Tuesday, August 30th at 11:00AM ET
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Takeaway: With Galaxy finally reporting we can say that our inaugural Hedgeye Mass Tracker seems to be working
Just a quick update on the Hedgeye Mass Tracker. Galaxy Entertainment reported Q2 this morning and it was solid and in line. More importantly for us, mass revenues grew 29% YoY in Q2. Galaxy's mass performance brings the Macau market to a total of 4.6% YoY growth in Q2, slightly ahead of our bold (at the time) Tracker estimate of +2-4%. We can tell you that we were conservative with in our +2-4% Tracker estimate given that it was already a bold call to predict positive growth (sell side was projecting flat to slightly down) and it was the inaugural Tracker estimate.
Looking ahead, we've already published our July Tracker estimate of +4-6% mass revenue growth in Macau. August GGR may come in positive which would be the first positive GGR growth month since May of 2014. Positive GGR growth would imply further mass growth acceleration from July.
We'll be publishing a post mortem on Macau's Q2 today so stay tuned for more details and analysis.
Takeaway: We’re giving back 5% for a big reset in room-night estimates; means we can sleep on our long through 2016 given what we saw out of OWW/AWAY
Let us know if you have any questions or would like to discuss in more detail.
Takeaway: Our RevPAR tracker suggests 2Q RevPAR at the low end of guidance for most lodgers
Lodging companies (C-Corps) are set to report earnings this week, starting with HOT on Tuesday (press release only). We think this earnings season will illustrate a deceleration trend. Post-Brexit, hotel stocks have come roaring back, and in our opinion the move is well overdone and largely a function of sector rotation and negative sentiment washout. However, our company RevPAR trackers suggest that most of the hoteliers/REITs will post 2Q RevPAR around the low end of their guidance range and likely lower full year RevPAR expectations. The operators will probably escape with intact 2Q EBITDA and full year EBITDA guidance. However, we think the hotel REITs may be forced to cut EBITDA guidance as well. Stay tuned to management commentary regarding the battle shaping up between the brands and the OTAs – a price war that likely weighs heaviest on the REITs.
PLEASE SEE OUR DETAILED NOTE | HERE
Takeaway: Headline Q2 GGR disappointed but the mix likely more favorable than expected. HE Mass Tracker suggests mass revs up 2-4%. LVS is the play
The Hedgeye Macau Mass Tracker suggests mass gaming revenue increased in the range of 2-4% YoY in Q2. Given the headline GGR disappointment of -9%, positive mass growth may come as a surprise to most. If the Tracker is right – the high R Square suggests it probably is – this would imply better margins in general for the Macau operators’ Q2. With a growing mass segment, LVS is the obvious play and it is our favorite, particularly over the long-term. Our only reservations pertain to the very near term – for whatever reason, the sell side has not reduced Q2 expectations despite the softer monthly GGR figures.
Positive mass revenue growth in Q2 would represent the first growth quarter since Q3 2014. Extrapolating estimated Q2 mass revenues portends consistent YoY growth for at least the next 3 quarters, and likely more assuming just some market growth from new properties. This is a very important inflection point for the market and particularly LVS. Importantly, within the mass segment, higher margin bass mass is likely outperforming. Not only is LVS the largest mass player in Macau, it maintains the most exposure to base mass.
PLEASE SEE OUR DETAILED NOTE | HERE
Takeaway: Caribbean tailwinds abate somewhat for the rest of 2016 - soft guidance stemming from Europe & China matters
Here are our takeaways from today's release and conf call: