The Henry Fund
Henry B. Tippie School of Management
Lawrence Epperly [Lawrence-epperly@uiowa.edu]
November 20, 2013
MGM Resorts International (MGM)
No Action
Stock Rating
Consumer Discretionary – Resorts and Casinos
Investment Thesis
(+) MGM fits the Henry Fund’s investment thesis of mid-cap growth companies
that have low payout ratios and therefore do not serve as a bond proxy. MGM
also has a significant amount of long-term debt that has been restructured at
relatively low interest rates.
(+) MGM has a strong portfolio of casinos in a variety of areas including a large
share of the Las Vegas Strip, and casinos in major US cities. They also have a
presence with a casino in Macau to capture the Chinese gaming market.
(+) MGM is poised to grow in a strengthening economy. Revenues are highly
correlated with a strong economy and increased consumer access to capital.
(+/-) International growth, especially with MGM China, has provided a catalyst
for the gaming industry as a whole. New growth avenues, including the
legalization of online gaming, could provide similar explosive growth for MGM.
(-) A strong 52 week return of over 100% puts MGM in the fairly valued range.
(-)MGM looks fairly valued on a DCF and Relative 2014 basis. On a DDM model
the company looks significantly overpriced. DDM and relative models are hard
to assess for MGM due to negative projected earnings for 2013.
Target Price
Henry Fund DCF
Henry Fund DDM
Relative Multiple
Price Data2
Current Price
52wk Range
Consensus 1yr Target
Key Statistics2
Market Cap (B)
Shares Outstanding (M)
Institutional Ownership
Beta
Dividend Yield
Est. 5yr Growth
Price/Earnings (TTM)
Price/Earnings (FY1)
Price/Sales (TTM)
Price/Book (mrq)
Profitability2
Return on Assets (TTM)
Return on Equity (TTM)
(+) There has been increased shareholder activism in the last two years around
gaming companies to encourage spin-offs. MGM may be able to unlock
shareholder value by operating a core casino business and spinning off other
operating units such as hotels and shopping centers allowing for increased
exposure from investors tentative to enter the gaming industry.
100
90.3
$19-21
$18.18
$6.76
$26.55
$18.68
$9.47 – 20.98
$22.88
9.31
488.99
60.50%
1.855
0.00%
13.00%
N/A
90.29
1.02
2.21
2.49%
-13.72%
MGM
Resorts and Casino
Consumer Discretionary
192.6
19.3
2.2 7.2 2.5
1
P/E (FY1)
Earnings Estimates
Year
EPS
2010
(3.19)
2011
6.37
2012
(3.61)
2013E
(0.45)
2014E
0.07
2015E
0.62
ROE 0.1
0.0
P/B
0.01
12 Month Performance2
Recent Developments
1.
2.
3.
MGM moved 7% in mid-November 2012
after Penn National spins of real estate
assets. The thought was that other casino
stocks may follow.3
In early May MGM reported positive
quarterly earnings. Analysts had also been
commenting on increased traffic through
Macau casinos during the April-May period.3
Throughout August MGM was bolstered by
strong traffic numbers in both Las Vegas and
Macau.3
Important disclosures appear on the last page of this report.
EXECUTIVE SUMMARY
MGM Resorts International (MGM) is one of the world’s
leading global hospitality companies, operating a worldrenowned portfolio of destination resort brands. MGM
has transformed itself from the brink of bankruptcy in the
heart of the financial crisis to a diversified casino
conglomerate with resorts in the United States and
Macau. Since the lows of 2009 the stock has more than
quadrupled and is up over 100% in the last year. MGM is
a mid-cap company with a low payout ratio, two things we
have targeted for the Henry Fund portfolio moving
forward. However, the company is currently fairly valued
and we are recommending No Action at this time.
From a valuation perspective we see slight upside with our
DCF model and a relative valuation. The significant
downside on our Dividend Discount model, does not
concern us due to difficult current forecasting for the
growth company. Combining these three and weighting
them at 75% DCF, 5% DDM, and 20% relative we come out
with a target range of $19-21, just shy of our investment
objectives.
COMPANY DESCRIPTION
MGM operates in a variety of segments and geographic
regions. The most prominent of these geographic regions
are the United States and Macau. Business segments
revenues includes that from the casino, rooms, food and
beverage, entertainment, retail, and others. The following
graph shows the revenue breakdown for MGM by
geographic segment. MGM has been looking to broaden
this geographic reach but currently operates in a limited
space. Since the IPO of MGM China in 2011, China has
already captured 31% of the total revenue for MGM. We
expect continued increase in this proportion moving
forward as the Chinese gaming market is much more
growth oriented than in the United States.
2012 Geographic Revenue
Breakdown
31%
4%
65%
Wholly owned domestic resorts
Corporate and other
MGM China
Source: 10-K1
Next, you can see the revenue breakdown for each
business segment for MGM. Going forward we have
projected a modest growth rate for casino and a slow but
steady growth rate for food and beverage and
entertainment segments. We think the majority of growth
will come from room revenue. With a strengthening
economy MGM should be able to increase occupancy,
REVPAR (revenue per available room), and ADR (average
daily rate).
Segments
Casino
Rooms
Food and beverage
Entertainment, Retail & Other
Reimbursed costs
Less: Promotional allowances
Total
2008
2976
1907
1582
1372
47
-675
7208.77
2009
2618
1370
1362
1194
99
-666
5978.59
2010
2479.70
1370.05
1339.17
1104.36
359.47
-633.53
6019.23
2011
4002.985
1547.765
1425.428
1205.35
351.207
-683.423
7849.31
2012
5319.489
1588.77
1472.382
1163.431
357.597
-740.825
9160.84
Source: 10-K1
The following graph from the annual report shows the
properties that MGM wholly or partially owns. It does not
include projects that are currently in development. For
our projections we have used the current 48,311 rooms.
We do expect this number to grow as the company takes
on projects in Dubai, Abu Dhabi, and other areas of the
United States. We think that this portfolio is strong and
provides marquee destinations with resorts like CityCenter
and the Bellagio while also having the ability to cater to the
middle market with properties like MGM Grand, Mandalay
Bay, and the Mirage. It also caters to the lower end
travelers with properties like the Circus Circus and the
Excalibur which serve a younger, more value oriented
crowd. This ability of MGM to compete in all three of these
market segments gives them a competitive advantage
over other resorts that operate in a specialized segment
like Wynn or Las Vegas Sands.
Page 2
resorts find easily accessible gaming, lodging, dining,
shopping, and entertainment at a variety of price points in
order to serve the targeted market for each particular
resort.
Shareholder Returns
MGM has not paid a dividend for over a decade. They have
also not engaged a large repurchase program over that
period. Share count has gone up over 60% since 2003. We
are not concerned about this lack of shareholder return
because of the fact that MGM was on the brink of
bankruptcy in 2009. Since that time the company has been
a growth play and these lack of shareholder returns are
common in growth companies. The stock price has
followed going from under $5 per share to over $20. We
do not see a change coming in this payout policy anytime
in the next 5 years as the company is has a large amount
of debt to pay down.
RECENT DEVELOPMENTS
MGM has experienced a lot of recent developments.
These include changes in the resort portfolio,
management changes, and of course, earnings
announcements. When looking into the future the biggest
catalyst for change may be online gambling.
New Projects and M&A
Treasure Island
Source: 10-K1
Company Strategy
MGM’s strategy is focused on creating great destination
resorts around the globe for travelers. We see the
company slowing the expansion of their brand in order to
pay down debt. Currently, 60% of MGM is financed
through debt with 40% equity. We think MGM will take
the next couple years attempting to pay down some of this
debt in order to refinance at still favorable rates in a year
or two. Most of their debt does not mature for at least 2
years.
