MGM Mirage Reports First-Quarter Loss as Convention Business Fizzles

Michael Kaplan
Updated
MGM Mirage reported a loss of $96.7 million for the first quarter of this year. Contributing to the results were anemic convention business and condominium write-downs at the recently opened $8.5-billion CityCenter, shown in this photo
MGM Mirage reported a loss of $96.7 million for the first quarter of this year. Contributing to the results were anemic convention business and condominium write-downs at the recently opened $8.5-billion CityCenter, shown in this photo

MGM Mirage, one of the world's largest gaming companies, reported a loss of $96.7 million for the first quarter of this year. Contributing to the results were anemic convention business and condominium write-downs at the recently opened $8.5 billion CityCenter.

Investors showed their concern by beating back the Las Vegas casino operator's share price by 8.2% to $13.72 at the close on Thursday.

Aria Resort & Casino, which stands as the jewel of the 76-acre CityCenter mixed-use development, had an operating loss of $66 million. Room occupancy was a disappointing 63% for Aria's 4,004 rooms. Revenue per room for MGM Mirage swooned by 8%.

Pulled Down by Market Slide

Grant Govertsen, analyst and principal with Union Gaming Group, attributes Aria's disappointing room sales to the cost of launching a mega-resort in a dead marketplace.

Govertsen is neither surprised nor put off by MGM Mirage's overall negative report. He sees the stock fall, at least in part, as symptomatic of Wall Street's overall condition Thursday. The Dow Jones Industrial Average lost 1,000 points during afternoon trading before scaling back the loss to 347.80 points, or 3.2%, to close at 10,520.32.

MGM Mirage's stock had gained nearly 12% over the last 30 days before Thursday's market slide.

Brighter Future

"MGM Mirage had a tremendous run, so it's not surprising to see it down more than the market," Govertsen says, pointing out that casinos's high betas (a measure of market volatility) contribute to dramatic bounces. He believes that macro improvements in Las Vegas overall will help out CityCenter in particular and MGM Mirage in general. Plus, MGM Mirage can expect an influx of cash when it takes the company public in Hong Kong later this year through the listing of its Macau property.

MGM Mirage's CEO Jim Murren saw similarly blue skies earlier today. He predicted that numbers will turn positive in the coming months. "We see signs of improvement and expect those to accelerate in the second half of the year and into 2011," Murren said in a statement.

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