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The Seismic Report Pushing MGM Stock Up (It Predicts 70% Upside)

Wayne Duggan

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")

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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.

Related Link: Deutsche Bank: MGM Is 'Undervalued,' But REIT Conversion Is A 'Low Probability'

"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

Feb 2015

JP Morgan

Maintains

Overweight

Feb 2015

Nomura

Maintains

Buy

Jan 2015

Barclays

Maintains

Overweight

View More Analyst Ratings for MGM
View the Latest Analyst Ratings

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