Thursday, Sept. 9, 1999 | 11:38 a.m.
Analysts differ on Mirage view
Investment bankers differ on the outlook for Mirage Resorts stock after the departure of CFO Dan Lee.
Donaldson, Lufkin & Jenrette reiterated its "market perform" rating Wednesday, but slashed its target price for Mirage stock to $14 a share from $17.
However, Schroder & Co. reiterated its "outperform" rating and set a target price of $20 a share for Mirage stock.
J.P. Morgan reiterated its "market perform" rating, and trimmed 5 cents a share from its earnings estimates for Mirage for 1999 and 2000.
Mirage Resorts Inc. shares rose 8 percent Wednesday, partly on speculation that someone could buy a stake in or all of the third-largest U.S. casino company, after its stock fell to its lowest price in four years Tuesday.
The Las Vegas-based company could be buying back its own shares or value investors, who purchase stocks they consider cheap, could be accumulating shares, analysts said.
Shares of Mirage, whose Chairman Stephen Wynn is known for building spectacular casino resorts, have fallen almost 50 percent in four months as its profit declined.
Its Las Vegas casinos lost customers to newer properties and operating costs for a new resort in Mississippi were more than it expected. The shares touched a low of 11.75 Tuesday after Mirage said Chief Financial Officer Daniel Lee resigned.
"It wouldn't surprise me if some gaming company or financial company is looking at it as an investment," said Bear, Stearns & Co. analyst Jason Ader, who rates Mirage shares "neutral." "The stock is trading at a significant discount to what the assets are really worth."
The shares rose 1 to 13.06 Wednesday on trading of 11.4 million shares, more than six times its three-month daily average.
A Mirage spokesman declined to comment.
The company owns some of the best-known casino resorts in Las Vegas, including the Mirage, Treasure Island and Bellagio, which it opened last year at a cost of $1.6 billion. Mirage also opened the $680 million Beau Rivage casino resort in Biloxi, Miss., in March.
Its cheap stock price, relative to the value of its casinos, is fueling speculation, analysts said. Bear Stearns's Ader estimated that it would cost at least $6 billion to replace its properties, the most profitable of which are located at the busiest part of the Las Vegas Strip. Yet the company has an enterprise value -- a total value of stock plus long-term debt --of $4.7 billion.
"There's a rumor that someone might take a run at the company," said Southcoast Capital LLC analyst Daniel Davila, who rates Mirage shares "short-term hold."
Analysts said that Wynn, 57, might not be willing to sell. He took control of the company, then called Golden Nugget Inc., 26 years ago and went to on to build properties like the Mirage that draw millions of tourists a year to Las Vegas.
"I don't think (a take-over offer) would be welcome on Steve Wynn's part," said Morgan Stanley Dean Witter analyst Mike Happel, who rates Mirage "neutral."
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