MGM has also been creating value by adding top of the
line entertainment, dining, retail at their resorts. By doing
this they are able to control and attract consumers in all
aspects of the vacation spend. Travelers visiting their
The sale of Treasure Island (TI) is an example of the dire
straits that MGM was in during the heart of the financial
crisis. On March 19th, 2009 MGM sold TI to Phil Ruffin for
$775 million. MGM offered a $20 million discount to
Ruffin if he paid in cash. They did this because the
company was in need of cash to meet obligations.5
While the sale of TI may have caused MGM to lose one of
their quality properties, the sale allowed the company to
survive and continue meeting obligations on the rest of
their extensive properties. We think that this was a good
decision because the TI offered enough cash to meet these
demands without losing a top of the line property.
MGM China
In 2011 MGM acquired an additional 1% of the overall
capital stock in MGM China.1 MGM currently owns 51% of
MGM China. Macau earns roughly six times more
Page 3
gambling revenue than Las Vegas.6 There have only been
six players in the area as government licenses are tightly
controlled.
Earlier this year MGM won approval for a second casino in
the area. This was a huge approval for the organization as
they should be able to capture a larger share of the total
Macau gaming revenue. We believe that MGM China will
be a catalyst for the company in the future and the
company’s stock will move significantly more on news
coming out of Macau than it will with events domestically.
Construction is expected to take at least three years and
still needs government approval.6
CityCenter
CityCenter accounts for close to 4% of overall revenues for
MGM. This is a unconsolidated affiliate and therefore
reports into the corporate and other business segment.
CityCenter is a development in Las Vegas between the
Bellagio and the Monte Carlo that is owned 50% by MGM
and 50% by Infinity World Development Group (Dubai
World). CityCenter is home to the Aria casino and hotel,
the Mandarin Oriental non-gaming hotel boutique, a retail
and entertainment district called Crystals, and Vdara
luxury condominiums.
While CityCenter was expensive and has experienced
multiple writedowns on MGM’s balance sheet in the last
couple of years, we believe that this can be a growth driver
going forward. The timing of CityCenter almost sent MGM
into bankruptcy. The project was announced just before
the recession hit. The recession caused a lot of capital to
dry up in Las Vegas and slowed the growth. WE think that
as the economy continues to recover, CityCenter could be
a positive benefit to MGM instead of the liability it has
been for the last three years.
Earnings
IN Q3 MGM missed earnings. Consensus estimates were
that MGM would report -0.03 and the number came in at
-0.07 with revenue at 2.46B beating the consensus
estimates of 2.41B. This was not a surprise for us as we
think MGM is still a year away from starting to earn
positive earnings per share.3
In Q2 MGM missed estimates of 0.01 and reported -0.19.
After accounting for one time charges the company
actually beat by three cents per share. Revenue of 2.48B
beat the 2.47B estimate. Revenue numbers on both the
strip and in Macau caused the stock in increase 6% on the
announcement.3
In Q1 MGM earned 0.01 matching estimates and beat by
0.06B on revenue. Revenue numbers from both China and
Macau came in strong. The stock moved up 5% on the
announcement.3
Online Gambling
In October 2011, MGM announced a strategic partnership
with bwin.party digital entertainment plc, the world’s
largest publicly traded online poker operator with
operations under the “PartyPoker” brand.1 We believe this
was a crucial agreement as online gambling may be the
revenue driver of the future. It is our belief that bwin.party
was not the top player in town but that the partnership
was crucial because having a platform for online gaming
will be crucial. We also believe that online poker will be
legalized before the rest of online gaming and therefore
Pokerstars will have a dominant market share with the rest
of the websites coming in well behind. Pokerstars in
privately owned and has had strategic partnerships with
Wynn Resorts and Resorts Caino.
Management
In December 2008 James Murren took over as Chairman
and CEO. We believe that Mr. Murren is a definite asset
with a long history in the gaming industry and a
background in investment community. Murren was
managing director and director of equity research at
Deutsche Bank. He worked on Wall Street for 14 years
before starting at MGM as CFO in 1998.7 We think that this
experience on the investment side coupled with the result
over the last 5 years that Murren is a true strength for the
organization and adds significant value to the company.
INDUSTRY TRENDS
The casino and resort industry is being shaped by
economic and political factors. The biggest political
factors are garnering licenses from governments. This is
true with both online gambling as well as international
and domestic expansion. There is also a significant
dependce on a strong macroeconomy in order to make
people comfortable enough to travel, gamble, and spend
money.
Page 4
Online Gambling
As discussed earlier MGM has a strategic partnership with
bwin.party. We think that within the next five years online
gambling will be legalized, with full online gambling
following. Full online legalization may take 10-15 years.
We expect this legalization to increase MGM’s revenue 50100% over the course of the first 3 years of legalization.
This has not been factored into our model since predicting
government legislation is risky and difficult. If such a bill
were to pass we would recommend a BUY on MGM.
Rate (ADR) was $129 and Revenue Per Available Room
(REVPAR) was $117. We have held occupancy steady at
91% but think it could rise to as much as 95% if the
economy grows faster than expected. We have calculated
the ADR to be $140 in 2013 rising to $180 by 2017. This is
well below industry predictions of 193 by 2015 but we
think that the economy will grow very slowly and that this
will cause that number to grow slowly as well. Similarly we
have REVPAR growing to $140 by 2017 while industry
average has it at $162 by 2015. The slow growth here is
for the same reasons listed for the slow growth in ADR
International and Domestic Expansion
Expansion is key to MGM being able to broaden its
revenue base over the next few years. Currently MGM is
trying to secure licenses to operate in both New York and
Japan.3 Gaining licenses in different political environments
is challenging and understanding each areas norms,
cultures, and practices is crucial to success. The approval
of MGM’s 2nd license in Macau is encouraging and we
believe they are a top contender for licenses in Japan
where they are competing with the likes of Wynn Resorts
and Las Vegas Sands.
The rise in local casinos is another problem for MGM.
Many states have started looking to get in the gaming
business and have awarded local gaming licenses. This
makes it less likely for people to travel to destination
resorts to fulfill their gaming desires and puts pressure on
destination resorts to offer significantly enhanced
experiences.
Macroeconomic Dependence
The casino and resort industry is highly dependent on a
strong macroeconomic environment. As we saw in the
Great Recession, a weak economy could cripple MGM
Resorts and many other casinos. All aspects of the casino
and resort industry (gaming, dining, entertainment, retail,
and hotel) are dependent on consumers having disposable
income. If people find they have less disposable income
the traffic that comes through travel destinations like Las
Vegas or Macau could be dramatically slowed. We are
particularly concerned about a slowdown in China due to
the fact that the economy has been growing so fast for so
long and gaming revenues are larger in Macau than in
Vegas.
MARKETS AND COMPETITION
In order to analyze the markets and competition we will
do a Porter’s 5 Forces analysis and a competitive outlook
with other major players in the casino and resorts industry.
Bargaining Power of Suppliers (Varies)
The bargaining power of suppliers shifts depending on
which business segment you are analyzing. Suppliers in
the gaming and dining segments are typically either
commoditized or stable and predictable. However, when
looking at expansion opportunities the contractors to build
facilities and retailers to put in the shopping centers may
be able to leverage some sort of bargaining power.
Bargaining Power of Consumers (High)
The bargaining power of consumers is high. Resorts
operated by MGM tend to be in destination locations
where there are multiple competitors that guests can
choose from. MGM’s ability to continue providing
exceptional customer service to all levels of clients will be
critical for them to keep consumers frequenting their
resorts.
Threat of New Entrants (Low)
The threat of new entrants is relatively low. The difficulty
and highly political process of obtaining licenses is not easy
and most of the big players are already established in the
market. Most new entrants are entering in smaller
markets and will struggle to reach the size and reach of
MGM.
