MGM Resorts International: 1Q19: In line Vegas; Macau and Regionals Beat

 

1Q results were ahead of expectations, driven by stronger Macau, CityCenter, and Regionals. As guided, Vegas got hit by weaker baccarat but mgmt reiterated its 2019 outlook. Our forecasts inch up (for the 3rd straight qtr), we see NT catalysts with real estate and Osaka. Our PT remains at $35, OW.

Conclusion. MGM's 1Q results were slightly better than expected driven by Macau and regionals. Mgmt commentary that decisions around future real estate plans will be made in months not quarters provides a near-term catalyst, as does progress with a license award in Osaka (which we see could be worth $4/share to MGM). Mgmt also gave more detail on its MGM 2020 plan, with a good amount of labor savings in place by 2Q QE. We now forecast 2019 / 2020 EBITDA of $3,250m (from $3,240m) / $3,615m (from $3,589m, guidance $3,600-3,900m but cons $3,431m). Our price target is unchanged at $35, based on 10x 2020e EBITDA (below MGM's long-term avg 11x), and implies 24% upside; reiterate Overweight.

1Q19 Results. 1Q property-level EBITDA of $871m came in above MSe $856m / cons $857m. MGM China EBITDA of $191m beat MSe $185m / cons $180m, with Macau (peninsula) EBITDA at $129m vs. MSe $115m / cons $122m and Cotai EBITDA at $66m vs. MSe $71m / cons $59m. Mgmt called out $16m of high hold in Macau but hold was consistent with prior period and relatively in line with our expectations. Regional U.S. properties EBITDA of $207m beat MSe $201m and cons $195m, supported by strength in MS from sports betting. Mgmt highlighted same-store regional revenue growth was 3% and EBITDA 9%. LV Strip EBITDA of $404m was in line with MSe $405m but missed cons $427m. RevPAR growth of 3.7% was ahead of MSe +2.4% but in line with cons +3.8%. On the positive side, slot revs were up 6%, non-gaming revs were up 4%, and mgmt suggested non-bacc revs were also up. On the negative side, mgmt highlighted that low baccarat hold and volumes drove a $35m y/y decline in Vegas EBITDA, which adjusting for, still implies residual Vegas EBITDA declined 2% y/y.