Monday, February 12, 2007

Calls of Note Part 2

- UBS comments on MGM Mirage (NYSE:MGM) saying industry sources indicate the MGM/Pansy Ho Macau joint venture (JV) will go before Nevada Gaming Control 2/27 to determine Pansy's suitability as a partner. Firm believes there is good likelihood for a favorable outcome and expect the partnership to receive formal approval from Nevada. The partnership is still also under investigation in New Jersey, and resolution could follow shortly after Nevada.

The MGM/Pansy Ho JV is developing the $1B MGM Grand Macau, set to open Q3'07, with other Macau projects possibly to follow. Nevada and New Jersey regulators have been investigating for over a year so approval of the MGM partner would be a positive catalyst for the stock. Macau accounts for 15% of UBS' MGM target.

If Pansy Ho not found suitable by Nevada regulators, the JV agreement calls for MGM to sell its interest, which includes a gaming subconcession purchased for $200M in '04 as well as the $1B property. MGM does not have right to buy Pansy Ho's interest. If found unsuitable by New Jersey, MGM could decide to sell its Macau interest or its 50% of the Borgata.

Maintains Buy and $82 tgt.

Notablecalls: Expect to see some buy interest following the call. Would not overstay my welcome.

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