27 April 2017 North American Research Rating: Buy Price Target: $40.00 Price $31.01 52wk Range $21.12 - $30.62 Shares Outstanding (MM) 574.5 Market Capitalization (MM) $17,814.2 Enterprise Value (MM) $33,514.7 30D Avg Volume (000s) 8,877.4 Short Interest/Float 3.0% Dividend Yield 1.5% YTD % Chg 3.3% YTD % Chg Relative to Index (3.3)% Total Implied Return to PT 30.5% Pricing Date April 27, 2017 32 30 28 26 24 22 MGM MGM Resorts International 20 04/16 07/16 10/16 01/17 04/17 MGM Resorts International Global Gaming Operators MGM NYSE $31.01 Company Update The Road to $40... Re-rating MGM Upwards, PT to $40 MGM reported a solid 1Q, beating the Street on all fronts in Las Vegas and Macau. Management also provided the building blocks of guidance for 2Q17 and FY17, which are consistent with their commentary from 4Q earnings. We remain comfortable with the outlook in Las Vegas and see upside in Macau as the market regains its stride just in time for the MGM Cotai opening later this year. The company's new investor deck frames up the quarter nicely and articulates expectations for the remainder of the year. We rehash the 1Q results later in this report, but for now we are focusing on reiterating our investment thesis on the shares of MGM going forward. Re-rating MGM, raising multiples across the board - PT goes to $40 (from $35). We are re-rating the business overall as we see little need to remain conservative on our valuation given the number of catalysts ahead. We are raising our price target to $40 which is based on our sum-of-the-parts analysis and implies a blended 12.2x multiple of our 2018 Consolidated Adjusted EBITDA estimate of $3.1bn. Currently, the US domestic business trades at an implied valuation of 7.0x-7.5x EBITDA, but in our view, should be worth 10.5x EBITDA,. This view is supported by premium multiples ascribed to MGM's crown jewel, the Bellagio (13x), and its namesake flagship, MGM Grand (12x). We value the leased assets at 8.5x EBITDA, net of rent, which is also a premium to regional gaming OpCos that trade in the 7.0x-7.5x context. Collectively, this implies a blended multiple of 10.5x EBITDA from the domestic business. The Road to $40 and the Catalysts Ahead. We expect MGM to find its way to a $40 share price over the next 12-18 months with the help of some significant catalysts ahead. First, the organic growth in Las Vegas coupled with continued cost control. MGM's Las Vegas business will continued to be stimulated by the arrival of the NHL Golden Knights this fall and the renovation and rebrand of the Monte Carlo in 2H18. Regionally, the broader markets are improving and MGM will benefit from the continued ramp of MGM National Harbor and Borgata. The eventual monetization of MGM National Harbor with MGP will provide a valuation boost and incremental deleveraging. Even sooner than that, MGM Cotai is poised to open likely in 4Q17 providing nice growth for all of 2018. And, if that isn't enough, in September 2018, MGM Springfield will open, providing growth for 2019 as well. Cash is King, MGM poised to become a free cash machine. We are forecasting 20% EBITDA growth in 2017 and 13% in 2018. Meanwhile, the development cycle is winding down, capex needs are waning, and deleveraging has accelerated. With capex and interest declining and EBITDA rising, MGM is poised for accelerating FCF. We are modeling ~$1B of normalized FCF in 2018 in the US, which represents a 14% yield on the implied market value of the domestic business. Analysts John DeCree Tel: 702-691-3213 john.decree@uniongaming.com Year to Dec Net Revenue Property EBITDA Adjusted EBITDA EV/EBITDA Net Debt/EBITDA 2017E 10,892 3,061.7 2,780 11.9x 4.4x Prior 10,813 2,997.3 2,708 11.4x -- 2018E 12,107 3,432.7 3,146 10.5x 3.5x Prior 11,694 3,449.5 3,163 9.7x 3.3x *Please see analyst certification and required disclosures starting on page 7 of this report. 2017 Union Gaming. All rights reserved. No part of this report may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying or by any information storage and retrieval system, without permission in writing from Union Gaming.
