The Seismic Report Pushing MGM Stock Up (It Predicts 70% Upside)
In a recent report, Land and Buildings laid out its case for MGM Resorts International (NYSE: MGM) to unlock value by restructuring its corporation.
Land and Buildings analysts believe that the full value of MGM's global resorts, centered in the Las Vegas market, is not being reflected by the company's market cap under its current structure.
70 Percent Upside
Analysts currently see a 70 percent valuation upside in MGM based on their net asset valuation of the company. They believe that MGM could fully unlock this upside by taking the following three steps:
1. Gain real estate investment trust (REIT) status for the parent company ("MGM REIT")
2. Perform a tax-free spin-off of a lodging C-corp ("MGM Lodging C-corp")
3. Dial back leverage by selling-off assets
Net Asset Value
Analysts see $33 per share as the base-case net asset value of MGM shares.
However, they see as much as $55 per share upside if MGM's full potential is realized. Analysts believe that MGM's real estate alone suggests major upside for the stock.
"We strongly believe the U.S. real estate of MGM (MGM REIT) is worth $25 per share alone, more than the entire MGM share price today," analysts explained.
Two Ways To Win
Analysts point out that MGM investors have two ways to win from this point forward: a strategic catalyst and/or an operational catalyst. Strategically, analysts see major upside if MGM executes the REIT-based plan that Land and Buildings laid out in its report.
Operationally, MGM can see upside from stabilization in Macau and a continued strong recovery in Las Vegas.
Land and Buildings intends to nominate four candidates for MGM's board of directors.
Latest Ratings for MGM
|Oct 2016||Argus Research||Upgrades||Hold||Buy|
|Aug 2016||Buckingham Research||Initiates Coverage on||Buy|
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