MGM Likely To Sustain Growth Momentum Through Business Expansions

by Trefis Team
MGM Resorts International
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MGM Resorts  (NYSE: MGM) has shown solid growth potential in the last few years. MGM’s business was relatively insulated from the downturn in Macau’s gaming industry caused by the corruption crackdown movement in China, largely because of the diversified nature of MGM’s revenue streams. In the last year, MGM has grown its revenues and earnings through new openings and the recovery in the Macau gaming industry. We expect MGM to be able to continue this growth momentum because of some new ventures. The McGregor-Mayweather recently took place at MGM’s T-Mobile Arena, which could drive MGM’s Q3’17 revenues. The recovery in Macau’s gaming industry will also help MGM, and in terms of domestic resorts, MGM National Harbor and the Borgata hotel will continue to help MGM grow. Additionally, other new casinos such as MGM Cotai and MGM Springfield should ensure long-term growth.

MGM’s U.S. Operations To Get a Boost From McGregor Mayweather Fight

The McGregor-Mayweather, which took place at MGM’s T-Mobile Arena on August 26, is expected to generate as much as $700 million in revenues for MGM, which should drive growth in MGM’s Q3’17 earnings. Additionally, MGM National Harbor has been performing strongly. We expect MGM National Harbor to continue to stimulate growth in MGM’s domestic operations in the short term. MGM acquired Borgata in September of last year, and this will be the last quarter when the growth from the deal will be inorganic. But looking at the sequential growth the chain has seen in the last three quarters, we expect it to continue to boost MGM’s earnings in the coming quarters.

New Openings to Drive Long-Term Growth

The gaming industry in Macau has been growing for about a year now, and the increase in year to date gross gaming revenues have touched 20% in August. Although MGM lost market share in the region due to increased competition in the region and new casino openings by Las Vegas Sands and Wynn Resorts, we expect MGM to bounce back in the coming quarters. MGM’s new casino on the Cotai strip will be opening in the fourth quarter of 2017, and with the increased traffic in the region and completion of some infrastructure projects, we expect MGM’s market share to increase in the next one year.

MGM’s domestic resorts will also get a boost in earnings next year when MGM Springfield will start its operations in the latter half of 2018. MGM was also in talks with Las Vegas Sands to buy Sands Bethlehem, but according to some reports, the deal has been called off. However, we expect MGM to continue to expand its domestic resort portfolio through acquisitions and new ventures in the coming years.

For our model and valuation, please refer to our complete analysis of MGM Resorts International

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