MGM Resorts (MGM +1.96%) owns nearly half of the resorts on the Las Vegas Strip and has become synonymous with all things Las Vegas. But from an investment standpoint, the company may not be as Las Vegas-centric as you might think.
Macau is playing an increasingly important role for MGM Resorts' business and non-Las Vegas resorts in the U.S. like MGM Detroit, Borgata, and MGM National Harbor each generate more revenue than most Las Vegas resorts. Here's where the money is coming from at MGM Resorts.
Image source: Getty Images.
Las Vegas is still king (for now)
Las Vegas is where MGM Resorts is headquartered and where most of its revenue comes from. But investors shouldn't lose sight of the fact that a quarter of revenue comes from other locations in the U.S. and nearly 20% comes from Macau.
| Region | MGM Resorts Revenue (TTM) | Percent of Revenue |
|---|---|---|
| Las Vegas operations | $5.61 billion | 51.6% |
| U.S. non-Las Vegas | $2.69 billion | 24.7% |
| Macau | $2.09 billion | 19.2% |
| Management | $488.5 million | 4.5% |
Data source: MGM Resorts quarterly earnings report. TTM = trailing 12 months.
Revenue is one measure of how MGM makes money, but a better metric for investors is property EBITDA, a measure of cash flow coming from a resort. As you can see in the table below, Las Vegas' share of EBITDA is larger than its share of revenue, but that may mask changes taking place in the company's operations.
| Region | MGM Resorts EBITDA (TTM) | Percent of Revenue |
|---|---|---|
| Las Vegas operations | $1.75 billion | 55.1% |
| U.S. non-Las Vegas | $733.7 million | 23.1% |
| Macau | $530.6 million | 16.7% |
| Management | $162.8 million | 5.1% |
Data source: MGM Resorts quarterly earnings report. EBITDA = earnings before interest, taxes, depreciation, and amortization.
What the two tables above don't account for are new resorts, like the opening of MGM Cotai in mid-February 2018. MGM Cotai contributed $85.0 million in revenue and just $5.9 million in EBITDA in a month and a half but will be a big contributor going forward.
Times are changing
Based on the performance of surrounding resorts, MGM Cotai should be MGM Resorts' biggest moneymaker once it's fully ramped up. It should beat the $2.0 billion in revenue and $525 million in EBITDA that MGM Macau, which is located in the Macau Peninsula region of Macau, which could make Macau the company's second-biggest market.
Rendering of MGM Osaka. Image source: MGM Resorts.
The success in Macau has also led MGM's management to make winning a gaming concession in Japan a top priority. Management recently highlighted its proposed project in a presentation to investors and hopes it will be the company's next great growth driver. With analysts predicting Japan's gaming market could be over $10 billion per year in revenue, those able to build a casino in the country will have strong odds of success.
What's clear right now is that Asia is an important, and growing, portion of MGM Resorts's business.
MGM Resorts may not be the company you thought it was
MGM Resorts is known as one of the biggest companies in Las Vegas. But the Strip is only about half of its business and will fall to less than 50% as MGM Cotai ramps up.
If you're looking for where the company can grow, investors should focus on Asia, where there are far more growth opportunities than there are in the U.S. Outside of Las Vegas is where the growth is today, a big shift from the Las Vegas Strip dominating all things gaming over the last three decades.
