UPDATE: Morgan Stanley Raises PT on MGM Resorts on Limited Near-Term Potential
In a report published Wednesday, Morgan Stanley analyst Thomas Allen reiterated an Equal-Weight rating on MGM Resorts International (NYSE: MGM), and raised the price target from $17.00 to $20.00.
In the report, Morgan Stanley noted, “The ‘Las Vegas recovery' thesis is clearly building momentum; however, continued low visitation growth and already reflected 2H RevPAR recovery / high margin flow-through likely limits the potential for positive estimate revisions near term. LV EBITDA is still near trough levels, and we project a recovery to ~60% of peak EBITDA by 2015, up from ~55% currently. MGM is highly levered to the long-term recovery of the LV Strip. We estimate every $5 of incremental cash RevPAR equals $60mm of EBITDA and ~$1 per share of equity value. Implied U.S. valuation (ex Macau) inline with historical avg. (~10x 2014e EBITDA). MGM has done an impressive job managing its liquidity issues, extending its liquidity cushion through 2015, limiting the risk of near-term equity issuance. Strong Macau FCF and under-levered B/S likely leads to cont'd repatriation of Macau FCF. Upside to our base case estimates exists if further cost controls emerge.”
MGM Resorts International closed on Tuesday at $20.56.
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