Industry Statistics
We expect industry statistics to continue to grow. In 2012
MGM posted an occupancy rate of 91%. The Average Daily
Page 5
Threat of Substitute Products (High)
ECONOMIC OUTLOOK
Consumers have a variety of substitute products they can
choose from. In Vegas alone there are dozens of casinos.
Walking down the Vegas Strip, consumers could visit more
than 5 different casino operators properties in a couple of
hours.
Competitive Rivalry (High)
The competitive rivalry is high. When competing for new
licenses and customers there is a great deal of promotion
and money spent. Loyalty programs offer rewards and
billions are given out each year in Vegas and Macau to try
and lure gamblers to different properties.
The following are a few graphs detailing metrics of
different major casino and resort companies. This details
where MGM is strong relative to peers and where they
need to look to improve.
Company
Las Vegas Sands
Wynn Resorts
Boyd Gaming
Penn National
Melco Crown
Average
MGM
Market Cap (B) Revenue (B) P/E (ttm) P/E (FY1)
57.41
13.19
26.56
19.28
16.27
5.39
26.16
22.3
1.08
2.84 N/A
47.9
1.15
3.02
13.23
27.11
18.88
4.79
36.3
21.64
18.96
5.85
25.56
27.65
9.21
9.23 N/A
85.31
Company
Operating Margin Profit Margin ROA
Las Vegas Sands
24.65%
16.40%
8.91%
Wynn Resorts
22.55%
11.62% 10.98%
Boyd Gaming
9.42%
-32.82%
2.75%
Penn National
13.95%
3.80%
5.08%
Melco Crown
15.21%
10.89%
5.93%
Average
17.16%
1.98%
6.73%
MGM
11.53%
-14.55%
2.49%
ROE Div. Yield
27.91%
2%
303.49%
2.40%
-92.66% N/A
4.99% N/A
11.62% N/A
51.07% 2.20%
-13.72% N/A
Source: Yahoo! Finance2
For our comparisons here we used all data from Yahoo!
Finance. As you can see MGM is second in revenue to LVS
meaning they generate a large amount of money flowing
through the organization. They are also the most
expensive on a forward P/E ratio. On a size basis they
compete with the larger companies like Las Vegas Sands
but when it comes to efficiencies and margins they seem
to compete more with the smaller players like Penn
National. As MGM continues to improve its balance sheet
we expect margins and returns to look more like the bigger
players than the smaller players. We also do not expect
them to start paying a dividend in the foreseeable future
due to the amount of debt that the company is going to
have to pay down.
Given the current environment of muted economic growth
due to the recent government shutdown, potential for
ongoing fiscal issues, as well as continued tapering, we do
not anticipate any substantial changes in the current
economic outlook. We expect Real GDP growth will pull
back slightly due to fiscal turmoil to a level closer to 2%
versus the 2nd Quarter 2.5%. Due to a lack of strong
economic growth and little movement in energy prices,
both CPI and employment growth will remain subdued at
an estimated CPI of 1.5% with unemployment slightly
higher at 7.3%. Interest rates may back up from the
current unsustainable rates of 0.11% for the 1 year T Bill
and the 2.53% for the 10 year T-Bond, but we don’t expect
them to rise above 0.2% and 3% respectively. With limited
economic growth and an increase in supplies, we estimate
oil prices to remain in the $95-105 range for the near
future. With current market levels at all-time highs, a
pullback of 5% from current levels is certainly not out of
the question.
Despite our lackluster outlook, our concerns for portfolio
construction are related to longer term macro issues, most
notably the upcoming Federal Reserve tapering process.
We are not in a position to predict a starting point in time,
but are confident that it will occur during the holding
period of any new selections for the portfolio. Given our
concerns regarding market impact from the changes in
economic policy from the Fed, we believe that
underweighting holdings that would be most severely
impacted by tapering is a priority. Portfolio holdings that
would be underperformers would likely include higher
yielding stocks and/or sectors, as well as companies with
higher financing needs. These will be areas for potential
future disinvestment.
When it comes to a macroeconomic view, a few factors
play into the casino and resort industry. The industry is
highly reliant on strong macroeconomic and consumer
data. Consumer factors like consumer confidence,
consumer sentiment, and unemployment rates greatly
affect the industry. We believe that both unemployment
and consumer confidence will slowly improve in both the
United States and China which should allow people to
spend freely on leisure in the future.
Page 6
confidence should prove very beneficial for MGM Resorts
International.
INVESTMENT POSITIVES



Source: www.tradingeconomics.com8

Long-term restructured debt at low rates should allow
for a continued improvement in the financial
statements
MGM is a mid-cap growth stock which should be less
affected by rising interest rates since they have not
been serving as a bond proxy
MGM has a strong portfolio of resorts with locations
in the United States and Macau and expansion
opportunities in both of those locations as well as
Japan and the Middle East
MGM could unlock shareholder value if it follows
PENN and spins off the hotel and shopping center
business segments
INVESTMENT NEGATIVES



Source: www.tradingeconomics.com8

CATALYSTS FOR GROWTH
MGM has many catalysts for growth coming in the future.
As noted earlier expansion into new territories is a huge
catalyst for a gaming company. MGM has projects in the
works and hopes to build new resorts in Macau, Japan, and
New York.
The biggest catalyst to the industry is the legalization of
online gambling. We at the Henry Fund predict that this
will first take the form of legalizing online poker and then
full gaming to follow.
The lack of a dividend skews our DDM model to
reflect a significant downside
High reliance on consumer confidence could be
problematic in the current uncertain economic and
political environment
MGM looks fairly valued when looking at a DCF or
relative multiple valuation
A 52 week return of over 100% may cause investors
to take gains and not continue to put money into the
stock on a momentum buy
VALUATION
For the purposes of valuation we have conducted a
discounted cash flow model, a dividend discount model,
and relative P/E and relative PEG valuations. We
acknowledge that all of these have advantages and
disadvantages so we have weighted them in the following
order:
The last major catalyst is a strong world economy. If the
economy continues to improve we project that MGM will
thrive as people have more disposable income. A
continued decrease in the unemployment rate coupled
with increasing consumer sentiment and consumer
Page 7

DCF – 70% - This provides us with what we think is
the best account of the three and reflects what we
believe are both sustainable and realistic future
projections


DDM – 5% - This give us a lower valuation metric.
This will be an unreliable metric as it is hard to
forecast this since MGM has never paid a dividend
and does not have a set payout policy yet
2014 Relative Weighted Average – 25% - We
conducted our relative valuations as a weighted
average of the 2014 P/E and 2014 PEG.
Considering the low earnings and high growth
potential the PE comes out artificially low and the
PEG comes out around the current stock price. We
chose to weight the PEG at 80% and the P/E
multiple at 20%
In addition we have used the following assumptions for
our model:









Tax Rate – 30%
Risk-free rate – 2.8%
Market Risk Premium – 5.60%
Beta – 1.855
WACC – 7.8%
CV growth of NOPLAT – 2%
CV growth of EPS – 2%
Cost of Equity – 13.19%
CV ROIC – 10.96%
This report was created by a student enrolled in the
Applied Securities Management (Henry Fund) program at
the University of Iowa’s Tippie School of Management.
The intent of these reports is to provide potential
employers and other interested parties an example of the
analytical
skills,
investment
knowledge,
and
communication abilities of Henry Fund students. Henry
Fund analysts are not registered investment advisors,
brokers or officially licensed financial professionals. The
investment opinion contained in this report does not
represent an offer or solicitation to buy or sell any of the
aforementioned securities. Unless otherwise noted, facts
and figures included in this report are from publicly
available sources. This report is not a complete
compilation of data, and its accuracy is not guaranteed.
