Deutsche Bank Comments on MGM (MGM) Amid Weakness

Deutsche Bank maintained a Buy rating on MGM Resorts (NYSE: MGM) price target of $30. Earlier MGM reported a settlement of claims related to CityCenter and the Harmon Tower.

Commenting on developments, analyst Carlo Santarelli said, "At the time of our writing, MGM shares are trading off ~510 bps (SPX +14 bps) as levered equities continue to show worst amongst our Gaming & Lodging coverage universe and, more specific to MGM, Macau fundamentals continue to search for a bottom. This afternoon, MGM announced, via an 8-K, that it has settled claims related to CityCenter and the Harmon Tower. Since the filing hit, shares have dipped an additional ~250 bps."

"In short, the filing has two components. The first is the CityCenter piece. CityCenter will receive $195 mm in proceeds from the settlement, of which, it has already received $85 mm. The remaining $110 mm will come from contractors, insurance, $20 mm from MGM, and other third parties. The second component is the MGM piece. MGM, as noted will pay $20 mm towards CityCenter and $153 mm to Perini to resolve non-Harmon related liens," continued the analyst.

"In short, MGM will lay our $173 mm ($20 mm to CityCenter and $153 mm to Perini), of which, the net cash outlay will be $101 mm as $72 mm resides in a restricted CC cash account related to CityCenter condo sales. Given MGM owns 50% of CityCenter, MGM will receive, and has to an extent already received, ~$88 mm from the CityCenter settlement. Thus, on a net aggregate basis, the total cash impact to MGM is ~$13 mm ($101 mm out less $88 mm in)," he added.

For an analyst ratings summary and ratings history on MGM Resorts click here. For more ratings news on MGM Resorts click here.

Shares of MGM Resorts closed at $19.82 yesterday.

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