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Analyst upbeat on MGM Mirage

12 Jan 2010

By Howard Stutz

LAS VEGAS, Nevada -- One gaming analyst believes MGM Mirage has turned the corner.

In a report to investors this morning, Steven Kent of Goldman Sachs said, "the lion will roar again."

The research note was released before Nevada reported November's 4.35 percent gaming revenue increase.

Kent said the trends in Las Vegas have gotten "less bad" and that MGM Mirage has a strong upside to earnings. In December, MGM Mirage opened the $8.5 billion CityCenter, giving the company 10 Strip resorts.

"The stock is undervalued relative to its peers and corporate finance activities could create relief as the balance sheet overhang is reduced," Kent wrote. "The upgrade offers both high risk and high reward, based on a Vegas recovery that is in its very early stages and that could stall out due to a weaker consumer or room overcapacity."

Kent said that he expects to see stabilization in Las Vegas trends over the next several quarters as convention attendance rebounds and leisure travelers begin to pay more for rooms.

"MGM should also make progress on improving its balance sheet with a credit line extension, debt issuance, or a capital raise from one of its joint ventures," Kent said.

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