MGM Mirage (MGM)

jgseattle (96.57) Submitted: 12/17/2008 11:48:59 PM : Start Price: $13.89 MGM Score: +24.29

I have been short off and on LVS and MGM. I have been amazed by the amount these stocks have fallen. However, now with the credit issues and the capital required to continue the expansion of these companies, combined with large exsiting debt/debt payments I again find myself looking at them to fall further. I am not shorting LVS at this time but will in the future.

So why MGM? They just sold Treasure Island for about $225k/room. in the hay day MGM purchased many properties in LV ranging from $1m - $2.25M/room. So if you can extrapolate they are sitting on huge losses.

Currently MGM is has enough cashflow to cover the debt payment. I think this will change as the credit issues start to hit the consumer. How important is the trip to LV when you need to pay for food?

I also think that local gaming is a big hit to LV and when travel and big ticket gaming trips are put off the local casinos will get the revenues.

Finally, MGM has large fixed costs so when the slowdown hits they cannot lay off employees and downsize quickly. You have to have maids, dealers, maintenance, and all the support to keep the casino open. Yes they can reduce some but I do not feel it will be a material amount so the cashflow I spoke about will not last as revenues drop.