MGM Resorts withdraws financial targets over coronavirus

Citing uncertainty surrounding the Covid-19 coronavirus outbreak, MGM Resorts has opted to withdraw its 2020 full-year financial targets.

During the company’s full-year earnings call on Wednesday, MGM chairman and CEO Jim Murren told investors MGM is losing $1.5 million in operating expenses per day in Macao, where government officials have mandated a two-week casino shutdown to help curb the virus’ spread. He attributed the majority of those expenses to payroll costs.

MGM and other casino operators, including Wynn Resorts, were forced to shutter their Macao gaming venues on Feb. 5. MGM’s Macao properties include the MGM Macau and the MGM Cotai.

According to Murren, both MGM casinos are still maintaining some nongaming facilities to support any remaining hotel guests.

“We’re currently navigating an extremely fluid environment with the coronavirus,” said Murren. “While the current situation creates volatility, we are confident that it does not reflect the medium to long term earnings potential of these assets or this marketplace. In fact, we had been seeing signs of an improving marketplace during the first couple weeks in January, with our [Macao] businesses averaging just under $2.5 million of property EBITDA (earnings before interest, taxes, depreciation and amortization) a day.”

Net revenues for MGM’s China business were up 6% to $727 million in the fourth quarter and up 19% to $2.9 billion for 2019.

Domestically, Murren expressed concern over the decelerating “Far East baccarat market” in Las Vegas. He estimated that, historically, Far East baccarat business has accounted for around 5% to 7% of MGM’s Las Vegas Strip earnings before interest, taxes, depreciation, amortization and restructuring or rent costs (EBITDAR). By comparison, it now contributes to around 2% of the company’s Strip EBITDAR.

“Far East baccarat in Las Vegas had a difficult year in 2019, and we are not expecting a material recovery in the near term,” said Murren. He added, however, that the market was buoyed by nonbaccarat table games, which performed well in the final quarter of the year, and strong convention business.

In Vegas, MGM’s net revenues rose 4% to $1.43 billion in the fourth quarter and 2% to $5.8 billion in 2019. RevPAR across MGM’s Strip properties increased 6.4% to $150 for the quarter and 4% to $153 for the year.

In other company news, MGM announced just before Wednesday’s call that Murren would be stepping down as the company’s chief executive. MGM has formed a committee of independent directors to search for a replacement, and Murren will remain at the company’s helm until a successor is found.

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