Kerkorian's bid boosts MGM Mirage


Kirk Kerkorian's brief flirtation with buying the Bellagio and CityCenter fueled the average daily price per share of MGM Mirage throughout June, but it didn't provide the same boost to the competition.

During the month, shares of MGM Mirage averaged $82.52 on the New York Stock Exchange, according to an index compiled by Las Vegas-based financial adviser Applied Analysis. The company's price per share was more than 21 percent higher compared with May and more than 106 percent higher when compared to a year ago.

Kerkorian, a Los Angeles-based billionaire who is MGM Mirage's largest shareholder with 56 percent of the company, said on May 21 he wanted to explore buying two of the company's largest assets. He dropped the idea on June 20, but shares of the company had gained more than 20 percent in value.

"The average daily stock price (of MGM Mirage) remains elevated based on the timing of the previous month's announcement and continued speculation that some portion of the company may be in the sights of private equity firms," Applied Analysis partner Brian Gordon said in the report.

Meanwhile, the Applied Analysis index, which charts the stock progress and market variables of six casino operators and three gaming equipment manufacturers, jumped 12.16 points in the month to 465.03 points.

Boyd Gaming Corp., which began construction on the $4.8 billion Echelon project during June, was the only other casino operator to post a sizeable average daily increase in its stock price in the month. Shares of Boyd averaged $50.50 in June, up almost 8 percent.

Shares of Las Vegas Sands Corp. and Wynn Resorts traded down during the month on speculation over the company's holdings in Macau.

Goldman Sachs gaming analyst Steven Kent, in a note to investors Friday, said he was unsure why shares of Las Vegas Sands have been challenged of late. The company is opening the $2.4 billion Venetian Macau at the end of August and Kent said he doesn't see anything on the horizon that would hinder the opening.

"Las Vegas Sands shares have been under unwarranted pressure the past few weeks," Kent said. "We believe the dislocation in the share price has created an opportunity. We think this is a compelling entry point for long-term investors and expect the shares will trade higher over the next 12 months."

June marked the end of the second quarter for most casino operators and Gordon thought earnings announcements, expected to begin in late July, would provide additional insight into the companies' market performance.

Gaming analysts thought slot machine makers are ready for a boost, thanks to California lawmakers. The state Legislature this week approved four out of five expansionary gaming compacts that Gov. Arnold Schwarzenegger negotiated with tribes late last year.

The new compacts allow the tribes to upwards of 17,000 new slot machines to existing and new properties in California.

Bear Stearns gaming analyst Joe Greff estimated the growth would equal a one-third increase in the state's total installed base of slot machines.

Another 5,500 slot machines could be added to the total if a fifth tribe agree with additional auditing and other requirements requested by the state for approval of the compact.

Slot machine giant International Game Technology, saw its average daily stock price trade at $39.51 in June, relatively unchanged from May. Greff said that could change dramatically.

"We think the approvals are a positive for IGT, and estimate each 1,000 incremental machines placed by IGT in California could add roughly one penny per share of earnings per share," Greff said in a comment to investors. "We note a 50 percent share of the new placements approved could add 8 cents to 9 cents a share of earnings per share."

During June, Illinois-based slot maker WMS Industries split its stock, three shares for every two shares owned. The company's average daily price of $28.23 took into account the split.

Wachovia Capital Markets gaming analyst Brian McGill thought WMS could see a significant boost from California.

"If WMS is able to secure a 20 percent share, it could add 11 cents to 14 cents in earnings per share over the next two to two and a half years," McGill said in an investors note.

Average Daily Stock Price
  June 2007 May 2007 Percent change
MGM Mirage $82.52 $68.08 21.2 percent
Harrah's Entertainment $85.27 $85.45 -0.21 percent
Las Vegas Sands $77.26 $79.37 -2.66 percent
Wynn Resorts $93.34 $98.11 -4.86 percent
Boyd Gaming $50.50 $46.83 7.84 percent
Station Casinos $87.72 $87.67 0.05 percent
Intl Game Technolgy $39.51 $39.77 -0.65 percent
WMS Industries $28.23 $27.79 1.57 percent
Bally Technologies $26.35 $24.23 8.75 percent
Source: Applied Analysis
 

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