The goal of casino group MGM Resorts International to achieve as much as US$3.9 billion in adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) in 2020 – thanks to factors including hopes for a ramp up of business at its Macau resort MGM Cotai (pictured) – seems “too ambitious”.
That is according to a Thursday note from brokerage Sanford C. Bernstein Ltd.
MGM Resorts runs gaming in the Macau market via its Hong Kong-listed unit MGM China Holdings Ltd.
Sanford Bernstein analysts Vitaly Umansky, Kelsey Zhu and Eunice Lee stated, referring to the MGM parent: “The company’s goals of achieving US$3.6 billion to US$3.9 billion of adjusted EBITDA and US$3.50 per share in consolidated free cash flow in 2020 still seem too ambitious to us.”
According to Sanford Bernstein’s estimates, MGM China is expected to generate nearly HKD2.47 billion (US$315 million) in adjusted EBITDA via MGM Cotai in 2020, up 17.5 percent from the HKD2.10 billion expected this year.
The institution said that the casino group, which has ambitions to build a multibillion-U.S. dollar Japan resort, was likely to be able to reduce its leverage to 3.7 times by 2020 in line with a self-declared target.
But the brokerage suggested that 2020 group EBITDA was likely to be US$3.47 billion, in line with market consensus, with US$3.11 per share in consolidated free cash flow.
Sanford Bernstein said its in-line estimate allowed for MGM Resorts’ expectations of an increase in business at respectively Park MGM in Las Vegas, Nevada and at MGM Springfield in Massachusetts – both in the United States – and at MGM Cotai; as well as the coming contribution of newly-acquired U.S. properties; as well as implementation of “MGM 2020” scheme.
The latter has involved a major cost-saving programme. The group’s chief financial officer Corey Sanders said during the first-quarter earnings call that MGM 2020 was due to eliminate 1,000 job positions. Jim Murren, the group’s chairman, has noted the plan was expected to reduce labour costs by US$100 million.
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Analyst at Roth Capital Partners