Sunday, August 06, 2006

Despite a faltering lower-end market, MGM Mirage Thursday posted record
revenues and earnings for the second quarter. The salvation of the company's
overall performance came from strong demand for its premium products and
condo-hotel unit sales in its Signature project. The company reported
second-quarter net income of $146.4 million, or 50 cents per diluted share,
up 4 percent from $141.2 million, or 48 cents a share, a year earlier. The
average estimate of analysts polled by Thomson First Call had been for the
company to earn 53 cents a share. "In the context of the economy, if there
was any dip, it was in the lowest-end properties we have," said MGM Mirage
President Jim Murren. He cited Circus Circus, Excalibur and the Primm Valley
Casino Resorts as properties that have proved particularly vulnerable to the
softening lower-end market.
"What we've seen is a softening in some properties that cater to the lower
end," he said, noting there were exceptions, such as Monte Carlo, which had
a record quarter.

"But there has been softness in the value segment since January that
mid-market and high-end customers have been covering," he said.

"People are just more circumspect in their spending. They're value shopping
more. And they're more disciplined in their spending habits," Murren said.

The fundamental causes of concern, he said, are the deteriorating housing
market, interest rates going up, "which impacts everybody," and "it's tough
to read the newspaper these days because there just isn't much good news."

The trend so far is continuing into the third quarter as well and warrants
watching, Murren said.

Still, Murren was optimistic MGM Mirage and its competitors will continue to
outperform their peers in the hospitality industry.

"What's good about gaming is that it has always held up far better, and I
expect that to be the case going forward," he said,

MGM Mirage Chairman Terry Lanni said in a conference call with Wall Street
analysts and investors that his company has been very successful in luring
premium players, especially high rollers from Asia.

Although the company has long had a marketing plan in Asia, Lanni said that
lately it has been much more effective in attracting affluent customers from
China.

He said 93 percent of the Chinese nationals who travel to the United States
visit Las Vegas, a large share who try MGM Mirage properties.

Matthew Jacob, senior gaming analyst with Wall Street-based Majestic
Research, said strength in the premium markets was more than enough to
override the soft mass market.

MGM Mirage reported revenues of $2 billion in the second quarter, up 5
percent from $1.9 billion in the second quarter of 2005.

Earnings before interest, depreciation, taxes and amortization for the
company were $644.7 million, up 15 percent from $561.1 million in the second
quarter of 2005.

Another big boost for the company came from sales of condominium-hotel units
at Signature at MGM Grand, which contributed $27.9 million, or 6 cents per
share.

Deutsche Bank analyst Bill Lerner said the success of the project, combined
with similar developments in the pipeline, should prove a boon for MGM
Mirage.

"We're pretty excited about (Signature). It gives us even more confidence in
the residential component of (Project) CityCenter," he said.

Murren said the project has been far more successful than expected, not only
in generating sales revenues, but also in generating added business for the
casino, restaurants, shops and shows in MGM Grand.

The success of the Signature project has inspired confidence in the Project
CityCenter hotel-condominium component and led MGM Mirage to beef up its
pipeline.

This week, MGM Mirage presented preliminary plans to the County Commission
for two high-rise tower projects adjacent to Luxor.

Lanni said the company is very bullish on condo-hotel projects, which it
started at MGM Grand.

He also said that while the focus is now on hotel-condos at Project
CityCenter, it makes sense to have others in the pipeline because of the
time it takes to win government approval and get through construction.

Lanni confirmed the company is exploring opportunities for developing
casinos in Japan.

"Obviously we're very interested in the market, but talks are in early
stages and nothing is expected until after the November elections," he said.

Jacob said the overall results and guidance for the third quarter were
disappointing for investors, and fueled further concerns about consumer
spending in the third quarter and what that implies for the Strip.

MGM Mirage closed at $35.31, down $2.69, or 7.08 percent, on 5.5 million
shares traded, almost four times the average trading volume..