MGM Resorts International (NYSE: MGM). MGM is moving swiftly to raise cash and cut expenses. By the end of the first quarter, MGM drew down its entire $1.5 billion revolving line of credit, sold $1.8 billion of its stake in MGM Growth Properties (MGP), and boosted cash and equivalents to $6.0 billion. Management noted that 30%-40% of expenses are fixed costs and that casinos closures have enabled it to eliminate nearly all variable costs. As a result, we think that MGM has enough cash to last nearly two years. However, we believe these efforts to boost liquidity are offset by the company’s uncertain business outlook and prospects for a relatively slow recovery.
Overall 3Q net revenue fell 66% year-over-year, to $1.1 billion, reflecting a partial quarter of operations.
In May 2018, MGM completed a $1 billion share buyback program and announced a new $2 billion program. About $4 million remains available for repurchases under the new buyback program.
FINANCIAL STRENGTH & DIVIDEND
In April 2020, to conserve cash, MGM slashed its quarterly dividend from $0.15 to $0.002. Based on the timing of the cut, our dividend estimates are $0.16 for 2020 and $0.01 for 2021.
In May 2018, MGM completed its $1 billion share buyback program and announced a new $2 billion authorization.
MANAGEMENT & RISKS
On February 14, MGM announced the departure of CEO Jim Murren. Mr. Murren is departing before his contract expires; however, he will remain on the job until a replacement can be found and plans to continue to assist in the company’s efforts to obtain a gaming license in Japan.