Any thoughts on MGM Stock

[TKE683]

MGM Mirage (MGM: 9.44 +20.10%) announced just before the close of business Thursday it had finalized a negotiation with Dubai World and assorted lenders to finance the remaining work on CityCenter, the Las Vegas Strip gambling complex. The move was so triumphant for MGM, trading was suspended until this morning, at which point the stock opened up fifty percent ahead.
Dubai agreed to reimburse MGM for payments it made after Dubai sued MGM and stopped funding its share of the gigantic gaming resort. And lenders agreed to provide a $1.8 billion line of credit toward finishing CityCenter.
“CityCenter is now fully funded and on track to open in December 2009,” said a joint statement issued by the two companies.
MGM Mirage put Circus Circus casino up for collateral, along with valuable land adjacent to the family-oriented hotel on the Strip.
Gold Strikes Tunica Casino and a share in MGM Grand Detroit were included in backing the new loans.

 

[Presto]

Better companies in this category imo. MGM saddled with massive debt. They have some decent assets but they need the world economy to ramp up before they start making any decent profits.
They finally have financing for the god awful City Center project, but they aint out of the woods yet.

http://www.lvrj.com/news/43733857.html

 

[TKE683]

I was thinking with City Center finally looking like it was going to happen this might be a good time. I like Wynn, but clearly i missed the bottom.

 

[TKE683]

Big bump today, WYNN as well.

 

[Presto]

Casinos are on fire. All boats lifted with rising tide. The tide won't keep rising.




By Matt Koppenheffer
May 5, 2009 | Comments (13)


The headlines immediately following the release of MGM Mirage's (NYSE: MGM) first-quarter earnings yesterday highlighted the $0.38 in earnings per share that the casino operator reported. For a highly indebted gaming company that's had the cloud of bankruptcy looming, a quarter like that would have been great. Of course, I say "would have" because the reported results are a bit misleading.

During the quarter, MGM closed on the sale of its TI property -- the sexed-up transformation of the Treasure Island -- which resulted in a $190 million gain. The company also benefitted from $22 million from various insurance payouts stemming from the fire at the Monte Carlo back in early 2008.

Back the above items out of earnings -- and we'll even give MGM credit for the one-time preopening and start-up costs that it spent -- and that nice-looking $0.38 per share falls to a $0.10 loss. For those keeping score with Wall Street, that was $0.03 below what analysts had been expecting.

The results were affected by what you might expect -- conventions were canceled, people were jamming fewer coins into the slots, and rooms were tougher to book. The only holdout for the company appeared to be the high-end gambler; MGM reported that its baccarat volume was down just 1%.

While this helped MGM, it could be even better news for Wynn (Nasdaq: WYNN) and Las Vegas Sands (NYSE: LVS), both of which have fewer properties and focus more on the higher end of the market.

Now bulls will most likely either take issue with my characterization of MGM's results or suggest that they're a relatively meaningless look backward. After all, the media is talking about green shoots, mustard seeds, and a whole mess of other gardening metaphors.

A general air of bullishness has been boosting the entire casino industry from MGM and Wynn to Melco Crown Entertainment (Nasdaq: MPEL) and Boyd Gaming (NYSE: BYD). And, heck, I'll even concede that last week's news about MGM's new financing arrangement was much more significant than yesterday's earnings report.

But let's not get ahead of ourselves here. Once we back out the one-time events from MGM's results, EBITDA fell 38% from last year to about $350 million, which gives the company a meager two-times interest coverage. The company may have a pass from its lenders for the next few months, but unless those green shoots turn into full-blown flowers for MGM soon, it could face some tough decisions.

Bear in mind that even if bankruptcy isn't the fate of the company, harsher lending terms, asset sales under duress, and the like can all be bad news for equity investors.

So while I most certainly tip my hat to MGM and its management team for staying afloat -- not to mention keeping up the CityCenter construction -- I maintain that it's best to be very picky about where you fish in the gaming industry, and know when you are investing and when you are gambling.

 

[Legend-I-Aint]

I own a little LVS and a tiny bit of MGM. MGM has a lot of debt but will work itself out of it. LVS should take off and run tomorrow. Go long on either one of these and you could be rewarded nicely.

 

[C-Gold]

I was about to buy some MGM right when they missed a debt payment. They could have either

1) went chapter 11
2) have what happened and a 6 bagger

I wish I gambled