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Holding steady with MGM shares after the December Macau gaming data

Holding steady with MGM shares after the December Macau gaming data

While today marks the start of the 2018 trading year, and as we shared in today’s Monday Morning Kickoff (MMKO) it means “back to work” and the resumption of both economic and industry data. Not to be overly repetitive, in that issue of MMKO I detailed the coming economic data I’ll be looking at this, but early this morning we received the December report from the Macau Gaming Inspection and Coordination Bureau. Per the report, December gross gaming revenue rose14.6% year over year, but viewed on a sequential basis the month’s gross gaming revenue fell 1.5% and more than 22.5% compared to November 2017. For 2017 in full, gross gaming revenue reported by the Macau Gaming Inspection and Coordination Bureau rose more than 19%.

Here’s the thing – expectations for December gaming revenue in Macau were looking for a near 20% figure on a year over year basis. Odds are we could see our share price pressure in our Guilty Pleasure holding that is MGM Resorts (MGM) shares given the relative miss. My most thoughts on MGM is we have are in the middle of a seasonally slow time of year for the gaming industry given the holiday season. Furthermore, MGM has several refurbishment projects underway that will last into 1Q 2018, which should improve their competitive position in both Las Vegas and Macau.

We will continue to be patient with the position, as we look for both a seasonal pick up in gaming industry and better-operating metrics for the company in the coming months.

  • Our price target on MGM shares remains $37; we would look to add to the position closer to $31.

 

Amid a Las Vegas tragedy, remaining patient with MGM shares

Amid a Las Vegas tragedy, remaining patient with MGM shares

This morning shares of Guilty Pleasure company MGM Resorts (MGM) are under some pressure following the Las Vegas shooting that saw a gunman fire on a crowd of people at an outdoor country music festival. Reports are still being filed, but as of now, the current assessment is that at least 50 people were killed. Again, a tragic event outside of the Mandalay Bay Hotel, which is owned by MGM Resorts, but one that is likely not to be repeated.

As we’ve seen in the past these disruptions, while horrific, tend to only have a short-term impact on the stock, as things settling down to “normal” before too long. We see Las Vegas casinos likely amping up their already considerable security procedures in response, and tourist traffic returning to normal before too long.

Including today’s events, the MGM shares on the Tematica Investing Select List are down just under 2% since we added them in early June. We will remain patient with the position as we wait for the next round fundamental data – monthly gaming figures from Macau and Nevada.

  • Our price target on shares of Guilty Pleasure company MGM Resorts (MGM) remains $37
MGM Update: August Macau gaming revenue shrugs off Typhoon Hato

MGM Update: August Macau gaming revenue shrugs off Typhoon Hato

Early this morning the Macau Gaming Inspection and Coordination Bureau reported August gross gaming revenue rose 20.4% year over year, with a month over month dip of just over 1%. While this sequential dip may catch some off guard and could rattle the shares of gaming and resort companies operating in the Chinese city somewhat, as we head into the holiday weekend, let’s remember that as of late Houston was not the only city hit by a natural disaster. Earlier this month, Macau was hammered by the severe Typhoon Hato, which shuttered casinos and resorts for several days.

Adjusting our view for that, the year over year growth in Macau gaming revenue remained impressive in August as the city continues to woo tourists and gamblers, particular VIP gamblers. This was one of the key aspects for the addition of MGM Resorts (MGM) in June to the Tematica Select List as part of our Guilty Pleasure investment theme. With MGM slated to open another Macau based resort in 2018 — the MGM Cotai that will include a spa, theatre, and 1,500 hotel rooms — the company continues to expand its presence in this market. As a reminder, Macau is the only part of China where casino gambling is legal, and odds are China’s rising middle class (a key part of our Rise & Fall of the Middle Class investing theme) is embracing our Guilty Pleasure theme as are tourists to the region.

Being the data junkies we are here at Tematica, we’ll look to the next report on Macau gross gaming revenue due in early October to see how quickly the city shrugs off the effects of Hato. Before then, we’ll get the August Nevada Gaming Revenue Report and that should shed some details on the recent Mayweather-McGregor fight had on Las Vegas, even though it wasn’t a sold out event.

Finally, one quick reminder, on September 8 MGM shares go ex-dividend to reflect the next $0.11 per share dividend, which will be paid on September 15. While the current annualized dividend yield of 1.3% is not the largest, we see the recent decision to pay a quarterly dividend as more indicative of the company’s multi-year strategy.

  • For now, our price target on MGM Resorts (MGM) shares remains $37.