Figure 1. MGM Justifying the Consolidated Multiple The Road to $40 Rerating the business and justifying the multiple We are raising our price target on the shares of MGM today to $40 (from $35), which is supported by our sum-of-the-parts analysis later in this report and represents a blended 12.2x multiple of our 2018 Consolidated Adjusted EBITDA estimate of $3,146m. Our blended multiple is about ~1x higher than our previous valuation, which we had longconsidered conservative. We believe the higher blended multiple is justified for a number of reasons: 1) MGM s wholly-owned iconic assets (i.e. Bellagio, MGM Grand) that should receive a premium multiple based on precedent transactions 2) The significant mix of EBITDA generated by premium multiple businesses (i.e. MGP and MGM China), supported by current trading levels of both public entities 3) Double-digit EBITDA growth outlook for 2017 (+20%) and 2018 (+13%). In the table below, we map out the weighted-average multiple based on EBITDA attributable to MGM. Our 12.2x multiple is slightly higher than the weighted average of 12.1x depicted in the table below because the inclusion of the NPV of Springfield in our price target. 2018E MGM MGM % of EBITDA W. Avg Asset(s) EBITDA Share (%) Share ($) MGM EBITDA Multuple Multiple Bellagio $496 100% $496 17.7% 13.0x 2.3x MGM Grand $339 100% $339 12.1% 12.0x 1.4x Circus Circus $67 100% $67 2.4% 10.0x 0.2x National Harbor $164 100% $164 5.9% 10.0x 0.6x Leased Properties $781 100% $781 27.8% 8.5x 2.4x MGP $650 76% $496 17.7% 15.0x 2.7x MGM China $883 56% $495 17.6% 14.0x 2.5x City Center $374 50% $187 6.7% 13.0x 0.9x Management Fees $28 100% $28 1.0% 10.0x 0.1x Corporate ($286) 87% ($248) (8.8%) 10.0x -0.9x Total/Avg $3,495 $2,803 100% 12.1x Source: Company documents, Union Gaming Securities. Under bought equity creates unique valuation anomaly On a consolidated basis, shares of MGM trade at ~10.5x 2018 Consensus EBITDA, which is an anomaly in our view given the company s mix of trophy assets and high-value businesses, including MGP and MGM China. MGM owns 76% of MGM Growth Properties (MGP), a triple net REIT trading at 15.5x 2018 EBITDA. Next, MGM owns a 56% stake in MGM China, with the Big 6 Macau concessionaires historically trading in the 13x-16x context. Rounding out the company s JV partnerships, MGM owns 50% of CityCenter, including Aria, which is in the upper ranks as it relates to Strip assets. MGM still whollyowns its crown jewel, the Bellagio a $500m EBITDA generating trophy asset, in addition to the namesake MGM Grand, the Circus Circus and MGM National Harbor. Finally, as it relates to the assets leased by MGM, we ascribe an 8.5x multiple, which represents a premium to the trading multiples of regional gaming OpCos, PENN and PNK. However, given the rent coverage and strategic positioning of these assets, we believe this is justifiable. Further, some investors suggest MGP s multiple is negatively impacted because it is a controlled REIT. If MGP is dinged on valuation because it is substantially owned by MGM, one could argue the MGM OpCo should receive a control premium. 2
Demand in Las Vegas is as healthy as ever We remain comfortable with the Las Vegas Strip outlook considering there is virtually no supply growth over the next two years and demand across most customer segments is still growing. We appreciate the second derivative philosophy of growth naturally slowing on top of a larger base each year and the fact that prices in Vegas have risen considerably in recent years. However, the fact is that there is no place on earth like Las Vegas and consumers, leisure travelers, and group and meeting planners alike all still want