MGM Needs Cotai
Chase is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
With the release of Wynn's (NASDAQ: WYNN) Q2 results, we are made privy to the immense importance of Macau to our American gaming companies. Though Wynn was $.13 short of $1.51 EPS estimates, that is still a 30% increase over 2011. Most interesting is that Wynn now derives 72% of its revenues from its Asian operations. Las Vegas Sands (NYSE: LVS) is even more heavily dependent on Asia with 82% of revenues coming from its Singapore property and two Macau properties. Sheldon Adelson's 2007 prediction that Sands would eventually be a Chinese operation seems pretty prescient today.
So what about that other bastion of Las Vegas: MGM (NYSE: MGM)? Well, they are a bit late to the party. Currently, they only see about 25% of their income coming form Asia. Keep in mind, though, that that 25% comes from a 51% share in one property. The other 75% comes from the other 1.7 Million square feet of property operated by MGM. Those properties include, in Vegas alone (deep breath):
Bellagio
Aria Resort & Casino
Harmon Hotel and Spa
Veer Towers
The Crystals
Vdara
Mandarin Oriental
The Mirage
Luxor
Mandalay Bay
THEhotel at Mandalay Bay
MGM Grand Las Vegas
The Signature at MGM Grand
Skylofts at MGM Grand
Monte Carlo
Hotel 32
New York, New York
Excalibur
Circus Circus
Slots-A-Fun Casino
CityCenter (50% share)
So, 15% of MGM's casino square footage accounts for 25% of revenues. It is also notable that the MGM Macau has 582 rooms and a 317,000 square foot casino, whereas the MGM Grand in Vegas, for instance, has a 158,000 square foot casino with 6,020 rooms. Removing Macau, MGM (across their entire portfolio) averages about 35 square feet of casino per room. MGM Macau has 544 square feet of casino per room. Numbers like this are pretty common throughout Macau: LVS' The Venetian Las Vegas has 183 gaming square feet per room (Let's call it GSF/Room) and The Venetian Macau has a GSF/Room of 29. Wynn Las Vegas comes in at 40 vs. Wynn Macau at 202.
To MGM's credit, they have thrown their hat into the Cotai land grab. Unfortunately, though, they have to compete with another developer by the name of Sociedade de Jogos de Macau, otherwise known as SJM. On July 20, MGM China CEO Grant Bowie expressed his confidence that the MGM application for Cotai parcels 7 and 8 would be approved, though he did not specify a time frame. As of now, it seems MGM has refused to play the government greasing game so loved by Steve Wynn and Sheldon Adelson, to their detriment. This approval is crucial to MGM and, should they get it, I'd expect to see a nice buy materialize.
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