Vs.

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Index
Topic Investment Summary and Recommendations Business and Segment Analysis MGM Mirage Industry and Competition Analysis (SWOT) Harrahs Industry and Competition Analysis (SWOT) Macroeconomic Analysis Financial Analysis MGM Mirage Technical Analysis Harrahs Technical Analysis MGM Mirage Mergers and Acquisitions MGM Mirage 1st Quarter 2005 Earnings MGM Mirage Awards and Recognitions Harrahs Mergers and Acquisitions Harrahs 1st Quarter 2005 Earnings Harrahs Awards and Recognitions Works Cited Page 2 3 4 6 7 9 11 13 13 15 15 16 17 17 18

Investment Summary and Recommendations MGM Mirage started on January 29, 1986. It is a gaming company that manages other casinos in Las Vegas, Nevada. Some of the popular attractions that MGM Mirage owns are Bellagio, MGM Grand Las Vegas, The Mirage, Treasure Island (TI), New York-New York Hotel and Casino, Monte Carlo Resort and Casino, and the Boardwalk Hotel and Casino. The Company's other Nevada resorts are Primm Valley Resorts and the golf resorts, Shadow Creek and Primm Valley Golf Club. Until July 2004, the Company owned and operated MGM Grand Australia. As you can see MGM Mirage is a well established company which does not only rely on gambling as its main source of revenue. The company has reached to outside resources such as hotel room, golf courses, night clubs, restaurants, and real estate to increase its revenue. Harrahs casino started on November 2, 1989 and now owns 28 casinos in the US. This casino-entertainment facilities operate primarily under the Harrah's, Rio, Showboat, Horseshoe and Harveys brand names, and include 11 land-based casinos, 11 riverboat or dockside casinos, four casinos on Indian reservations, a combination greyhound-racing facility and casino, and a combination thoroughbred racetrack and casino. On July 1, 2004, the Company completed the acquisition of Horseshoe Gaming Holding Corp. In connection with this acquisition, it also acquired the rights to the Horseshoe brand in the United States, including rights to the World Series of Poker brand and tournament.

As you can see both MGM Mirage and Harrahs casino have two similar but different approaches to survive in this competitive industry. Both companies have succeeded in the industry and are creating new ways to market themselves. The Recommendations for this company is pretty plain in its explanation. Our team suggested that the stock is a seasonal stock. A seasonal stock is one that increases and decreases during certain periods during the year. MGM Mirage and Harrahs casino are both buy before winter time because the stock will rise when it gets colder. Then sell just before summer because the stock will decrease as it gets warmer. Historically, people tend to travel more to Las Vegas during the winter time because it is warmer there. During the summer people did not seem to travel to Las Vegas as much because it is a lot hotter than normal.

Business and Segment Analysis MGM Mirage is a gaming company that is taking this industry to new levels of competition. With the acquisition of the Mandalay Resort Group, MGM casinos will be able increase greatly in size. The company also has locations in Detroit, Michigan, the MGM Grand Detroit, Atlantic City, New Jersey, and in Mississippi. The company plans to open more casinos through out the US. Harrahs casino has 28 locations from where they operate and provide the best entertainment money can offer. After obtaining the 3

right to the World Series Poker Tournament, it has brought the company a lot of publicity. For both companies competition is very difficult and improvements are always something to keep in mind. MGM Mirage and Harrahs casino have similar strategies to compete and survive within the industry but yet they differ in some areas. MGM Mirage is looking to expand and grow to increase their revenues. Harrahs casino looks more towards the advertisement and entertainment side with their televised poker tournaments. Moreover, the two companies have developed locations in the US but have not really touch the international side of business. To go globally would probably be both companies dreams to raise the bar in the casino industry. Industry and Competitiveness Analysis SWOT MGM Mirage Strength: The Company's operations consist of 12 wholly owned casino resorts and 50% investments in two other casino resorts MGM generates a majority of its net revenues and operating income from the Las Vegas Strip resorts PLAYMGMMIRAGE.com, an online gaming Website The machines are outfitted to dispense and accept paper vouchers in addition to coins, which reduces labor costs and boosts revenue as players are able to gamble more rapidly without inserting money Weakness:

 First-quarter profit fell at MGM MIRAGE, in part due to lower casino revenue as the company failed to win as much from gamblers at the tables than expected Needs upgrade of existing Bellagio rooms that include adding marble entryways, new bathrooms, Internet access and flat-screen televisions Located next to other casinos Opportunities: Employees about 33,000 workers Internet gambling MGM MIRAGE and Mandalay Resort Group anticipates the merger will be completed in the second quarter of 2005 Threats: Caesars Entertainment Inc, Harrah's Entertainment Inc, Mandalay Resort Group, Stanley Leisure PLC Company, Boyd Gaming Corp, New York State Lottery Company Shares of Harrah's, which is acquiring Caesars Entertainment Inc. to become the world's largest casino operator, led the rally, rising 8.9 percent in midday trading While the Iraq war and the Asian virus known as Severe Acute Respiratory Syndrome have made some tourists reluctant to travel, company executives today blamed the economy for business levels that haven't yet recovered or remain fairly flat with activity before the Sept. 11 terrorist attacks.

