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Argus Keeps Hold On MGM Resorts Due To Continued Macau Weakness

MGM Resorts International NYSE:MGM - Argus Keeps Hold On MGM Resorts Due To Continued Macau Weakness

MGM Resorts International MGM 2.08% reported mixed results for 1Q. Argus’ John Staszak maintained a Hold rating for the company. The analyst commented that although MGM Resorts has a relatively greater presence in Las Vegas, its earnings are likely to be impacted by continued weakness in Macau.

MGM Resorts reported its 1Q16 operating ESP at $0.16, ahead of the consensus estimate of $0.11. Revenue declined, however, by 5 percent y/y, to $2.21 billion, mainly reflecting lower revenue at MGM China.

Macau Weakness To Continue

The Macau Gaming Inspection and Coordination Bureau reported a 9.5 percent decline in April gross gaming revenue, or GGR, to $2.17 billion. Analyst John Staszak noted that gaming revenue in Macau had declined 16 percent in March, was down merely 10bps in February due to the Chinese New Year, and had plunged 21 percent in January.

Staszak expects Macau GGR growth to be modest, due to a slowing Chinese economy and “a recovery that is likely to be slower than prior recoveries.” He weakness in Macau would continue, especially in the company’s VIP segment.

“If gaming revenue in Macau improves significantly or the company’s Macau projects ramp up more quickly than we anticipate, we would consider returning the stock to our BUY list,” the analyst wrote.

DateFirmActionFromTo
Apr 2016CitigroupMaintainsBuy
Jan 2016SusquehannaMaintainsPositive
Nov 2015UBSUpgradesNeutralBuy

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