to come to Las Vegas. In our view, the Las Vegas Strip commands a premium valuation, particularly for trophy assets like the Bellagio, MGM Grand and Aria. Double-digit EBITDA growth and an array of catalysts MGM has more near to medium term growth drivers than any company in our universe. First, there is still organic growth in Las Vegas via the lodging and convention businesses, coupled with ongoing cost control for margin improvement. Same-store growth in the regional US markets is also picking up broadly in addition to the continued integration and ramp of the Borgata and MGM National Harbor. Macau also has returned to growth and later this year MGM will have its outpost on Cotai, significantly increasing its operating exposure to Macau. In Las Vegas, the start of the NHL Golden Knights will help further stimulate demand and activate the south end of the Strip, also paving the way to the late- 2018 opening of the Park and NoMad rebrand. And, if that were not enough, MGM Springfield is scheduled to open in September 2018 providing growth throughout 2019. Cash is King; MGM is poised to be an emerging FCF machine While we still view MGM as a growth story given all of the catalysts described above, it is also uniquely positioned to rapidly accelerate its FCF generation. The company has significantly tamed its balance sheet in recent years and is looking to deleverage even further in the next 12 months. In addition, the company s capital outlay for its development cycle and aforementioned growth drivers is winding down when Cotai opens later this year followed by Springfield in September 2018. On a consolidated basis, we are looking for MGM to generate $1.74bn of FCF in 2018. This represents a 10% FCF yield based on the current market cap of MGM. In the US Domestically, we estimate MGM will generate ~$1bn of normalized FCF (before development capex) in 2018, representing a free cash yield of 14% on the implied equity value of the US business. Assuming a 10% FCF yield, similar to the consolidated business, we estimate there is about $5 of incremental equity value per share. In addition, we would expect FCF to accelerate in 2019 with a full year of MGM Springfield, plus incremental dividends from MGP and continued interest expense reductions. Figure 2. MGM Normalized FCF Yield Estimates and Valuation Upside 2017E 2018E US Domestic Adjusted EBITDA $2,487 $2,549 (-) CorpEx, net MGP share (266) (271) (+) Grand Victoria dividends 16 16 (+) MGM China Dividends 115 135 (+) MGP Dividends 288 300 (+) CityCenter Dividends 40 50 (-) Rent (650) (660) (-) Interest expense (485) (450) (-) Cash taxes (150) (175) (-) Maintence Capex (500) (500) Normalzed FCF $895 $994 US Domestic Implied Market Value $6,900 $6,900 Implied FCF Yield 13.0% 14.4% Source: Company documents, Union Gaming Securities. 3
1Q17 Financial Highlights Las Vegas Strip. Las Vegas Strip Adjusted EBITDA increased 17% y/y to $477m, beating the Consensus forecast of $435m. The company reported a slight table hold benefit (25.2% vs normalized 21%-25%). Even adjusting hold to the mid-point of the range, MGM still beat the Street by over $25m (6%) in Las Vegas. The quarter was characterized by strong RevPAR growth of 8.6% (ahead of the company s guidance for 7%) and 290 bps of margin improvement y/y. RevPAR in the quarter benefitted from 4-5 ppts from the Easter holiday shift and the triennial return of CONEXPO- CON/AGG. US Regionals. Regional Adjusted EBITDA grew 124% y/y to $171m with incremental contribution from the Borgata acquisition and the recently-opened MGM National Harbor property. Same-store Adjusted EBITDA increased 5% to $80m in the quarter with 80 bps of y/y margin