SWOT HET Harrahs Casino Strength: Harrah's Operating Company, Inc., owns or manages 28 casinos in the United States Its casino-entertainment facilities operate primarily under the Harrah's, Rio, Showboat, Horseshoe and Harveys brand names, and include 11 land-based casinos, 11 riverboat or dockside casinos, four casinos on Indian reservations, a combination greyhound-racing facility and casino, and a combination thoroughbred racetrack and casino They acquired the rights to the Horseshoe brand in the United States, including rights to the World Series of Poker brand and tournament Weakness: No online gambling Only 2 casinos in desert gambling city Since there is more competition Harrahs Casino will have to developed new marketing plans to stimulate the retail segment of our businesses More differentiation Opportunities: Shares of Harrah's, the No. 2 casino operator which last week agreed to buy its bigger rival Caesars Entertainment Inc. for $5 billion Employees about 46,600

Threats: Caesars Entertainment Inc, MGM Mirage Inc, Mandalay Resort Group, Stanley Leisure PLC Company, Boyd Gaming Corp, New York State Lottery Company MGM Mirage purchasing Mandalay Resort Group

Macroeconomic Analysis In the graph MGM Mirage follows a similar pattern as the industries. This means that the company is cyclical to that of the industry. In addition, MGM Mirage is very volatile because as the industry shows a decline, MGM show a greater decrease.

Second is the graph of Harrahs casino which is similar to MGM Mirage. Again, Harrahs is cyclical to the industry and shows that it too is following the same pattern as the industry. Moreover, the company is just as volatile because with every increase, Harrahs shows a greater increase.

There are many economic factors that can affect the industry and company, such as GDP, inertest rates, mortgage rates, inflation rates, unemployment rates, currency rates, and energy rates. Many people think that just because interest rates go up it will affect the casino and gambling industry. This is true that interest rates can affect the way people spend their money but to a certain extent. When interest rates rise, society thinks that the casino industry will go down because people will not be able to spend it on leisure time. Then again, when interest rates increase it can also mean that society is growing stronger and people are making more money, thus, will be able to spend more on traveling to Las Vegas. Mortgage rates are similar to that of interest rates, when the rates go up then people might not be able to spend it on other activities. Inflation rates and unemployment rates can closely tie together because if you do not have money then spending it would be impossible. Energy is an important and major factor that can affect companies in the casino and gambling industry. Places like Las Vegas, are very hot, thus, a lot of energy is required to keep the town at peoples satisfaction. Almost all

casinos will have to use air conditioning to keep their customers happy and wanting to return because of the service.

Financial Analysis HET MGG Industry Sector S&P 500 31.74 26.7 28.21 22.06 22.95 0.88 0.69 1.38 0.87 1.21 1.04 0.89 1.68 1.42 1.71 0.41 0.71 0.69 1.01 1 17.39 22.4 27.2 13.62 21.97 7.43 8.09 15.38 8.21 14.03 5.76 6.33 7.13 7.3 11.44 4.47 3.17 6.14 6.04 7.63 4.95 3.43 6.91 8.45 11.4 17.08 13.14 26.3 13.37 20 0.6 0.39 0.5 1.11 0.96 2.53 44.43 1.97 44.57 2.1 50.42 0.91 42.86 0.76 46.19

P/E Ratio Quick Ratio Current Ratio Beta Operating Margin Net Profit Margin (To Date) Net Profit Margin (5 yrs) Return on Assets Return on Investments Return on Equity Asset Turnover Total Debt to Equity (MRQ) Gross Margin

