MGM is currently trimming its portfolios as a way of cutting down its overheads. The company is also planning to sell three of its casinos in Las Vegas. The Casinos include Circus Circus, the Bellagio, as well as MGM Grand. The three casinos are to change hands to help the company cut down its expenditures.

Although these strategic actions are expected to affect the company’s real estate investment trust, the analyst feels the opposite may happen. Union Gaming’s John DeCree predicts MGM Growth Properties has a high chance of excelling.

In a post released this week, the analyst has highlighted other venues under MGM’s umbrella, like Springfield in Massachusetts as well as CityCenter located in Las Vegas, may end up being critical earners for the company.

Besides, gaming REIT is gaining traction as new sales deals are being made, and John DeCree thinks MGM’s strategic REIT review might shake things loose for the MGP in the next few quarters as stated on calvinayre. John also says that MPG might gain even greater liquidity in the event MGM reduces its shares, which is something the top brass has been thinking about for a while now.

Once Bellagio’s land was transferred to Blackstone Real Estate Circus was acquired by a Treasure Island Affiliate, both of which are worth $5billion, MGM will be in a position to cover its rent.

DeCree estimates that in 2019, there will be a net coverage of 4.5 times, on pro forma basis, under MGM’s lease, if you account for the sale of Bellagio real Estate and Circus Circus.

Regional portfolios owned by MGP within Vegas need a little more attention. Concerning Q3 earnings calls led by the management at MGP, DeCree thinks that the team does not believe there is a ceiling on a number of their assets, especially in the context of Bellagio being sold for 17.3 times rent. A few of the unique assets include MGM Detroit, MGM National harbour, Borgota in Atlanta City and Beau Rivage in Biloxi.

The management is also willing to sell either one of these assets to interested third parties as long as it will make a lot of sense to share value.

Although there were a few months during this year, results were less than satisfactory, and the casino industry has continued to experience growth. Also, casino real estate valuations have continues to grow with estimates reaching an all-time high.

September was particularly productive for the city of Nevada, which set a new revenue record of $1.06 billion from a casino win. Due to a continued strong performance, UG considers MGM to be a worthwhile candidate that will experience tremendous growth. For that reason, it has raised the target price from $34 to $38.

UG likes to stick to its Buy rating and feels its shareholders will reap big from their investment considerably in the years to come, provided things continue to improve. Things will likely change, but we only have to wait and see.