From time to time, the University of Iowa, its faculty, staff,
students, or the Henry Fund may hold a financial interest
in the companies mentioned in this report.
REFERENCES
1
Using these assumptions our model returns us values as
follows:



IMPORTANT DISCLAIMER
MGM Resorts
www.sec.gov
2
International
regulatory
filings.
Yahoo! Finance
3
www.seekingalpha.com
DCF - $18.18
DDM- $6.76
Relative Average: $26.55
4
mgmresorts.com
5
This created a weighted average target range of $19-$21.
Our estimates are generally in line with estimates. We do
project a slightly higher tax rate at 30% since MGM
generally does pay close to the effective rate. We are also
using a relatively low CV value of 2%. This may increase
with the GDP rate if the economy picks up In the future.
http://www.lasvegassun.com/news/2009/mar/19/mgmruffin-treasure-island-changes-hands-friday/
6
http://online.wsj.com/news/articles/SB10001424127887
323482504578230702968530038
7
http://www.masslive.com/news/index.ssf/2013/04/ceo_
james_murren_turned_around.html
8
www.tradingeconomics.com
Page 8
MGM Resorts International
Key Assumptions of Valuation Model
Ticker Symbol
Current Share Price
Fiscal Year End
MGM
18.68
Dec. 31
Hard Code Actual
30.00%
6.00%
18.00%
2.80%
5.60%
1.855
7.80% 7.80%
2%
2%
10.96% 10.96%
13.19% 13.19%
Tax Rate
Pre tax Cost of Debt
Normal Cash as percentage of sales
Risk Free rate
Risk Premium
Beta
WACC
CV growth of NOPLAT
CV growth of EPS
CV ROIC
Cost of Equity
DCF/EP Value
DDM Value
80% 2014 PEG 20% 2014 PE
DCF @ 70%/DDM @ 5%/relative 2014 @ 25%
USD
$ 18.18
$ 6.76
$ 26.55
$ 19.70 $
Page 9
19.21 $ 20.19
MGM Resorts International
Weighted Average Cost of Capital (WACC) Estimation
risk free rate
Risk Premium (Spread)
Beta
Cost of Equity (CAPM)
2.80%
5.60%
1.855
13.19%
Pre-tax Cost of Debt
Tax Rate
Cost of Debt
6.00%
30.00%
4.20%
Market Cap
Book Value of Debt
Capitalized Operating Leases
Enterprise Value
9,134
13,590
57
22,781
% of debt
% equity
59.90%
40.10%
WACC
7.80%
Page 10
MGM Resorts International
Revenue Decomposition
Fiscal Years Ending Dec. 31
2008
2009
2010
2011
5634.35
5892.9
5932.79
6526.069 7178.6759 7896.5435 8686.1978 9554.8176
0.00
4.59%
1534.96
384.88
421.45
0.68%
2807.68
82.92%
420.37
10%
10%
10%
10%
10%
3088.448 3397.2928 3737.0221 4110.7243 4521.7967
10%
10%
10%
10%
10%
462.407 508.6477 559.51247 615.46372 677.01009
6019.23
9.50%
7849.31
-0.26%
9160.84
2012 5 year CAGR
2013E
2014E
2015E
2016E
2017E
Geographic Revenue
Wholly owned domestic resorts
Domestic Resort Growth Rate
MGM China
MGM China Growth Rate
Corporate and other
Corporate and Other Growth
Rate
Total
Segments
2008
Casino
2976
Casino Growth Rate
Rooms
1907
Rooms Growth Rate
Food and beverage
1582
Food and Beverage Growth Rate
Entertainment, Retail & Other
1372
Entertainment, Retail & Other Growth Rate
Reimbursed costs
47
Reimbursed costs as a % of SG&A 3.34%
Less: Promotional allowances
-675
Promotion Allowance as a % of revenues
9.37%
Total
7208.77
Revenue Growth Rate
2009
2618
-12.02%
1370
-28.16%
1362
-13.91%
1194
-12.92%
99
7.57%
-666
11.13%
5978.59
-17.07%
2010
2479.70
-5.29%
1370.05
-0.01%
1339.17
-1.70%
1104.36
-7.54%
359.47
28.59%
-633.53
10.53%
6019.23
0.68%
2011
4002.985
61.43%
1547.765
12.97%
1425.428
6.44%
1205.35
9.14%
351.207
25.87%
-683.423
8.71%
7849.31
30.40%
RevPar (Revenue Per Available Room) 137
ADR (Average Daily Rate)
148
Occupancy
92%
EPS
Rooms
100
111
91%
102
115
89%
115
127
90%
10%
10%
10%
10%
10%
2012
5319.489 12.32%
5691.8532
32.89%
7%
1588.77
-3.59%
1795.3101
2.65%
13%
1472.382
-1.43%
1501.8296
3.29%
2%
1163.431
-3.24%
1198.3339
-3.48%
3%
357.597 49.80%
361.17297
24.21% growth rate
1%
-740.825
1.87%
-748.23325
8.09% growth rate
1%
9160.84
4.91%
9800.27
16.71%
6033.3644
6%
2028.7004
13%
1531.8662
2%
1234.2839
3%
364.7847
1%
-755.71558
1%
10437.28
6335.0326
5%
2251.8575
11%
1562.5036
2%
1258.9696
2%
368.43255
1%
-763.27274
1%
11013.52
6588.434
4%
2409.4875
7%
1593.7536
2%
1284.149
2%
372.11687
1%
-770.90547
1%
11477.04
6786.087
3%
2481.7721
3%
1625.6287
2%
1309.832
2%
375.83804
1%
-778.61452
1%
11800.54
125
150
91%
130
160
91%
135
170
91%
140
180
91%
117
129
91%
Page 11
120
140
91%
MGM Resorts International
Income Statement
Fiscal Years Ending Dec. 31
2008
2009
2010
2011
2012
Sales/Revenue
7,208.77
5,978.59
6,019.23
7,849.31
9,160.84
COGS excluding D&A
4,034.37
3,539.31
3,757.54
5,026.36
5,921.28
Depreciation & Amortization Expense
2013E
9,800.27
6,272.17
887.17
2014E
10,437.28
6,575.49
862.90
2015E
11,013.52
6,828.38
844.82
2016E
11,477.04
7,000.99
831.46
2017E
11,800.54
7,080.33
820.91
778.24
689.27
633.42
817.15
927.70
Gross Income
2,396.16
1,750.01
1,628.27
2,005.81
2,311.87
2,640.93
2,998.90
3,340.32
3,644.58
3,899.31
SG&A Expense
1,419.99
1,312.09
1,257.29
1,357.48
1,476.91
9.16
0.00
0.00
0.00
0.00
1,568.04
-
1,643.87
-
1,707.10
-
1,750.25
-
1,770.08
-
967.01
437.93
370.98
648.33
834.96
1,072.89
1,355.03
1,633.22
1,894.33
2,129.23
(697.76)
(88.20)
882.02
196.01
(93.94)
730.61
208.75
(99.12)
550.68
220.27
(103.29)
573.85
229.54
(106.20)
590.03
236.01
321.74
763.15
987.65
1,196.98
359.10
Other Operating Expense
EBIT (Operating Income)
Nonoperating Income (Expense) - Net
186.90
(175.51)
144.05
Interest Expense
609.29
775.43
1113.58
1086.83
(41.27)
1116.36
Unusual Expense (Income) - Net
1213.62
1499.57
1617.47
(3311.41)
755.05
Pretax Income
(668.99)
(2012.59)
(2216.03)
2831.63
(1734.21)
(93.34)
Income Taxes
Consolidated Net Income
M inority Interest Expense
Net Income
Basic Shares Outstanding
EPS (basic)
186.30
(720.91)
(778.63)
(403.31)
(117.30)
(28.00)
96.52
228.95
296.29
(855.29)
(1291.68)
(1437.40)
3234.94
(1616.91)
(65.34)
225.21
534.21
691.35
837.89
120.31
150.78
161.70
172.22
181.72
189.37
194.71
3114.64
(1767.69)
(227.05)
53.00
352.48
501.98
643.18
502.09
508.64
515.19
521.74
0.00
0.00
0.00
(855.29)
(1291.68)
(1437.40)
279.82
378.51
450.45
488.65
488.99
495.54
(3.06)
(3.41)
(3.19)
6.37
(3.61)
(0.46)
Page 12
0.11
0.69
0.97
1.23
MGM Resorts International
Balance Sheet
Fiscal Years Ending Dec. 31
2008
2009
2010
2011
2012
292.33
2013E
1,435.49
490.01
122.50
294.01
2014E
1,472.35
521.86
130.47
313.12
2507.09
2,342.01
2,437.80
1,794.17
1,944.49
2,162.16
20203.74
19907.90
5337.10
5713.25
14554.35
14866.64
14194.65
2521.89
2142.19
1444.55
430.61
429.16
7944.73
7640.68
0.00
0.00
0.00
0.00
497.77
20,406.76
6,600.42
13,806.35
1,470.04
7,350.20
539.01
20,980.45
7,463.31
13,517.14
1,356.85
7,306.10
521.86
21,611.51
8,308.13
13,303.38
1,211.49
7,158.79
495.61
22,274.12
9,139.59
13,134.53
1,032.93
6,886.22
459.08
22,969.86
9,960.50
13,009.36
826.04
6,490.30
472.02
23274.72
22518.21
18961.05
27766.28
26284.74
25,507.61
25,139.75
23,963.43
23,457.25
22,959.88
1049.30
1081.52
1.50
1.47
0.28
187.80
173.72
167.08
170.99
199.62
227.53
1.35
1,878.71
2,107.59
2.55
240.09
1.35
1,927.37
2,171.36
2.65
250.20
1.35
1,951.10
2,205.30
2.73
257.25
1.35
1,947.09
2,208.42
12,584.03
11,054.58
10,069.38
8,977.38
Cash & Cash Equivalents
295.64
2056.21
648.96
2015.91
1663.51
Short-Term Receivables
368.10
753.03
497.88
491.73
443.68
Inventories
111.51
101.81
96.39
112.74
107.58
Other Current Assets
757.78
142.46
212.41
192.34
Total Current Assets
1533.03
3053.50
1455.65
2812.72
20098.72
19431.27
19385.78
3809.56
4361.32
4831.43
Net Property, Plant & Equipment
16289.15
15069.95
Total Investments and Advances
5018.97
3964.15
433.56
Other Assets
Total Assets
Property, Plant & Equipment - Gross
Accumulated Depreciation
Intangible Assets & Goodwill
2015E
775.42
550.68
137.67
330.41
2016E
882.86
573.85
143.46
344.31
2017E
1,070.61
590.03
147.51
354.02
7.61
1.35
Other Current Liabilities
1765.48
1128.36
1077.63
1564.69
1724.42
Total Current Liabilities
3002.58
2383.60
1246.22
1744.76
1925.67
213.65
1.35
1,813.05
2,028.05
12421.31
12978.75
12048.93
13470.79
13589.63
13,013.63
3441.20
3031.30
2469.33
2502.10
2473.89
2473.89
2473.89
2473.89
2473.89
Other Liabilities
435.27
254.13
198.01
166.40
179.53
196.01
208.75
220.27
229.54
236.01
Total Liabilities
19300.36
18647.78
15962.50
17884.05
18168.72
17,711.57
17,374.26
15,920.10
14,978.11
13,895.70
Common Stock and Additional Paid-In Capital
4022.10
3501.84
4065.71
4099.21
4137.55
Retained Earnings
3365.12
370.53
(1066.87)
1981.39
213.70
4,232.15
(13.35)
28.73
4,326.74
39.65
28.73
4,421.34
392.14
28.73
4,515.94
894.12
28.73
4,610.54
1,537.30
28.73
ST Debt & Curr. Portion LT Debt
Accounts Payable
Income Tax Payable
Long-Term Debt
Deferred Tax Liabilities
0.00
Cumulative Translation Adjustment/Unrealized For. Exch.
(2.63)
Gain
Other Appropriated Reserves
Treasury Stock
Total Shareholders' Equity
Accumulated M inority Interest
Total Equity
Liabilities & Shareholders' Equity
2473.89
(2.10)
(0.40)
6.23
28.73
(54.27)
0.17
0.10
(0.25)
(14.42)
(14.42)
(14.42)
(14.42)
(14.42)
(3355.96)
0.00
0.00
0.00
0.00
-
-
-
-
3870.43
2998.55
6086.58
4365.55
4,233.11
4,380.70
4,827.79
5,424.37
6,162.15
3974.36
(14.42)
-
0.00
0.00
0.00
3795.64
3750.47
3,562.94
3,384.80
3,215.56
3,054.78
2,902.04
3974.36
3870.43
2998.55
9882.22
8116.02
7,796.05
7,765.50
8,043.34
8,479.15
9,064.19
23274.72
22518.21
18961.05
27766.28
26284.74
25,507.62
25,139.76
23,963.44
23,457.25
22,959.89
Page 13
MGM Resorts International
Cash Flow Statement
Fiscal Years Ending Dec. 31
Net Income
2013E
2014E
2015E
2016E
2017E
(227.05)
53.00
352.48
501.98
643.18
Depreciation Expense
887.17
862.90
844.82
831.46
820.91
Short Term Receivables
(46.34)
(31.85)
(28.81)
(23.18)
(16.18)
Inventories
(14.93)
(7.96)
(7.20)
(5.79)
(4.04)
Other Current Assets
(1.68)
(19.11)
(17.29)
(13.91)
(9.71)
(41.25)
17.15
26.26
36.53
(12.94)
Accounts Payable
14.03
13.89
12.56
10.10
7.05
Other Current Liabilities
88.63
65.66
48.66
23.73
(4.01)
Other Assets
Other Liabilities
16.47
12.74
11.52
9.27
6.47
675.06
966.41
1,243.00
1,370.20
1,430.74
(498.86)
(25.49)
(573.69)
113.19
(631.06)
145.36
(662.61)
178.55
(695.74)
206.90
290.48
44.10
147.31
272.57
395.92
Accumulated M inority Interest
(187.52)
(178.15)
(169.24)
(160.78)
(152.74)
Net Cash from (used in) Investing Activities
(421.40)
(594.54)
(507.63)
(372.27)
(245.66)
Net Cash from (used in) Operating Activities
Capital Expenditures
Total Investments and Advances
Intangible Assets & Goodwill
ST Debt
(0.28)
LT Debt
(576.00)
Common Stock for ESOP
Net Cash from (used in) Financing Activities
Net increase (decrease) in cash & cash equivalents
Cash & cash equivalents, beginning balance
Cash & cash equivalents, ending balance
94.60
-
2.55
(429.60) (1,529.45)
94.60
94.60
0.11
0.07
(985.20) (1,092.00)
94.60
94.60
(890.49)
(997.33)
(228.02)
36.87
(696.93)
107.44
1663.509 1435.487391 1472.3549 775.4214
1,435.49
1,472.35
775.42
882.86
187.75
882.8619
1,070.61
(481.68)
Page 14
(335.00) (1,432.30)
MGM Resorts International
Common Size Income Statement
Fiscal Years Ending Dec. 31
Sales/Revenue
COGS excluding D&A
Depreciation & Amortization Expense
Gross Income
SG&A Expense
Other Operating Expense