improvement. CityCenter. CityCenter Adjusted EBITDA increased 22% y/y to $112m, with a 400 bp improve in margin. Revenue was up 8%, with Aria and Vdara RevPAR gaining 9.1% and 7.6%, respectively. CityCenter recently recapitalized its balance sheet with a dividend recap, pricing a new $1.725b term loan and bringing net leverage up to 4.3x. MGM received $300m of cash from the CityCenter dividends in April. Macau. MGM China grew Adjusted EBITDA 25% to $143m, with a 415 bp improvement in margin, 7% net revenue growth and strong contribution from the mass market. While the company reported above-normal VIP hold, we would note that they held very light in direct-vip, eliminating any hold benefit in the quarter. MGM Growth Properties. The company reported $160m of Adjusted EBITDA, in line with expectations given the transparency and fixed nature of the company s rental income. Subsequent to the quarter, MGP repriced its TLB by 25 bps to L+225, resulting in nearly $5m of interest savings. In addition, the first 2% rent escalator kicked in on April 1, adding $12m to annual rent. 2Q and FY Guidance 2Q17 RevPAR. Management guided to 2Q17 RevPAR growth in Las Vegas of 1.5%- 2.5%. This is mostly in line with feedback we have received from investors in recent weeks that were looking for guidance in the ~2% range. 2Q17 Revenue and EBITDA. On the Strip, management expects both Revenue and EBITDA to remain flat y/y in 2Q, due in part to the difficult comparison, which included lucky table hold in 2Q16 ($17m ) and $5m of collections. 2017 Outlook Unchanged. Management s commentary regarding full year 2017 remains unchanged from the 4Q earnings call. Net revenue on the Las Vegas Strip is expected to grow low to mid-single digits, including 4%-5% RevPAR growth, and margin improvements in the 50-100 bp range. 4
Figure 3. MGM Resorts Sum-of-the-Parts Valuation 2018E TEV 2018E TEV Wholly-owned EBITDA Multiple TEV MGM Growth Properties EBITDA Multiple TEV Bellagio $496 13.0x $6,445 2018E EBITDA $650 15.0x $9,749 MGM Grand 339 12.0x 4,062 Less: net debt (3,332) Circus Circus 67 10.0x 666 Implied equity value $6,417 MGM National Harbor 164 10.0x 1,645 MGM equity stake 76.3% 4,896 Management operations 28 10.0x 278 Diluted shares 579 Total EBITDA/TEV 1,093 12.0 13,097 MGM equity value per share $8.45 Leased properties Mandalay Bay $258 MGM China EBITDA Multiple TEV The Mirage 157 MGM Macau - Peninsula $524 14.0x $7,339 Monte Carlo 86 MGM Cotai $359 14.0x $5,028 New York-New York 130 Less: net debt (1,535) Luxor 119 Total $10,832 Excalibur 111 MGM equity stake 56.0% 6,061 MGM Grand Detroit 180 Diluted shares 579 Beau Rivage & Gold Strike 153 MGM equity value per share $10.46 The Borgata 231 The Park 5 CityCenter EBITDA Multiple TEV Total EBITDAR 1,431 Aria $330 13.0x $4,288 Less: rent payable to MGP (650) Mandarin 7 12.0x 88 EBITDA 781 Vdara 37 12.0x 439 TEV/EBITDA 8.5x Total $374 12.9x $4,816 TEV 6,635 Less: net debt (1,413) Implied equity value 3,403 Total Enterprise Value (Domestic) 19,732 MGM equity stake 50.0% 1,701 NPV of MGM Springfield 330 Diluted shares 579 Less: MGM Borrower Group + National Harbor, net debt (6,685) MGM equity value per share $2.94 Implied Equity Value 13,377 Diluted shares outstanding 579 Value per share $23.10 Wholly-owned domestic $23.10 MGM Growth Properties $8.45 Corporate EBITDA Multiple TEV MGM China $10.46 Corporate expense ($286) 10.0x ($2,864) CityCenter $2.94 Diluted shares 579 Corporate ($4.95) MGM equity value per share ($4.95) UG Price Target $40.01 Source: Company documents, Union Gaming Securities. 5
