MGM Resorts Q1 earnings were pushed by an increase in revenue per available room (RevPAR), which in turn was boosted by 11% year-over-year growth in conventions.
In a new report Citi analyst Anil Daswani says he expects convention growth to east to 4% – 6% in the second quarter, as revenue from each visitor also continues to decline.
Daswani suggests a hold rating on expectations of a boost from Macau and Las Vegas Sands’ sluggish rebound. Here’s his breakdown on MGM’s prospects:
- MGM China is not a top buy but is expected to gain from Macau growth momentum. In June which is typically a slow month, Macau had MOP (Macau Pataca) 20.8 billion in gross revenue, (about $2.6 billion), which is encouraging. The region is set to meet 40% growth target, if it can achieve 36% growth in the second half of 2011.
- The stock is trading at par with the sector and is not too expensive.
- MGM China does however face stiff competition from new casinos in the Cotai Strip over the next several years. MGM is unlikely to open its Cotai property before 2017/2018.
- MGM China has failed to get an unconditional guarantee from Pansy Ho, daughter of Macau-based businessman Stanley Ho who owns 29% of the MGM Grand Macau, to reduce her stake in the group.