MGM Mirage to overhaul Macau casino operations
Posted by Sarah Banks on 04 Aug 2009 at 14:08
Casino firm MGM Mirage has revealed it is undertaking an overhaul of its interests in Macau after making an "underwhelming" start in the Chinese gambling haven.
According to Bloomberg, the American giant may go for an initial public offering for its Macau business when things pick up.
Quoted by Bloomberg, Jim Murren, chief executive and chairman, said: "Our Macau market share is half what it should be."
"The other US-based and other newer casinos have been more aggressive in marketing."
He added that the firm's rivals had also been more aggressive in terms of recruitment and junket relationships.
If the company does go for an IPO for the Macau business, it would mirror the likes of Las Vegas sands and Wynn Resorts, which are both already exploring the option for their businesses in Macau.
Macau has become the world's biggest gambling market and MGM is now realigning its attention there.
The changes come after it successfully reorganised its debts earlier this year to avoid the chance of bankruptcy.
According to information from Bloomberg, MGM grand Macau pulled in five per cent of 2008 revenue in the city, compared to over 60 per cent for Wynn and Las Vegas Sands.
Bloomberg added that on Thursday MGM Mirage increased 7.3 per cent to close at $7.40 in New York trading. Stock has fallen 46 per cent so far this year.
The company's interest in Macau is a partnership venture with pansy Ho, who is the daughter of legendary gambling mogul Stanley Ho.
The operation earned $17 million before tax, interest depreciation and amortization in the first quarter. Bloomberg also said the firm's total property Ebitda was $371.9 million in the three months ended March 31.
Quoted by the financial news agency, Murren added: "It has been very underwhelming operationally.
"It hasn’t been marketed effectively, it hasn’t been operated as well as we would like, and we have, with our partner, been making a lot of changes."
Bloomberg also said that Portuguese agency Lusa has put the MGM Grand behind five other firms in terms of revenue in Macau.
According to Lusa's figures, Bloomberg said the casino had nine per cent of gross revenue in June in Macau. This was behind SJM Holdings, Las Vegas Sands, Wynn, Galaxy Entertainment Group and Melco Crown Entertainment.
MGM Mirage also faces regulatory problems in terms of its partnership in Macau.
The firm, which co-owns the Borgata Hotel Casino and Spa in Atlantic City, has been told by the New Jersey Division of Gaming Enforcement that Pansy Ho is an 'unsuitable' partner in the Macau interests.
The recommendation was non-binding, and has been passed to the New Jersey casino commission.
But quoted by Bloomberg, Murren said: "July has been a pretty good month for us", with the firm sending some of its top executives and marketers to Macau.
Murren himself is also set to travel to the former Portuguese colony in August.
MGM has also faced construction problems alongside other firms in Macau. The MGM Grand there faced up to a delay in the opening of One Central, an adjacent residential development.
Built by Shun Tak Holdings and Hongkong Land Holdings, the development was meant to openat the same time as the casino resort.
Last week Las Vegas Sands also revealed it was considering selling a minority stake in its Macau projects, and, according to a Bloomberg source, is set to apply to regulators in Hong Kong for an IPO of shares in its Macau casinos - possibly as early as this month.
Wynn Resorts is also set to open a new casino in Macau in 2010 and has already revealed a Macau subsidiary filed an application with the Hong Kong Stock Exchange to sell shares.
According to Bloomberg, Murren added an IPO in Macau would be "logically" an option for the firm in time and was an issue the firm has already considered in detail.
He added: "We need to build up our market share, more importantly build up our cash flows, and we need to assert ourselves as a stronger player there before we would ever consider a capital markets transaction like that, but it’s not like that’s a unique idea to the other guys.
"It’s something that certainly we could pursue too."
