The offer is a 12% premium to MGM's $49 closing share price on Tuesday. In noontime trading today (Wednesday, Nov. 22) the company's share price stood at a 52-week high of $54.06, up more than 10% on the day.
JP Morgan Securities gaming analyst Harry Curtis told clients this morning in an email that the offer "shows that Kerkorian sees significant value in the shares, which we believe is largely related to future development in Macau and Las Vegas. In the near term, it could also suggest that trends in Las Vegas are very strong."
The $55 offer is a valuation that Curtis says he has "long thought as being a fair value for future cash flows" in 2007 and 2008. The offer implies an 8.6x debt adjusted multiple on 2008 EBITDA. "Looking forward, it suggests that there is further upside beyond $55 over the next 12-18 months," Curtis said, reiterating his Overweight rating.
MGM Mirage owns the Bellagio, MGM Grand and Luxor casino resorts on the Las Vegas Strip and is currently developing its CityCenter. At $7 billion, the 66-acre Strip project is the largest privately financed development in the US.
MGM Mirage Inc. earlier this month reported that third-quarter profit climbed 68%. MGM's net income rose to $156.3 million, or $0.54 per share, in the third quarter of 2006 from $93.2 million, or $0.31 per share, in the third quarter of 2005. Third quarter revenue increased 5% from one year ago to $1.90 billion. Analysts' average expectation was $0.41 per share on revenue of $1.83 billion.
Continue Reading for Free
Register and gain access to:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
