP 1.1 billion). And it could have been higher if not for a branding payment of USD 11 million (MOP 88 billion) to controlling shareholder MGM Resorts.
The company’s performance was “very solid,” Jefferies & Co. gaming analyst David Katz said, quoted by Las Vegas Review-Journal.
The operator stressed that things are bound to get even better this year. “October was also a record month for us in Macau, a tremendous result,” MGM Resorts chairman Jim Murren said in a conference call with investors.
MGM China will be debt-free this quarter and may pay dividends next year, Murren added.
“We are extremely pleased with our Cotai development plans while at the same time have some exciting expansion opportunities within our existing MGM Macau property,” Murren said in a statement.
A new in-house VIP gaming area will open in early December at MGM Macau.
The company is ready to begin groundwork on a planned casino resort in Cotai as soon as it gets government approval, the executive said in a phone interview with Bloomberg.
“We are hopeful we’ll receive that soon,” he added during the conference.
The resort would have 1,600 rooms, more than twice as many as MGM Macau, Murren said, and a gaming area able to “accommodate up to 500 tables and 2,500 slot machines”.
“The retail and entertainment attractions will utilise advanced technology that does not exist in Macau today,” he added. Details of the spending plan for the Cotai resort will be released next quarter.
Meanwhile US-based MGM Resorts reported a narrower third-quarter loss after taking control of MGM China. The shares fell, though, as cash flow missed some estimates.
The net loss was USD 123.8 million (MOP 990.4 million), or 25 cents a share, including a write-down of a Nevada casino, compared with a loss of USD 318 million (MOP 2.5 billion), or 72 cents, a year earlier.
Murren said MGM Resorts would seek to refinance some of its USD 13 billion (MOP 104 billion) in debt to reduce interest payments for the next two years.
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