Will MGM's Problems Ever End?
Here we go again with MGM Resorts' (NYS: MGM) money pit, CityCenter.
TheWall Street Journal reported on Tuesday that MGM is now looking to demolish the Harmon Building of the embattled CityCenter. After saddling itself with loads of debt constructing the massive joint project, the company now wants to tear part of it down because of structural engineering problems.
The company's engineers issued a report indicating that the building wouldn't be able to withstand a strong earthquake. Alternatively, to rehabilitate the building, the report claimed it would take up to 18 months just to fully assess the extent of repairs, followed by another two to three years to rebuild the tower. The company is now in court battles with its general contractor, Perini Building Co., over the faulty construction.
Compared to rivals Las Vegas Sands (NYS: LVS) and Wynn Resorts (NAS: WYNN) , MGM is financially weaker in almost every way.
Metric | MGM Resorts | Las Vegas Sands | Wynn Resorts |
|---|---|---|---|
Quick Ratio (MRQ) | 1.06 | 1.71 | 1.72 |
Current Ratio (MRQ) | 1.13 | 1.72 | 1.79 |
Long-Term Debt to Equity (MRQ) | 198% | 113% | 119% |
Total Debt to Equity (MRQ) | 198% | 126% | 125% |
Interest Coverage (TTM) | (1.84) | 1.18 | 1.79 |
Source: Reuters. MRQ = most recent quarter, TTM = trailing 12 months.
MGM's lower quick and current ratios show it has less liquidity and flexibility to cover short-term obligations. Its negative interest coverage ratio reinforces this view. Both of its debt-to-equity ratios are also significantly higher than its peers', showing just how levered up the company is.
MGM's domestic results weren't exactly winner, winner, chicken dinner, with the company still relying heavily on Macau to drive its revenue growth. It's no secret that Macau is the golden goose of gaming. I'm with fellow Fool Travis Hoium in thinking that Melco Crown (NAS: MPEL) , Las Vegas Sands, and Wynn Resorts have better exposure to the big opportunities on that little island, although Melco Crown may be nearing its own tipping point. Less debt and more growth? I'll take two, please.
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At the time thisarticle was published Fool contributorEvan Niuenjoys a good round of Ace-to-Five Triple Draw Lowball, but holds no position in any company mentioned.Click hereto see his holdings and a short bio.Motley Fool newsletter servicesformerly recommended Melco Crown Entertainment. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.
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