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MGM Mirage profit rises 31 percent

Casino giant MGM Mirage Inc. on Thursday said earnings rose 31 percent in the fourth quarter, as higher revenue at its Las Vegas Strip hotels made up for the closure of its hurricane-hit resort in Mississippi.
/ Source: The Associated Press

Casino giant MGM Mirage Inc. on Thursday said earnings rose 31 percent in the fourth quarter, as higher revenue at its Las Vegas Strip hotels made up for the closure of its hurricane-hit resort in Mississippi.

The world’s second-largest casino company said earnings grew to $97.8 million, or 33 cents per share, for the three months ended Dec. 3, compared with a year ago. Revenue rose 65 percent to $1.75 billion.

Excluding non-operating and one-time items, MGM said it earned 35 cents per share, beating Wall Street expectations of 33 cents per share on revenue of $1.74 billion, according to Thomson Financial.

“The other properties performed quite well,” said MGM Chief Executive Terry Lanni, noting strong performances at Strip properties such as Mandalay Bay and Luxor that the company acquired when it bought Mandalay Resort Group last April.

“Our people have done a great job there increasing the REVPARs (revenue per available room) in those properties,” he said. “We’ve only had them as part of our company for about seven, eight months now and we think there can be continued improvements.”

Revenue per available hotel room rose 8 percent to $152 in the quarter, even as the company added 11 percent, or 160,000 more room nights, on the Strip. The figure multiplies rooms by available nights.

Executives said the Beau Rivage casino resort in Biloxi, Miss. would be ready to reopen Aug. 29, a year after Hurricane Katrina forced it to close. Revenue from the resort was $204,000 in the quarter, compared with $77.1 million a year earlier.

“The traffic is backed up. And the customers are wrapped around the corner to play,” Mirage Resort chief executive Bobby Baldwin said.

Baldwin said gambling revenues for other casino operators in Biloxi in January were $62 million, or 69 percent of the level in January 2005, with only three of nine casinos up and running.

“We just need to get open,” he said. “I expect to hit full throttle pretty quickly.”

Despite the better than expected results, MGM shares closed down $1.61, or 4.1 percent, to $37.93 Thursday on the New York Stock Exchange. The company’s shares have traded in a 52-week range of $32.57 to $46.77.

Analysts suggested concerns about the growth of revenue per available room and the planned $7 billion Project CityCenter development to be finished in late 2009 were weighing on the shares.

“We have viewed Project CityCenter as the biggest risk to the shares,” analyst J. Cogan of Banc of America Securities said in a research note.

Rod Petrik of the Baltimore investment bank, Stifel, Nicolaus & Co. said the market was worried about “this constant drumbeat of additional supply on the Strip” — including the scheduled 2007 opening of the 3,000-room Palazzo resort by Las Vegas Sands Corp.

But he said there also are plans to rebuild existing casino hotels, which would temporarily cut supply, such as plans by Boyd Gaming Corp. to tear down the 1,550-room Stardust to make way for a 5,300-room megaresort called Echelon Place by 2010.

“What often gets missed is those rooms have got to be taken out of service before you build something new,” he said. “When that happens, you’re going to have up to 5,000 rooms that get taken out of service. Given the trends, we’re bullish on Vegas, and barring any kind of event, those trends should continue to remain strong.”

MGM said it expects revenue per available room to rise in the first quarter, but did not say how much.

Lanni said MGM might be able to reduce its net spending on Project CityCenter — estimated at $4.5 billion after sales of condo-hotel units — by selling some of the retail space or the two 400-room boutique hotels.

“That shopping facility at some 500,000 square feet would be a definite asset, where if we decided to at some point, it could be sold,” Lanni told The Associated Press. “We have the two boutique hotels which we currently plan on owning. They could be sold in that regard. There’s a lot of opportunities there, and we’ll adjust that as market conditions would warrant.”

For the full year, MGM’s earnings increased 8 percent to $443.3 million, or $1.50 per share, from 2004’s profit of $412.3 million, or $1.43 per share. Annual revenue rose 53 percent to $6.48 billion from $4.24 billion.

MGM forecast adjusted first-quarter earnings of 55 cents per share, up almost 28 percent from the prior-year quarter’s 43 cents.

Analysts expect MGM will earn 56 cents per share in the quarter.