Figure 4. MGM Resorts Summary Financial Model $ in millions. FYE December. 2015 1Q16 2Q16 3Q16 4Q16 2016 1Q17 2Q17E 3Q17E 4Q17E 2017E 2018E Revenue Las Vegas Strip 5,342.7 1,348.2 1,413.2 1,465.0 1,322.0 5,548.3 1,435.9 1,417.1 1,473.0 1,353.6 5,679.7 5,737.3 MGM Grand Detroit 547.4 140.9 140.5 142.7 141.0 565.0 144.2 143.3 144.8 144.6 576.8 588.2 Mississippi 528.5 130.2 140.9 139.9 130.0 540.9 132.0 142.3 141.3 131.3 546.9 563.3 National Harbor 0.0 - - - 53.0 53.0 173.2 176.4 183.4 171.5 704.5 715.1 Springfield 0.0 - - - - 0.0 - - - - 0.0 141.7 Borgata 0.0 - - 151.0 197.5 348.5 201.1 205.3 228.0 207.8 842.1 849.8 Other/MGM Hospitality 79.1 20.4 22.3 17.3 21.8 81.8 19.2 24.5 18.7 24.0 86.3 87.2 MGM Macau 2,214.8 469.0 452.0 499.8 499.7 1,920.5 502.4 487.9 507.2 557.6 2,055.1 3,008.9 Total revenue $9,190.1 $2,209.7 $2,269.5 $2,515.1 $2,460.8 $9,455.1 $2,708.1 $2,697.6 $2,796.4 $2,690.3 $10,892.3 $12,107.4 Las Vegas Strip, y/y change 2.9% 4.5% 0.2% 8.9% 1.9% 3.8% 6.5% 0.3% 0.5% 2.4% 2.4% 1.0% Other Nevada, y/y change (33.2%) NA NA NA NA NA NA NA NA NA NA NA MGM Grand Detroit, y/y change 3.2% 5.7% (0.4%) 10.8% (2.3%) 3.2% 2.4% 2.0% 1.5% 2.6% 2.1% 2.0% Mississippi, y/y change 5.3% 2.7% 4.9% (0.4%) 2.5% 2.4% 1.4% 1.0% 1.0% 1.0% 1.1% 3.0% National Harbor, y/y change NA NA NA NA NA NA NA NA NA NA NA 1.5% Springfield, y/y change NA NA NA NA NA NA NA NA NA NA NA NA Borgata, y/y change NA NA NA NA NA NA NA NA NA 5.2% NA 0.9% MGM Macau, y/y change (32.5%) (25.6%) (18.8%) (5.5%) 0.2% (13.3%) 7.1% 8.0% 1.5% 11.6% 7.0% 46.4% Total revenue, y/y change (8.8%) (5.3%) (4.8%) 10.3% 12.3% 2.9% 22.6% 18.9% 11.2% 9.3% 15.2% 11.2% EBITDA Las Vegas Strip 1,396.7 408.8 430.6 452.5 365.0 1,657.3 476.9 430.9 452.1 388.3 1,748.2 1,762.3 Other Nevada 3.4 - - - - 0.0 - - - - 0.0 0.0 MGM Grand Detroit 155.0 40.0 43.8 44.0 43.6 171.4 44.6 44.4 43.4 45.5 178.0 179.6 Mississippi 134.9 36.1 40.7 37.6 29.0 143.5 35.2 41.3 38.4 32.8 147.7 153.3 National Harbor 0.0 - - - 9.6 9.6 32.1 35.7 39.9 38.6 146.3 164.5 Springfield 0.0 - - - - 0.0 - - - - 0.0 30.5 Borgata 0.0 - - 36.1 45.2 81.3 58.9 60.7 68.4 52.0 240.0 231.3 Other/MGM Hospitality 37.4 4.1 4.4 1.3 3.2 13.0 10.9 4.8 1.4 9.6 26.7 27.8 MGM Macau 539.9 114.1 119.2 149.9 137.5 520.7 143.0 133.8 143.2 154.8 574.7 883.4 Property level EBITDA $2,267.3 $603.2 $638.7 $721.3 $633.1 $2,596.8 $801.7 $751.6 $786.9 $721.6 $3,061.7 $3,432.7 Corporate expenses (254.1) (65.1) (74.9) (80.4) (63.4) (283.7) (64.3) (75.0) (72.0) (70.0) (281.3) (286.4) Adjusted EBITDA $2,013.2 $538.1 $563.8 $641.0 $569.7 $2,313.0 $737.4 $676.6 $714.9 $651.6 $2,780.4 $3,146.3 Income from unconsolidated affilates 257.9 14.7 448.3 32.6 32.0 527.6 39.7 19.4 20.2 25.0 104.3 94.7 Non-cash compensation ($32.1) (9.9) (10.4) (11.1) (13.5) ($45.0) (13.4) (14.1) (15.1) (18.3) ($60.9) ($82.4) Reported Adjusted EBITDA $2,238.9 $542.9 $1,001.6 $662.4 $588.3 $2,795.7 $763.7 $681.8 $720.0 $658.3 $2,823.9 $3,158.6 EPS (GAAP) ($0.80) $0.12 $0.83 $0.93 $0.04 $1.92 $0.36 $0.25 $0.24 $0.12 $0.97 $1.34 EPS (ADJUSTED) ($1.85) $0.16 $0.91 $0.98 $0.12 $2.17 $0.44 $0.33 $0.32 $0.21 $1.30 $1.89 Las Vegas Strip, y/y change 10.6% 25.7% 12.8% 34.4% 3.4% 18.7% 16.7% 0.1% (0.1%) 6.4% 5.5% 0.8% Other Nevada, y/y change (1643.0%) NA NA NA NA NA NA NA NA NA NA NA MGM Grand Detroit, y/y change 7.0% 19.1% 2.5% 31.9% (3.8%) 10.6% 11.4% 1.4% (1.3%) 4.5% 3.8% 0.9% Mississippi, y/y change 21.9% 20.7% 24.4% (1.7%) (14.5%) 6.4% (2.5%) 1.3% 2.3% 13.1% 3.0% 3.8% National Harbor, y/y change NA NA NA NA NA NA NA NA NA NA NA 12.4% Springfield, y/y change NA NA NA NA NA NA NA NA NA NA NA NA Borgata, y/y change NA NA NA NA NA NA NA NA 89.5% 15.2% 105.5% (3.6%) MGM Macau, y/y change (36.5%) (23.1%) (9.8%) 16.9% 5.0% (3.5%) 25.3% 12.2% (4.5%) 12.5% 10.4% 53.7% Total Property EBITDA, y/y change (5.7%) 