MGM Resorts (MGM) Disappoints Again!

The MGM Resorts (MGM) short has done well since we were pounding the table in April - has fallen about 30% since the peak when I was getting really up in arms about it.

MGM reported second quarter earnings today, and I don't think the results are what the casino bulls were looking for. Revenue per available room and occupancy were both lower than the year ago quarter.

What I pay attention to is the adjusted EBITDA, since it adds back all of the noncash charges, making it a proxy for the cash that the business is generating. Over the past 12 months, adjusted EBITDA has been less than the company's interest expense - not a good sign.

EBITDA is actually a metric that is very generous to the company, because depreciation is not just an accounting fiction when it comes to running a luxury Las Vegas resort. As Steve Wynn mentioned during the WYNN conference call, some of the casinos

"with very bad capital structures [have] neglected their properties rather severely. And the properties are all showing the wear and tear. They're showing the lack of capital expenditures. And the public, of course, takes note of this immediately."

Perhaps deferred maintenance is why the Revenue Per Available Room (REVPAR) that Circus Circus (an MGM hotel) can command was only $35 this quarter, down from $39 last year?

The enterprise value is an expensive 20x the trailing 12 months' adjusted EBITDA. For whatever reason - maybe all the capacity that was added during the bubble - the Las Vegas situation seems to be getting worse.

Yet MGM is now up 20% from its July lows. Time to get seriously short, I say.