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MGM Resorts (NYSE: MGM ) still hasn't dug out of the hole it made when it built CityCenter. If it wasn't for an income tax benefit in the fourth quarter, the company would have reported an expanding loss as MGM China can't make up for the company's struggles in Las Vegas.
During the fourth quarter, revenue increased to $2.30 billion from $1.48 billion, mostly because MGM is now consolidating $719 million in quarterly revenue. Net loss fell to $113.7 million from $139.2 million a year ago, helped by a $190.9 million benefit from income taxes.
Macau is going very well for MGM. In 2011, net revenue grew 66% to $2.6 billion and adjusted EBITDA rose 76% to $630 million. MGM's casino now trails just Las Vegas Sands' (NYSE: LVS ) Venetian Macao, Wynn Resorts' (Nasdaq: WYNN ) resort, and Melco Crown's (Nasdaq: MPEL ) City of Dreams in profitability among U.S.-traded companies. MGM also announced that MGM China would pay a $400 million dividend, $204 million of which will go to MGM Resorts.
It's all about the debt
My concerns about MGM haven't been about Macau, but about the massive amount of debt the company racked up in expanding its footprint in Las Vegas. CityCenter, which generated just $58 million in property EBITDA last quarter, was the last of the company's big moves.
At least MGM's debt situation has stabilized, a positive trend for the company. The company has $13.67 billion in long-term debt and $1.87 billion in cash for a net debt of $11.81 billion. This was up just slightly from 2010, helped slightly by the MGM China consolidation.
Debt was the main reason I said MGM's biggest competitor in Las Vegas, Caesars Entertainment (Nasdaq: CZR ) , is in real trouble, and at least MGM isn't adding debt while it loses money, like Caesars is.
An eye on the future
CEO Jim Murren is confident that online poker legislation will be passed this year, another potential revenue stream for the company. Pressure is mounting on the feds to get something done, but an election year is a tough time to pass something like this. If something is passed, expect MGM to move quickly to build market share.
MGM reiterated its plans to build a resort on Cotai in Macau. According to management, the resort will cost $2 billion to $2.5 billion, contain 500 table and 2,500 slots, have 1,600 hotel rooms, and take 36 months to build. When that construction begins is anyone's guess.
Foolish bottom line
If MGM can continue steady progress in Las Vegas, while paying down some debt, there could be reason for optimism. I've been off the MGM bandwagon for quite some time because of the debt load, but if online poker is approved and a Macau expansion is approved, the company's debt might not be an anchor on the stock.
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