8.7% 6.8% 32.3% 11.2% 14.5% 32.9% 17.7% 9.1% 14.0% 17.9% 12.1% Total Cash EBITDA, y/y change (7.8%) 5.7% 3.8% 34.7% 17.5% 14.9% 37.0% 20.0% 11.5% 14.4% 20.2% 13.2% EBITDA margins Las Vegas Strip 26.1% 30.3% 30.5% 30.9% 27.6% 29.9% 33.2% 30.4% 30.7% 28.7% 30.8% 30.7% Other Nevada 4.4% NA NA NA NA NA NA NA NA NA NA NA MGM Grand Detroit 28.3% 28.4% 31.2% 30.8% 30.9% 30.3% 30.9% 31.0% 30.0% 31.5% 30.9% 30.5% Mississippi 25.5% 27.8% 28.9% 26.9% 22.3% 26.5% 26.7% 29.0% 27.2% 25.0% 27.0% 27.2% National Harbor NA NA NA NA NA NA 18.6% 20.3% 21.8% 22.5% 20.8% 23.0% Springfield NA NA NA NA NA NA NA NA NA NA NA 21.5% Borgata NA NA NA 23.9% 22.9% 23.3% 29.3% 29.5% 30.0% 25.1% 28.5% 27.2% MGM Macau 24.4% 24.3% 26.4% 30.0% 27.5% 27.1% 28.5% 27.4% 28.2% 27.8% 28.0% 29.4% Property level EBITDA 24.7% 27.3% 28.1% 28.7% 25.7% 27.5% 29.6% 27.9% 28.1% 26.8% 28.1% 28.4% Adjusted EBITDA 21.9% 24.3% 24.8% 25.5% 23.2% 24.5% 27.2% 25.1% 25.6% 24.2% 25.5% 26.0% Total debt $12,854.4 $13,092.7 $12,506.8 $13,107.1 $13,081.2 $13,081.2 $13,197.8 $13,382.8 $13,422.8 $13,483.8 $13,483.8 $13,703.8 Net debt 11,184.1 11,428 10,004 11,661 11,635 11,634.2 11,802 12,046 12,181 12,301 12,301.2 11,017.4 Total debt/ LTM EBITDA 6.4x 6.4x 6.1x 5.9x 5.7x 5.7x 5.3x 5.1x 5.0x 4.8x 4.8x 4.4x Net debt/ LTM EBITDA 5.6x 5.6x 4.9x 5.2x 5.0x 5.0x 4.7x 4.6x 4.5x 4.4x 4.4x 3.5x Source: Company documents, Union Gaming Securities. 6
Important Disclosure Analyst Certification The analyst, John DeCree, primarily responsible for the preparation of this research report attests to the following: (1) that the views and opinions rendered in this research report reflect his or her personal views about the subject companies or issuers; and (2) that no part of the research analyst s compensation was, is, or will be directly related to the specific recommendations or views in this research report. Ratings Definitions Current Ratings Definition Union Gaming Securities LLC and Union Gaming Securities Asia Limited use a traditional ratings construct (Buy, Hold, and Sell) that is underscored by percentage upside/downside from current trading levels along with dividend yields for total return. We exclude special dividends and contemplate regular dividends only in our total return forecasts. These are absolute ratings, not relative or forced ratings. We define a Buy rating as a company whose shares exhibit total return (appreciation and dividends) potential of at least 15% within the next 12 months, and conversely a Sell rating as a company whose shares exhibit downside potential of at least 15% within the next 12 months. A Hold rating is reserved for companies whose shares exhibit total return potential between those parameters. Buy the total forecasted return is expected to be greater than 15% within the next 12 months Hold the total forecasted return is expected to be greater than or equal to 0% and less than or equal to 15% Sell whose shares exhibit downside potential of at least 15% within the next 12 months Suspended the company rating, target price and earnings estimates have been temporarily suspended. Valuation and Risks Valuation Valuation Methodology for Price Target: Enterprise Value-to-EBITDA, Sum-of-the-Parts Analysis, Price-to-Earnings Ratio, Discounted Cash Flow Analysis, Price-to-AFFO, Net Asset Value. Risks Investment Risks: Union Gaming Securities equity research team covers the casino, gambling, gaming, lottery and related sectors. The companies operating within these sectors generally have a global presence or significant exposure to China and Las Vegas, among other markets. In addition, the markets that companies in these sectors operate are highly regulated by local and