Sell: MGM Resorts International
MGM Resorts International (MGM) owns 51% of MGM China Holdings Limited (MCHVY). MGM China in turns owns one casino in Macau, with another on the way in Cotai. The $2.5 billion development will include 500 gaming tables, 2,500 slot machines and 1,600 hotel rooms. It’s going to be a player come the middle of 2016 once the new casino opens for business, but by the time it does, MCHVY will face significant competition in both regions.
While MGM’s situation is much better than Caesar’s thanks to Macau, its debt is still a significant concern. At the end of September, it had $13 billion in long-term debt or 51% of its total assets. Although it’s reduced its debt by $550 million so far in 2013, it will still shell out $865 million in interest payments this year making it awfully difficult to generate decent profits. Furthermore, its 50%-owned interest in the City Centre development in Las Vegas continues too lose millions, although the loss has slowed in recent quarters.
At the end of the day, LVS and WYNN (and, to a lesser extent, MPEL) are all better-positioned financially to take advantage of the future in global gaming.
As of this writing, Will Ashworth did not hold a position in any of the aforementioned securities.