MGM 22Q2 Preview: Stable growth amid volatile headwinds

Strong group booking base and leisure bookings in 2Q suggest MGM is likely to reach 90% occupancy (78% in 1Q), with 2H meeting room stays expected to reach 90% of 2019 levels. NAMA sales remained strong in April despite rising inflation. MGM is upgrading resorts, acquiring the Cosmopolitan for $1.6B and selling the old Mirage, and Las Vegas and regional EBITDAR margins are likely to stabilize above 2019 levels.

Strong performance in April drove a small upward revision to Deutsche Bank's forecast, but growth is expected to slow. Based on observations and forecasts for the company throughout the year, more macro headwinds will emerge. The MGM regional portfolio has performed relatively well, and the underperformance of some investments may be structural given the strength of MGM Borgata and MGM Detroit over most regional markets in 2022.

Deutsche Bank believes that the two assets, Borgata MGM Hotel and Detroit MGM Hotel, will still have difficulty reaching 2019 levels in 2022 due to multiple factors.

Other potential upside drivers for Deutsche Bank's 2H22 EBITDAR and EBITDAR profit forecasts for MGM Resorts include 1. Favorable margin impact from the Cosmopolitan acquisition and synergy potential to drive upside. 2. Sales of The Mirage hotel to drive synergies in the south Las Vegas area. 3. Continued advantage inconsumption industry.

Deutsche Bank believes that there remains a focus on the significant benefits that the Las Vegas market will gain from increased gaming levels from both an EBITDAR and EBITDAR margin perspective.