After closing out 2022 with a record fourth quarter, MGM Resorts International (MGM 4.26%) has plenty to keep long-term investors optimistic. Here's why I'm bullish on this casino stock.
1. Vegas operations grew revenue 27%
Strong visitation to MGM's Las Vegas properties in Q4 2022 helped drive $2.3 billion in revenue, a remarkable 27% increase year over year for this business segment. More impressively, Q4 results set a new record for adjusted property earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs (EBITDAR) for MGM's Las Vegas resorts.
Driven largely by MGM Resorts' entertainment offerings, vacationers flocked to MGM's Las Vegas Strip properties in the fourth quarter. Year over year, same-store sales on the Strip grew 11%. Adjusted property EBITDAR for Strip resorts rose 26%, finishing at $877 million.
Overall, net income attributable to MGM Resorts International increased 117% in Q4 compared with the same period in 2021, hitting $284 million. Regarding Q1 2023 performance, Chief Financial Officer Jonathan Halkyard reassured investors during February's Q4 earnings call, stating, "Demand in Las Vegas remains strong across all segments."
2. Macao is back in play
Emphasizing the significance of the region's reopening earlier this year, MGM's CEO Bill Hornbuckle announced during the Q4 earnings call that "Macao is back." After severely impacting the company's results in 2022, MGM's China operations posted "a rebound in 2023," according to Hornbuckle.
Guests in the Macao region of China eagerly returned to MGM's casinos during the first quarter. Hornbuckle describes MGM China's combined properties as "the highest-earning businesses within our company."
Similar to MGM's Las Vegas resort properties, nongaming attractions like entertainment helped draw high visitor numbers in Macao, particularly during the Lunar New Year holiday. Hornbuckle projects the recovery in Macao to progress throughout 2023, suggesting "a long-term growth story" in the region.
3. MGM's empire is expanding
Last week, MGM Resorts announced the certification of its development plan for an integrated resort in Osaka, Japan, the country's third-largest city. Japan's Ministry of Land, Infrastructure, Transport, and Tourism authorized MGM's plan, a joint venture with ORIX Corporation, a Japanese financial services firm.
The certification puts MGM one step closer to breaking ground on a $10 billion development project -- and Japan's first-ever gambling venue. Once complete, MGM Resorts International will have a 40% stake in the resort's operations.
While this is certainly exciting news, there are many steps ahead to keep the project moving forward -- and the resort isn't expected to open until 2029. For investors in for the long haul, however, here's an interesting tidbit to consider: The local population in the Osaka metro area is 3 times that of Singapore, and Singapore's casino and gaming market is anticipated to reach $8.6 billion by 2025.
