MGM Refocuses on Macau

(Bloomberg) -- MGM Mirage, with the smallest casino market share in Macau, said it's overhauling operations and marketing at its venture in the city to boost the company's revenue after an "underwhelming" start.

"Our Macau market share is half what it should be," Jim Murren, chief executive officer and chairman, said in an interview yesterday in Las Vegas, where the company is based. "The other U.S.-based and other newer casinos have been more aggressive in marketing, more aggressive" in recruiting and junket relationships, he said.

MGM Mirage may consider an initial public offering for the Macau business when earnings improve, Murren said. Las Vegas Sands Corp. and Wynn Resorts Ltd. are both exploring IPOs for their businesses in the Chinese city.

Murren is refocusing attention on Macau, the world's biggest gambling center, after MGM Mirage in May reorganized its debt to remove the risk of bankruptcy. MGM Grand Macau derived 5 percent of 2008 revenue from the city, the only region of China where casinos are legal, compared with more than 60 percent for Wynn and Las Vegas Sands, according to Bloomberg data.

MGM Mirage rose 7.3 percent to close at $7.40 in New York trading yesterday. The stock has dropped 46 percent this year, compared with a 9 percent gain in the Standard & Poor's 500 Index.

Gross Revenue

MGM Mirage's venture with Pansy Ho, daughter of gambling magnate Stanley Ho, generated $17 million in earnings before interest, taxes, depreciation and amortization in the first quarter. The company's total property Ebitda was $371.9 million in the three months ended March 31.

"It has been very underwhelming operationally," Murren said of the Macau business. "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."

MGM Grand had less than 9 percent of Macau casinos' gross revenue in June, Portuguese news agency Lusa reported this month, citing data from the operators. That trailed the five other companies, SJM Holdings Ltd., Las Vegas Sands, Wynn, Galaxy Entertainment Group Ltd. and Melco Crown Entertainment Ltd., according to Lusa.

Stock rallies this year have revived interest in share sales after IPO fund raisings in Hong Kong had the slowest first half since 2003, according to Bloomberg data.

MGM Mirage, which co-owns the Borgata Hotel Casino & Spa in Atlantic City, New Jersey, with Boyd Gaming Corp., faces some resistance to its Macau partnership from U.S. gaming regulators. The New Jersey Division of Gaming Enforcement deemed Pansy Ho to be an unsuitable partner in the Macau property, the company disclosed in May.

‘Good Month'

The non-binding recommendation is now in the hands of the New Jersey Casino Commission.

"July has been a pretty good month for us" in Macau, said Murren, who is visiting Macau next month as part of the overhaul. MGM Mirage, the biggest casino owner on the Las Vegas Strip, sent a "major contingent" of its "best operators and marketers" to assess Macau this month, he said.

The 35-story MGM Grand Macau suffered setbacks with the delayed opening of One Central, a neighboring residential development by Shun Tak Holdings Ltd. and Hongkong Land Holdings Ltd., which was planned to open in conjunction with the casino resort, Murren said. MGM's business is located on the Macau Peninsula near Wynn Macau and many of Stanley Ho's casinos.

Minority Stake

Las Vegas Sands said yesterday it may sell a minority stake in its Macau operations. Sands plans to apply to Hong Kong regulators for an initial public offering of shares in its Macau casinos as soon as August, a person with knowledge of the matter said July 17.

Wynn Resorts, which is opening its second Macau casino next year, said earlier this month a Macau subsidiary filed an application with the Hong Kong Stock Exchange to sell shares.

A Macau IPO "logically would be something that we would look at over time," Murren said. "It's certainly something that we've thought about many times in the past.

"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," Murren said. "It's something that certainly we could pursue too."