Deutsche Bank Thoughts from Meetings with MGM Mirage (MGM) Management

July 3, 2008 8:45 AM EDT

Deutsche Bank hosted meetings with MGM Mirage's (NYSE: MGM) President and COO, Jim Murren. After the meetings, the firm feels encouraged about current volumes, pricing and visibility in Las Vegas, and City Center financing. The firm believes that MGM shares are far over discounting the magnitude of additional '09 revisions. Therefore, Deutsche Bank maintains their Buy rating and $74 price target.

The firm said, "Our sense is that business in Q2 has not deteriorated from Q1 in that MGM's Strip RevPAR and consolidated Vegas EBITDA may be down YoY about as much as in Q1 (-4%, -13%), which would be better than sentiment suggests. There appear to be pockets of strength (high end, upscale dining, entertainment, select retail, international volumes) and weakness (lower end like Circus Circus) but management feels as though business in Vegas has based out. In this context, our channel checks suggest that May Strip gaming revenues were UP 4%+ (hold and calendar helped) on the back of -1.3% in April. June has apparently given some back due to calendar but volumes are suggested to be similar to trailing few month average."

Deutsche also highlighted that convention business at MGM Grand and Mandalay look better in the second half of 2008 and into 2009, with record levels booked for next year. Management’s visibility has also been aided as attrition levels have seemingly improved sequentially. Finally, the firm notes that the event calendar for Q4 is particularly encouraging.

MGM Mirage, through its subsidiaries, engages in the ownership and operation of casino resorts in the United States.

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