Note that MGM Mirage has, by my estimates of its 1,300 acres around the ...
Suggestion by 134.48.160.44 on 2007-12-10 09:34:13
Note that MGM Mirage has, by my estimates of its 1,300 acres around the country that it owns, $7 billion in hidden land assets that are not reflected on the company's balance sheet. The equity sale to a Dubai investment group will allow MGM to pay off a substantial portion of its bank debt. The company's debt looks like the most interesting play here as the stock valuation is closer to fair value (PT of $95-100), while the company's debt, especially the senior 5.85% due in 2014 trading at 92, while higher risk subordinated debt trades closer to par. Needs to get its spread of ROIC to its WACC in line before the rating agencies will start thinking about upgrading to low investment grade. Tell tale signs of this will be how successful the new casinos are. The company's JV with Stanley Ho's daughter in Macau takes some of the risk away from MGM. Levered to great growth story of China's rising middle class- as long as the company can survive its balance sheet in the event of a downturn in the casino market, MGM looks like a great company going forward.
International Gaming Technology and Boyd Gaming are interesting names to check out as well. Boyd mainly caters to the Las Vegas locals market, and as a result doesn't have as many big projects. BYD has great free cash flow. Casino suppliers like IGT are also levered to the growth story in this industry, but have better ROIC because they don't have the high CAPEX requirements that operators do. If I had to play this industry, I would go for the suppliers.
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