The addition of casino operator MGM Resorts International to the S&P 500 index “should provide a modest tailwind” for the firm’s stock in the near term, says Japanese brokerage Nomura. MGM Resorts announced on Thursday it would join the S&P 500 prior to the open of trading on July 26, 2017.
The S&P 500 is a stock market index in the United States based on the market capitalisations of 500 large companies that have common stock listed on the New York Stock Exchange or Nasdaq. It is regarded as one of the best single gauges of U.S. equities issued by companies with large-scale market capitalisation, also known as “large-cap” stocks.
MGM Resorts said it would be added to the casinos and gaming sub-industry index.
“We are honoured to join the esteemed companies that comprise the S&P 500 index,” said Jim Murren, chairman and chief executive of MGM Resorts, in a statement.
MGM Resorts is the parent firm of Macau-based casino operator MGM China Holdings Ltd, with a 56-percent stake.
In its Thursday note, Nomura said that the inclusion of MGM Resorts in the S&P 500 “should create near-term buying pressure in excess of the stock’s usual trading volume”.
“In addition, the move increases the company’s potential active and passive investor base,” said the Nomura analysts.
The brokerage stated that “more important should be the long-term growth in free cash flow”. Nomura expects MGM Resorts’ discount to large-cap gaming peers to narrow as the company should deliver about US$1 per share of free cash flow this year, and growing to US$3 per share in 2019.
“Historically, stocks added to the [S&P 500] index rise 3 percent in the week after inclusion,” said the Japanese brokerage. On average, stocks added to the index gained 7 percent over a one-month period, added Nomura.
Also on Thursday, MGM Resorts appointed Marcus Glover as president and chief operating officer of Atlantic City’s Borgata Hotel Casino and Spa. He will succeed Tom Ballance, who is becoming executive vice president of operations for MGM Resorts.
Mr Glover joined MGM Resorts in 2015, first serving as general manager and then president and COO of Beau Rivage Resort and Casino in Mississippi, United States. He will assume his new role after obtaining the necessary approval from New Jersey casino regulators.
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