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Analyst Bullish on Stock of MGM Grand

2 February 2000

MGM Grand has received a strong endorsement from prominent Wall Street analyst Jason Ader of Bear, Stearns & Co., who raised his rating of the company's stock to "buy.'' For two years, he had maintained an "attractive'' rating on the stock.

Ader said in a report Tuesday that "management of MGM Grand is at the top of its game.'' He said the company's strong earnings growth should continue, and he believes it will make a major acquisition in the next 12 to 18 months.

Based in Las Vegas, MGM Grand owns a massive resort there with the same name. Its holdings also include Las Vegas' New York-New York and MGM Grand Detroit. Most of its stock is held by billionaire Kirk Kerkorian.

The stock is down considerably from its high of $54.375 on Nov. 9, closing Wednesday at $42.50. Ader says the company has an "asset value'' of $58 to $60 a share.

MGM Grand plans a 2-for-1 stock split on Feb. 10. It also will begin paying dividends March 1, something that casino firms rarely do.

Despite the opening of major new resorts in Las Vegas last year, Ader noted, MGM Grand in Las Vegas and New York-New York had occupancy rates above 95 percent for the year. The former is getting more than its fair share of high-end play, he said, and the improving economy in Asia should mean that more high rollers will visit Las Vegas.

MGM Grand's temporary casino in Detroit, which opened in July, is exceeding expectations, Ader said. Its revenue for the fourth quarter was $100.9 million. More gaming equipment has been added, making a total of 2,451 slot machines and 85 table games.

He predicts that Detroit - when all three casinos are open -- will become a $1.5 to $2 billion gaming market by 2003, and that MGM Grand will lead the market.

MGM Grand is looking at international and domestic acquisitions, Ader said, as well as at possible contracts to manage Indian casinos in California. It's also interested in the Chicago market. One rumored takeover target, he said, is Empress Entertainment, which has profitable riverboat casinos in Joliet, Illinois, and Hammond, Indiana, that cater to Chicago gamblers.

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