Last week MGM Resorts
Unlike casino rivals like Las Vegas Sands
Analysts can't stop talking about the impressive 13% jump in revenue per available room (REVPAR), with a 16% spike on the Vegas Strip. This shows that people are coming back to the Strip looking for more than just a big discount. REVPAR increases were solid across the board, so it doesn't look isolated in one market segment.
Macau was also strong in the quarter, with MGM's share of EBITDA jumping to $61.7 million from $23.1 million last quarter. This shouldn't be any surprise considering how strong Macau has been.
Casino revenue was down 4.7% in the quarter to $582.3 million, as visitors chose to spend on rooms, food and entertainment. MGM doesn't rely on gaming revenue quite as heavily as Melco Crown
One analyst from CRT Capital upgraded MGM to a buy on "deleveraging" at the company, leaving this Fool to scratch his head. Long-term debt actually increased compared to last quarter, to $12.08 billion, and MGM isn't generating enough cash to pay off its debts.
Interest expense increased to $269.9 million and is barely covered by the company's EBITDA. As a result of this crunch, cash on hand dropped $67.7 million, to $431.3 million, even after a $31 million distribution from MGM Macau. That doesn't look like deleveraging to me.
Foolish bottom line
MGM's improving EBITDA is encouraging, but I still see challenges ahead considering the heavy debt load. As far as investments go, Melco Crown, Las Vegas Sands, and Wynn Resorts are all safer picks with more growth potential.
Fool contributor Travis Hoium owns shares of Melco Crown and is short MGM Resorts. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.
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