EBIT (Operating Income)
Nonoperating Income (Expense) - Net
Interest Expense
Unusual Expense (Income) - Net
Pretax Income
Income Taxes
Consolidated Net Income
M inority Interest Expense
Net Income
2008
100.00%
55.96%
10.80%
33.24%
2009
100.00%
59.20%
11.53%
29.27%
2010
100.00%
62.43%
10.52%
27.05%
2011
100.00%
64.04%
10.41%
25.55%
19.70%
0.13%
13.41%
21.95%
0.00%
7.32%
20.89%
0.00%
6.16%
17.29%
0.00%
8.26%
16.12%
0.00%
9.11%
2.59%
8.45%
16.84%
-9.28%
-2.94%
12.97%
25.08%
-33.66%
2.39%
18.50%
26.87%
-36.82%
-0.53%
13.85%
-42.19%
36.07%
2.58%
-11.86%
0.00%
-11.86%
-12.06%
-21.61%
0.00%
-21.61%
-12.94%
-23.88%
0.00%
-23.88%
2012 5 year average
100.00%
100.00%
64.64%
61.25%
10.13%
10.68%
25.24%
28.07%
2013E
100.00%
64.00%
9.05%
26.95%
2014E
100.00%
63.00%
8.27%
28.73%
2015E
100.00%
62.00%
7.67%
30.33%
2016E
100.00%
61.00%
7.24%
31.76%
2017E
100.00%
60.00%
6.96%
33.04%
19.19%
0.03%
8.86%
16.00%
15.75%
15.50%
15.25%
15.00%
0.00%
10.95%
0.00%
12.98%
0.00%
14.83%
0.00%
16.51%
0.00%
18.04%
-7.62%
12.19%
8.24%
-18.93%
-1.22%
13.19%
6.97%
-12.52%
-0.90%
9.00%
2.00%
-0.90%
7.00%
2.00%
-0.90%
5.00%
2.00%
-0.90%
5.00%
2.00%
-0.90%
5.00%
2.00%
-5.14%
41.21%
1.53%
39.68%
-1.28%
-17.65%
1.65%
-19.30%
-5.77%
-6.76%
0.64%
-7.39%
-0.29%
-0.67%
1.65%
-2.32%
0.92%
2.16%
1.65%
0.51%
2.08%
4.85%
1.65%
3.20%
2.58%
6.02%
1.65%
4.37%
3.04%
7.10%
1.65%
5.45%
MGM Resorts International
Common Size Balance Sheet
Fiscal Years Ending Dec. 31
2008
4.10%
5.11%
1.55%
10.51%
21.27%
2009
34.39%
12.60%
1.70%
2.38%
51.07%
2010
10.78%
8.27%
1.60%
3.53%
24.18%
2011
25.68%
6.26%
1.44%
2.45%
35.83%
278.81%
52.85%
225.96%
69.62%
6.01%
0.00%
322.87%
325.01%
72.95%
252.07%
66.31%
7.20%
0.00%
376.65%
322.06%
80.27%
241.80%
41.90%
7.13%
0.00%
315.01%
257.40%
67.99%
189.40%
27.29%
101.22%
0.00%
353.74%
217.32%
62.37%
154.95%
15.77%
83.41%
5.43%
286.92%
14.56%
2.61%
0.00%
24.49%
41.65%
18.09%
2.91%
0.00%
18.87%
39.87%
0.02%
2.78%
0.00%
17.90%
20.70%
0.02%
2.18%
0.10%
19.93%
22.23%
172.31%
47.74%
6.04%
267.73%
217.09%
50.70%
4.25%
311.91%
200.17%
41.02%
3.29%
265.19%
Total Equity
55.79%
46.68%
-0.04%
-0.75%
-46.55%
55.13%
0.00%
55.13%
58.57%
6.20%
-0.04%
0.00%
0.00%
64.74%
0.00%
64.74%
Liabilities & Shareholders' Equity
322.87%
376.65%
Cash & Cash Equivalents
Short-Term Receivables
Inventories
Other Current Assets
Total Current Assets
Property, Plant & Equipment - Gross
Accumulated Depreciation
Net Property, Plant & Equipment
Total Investments and Advances
Intangible Assets & Goodwill
Other Assets
Total Assets
ST Debt & Curr. Portion LT Debt
Accounts Payable
Income Tax Payable
Other Current Liabilities
Total Current Liabilities
Long-Term Debt
Deferred Tax Liabilities
Other Liabilities
Total Liabilities
Common Stock and Additional Paid-In Capital
Retained Earnings
Cumulative Translation Adjustment/Unrealized For. Exch. Gain
Other Appropriated Reserves
Treasury Stock
Total Shareholders' Equity
Accumulated M inority Interest
2013E
2014E
2015E
2016E
2017E
5.00%
1.25%
3.00%
5.00%
1.25%
3.00%
5.00%
1.25%
3.00%
5.00%
1.25%
3.00%
5.00%
1.25%
3.00%
280.12%
67.28%
212.84%
44.18%
40.99%
1.09%
331.04%
208.23%
67.35%
140.88%
15.00%
75.00%
5.50%
201.01%
71.51%
129.51%
13.00%
70.00%
5.00%
196.23%
75.44%
120.79%
11.00%
65.00%
4.50%
194.08%
79.63%
114.44%
9.00%
60.00%
4.00%
194.65%
84.41%
110.24%
7.00%
55.00%
4.00%
0.00%
2.18%
0.01%
18.82%
21.02%
6.54%
2.53%
0.02%
20.01%
29.09%
0.00%
2.18%
0.01%
18.50%
20.69%
0.00%
2.18%
0.01%
18.00%
20.19%
0.02%
2.18%
0.01%
17.50%
19.72%
0.02%
2.18%
0.01%
17.00%
19.21%
0.02%
2.18%
0.01%
16.50%
18.71%
171.62%
31.88%
2.12%
227.84%
148.34%
27.01%
1.96%
198.33%
181.91%
39.67%
3.53%
254.20%
132.79%
25.24%
2.00%
180.73%
120.57%
23.70%
2.00%
166.46%
100.37%
22.46%
2.00%
144.55%
87.74%
21.56%
2.00%
130.51%
76.08%
20.96%
2.00%
117.75%
67.55%
-17.72%
-0.01%
0.00%
0.00%
49.82%
0.00%
49.82%
52.22%
25.24%
0.08%
0.00%
0.00%
77.54%
48.36%
125.90%
45.17%
2.33%
0.31%
-0.16%
0.00%
47.65%
40.94%
88.59%
55.86%
12.55%
0.06%
-0.18%
-9.31%
58.98%
17.86%
76.84%
43.18%
-0.14%
0.29%
-0.15%
0.00%
43.19%
36.36%
79.55%
41.45%
0.38%
0.28%
-0.14%
0.00%
41.97%
32.43%
74.40%
40.14%
3.56%
0.26%
-0.13%
0.00%
43.84%
29.20%
73.03%
39.35%
7.79%
0.25%
-0.13%
0.00%
47.26%
26.62%
73.88%
39.07%
13.03%
0.24%
-0.12%
0.00%
52.22%
24.59%
76.81%
315.01%
353.74%
286.92%
331.04%
260.27%
240.86%
217.58%
204.38%
194.57%
Page 15
2012 5 year average
18.16%
18.62%
4.84%
7.42%
1.17%
1.49%
3.19%
4.41%
27.37%
31.94%
MGM Resorts International
Value Driver Estimation
Fiscal Years Ending Dec. 31
NOPLAT
EBITA:
Total Revenues
-Cost of Products Sold
-Depreciation Expense
-Selling, General, and Administrative Expenses
-Other (Income)/expense
+Implied Interest on Operating Leases (Cost of Debt * PV lease(t-1)
EBITA
2008
2009
2010
2011
2012
2013E
2014E
2015E
2016E
2017E
7208.77
4034.37
778.24
1419.99
9.16
967.01
5978.59
3539.31
689.27
1312.09
0.00
4.00
441.92
6019.23
3757.54
633.42
1257.29
0.00
4.37
375.35
7849.31
5026.36
817.15
1357.48
0.00
3.63
651.96
9160.84
5921.28
927.70
1476.91
0.00
3.74
838.70
9800.27
6272.17
887.17
1568.04
0.00
3.41
1076.30
10437.28
6575.49
862.90
1643.87
0.00
3.50
1358.53
11013.52
6828.38
844.82
1707.10
0.00
3.60
1636.82
11477.04
7000.99
831.46
1750.25
0.00
3.71
1898.04
11800.54
7080.33
820.91
1770.08
0.00
3.82
2133.05
186.30
182.79
56.07
364.08
0.00
789.24
-720.91
232.63
-52.65
449.87
1.20
-89.87
-778.63
334.07
43.22
485.24
1.31
85.21
-403.31
326.05
-12.38
-993.42
1.09
-1081.98
-117.30
334.91
-209.33
226.51
