Is MGM's Bull Case Finally Here?

In a report published Wednesday, Morgan Stanley analyst Thomas Allen maintained an Overweight rating on

, while raising the price target from $22 to $25. MGM Resorts reported robust 2Q results besides announcing an achievable profit growth plan. The company also stressed that it would finalize strategic initiatives by the yearend. The consolidated EBITDA estimate for 2015 and 2016 have been raised by 2 percent and 10 percent, respectively, to reflect the stronger 2Q15 results and the implementation of the profit growth plan, analyst Thomas Allen said. In the report Morgan Stanley noted, "…we now see a more viable strategic bull case of ~$31 that mgmt appears to be working towards from either a full REIT conversion or, more likely, a combination of smaller transactions." Allen believes that the company's profit growth would be largely driven by cost savings and not revenue initiatives as the management expects. MGM Resorts' full profit growth initiative $300m run rate is expected to be achieved in 4Q17, Allen added. MGM International may be able to create significant value through various strategic initiatives which could be in the form of a full OpCO PropCo split or a combination of the company selling its share of the Crystals mall and entering into sale-leaseback transactions for its regional assets, besides monetizing the 103 acres of land at Circus, the report said.