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Treasure Island Macau

The talk of CityCenter's failure in the VegasTripping world made me wonder how much is MGM Grand Macau worth to the company. Could MGM Grand pull the plug and walk away, pay off their CityCenter debt, and live to fight another day on their Cotai plot?

MGM Grand Macau is a private enterprise owned 50/50 between MGM and Pansy Ho (daughter of SJM's Stanley Ho). Being private, there is no clear way find its worth, but looking at the gaming revenue and stock prices of companies similarly situated (i.e. not Sands or Wynn with their projects outside Macau) can give us some gauge. Crunching the numbers you get (all figures in HK Dollars):

  Mkt Cap Price Shares Price '09 Cap '09 Revenue Multiple % Price Chng
SJM 41,120 7.93 5,185 4.28 22,193 35,384 0.627 1.85
Galaxy 25,370 6.43 3,946 3.20 12,626 13,881 0.909 2.00
Melco 17,941 33.73 532 25.87 13,763 14,773 0.931 1.30
            Average 0.822 1.72

From here you take MGM's gaming revenue in 2009, 10,622, times the average multiple (how much people pay for that revenue), times the average price change since December 31, 2009, and convert to US dollars, the value of MGM Grand Macau is US$1.9 Billion. MGM's half is $977 million, or about $200 million more than MGM sold Treasure Island to Phil Ruffin for.

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Comments & Discussion:

I haven't had time to sit down and go over your numbers to see if I come up with similar figures. But MGM isn't going to sell/walk away from MGM Macau. Instead they are planning on doing an IPO in Asia for some of their Macau assets, and that should net the company between $500-1B, and they'll still be able to keep MGM Macau.

I know they are not going to sell anytime soon, but found the price interesting compared to all the Macau hype. I was expecting it to be worth about 20% CityCenter given the news.

The IPO idea is interesting, but I have no idea what the arrangement is like with Pansy Ho. That said, MGM, using this valuation, could only net about $400m with them still holding control of their part. Chump change in light of the CC debt.

In case you are wondering, cap and stock prices from Yahoo finance, revenue is gaming revenue and available, in Chinese or Portuguese, through the Macau Gaming authorities (used because they have less a reason to inflate the figures as they pay taxes on it).

Nice work on this. Thanks for putting those numbers together.

I wouldn't call $400 Million chump change. That would reduce MGM's debt on City Center by almost 25%. MGM only has $1.8 Billion in debt on City Center.

Middle> Thanks for the kind words

Brian> I see your point about proportionally, and MGM's announced exposure on CC. However what I wonder is all the behind the scene actions, agreements, and promises that allowed a $4B project balloon to $11B. Lets say MGM does cash out partially or fully in Macau. Can those proceeds be applied to whatever Mezz used for later CC work? Would the $700m in financing for MGM Grand Macau have seniority? Perhaps the answer for all of this is buried in MGM's 10-K.

Recent media reports MGM Int'l filed in Hong Kong to raise $500 million via selling shares in its Macau venture. This is likely half of MGM's half (as MGM wants to keep control of its half owning 51% of it). Meaning the $2 billion valuation above for all of MGM Grand Macau (Pansy's and MGM in total) was pretty close.

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