Updated from 10:40 a.m. EDTWhile MGM Mirage ( MGM) reported an 18% rise in third-quarter earnings, the results in its core Las Vegas market were tepid at best. The casino operator earned $183.9 million, or 62 cents a share, in the third quarter, compared with $156.3 million, or 54 cents a share, a year earlier. Analysts expected a profit of 50 cents a share, according to Thomson Financial, though it's not clear if that is directly comparable to MGM's figures. MGM's profits benefited from insurance recoveries related to Hurricane Katrina damage at its Mississippi casinos, which added 24 cents to EPS. Net revenue increased 6% to $1.9 billion, matching analysts' expectation. The results were boosted by MGM's Beau Rivage casino in Mississippi. Beau Rivage was open for a full quarter, compared with just 33 days a year in last year's third quarter. While the company did not break out specific revenue growth at Beau Rivage, it did say that its net revenue would have increased only 2% at its properties excluding Beau Rivage. Gaming revenue increased 3% across the portfolio but decreased 3% excluding Beau Rivage. On the Las Vegas Strip, where MGM is the largest owner of casinos, property EBITDA fell 3.5% to $469.6 million. EBITDA, or earnings before interest, taxes, depreciation and amortization, is a proxy for cash flow and is a commonly used performance metric in the casino industry.
Overall revenue rose 3.6% at the Vegas casinos. EBITDA margins fell to 29%, compared with 31.5% a year earlier. Sources say that MGM told Wall Street analysts that the Vegas weakness was due to construction expenses and below-normal casino hold percentage at the Bellagio casino, which means the casino did not win enough from its customers. On the company's conference call, MGM management blamed part of the Bellagio weakness on the fact that the casino's high-end baccarat room has been closed for renovations. Baccarat is the most popular game played by high-rolling Asian gamblers. The renovations will be completed by mid-December, in time for the holidays, management said. MGM also said on the call that it may be teaming up with Dubai World, which owns 5% of its stock, on a future hotel and residential project in Singapore. The site will not house a casino. Additionally, MGM said it is also looking at a non-casino hotel site in Dubai, where it may employ one of its brands -- such as MGM Mirage or Mandalay Bay -- and reap development and management fees. The arrangement could be similar to how privately held resort operator Kerzner International is using its Atlantis casino brand on a hotel complex being developed in Dubai. Shares of MGM were down $1.85, or 2%, to $91.07 Tuesday afternoon.