Analyst: MGM MIRAGE still has capital needs

Dec 30, 2009 7:51 PM


A "reasonably successful" CityCenter phased opening in Las Vegas and a potential Macau initial public offering are good news for MGM MIRAGE (MGM), but the need for more capital weighs on the casino operator, an analyst said Wednesday.

David Katz of Oppenheimer said in a client note that MGM MIRAGE's management anticipates CityCenter will report 2010 margins in the low 20 percent range, compared with his previous 12 percent estimate. Katz said the company's margin forecast could be optimistic, but he raised his estimate for CityCenter's earnings before interest, taxes, depreciation and amortization to $196 million from $136 million and increased the casino operator's price target to $9 from $8.

While management is upbeat on CityCenter's prospects, Katz feels the stock price already reflects this potential. He maintained a "Perform" rating.

The $8.5 billion CityCenter - a joint project between MGM MIRAGE and Dubai World - is a 67-acre, six-tower complex of hotels, restaurants, retail shops and a casino that began with the roll out of the Vdara Hotel & Spa, a condo-hotel property, earlier this month.

MGM MIRAGE and Dubai World each have billions in debt, with Dubai World recently receiving a $10 billion bailout from Abu Dhabi.

Katz said executives indicated MGM MIRAGE is looking into a possible Macau IPO. Peers Las Vegas Sand Corp. (LVS) and Wynn Resorts Ltd. (WYNN) both recently launched their own Macau IPOs.

Shares of MGM MIRAGE fell 18 cents to $9.23 in morning trading.