MGM CFO Jonathan Halkyard Sees Convention Biz Improving, BetMGM Progress

Posted on: September 20, 2022, 10:48h. 

Last updated on: September 21, 2022, 02:15h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

MGM Resorts International (NYSE: MGM) could evaluate more acquisitions following the purchase of the LeoVegas online casino. That’s while continuing to reward investors via share buybacks, noted CFO Jonathan Halkyard.

Jonathan Halkyard
MGM CFO Jonathan Halkyard in a 2018 interview. He said convention business is bouncing back. (Image: Hotel Business)

Halkyard made the comments Tuesday at Deutsche Bank’s 30th Annual Leveraged Finance Conference. MGM recently put the finishing touches on its $607 million acquisition of LeoVegas, which positions the casino giant to expand its internet gaming and sports betting footprints in Europe.

Halkyard told analysts and investors at the conference that LeoVegas had some acquisitions in the works before MGM floated its takeover offer in May. But the Swedish gaming company faced capital constraints in getting deals done. MGM could evaluate some of the irons LeoVegas had in the fire with a strong cash position. But Halkyard didn’t identify specific targets.

Echoing comments he’s made at previous investment confabs, Halkyard told attendees at the Deutsche Bank conference that MGM will remain a dedicated buyer of its own stock. He noted the gaming company repurchased about 30% of its market capitalization over the past year.

Encouraging Convention Signs, Stock Comments

Because of its status as the largest operator on the Las Vegas Strip, integral to the MGM investment thesis is the return of convention and meeting business to the largest US casino center. After a multi-year delay induced by the coronavirus pandemic, group and meeting turnover appears to be trending in the right direction, noted Halkyard.

A year ago, people were very tentative in their planning, and cancellation clauses and rebooking were heavily negotiated,” said the MGM finance boss. “We’re seeing very much a return to normalcy or even real enthusiasm around the group and meeting business, and that’s extending deep into the first and second quarter of 2023.”

Halkyard said the group and meeting business accounts for 20% of MGM’s turnover, and its pricing sets a base for the rest of the operator’s revenue management endeavors. For MGM and rivals, conventions are vital because those get-togethers boost midweek occupancy rates in Las Vegas.

In discussing the company’s shares, Halkyard pointed out that the stock trades at an implied US enterprise value/earnings before interest depreciation and amortization (EV/EBITDA) of just 5.3x.

That doesn’t include the company’s nearly 56% stake in MGM China, and that estimate ascribes no value to BetMGM.

At the end of the second quarter, MGM Resorts had $4.34 billion in cash and total liquidity of $4.34 billion.

Speaking of BetMGM

BetMGM — the internet casino and online sportsbook operator in which MGM holds a 50% interest — issued bullish financial commentary in May. Halkyard reiterated that view at the Deutsche Bank conference.

The MGM CFO said that by the end of this year, the casino company and partner Entain will have contributed $1 billion in capital to the iGaming unit. He said BetMGM should turn profitable on an EBITDA basis by the end of 2023.

BetMGM has about 30% of the US online casino market, while its closest competitor hovers at around 20%. BetMGM is a solid number two regarding online sports betting, though it trails leader FanDuel by a wide margin.

Halkyard said MGM enjoys advantages in internet gaming through its land-based casinos, citing Michigan, where it runs MGM Grand Detroit, as a prime example.