federal governments. Risks across or specific to one or more of these sectors include regulatory or legislative impacts related to licensing, tourism or the competitive landscape. Licenses to operate gaming facilities or supply gaming equipment or lottery services are often governed by regulatory authorities. Additional Risks for investing in these sectors include volatility in consumer discretionary spending and consumer confidence, currency, interest rates, unemployment rates, access to capital, the cost of capital, commodity costs, geopolitical uncertainty, and unfavorable government regulations. Companies operating within our covered sectors rely in part on tourism, and business trends could be impacted by changes or influences to tourism in a given market or markets, including visa policy, transit policies and security, transportation infrastructure, weather and natural disasters. Ratings Distribution (as of 04/27/2017) Coverage Universe Investment Banking Services / Past 12 Months Ratings Count Pct. Rating Count Pct. BUY 18 78% BUY 3 17% HOLD 5 22% HOLD 0 0% SELL 0 0% SELL 0 0% MGM Resorts International Rating History as of 04/26/2017 powered by: BlueMatrix B:$29.00 06/09/14 B:$30.00 07/17/14 B:$32.00 08/05/14 B:$28.00 10/15/14 T:SU:NA 11/06/14 I:B:$26.00 01/22/15 B:$28.00 10/30/15 B:$32.00 07/06/16 B:$35.00 11/07/16 B:$34.00 02/17/17 40 35 30 25 20 15 Jul 2014 Oct 2014 Jan 2015 Apr 2015 Jul 2015 Oct 2015 Jan 2016 Apr 2016 Jul 2016 Oct 2016 Jan 2017 Apr 2017 Closing Price Target Price 7
General Disclosures Additional information is available upon request. This report was prepared by Union Gaming Securities LLC. Union Gaming Securities LLC is a FINRA member firm and wholly owned subsidiary of Union Gaming Group LLC. Union Gaming Group LLC also owns Union Gaming Securities Asia Ltd., a licensed corporation with the Securities and Futures Commission (SFC) in Hong Kong and Union Gaming Analytics, LLC. All questions or comments concerning this research report should be addressed to Union Gaming Securities LLC at (702) 866-0743. Neither Union Gaming Securities LLC("UGS") nor its affiliates, analysts or employees own any securities of companies analyzed in the research reports it distributes. Neither Union Gaming Securities LLC nor its affiliates or analysts serve as an officer, director or advisory board member of any Subject Company. UGS, its affiliates, analysts and employees may have received investment banking, non-investment banking securities and non-securities service, related compensation from the subject company in the past 12 months. It further intends to seek compensation for investment banking, non-investment banking securities and non-securities service, related activities in the next three months. Accordingly, investors should be aware that the firm and its affiliates may have a conflict of interest that could affect the objectivity of the reports it distributes. UGS is not now nor has ever been a market maker. All prices are those current at the end of the previous trading session unless otherwise indicated. Prices are sourced from local exchanges via Bloomberg and Factset. Data is sourced from Union Gaming Securities LLC, Union Gaming Securities Asia Limited, and subject companies. Union Gaming Securities LLC and Union Gaming Securities Asia Limited are not responsible for errors in prices provided by independent sources. Data, analyses, and reports necessarily contain time-sensitive information, and no subscriber or client should rely on dated reports or conclusions. Investor clients and financial advisers should consider any report from Union Gaming as only a single factor in making any investment decision. 8