1.12
235.92
-28.00
264.61
-26.46
58.80
1.02
269.97
96.52
219.18
-28.18
62.62
1.05
351.20
228.95
165.20
-29.74
66.08
1.08
431.57
296.29
172.16
-30.99
68.86
1.11
507.44
359.10
177.01
-31.86
70.80
1.15
576.19
3441.20
3031.30
-409.90
2469.33
-561.97
2502.10
32.76
2473.89
-28.21
2473.89
0.00
2473.89
0.00
2473.89
0.00
2473.89
0.00
2473.89
0.00
177.77
121.89
-271.84
1766.70
574.58
806.33
1007.33
1205.25
1390.60
1556.86
295.644 1076.146
648.964 1412.8762 1648.9519
368.101
753.029
497.876
491.73
443.677
111.505
101.809
96.392
112.735
107.577
758
142
212
192
292
$ 1,533.03 $ 2,073.44 $ 1,455.65 $ 2,209.68 $ 2,492.53
1435.49
490.01
122.50
294.01
2342.01
1472.35
521.86
130.47
313.12
2437.80
775.42
550.68
137.67
330.41
1794.17
882.86
573.85
143.46
344.31
1944.49
1070.61
590.03
147.51
354.02
2162.16
Operating Current Liabilities
187.796
173.719
167.084
170.994
199.62
0
0
0
7.611
1.35
$1,765.48 $1,128.36 $1,077.63 $1,564.69 $1,724.42
$1,953.28 $1,302.08 $1,244.72 $1,743.29 $1,925.39
213.65
1.35
1813.05
2028.05
227.53
1.35
1878.71
2107.59
240.09
1.35
1927.37
2168.81
250.20
1.35
1951.10
2202.65
257.25
1.35
1947.09
2205.69
Net Operating Working Capital
+ Net PP&E
+ PV of Operating Leases
+ Total Investments and Advances
+ Other Operating Assets
- Other Long-Term Liabilities
$ (420.25) $ 771.36 $ 210.93 $ 466.39 $ 567.14
16289.154 15069.952 14554.35 14866.644 14194.652
66.60
73
60
62
57
5018.97 3964.151 2521.893 2142.186 1444.547
0
0
0
0
497.767
435.269
254.126
198.012
166.403
179.534
313.97
13806.35
58.32
1470.04
539.01
196.01
330.21
13517.14
59.96
1356.85
521.86
208.75
-374.64
13303.38
61.76
1211.49
495.61
220.27
-258.16
13134.53
63.65
1032.93
459.08
229.54
-43.53
13009.36
65.64
826.04
472.02
236.01
20,519.21
15991.68
15577.27
14477.32
14202.50
14093.52
806.33
16581.47
4.86%
1007.33
15991.68
6.30%
1205.25
15577.27
7.74%
1390.60
14477.32
9.61%
1556.86
14202.50
10.96%
574.58
(789.77)
1,364.35
806.33
-589.79
1396.12
1007.33
-414.41
1421.74
1205.25
-1099.95
2305.19
1390.60
-274.83
1665.43
1556.86
-108.97
1665.83
20,519.21 19,624.14 17,149.60 17,371.23
0.59%
-1.39%
10.30%
3.31%
7.80%
7.80%
7.80%
7.80%
-1478.61 -1802.52
429.03
-780.38
16581.47
0.05
0.08
-487.02
15991.68
0.06
0.08
-240.02
15577.27
0.08
0.08
-9.78
14477.32
0.10
0.08
261.37
14202.50
0.11
0.08
449.06
Less Adjusted Taxes:
Tax Provision
+ Tax shield on Interest Expense
+ Tax Shield on nonoperating expense
+ Tax shield on unusual expense
+ Tax shield on implied lease interest
- Total Adjusted Taxes
+Change in Deferred Tax Liabilities:
Deferred Tax Liabilities
+Net Change in Deferred Tax Liabilities (t,t-1)
NOPLAT (EBITA - Adjusted Taxes + Change in Deferred Tax Liabilities)
Invested Capital (IC)
Operating Current Assets:
Normal Cash
Short term receivables
Inventories, net
Other current Assets
Operating Current Assets
Operating Current Liabilities:
Accounts payable
Income taxes payable
Other Current Liabilities
Invested Capital
NOPLAT (EBITA-Adjusted Taxes+Change in Deferrred Tax Liabilities)
177.77
Beginning Invested Capital
Return on Invested Capital (ROIC) (NOPLATt/Begin ICt)
NOPLAT
Change in Invested Capital
Free Cash Flow (FCF) (NOPLATt - Change in ICt,t-1)
Beginning Invested Capital
ROIC
WACC
Economic Profit (EP) (Begin IC * (ROICt - WACC))
177.77
19,624.14
17,149.60
17,371.23
16,581.47
121.89
-271.84
1766.70
574.58
20,519.21 19,624.14 17,149.60 17,371.23
0.59%
-1.39%
10.30%
3.31%
121.89
-271.84
(895.07) (2,474.54)
1,016.96
2,202.70
Page 16
1766.70
221.63
1,545.06
MGM Resorts International
Discounted Cash Flow (DCF) and Economic Profit (EP) Valuation Models
Key Inputs:
CV Growth
CV ROIC
WACC
Cost of Equity
2%
10.96%
7.80%
13.19%
Fiscal Years Ending Dec. 31
2013E
2014E
2015E
2016E
2017E
DCF Model
Free Cash Flow
PV of Free Cash Flow
1,396
1,295
1,422
1,223
2,305
1,840
1,665
1,233
21,944
16,250
(240)
(207)
(10)
(8)
261
194
7,742
5,733
Present Value of Operating Assets
(-) Book Value of Debt
(-) PV of Operating Leases
(-) PV of ESOP
Intrinsic Value
21,842
13,590
57
237
7,958
DCF Share Value 12/31/12
DCF Share Value Today
16.27
18.18
EP Model
Economic Profit
PV of Economic Profit
(487)
(452)
Present Value of Operating Assets
(-) Book Value of Debt
(-) PV of Operating Leases
(-) PV of ESOP
Intrinsic Value
EP Share Value 12/31/12
EP Share Value Today
21,842
13,590
57
237
7,958
16.27
18.18
Page 17
MGM Resorts International
Dividend Discount Model (DDM) or Fundamental P/E Valuation Model
Fiscal Years Ending Dec. 31
2013E
Key Assumptions
CV growth of EPS
CV ROE
Cost of Equity
2015E
2016E
0.11
0.69
0.97
2017E
2.00%
7.59%
13.19%
Earnings Per Share
P/E Multiple
Future Stock Price
(0.46)
Dividends Per Share
Discounted Periods
Discounted Cash Flows
Fundamental P/E 9/30/12
Fundamental P/E today
2014E
0.00
1
$
$
0.00
2
-
0.00
3
-
1.23
6.58
8.111892
0.00
4
-
4
6.05
6.05
6.76
MGM Resorts International
Relative Valuation Models
WYNN
BYD
PENN
ISLE
MPEL
Company
Las Vegas Sands
Wynn Casinos
Boyd Gaming
Penn National Gaming
Isle of Capri
Melco Crown
Price
$ 69.52
$ 159.08
$ 14.69
$ 7.36
$ 33.63
$ 18.68
EPS
2013E
$3.00
$6.94
($0.24)
$1.35
$0.27
$1.22
MGM
MGM Resorts International
$ 18.68
($0.46)
Ticker
Penn
National
Implied Value:
Relative P/E (EPS13)
Relative P/E (EPS14)
PEG Ratio (EPS13)
PEG Ratio (EPS14)
EPS
2014E
$3.61
$7.25
$0.21
$0.55
$0.37
$1.58
Average
P/E 13
23.2
22.9
(61.2)
5.5
124.6
15.3
21.7
P/E 14
19.3
21.9
70.0
13.4
90.9
11.8
37.9
$0.11
(40.8)
177.0
$ (9.94)
$ 4.00
$ (223.30)
$ 32.19
Page 18
Est.
