Mgm Case Analysis
Introduction
MGM Resorts International ( MGM) is a Fortune 500 company traded on the NYSE in the complex and unpredictable industry of gaming and hospitality. MGM is one of the leading global hospitality companies with a portfolio of 15 wholly owned resorts and gaming properties located in Nevada, Mississippi, and Michigan and 50 percent stakes in four additional properties in the US and China ( Exhibit 1). With approximately 45,000 full time employees, the company has an enterprise value of $ 18.09 billion and 2010 revenues of more than $ 6 billion ( Exhibit 2). It is the third largest revenue generating company in its industry. MGM believes its success is due to its reputation for delivering high quality gaming and luxury services and believes its hospitality and entertainment venues are the best in the business. 1 Previously thought to be a recession- proof industry, gaming was not only hit harder than expected by the most recent economic recession, but is on a slower than predicted road to recovery. Nevertheless, many leading analysts view MGM as a worthwhile long- term investment. In fact, within the MGM conglomerate, Mandalay Bay, Bellagio, and MGM Las Vegas experienced double- digit EBITDA growth in 2010 and were projected to grow even more in 2011.2 Yet, despite its isolated wins and the subtle optimism in the financial community toward the gaming industry as a whole, MGM faces significant concerns. At $ 12.1 billion, MGM carries one of the heaviest debt burdens and shows the largest net operating losses in the industry year over year since 2007— posting losses in excess of $ 1 billion for both 2009 and 20103 ( Exhibit 3). Domestically, MGM has debt obligations maturing in 2013 and 2014. Internationally, MGM is working to offset a weak dollar with new growth ventures in China and Vietnam and has experienced higher than anticipated returns from its Macau ( China) property. While its competitors are experiencing similar difficulties and achievements
MGM Resorts International ( MGM) is a Fortune 500 company traded on the NYSE in the complex and unpredictable industry of gaming and hospitality. MGM is one of the leading global hospitality companies with a portfolio of 15 wholly owned resorts and gaming properties located in Nevada, Mississippi, and Michigan and 50 percent stakes in four additional properties in the US and China ( Exhibit 1). With approximately 45,000 full time employees, the company has an enterprise value of $ 18.09 billion and 2010 revenues of more than $ 6 billion ( Exhibit 2). It is the third largest revenue generating company in its industry. MGM believes its success is due to its reputation for delivering high quality gaming and luxury services and believes its hospitality and entertainment venues are the best in the business. 1 Previously thought to be a recession- proof industry, gaming was not only hit harder than expected by the most recent economic recession, but is on a slower than predicted road to recovery. Nevertheless, many leading analysts view MGM as a worthwhile long- term investment. In fact, within the MGM conglomerate, Mandalay Bay, Bellagio, and MGM Las Vegas experienced double- digit EBITDA growth in 2010 and were projected to grow even more in 2011.2 Yet, despite its isolated wins and the subtle optimism in the financial community toward the gaming industry as a whole, MGM faces significant concerns. At $ 12.1 billion, MGM carries one of the heaviest debt burdens and shows the largest net operating losses in the industry year over year since 2007— posting losses in excess of $ 1 billion for both 2009 and 20103 ( Exhibit 3). Domestically, MGM has debt obligations maturing in 2013 and 2014. Internationally, MGM is working to offset a weak dollar with new growth ventures in China and Vietnam and has experienced higher than anticipated returns from its Macau ( China) property. While its competitors are experiencing similar difficulties and achievements