The chart above presents a comparison of our two companies with the industry, sector, and S&P 500. The information above show how these companies compare with the current industry and if the company is well off or declining. Starting from the P/E ratio, a high P/E means high projected earnings in the future. However, the P/E ratio actually doesn't tell us a whole lot by itself. This ratio however is usually used to compare the company with industry, and from the looks of it, Harrahs is under the industry, and sector while MGM is well above the industry, sector, and S&P. Another important ratio that is used for comparative companies is the current ratio. After dividing current assets and current liabilities, you check if a ratio is high because the higher of the

ratio, the more liquid the company is. The current ratios from both companies show that they cannot turn assets in cash as fast as the industry, sector, or S&P. Another item that is used to compare companies is the beta. Beta is a measure of a security's or portfolio's volatility. MGM and Harrahs betas are both below the S&P which shows that both of these companies are less volatile. Total debt to equity ratio is ratio that also can calculate volatility in a way. The debt to equity ratio is liabilities divided by shareholders equity. The higher of the ratio, the more volatile the stock is because the companys debt has increased which would result in volatility and a higher beta. Both MGM and HET have debt to equity ratios that are higher than the S&P. This draws a concern because when this is number is high; debt is high so both companies are having debt management problems. A possible reason why there debt is high is that the current ratios are both low. When the companies cannot convert their assets in to cash fast, then it is hard for both companies to pay off the debt. A useful indicator of how profitable a company is relative to its total asset is the return on assets. Calculated by dividing a company's annual earnings by its total assets, this tells you what earnings were generated from invested capital. So far the companies are both under the industry, sector, and S&P. The companies need to find a way to increase their net income to increase their earnings. The return of investment is both low compared to the industry, sector, and S&P. There is a profit coming form both companies, however it could use some improvement. Finally return on equity is an instrument that can be useful in making a decision. This shows how profitable a company can be and from the look of it, both companies are profitable but not as

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profitable as the S&P. Increasing the net income will significantly help increase the ROA, ROI, and ROE, which would make a stock more valuable. Technical Analysis

MGM Mirage (MGG) Bollinger Bands

MGM Mirage (MGG) Historical Prices

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MGM Technical Analysis

The graphs above show the Bollinger Bands and the Historical prices of MGM. Bollinger bands are a good indicator on when to buy and sell a stock. When a stock price crosses the security lines when the security line is at a low point, the stock price tends to rise and in this case, MGM Mirage stock is on the rise because the stock price crosses the security line at a low point at around December 2004. Near the end of the March the stock price is peaking at a point and the price will gradually drop due to the fact that the gambling industry is a seasonal industry and it peaked at December. As you can see in the historical price, the stock price is starting to level off and it is getting ready to drop. A recommendation for this stock is to buy the beginning of August, and sell at around January.

Harrahs Entertainment (HET) Bollinger Bands

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Harrahs Technical Analysis

Harrahs is in a similar boat with MGM Mirage because of the seasonal industry. There is an interesting trend with Harrahs Bollinger Bands. From the seeing the bands, the stock price is consistently staying between the two security lines. This shows that the stock has been consistent with the current market outlook. However, similar to MGM Mirage, the gambling industry is seasonally so by January, the stock price will gradually go down so I recommend doing the same as you did with MGM Mirage, buy at end of August and sell at January.

MGM Company News Mergers & Acquisitions: In recent months MGM Mirage has agreed to acquire Mandalay Resort Group for an estimated $7.9 billion, including equity value of approximately $4.8 billion, $600

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million of convertible debentures and the assumption of approximately $2.5 billion in outstanding Mandalay debt. This acquisition was approved by the stockholders of Mandalay in December of last year, and still has to be approved by many gaming commission offices in the states that the new company will have casinos. The merger remains subject to customary closing conditions and successful completion of the approval process in Illinois and Michigan. MGM Mirage anticipates the merger will be completed in the second quarter of 2005. Each of these offices is expected to approve the merger without hesitations. The combination will bring together two leading gaming resort operators to form a highly diversified hospitality company with an estimated 70,000 employees, appealing to a broad spectrum of the leisure and business travel and event markets. Following the acquisition, MGM MIRAGE will own and operate 28 properties throughout Nevada, Mississippi, Illinois, Michigan and New Jersey. The combined company will have an asset portfolio that includes Bellagio, MGM Grand Las Vegas, The Mirage, Treasure Island, Monte Carlo, Mandalay Bay, Luxor, Excalibur, New York New York, and Circus Circus, which are all huge resort-casino complexes on the Las Vegas strip. These properties cater to a broad customer base, ranging from value-oriented to ultra high-end and chic, and each provides a unique customer experience. Following completion of the transaction, MGM MIRAGE will also own the fifth largest convention center in the U.S., providing the opportunity to further develop Las Vegas as a significant convention alternative for consumers. The company, still to be called MGM Mirage, will own approximately 85% of the Las Vegas strip, forcing other companies located in Las Vegas and through out the

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United States and the world to become much more competitive and even perhaps go through some major transformations to catch up with the increasing elegance and success of the properties owned by MGM Mirage.

