Casino operators upgraded

Tuesday, June 11, 2002 | 11:01 a.m.

Investment banking firm UBS Warburg has upgraded its rating on MGM MIRAGE stock from "hold" to "buy," while CIBC World Markets has applied a similar upgrade to Mandalay Resort Group.

"While we still have a cautious view of the gaming sector, (MGM MIRAGE) is at a more attractive valuation than it has been since last fall," UBS Warburg analysts said.

The company's stock was dragged down last week due to concerns about higher gaming taxes in the Midwest, though 70 percent of its cash flow is generated from the Las Vegas Strip. "The stock has pulled back enough that even with capital spending above what the company has announced, the stock has some upside potential, in our view," analysts said.

"We consider the recent sell-off in shares of (Mandalay) an opportunity to own one of the major Las Vegas operators at what we view as an attractive level," CIBC analysts said. The company should benefit from continued improvement in tourism as business returns to pre-Sept. 11 levels. New assets -- a 1.8 million convention center in 2003 followed by a new 1,000-plus room hotel tower, "should produce solid returns," analysts said.