The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.
NEW YORK (
MGM Resorts International
(MGM - Get Report)
has a majority of its operations based in the U.S., particularly in Las Vegas.
We consider this as a limiting factor for MGM's future growth. Although it does have a footprint in Macau, it's on a smaller scale than its peers. It operates in China through a joint venture with Pansy Ho, daughter of Stanley Ho. The joint venture generated an income of $129 million in 2010. On the other hand, competing firms like
(WYNN - Get Report)
derive approximately 60% of their revenues from this region.
The record growth in Macau gaming revenues of approximately 42% in 2011 to $33.5 billion is expected to drive growth in prominent gaming companies like Wynn and
Las Vegas Sands
(LVS - Get Report)
, which have operations in Macau. LVS currently operates several facilities in Macau, including the Venetian Macao, the Sands Macao and the Plaza Casino at the Four Seasons Hotel.
MGM does have well-known brands under its name including Bellagio, MGM Grand Las Vegas, The Mirage, Mandalay Bay among others. However, we believe its dependence on one major market in the present volatile conditions is really risky for its business. MGM lacks a geographically diversified revenue stream as enjoyed by its competitors who have a strong presence in Macau.
MGM has plans to develop a project in Macau in partnership with Pansy Ho. The resort and casino is expected to have about 1,600 rooms and suites, as well as the gaming area that would accommodate up to 500 tables and 2,500 slot machines. However, we believe gradually the growth in Macau gaming industry will start slowing down with an increase in competition and so a late entrant like MGM could miss the fruits of the present period of higher growth.
Our price estimate for MGM Resorts International is $11
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