MGM Resorts International: A Brief Synopsis

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About: MGM Resorts International (MGM)
by: Andrew Gu
Summary

The MLB recently delegated MGM Resorts International as its first official gaming and entertainment partner.

MGM's presence in the expanding China/Macau Market has been increasing into 2019.

MGM's increasing presence in the gaming and sports betting industry has positioned the company for long-term growth.

Basic Financials

Share Price: $26.07

52 Week Range: $23.81 - $38.41

PE Ratio: 5.88

Market Cap: 13.74B

Competitors

MGM Resorts International operates in the Hotels and Motels sector as well as the Gaming industry. The key competitors to MGM International are Las Vegas Sands Corp. (NYSE:LVS), Hilton Worldwide Holdings (NYSE:HLT), and Wynn Resorts (NASDAQ:WYNN).

Investment Thesis

MGM Resorts International is currently undervalued as the company has been suffering losses in the last couple of quarters, magnified by decreasing revenue across both domestically and internationally this past quarter. However, the company's increasing presence and partnerships with national sports associations combined with the company's opportunities in Macau have positioned the company for long-term growth.

Key Catalysts

Sports Partnerships

MGM recently announced that it partnered with the MLB, and this is the third large sports organization to become a partner. In this partnership, MGM will have access to exclusive data regarding specific baseball metrics such as exit velocity. Thus, this deal has allowed MGM to once again take the sole lead in the sports betting industry. Furthermore, the company will most likely see increases in its mobile platform users on PlayMGM, justifying the importance of GVC JV venture.

MGM has also partnered with both the NHL and the NBA, two of the largest sports associations. The NHL has over 650 Million Viewers, and MGM has been able to capitalize off the exposure through brand marketing. Thus, through key sports partnerships, the company has established itself as a leader in the sports betting industry, utilizing exclusive partnerships and data.

Macau and MGM China

Macau has overtaken Las Vegas as the biggest casino market, and the growth of Macau is projected to be over 5% in 2019. However, MGM entered the VIP offerings late in the game compared to its competitors. MGM has increased its presence in the East through MGM Macau and MGM Cotai. The company will have a full suite of VIP offerings by Chinese New Year in February, preparing for the influx of consumers moving forward. Furthermore, MGM has increased its quality of high-end offerings in Cotai, featuring its Mansion and President's Club offerings in the company's Q3 earnings. These rooms offer the best-in-class amenities for those staying overnight and tends to attract those that have the means to frequent Macau. These high-end offering will boost MGM Cotai's Revenue in the long run, especially since the building opened recently in February of 2018.

MGM China has seen a 37% YOY Revenue Growth, and this value will most likely increase as a result of increasing penetration and the growing industry.

(Source: MGM 3Q18 Investor Presentation)

Bearish Trends

As the Gaming Industry increases in size, there will be an increased amount of competition within the market. Furthermore, MGM International Resorts has been known to have a high debt burden.

Consequently, the company has taken the initiative to dominate the sports betting market share to out-compete its opponents. Furthermore, the company's expansive moves in China and Macau compose of primarily upfront costs, such as MGM Cotai.

Conclusion

All in all, MGM Resorts International has seen a rough couple of months in the past. The industry has begun revolving around both the Las Vegas Strip as well as Macau. As the Macau market continues to growth, MGM has positioned itself with a set of VIP suites that will provide a good foundation for increasing revenue and cash flows. Furthermore, MGM has taken the forefront of the sports betting industry, operating as partners with the three of the most famous sports organizations (NBA, NHL, and MLB).

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.