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CS First Boston Raises MGM to 'Neutral'


CS First Boston upgraded Metro-Goldwyn-Mayer (MGM) to neutral from underperform.

Analyst William Drewry says the Hollywood movie studio's fundamental performance has improved, and the balance sheet has moved to debt free/net cash positive. He says MGM is successful on a more conservative film production strategy.

Drewry notes the sector's financial returns are improving on a tailwind of higher profitability of the video window, i.e., DVD. He thinks a special dividend or return of capital to shareholders is probable.

Drewry says it seems as if MGM is for sale, based on recent management comments about a merger synergy, two recent tenders, and potentially more returns of capital in some form to shareholders. He raised the $16 target to $19.


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