MGM Mirage (NYSE: MGM) is making headlines today after quadrupling its fourth-quarter net income on strong casino performance combined with a huge outside investment. Net income climbed to $872.2 million from $201.6 million a year ago with revenue increasing 4.5 percent to $1.93 billion, both of which exceeded analysts' estimates. These results were partially driven by a 5% increase in hotel revenue, a 2% increase in gambling revenue, and a 17% increase in lucrative baccarat volume.
Though MGM's core businesses of resorts and gambling seem strong, especially given the economy, they fail to account for the monstrous climb in net income. Instead, it was largely helped by Dubai World's $3 billion investment in MGM related to its CityCenter project - a new mega-resort on the Las Vegas Strip. This investment led to a one-time gain for MGM of $1 billion.
"Even while closing on the most historic transaction in our company's history - the CityCenter joint venture and strategic relationship with Dubai World - our dedicated employees delivered exceptional operating results," CEO Terry Lanni said, noting that the company is "ideally positioned to excel domestically and internationally." Though the deal with Dubai World is ironic given that gambling is banned in Dubai, most analysts agree that the partnership is good for MGM because of Dubai World's very deep pockets and extensive experience with real estate projects.
MGM is seeking such partnerships as it attempts to expand its existing Las Vegas holdings but enter into Atlantic City and abroad. MGM now sees itself not as a casino operator but a resort brand, and it is attempting to leverage that brand in new markets.
MGM operates resorts such as the Bellagio, Mandalay Bay and Circus Circus in Las Vegas, the MGM Grand Detroit aptly located in Detroit, and a casino property in the Asian gambling mecca Macau. Though gambling revenues are notoriously unpredictable, MGM is positioning itself strongly across markets through strategic partnerships and may preform accordingly in the coming years.
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