5yr Gr.
15.53
11.33
57.7
-24.33
4
28.6
55.40
PEG 13
1.49
2.02
(1.06)
(0.22)
31.14
0.53
8.8
(0.7)
PEG 14
1.24
1.94
1.21
(0.55)
22.72
0.41
5.5
3.2
MGM Resorts International
Key Management Ratios
Fiscal Years Ending Dec. 31
2010
2011
2012
2013E
2014E
2015E
2016E
Liquidity Ratios
Current Ratio
Cash Ratio
Quick Ratio
1.17
0.52
1.09
1.61
1.16
1.55
1.30
0.86
1.25
1.15
0.71
1.09
1.16
0.70
1.09
0.83
0.36
0.76
0.88
0.40
0.82
3.15
37.92
9.62
3.54
48.07
15.86
2.87
53.75
19.59
2.60
54.52
20.99
2.41
51.99
20.63
2.18
50.93
20.54
2.04
49.81
20.41
Activity or Asset-Management Ratios
Assets to Sales
Inventory Turnover Ratio
Accounts Receivable Ratio
Financial Leverage Ratios
Debt to Equity Ratio
Debt Ratio
Debt to Non-Cash Assets
4.02
0.84
0.87
Profitability Ratios
Operating Margin
Net Profit Margin
Free Cash Margin
Return on Assets
Return on Equity
1.36
0.64
0.69
1.67
0.69
0.74
1.67
0.69
0.74
1.62
0.69
0.73
1.37
0.66
0.69
1.19
0.64
0.66
6.16%
8.26%
-23.88% 39.68%
36.59% 19.68%
-6.38% 16.43%
-37.14% 103.87%
9.11%
-19.30%
14.89%
-6.37%
-17.89%
10.95%
-2.32%
14.25%
-0.86%
-2.80%
12.98%
0.51%
13.62%
0.21%
0.68%
14.83%
3.20%
20.93%
1.40%
4.54%
16.51%
4.37%
14.51%
2.09%
6.24%
Present Value of Operating Lease Obligations
2012
Capitalization of Operating Leases
Pre-Tax Cost of Debt
Number Years Implied by Year 6 Payment
Year
1
2
3
4
5
6 & beyond
PV of Minimum Payments
Lease
Commitment
16.211
10.114
7.711
5.295
2.96
2.96
0.98 Current Assets/Current Liabilities
0.48 (Cash + Equivalents)/Current Liabilities
0.91 (Current Assets-Inventory)/Current Liabilities
1.95 Total Assets/Sales
48.67 COGS/Average Inventory
20.28 Net Sales/Average Receivables
0.99 Book Value of Debt/Book Value of Equity
0.61 Total Liabilities/Total Assets
0.63 Total Liabilities/(Total Assets-(Cash+Equivalents))
18.04%
5.45%
14.12%
2.74%
7.59%
Operating Profit/Sales
Net Income/Sales
Free Cash Flow/Sales
Net Income/Beginning Assets
Net Income/Beginning Book Value of Equity
Present Value of Operating Lease Obligations
2011
Operating
Leases
16.211
10.114
7.711
5.295
2.96
38.879
81.17
24
57
Fiscal Years Ending Dec. 31
2013
2014
2015
2016
2017
Thereafter
Total Minimum Payments
Less: Interest
PV of Minimum Payments
2017E
Operating
Leases
17.92
12.992
6.972
4.977
3.772
39.181
85.814
23
62
Fiscal Years Ending
2012
2013
2014
2015
2016
Thereafter
Total Minimum Payments
Less: Interest
PV of Minimum Payments
Capitalization of Operating Leases
6.00%
13.1
PV Lease
Payment
15.3
9.0
6.5
4.2
2.2
19.7
56.9
Pre-Tax Cost of Debt
Number Years Implied by Year 6 Payment
Year
1
2
3
4
5
6 & beyond
PV of Minimum Payments
Page 19
Lease
Commitment
17.92
12.992
6.972
4.977
3.772
3.772
Present Value of Operating Lease Obligations
2010
Operating
Fiscal Years Ending
Leases
2011
13.917
2012
11.868
2013
8.308
2014
5.644
2015
4.908
Thereafter
36.799
Total Minimum Payments
81.444
Less: Interest
21
PV of Minimum Payments
60
Capitalization of Operating Leases
6.00%
10.4
Pre-Tax Cost of Debt
6.00%
Number Years Implied by Year 6 Payment
7.5
PV Lease
Payment
16.9
11.6
5.9
3.9
2.8
21.3
62.4
Lease PV Lease
Year
Commitment Payment
1
13.917
13.1
2
11.868
10.6
3
8.308
7.0
4
5.644
4.5
5
4.908
3.7
6 & beyond
4.908
21.6
PV of Minimum Payments
60.4
Effects of ESOP Exercise and Share Repurchases on Common Stock Balance Sheet Account and Number of Shares Outstanding
Number of Options Outstanding (shares):
Average Time to Maturity (years):
Expected Annual Number of Options Exercised:
Current Average Strike Price:
Cost of Equity:
Current Stock Price:
$
$
Increase in Shares Outstanding:
Average Strike Price:
Increase in Common Stock Account:
$
Change in Treasury Stock
Expected Price of Repurchased Shares:
Number of Shares Repurchased:
$
Shares Outstanding (beginning of the year)
Plus: Shares Issued Through ESOP
Less: Shares Repurchased in Treasury
Shares Outstanding (end of the year)
23
3.50
7
14.44
13.19%
18.68
2013E
7
14.44 $
95
2014E
7
14.44 $
95
2015E
7
14.44 $
95
2016E
7
14.44 $
95
2017E
7
14.44 $
95
2018E
7
14.44 $
95
2019E
7
14.44
95
0
18.68 $
-
0
21.14 $
-
0
23.93 $
-
0
27.09 $
-
0
30.66 $
-
0
34.71 $
-
0
39.28
-
489
7
496
496
7
502
502
7
509
509
7
515
515
7
522
522
7
528
VALUATION OF OPTIONS GRANTED IN ESOP
Average
Average
B-S
Value
Range of
Number
Exercise Remaining
Option of Options
Outstanding Options of Shares
Price Life (yrs)
Price
Granted
Range 1
22.929
14.44
3.50 $ 10.32 $
237
Total
23 $ 14.44
3.50 $ 10.32 $
237
Page 20
528
7
535