First Quarter 2005 earnings: MGM Mirage reported its First Quarter 2005 earnings on April, 19th 2005. Some of the highlights include; Generated net revenues of $1.2 billion, up 13% from 2004, operating income of $293 million was up 15% over 2004; The addition of the Spa Tower at Bellagio propelled that resort to an all-time record quarterly profit, The company invested $105 million of capital in the Company's resorts, Reduced debt by $124 million, and finally they announced a 2-for-1 stock split, subject to stockholder approval at the Company's annual meeting of stockholders on May 3, 2005.

Awards and Recognition: In January of this year, MGM was named by Forbes magazine as one of the Best Managed Companies in America. They were named along with 25 other companies and placed first among all companies in the hotels, restaurants and leisure category. Also, in March of this year Fortune Magazine has named MGM Mirage one of "America's Most Admired Companies" for the fourth year in a row, in its annual survey of companies with large U.S. operations. They was rated the "Most Admired" casino resort company in the Hotels/Casinos/Resorts category. Overall, they ranked second in the Hotels/Casinos/Resorts category after Marriott International. MGM Mirages chairman and CEO had this to say about the award, "We are very pleased to be recognized by

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Fortune Magazine for the fourth time as our industry's top hotel casino resort company. This ranking reflects the quality of our top-notch management team and our employees' commitment to excellence."

Harrahs Company News Mergers and Acquisitions: On July 15th, 2004 Harrah's Entertainment, Inc. signed a definitive agreement to acquire Caesars Entertainment, Inc in a cash and stock transaction that was the largest in gaming-industry history. Under terms of the agreement, Caesars shareholders will receive an aggregate of $1.8 billion in cash and 66.3 million shares of Harrah's Entertainment common stock. Caesars operated 28 casinos with about 2 million square feet of gaming space and approximately 26,000 hotel rooms. Harrah's operates 28 casinos with about 1.7 million square feet of gaming space and approximately 15,650 hotel rooms. Put together the new company has 56 properties with 41,650 hotel rooms in 13 countries. The company will consist of the following well known properties; Caesars Las Vegas, Showboat Atlantic City, Harrahs Las Vegas, The Rio Las Vegas, Ballys Las Vegas and the Horseshoes Casino brands. The merger is still pending, but stockholders of both companies approved the merger on March 11th of this year. Harrahs CEO, Gary Loveman, said this regarding the approval of the merger, "We are gratified to receive the approvals of Harrah's and Caesars stockholders, and committed to rewarding their votes of confidence by delivering on the potential of this merger, we are making steady progress toward completion of this transaction. We believe we will be able to secure all remaining regulatory approvals in the near future and close in the second quarter.

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On September 27th, 2004 Harrahs and signed a definitive agreement to sell Harrah's East Chicago, Harrah's Tunica, Atlantic City Hilton and Bally's Tunica to an affiliate of Colony Capital, LLC. The agreement calls for the Colony unit to pay a combined total of about $1.24 billion for the four properties. The sale price represents approximately 8.5 times the trailing 12-month Earnings Before Interest, Taxes, Depreciation and Amortization of the four properties.

First Quarter 2005 earnings On April 20th, 2005 Harrahs reported their first quarter earnings to the SEC. Some of the highlights include the following; First-quarter Adjusted EPS from Continuing Operations was 87 cents per share, an increase of 26.1 percent from the yearago quarter, First-quarter income from operations rose 32.0 percent to $232.8 million from $176.3 million in the year-earlier quarter and First-quarter net income was $103.8 million, up 27.1 percent from $81.7 million in the 2004 first quarter.

Awards and Recongnition Also in the first quarter, Harrahs CEO, Gary Loveman was named "Best CEO" in the gaming and lodging industry by Institutional Investor magazine for the second straight year. Selections were based on the votes of analysts and investment portfolio managers. The board of directors for Harrahs was also recognized in the first quarter after a survey of the top-performing boards in gaming, conducted by HVS International, a human resources firm, ranked Harrah's Entertainment's board of directors second out of 41 publicly traded companies.

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Works Cited Harrah's Entertainment, Harrah's Entertainment Company News. 18 Apr 2005. Online. 21 Apr 2005. <www.harrahs.com>. MGM Mirage, MGM Mirage Press Releases. 18 Apr 2005. Online. 21 Apr 2005. <www.MGMmirage.com>. Reuters, Harrah's, Caesars Stockholders Approve Merger. Reuters Online. 11 Mar 2005. 21 Apr 2005. <www.reuters.com>. Reuters, MGM Mirage agrees to Purchase Mandalay Resort Group. Reuters Online. 25 Jul 2004. 21 Apr 2005. <www.reuters.com>. Yahoo!, MGM Mirage Basic Charts. 08 Apr 2005. Online. 08 Apr 2005. <finance.yahoo.com>. Yahoo!, Harrah's Entertainment Basic Charts. 08 Apr 2005. Online. 08 Apr 2005. <finance.yahoo.com>.

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