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    MARKET EDGES

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With estimates coming down and low baccarat hold generally well known, we don’t know if a subpar Q2 will matter. If Steve Wynn is slightly more optimistic about LV, then it’s a safe bet that MGM will be downright bullish.

Steve Wynn’s market commentary has generally proved to be realistic.  So when he sounds slightly more optimistic about Las Vegas, we assume that Las Vegas is getting a little better.  So what should we expect from the MGM commentary Tuesday morning?  Well, after applying the typical MGM multiplier (not to be confused with the Keynsian multiplier although both have been proven wrong), we’d have to say Tuesday’s conference call will be a party!

MGM should report a poor quarter on a lot of metrics.  To be fair, their high end properties played very unlucky during the quarter on the Baccarat tables.  We estimate MGM’s Baccarat volume share was roughly 50% during the quarter.  We know that Strip Baccarat hold the first two months of Q2 was only 8.4% versus 11.9% (fairly normal) in April and May 2009 combined.  Since LVS and WYNN already reported Las Vegas results and table holds were below normal but not as low as the Las Vegas numbers indicate.  Thus, MGM must have held below even the 8.4% for the Strip Baccarat total.

Given the Baccarat results and a much slower than expected overall ramp we think CityCenter will be once again close to break even on EBITDA basis.  Overall, we are projecting total consolidated EBITDA of $271 million on revenues of $1.45 billion and consolidated property level EBITDA of $310m.  On an economic basis with JV EBITDA factored in, our projection rises to $332m. 

We still think forward estimates need to come down and we are below the Street for 2010 and 2011.  However, Q2 expectations are low and management is likely to be extra bullish on the call.  So while we think this v-shaped recovery implicit in MGM’s recovery will remain elusive, Q2 may not be the negative catalyst despite the likely poor results.