My favorite response came from Ben Leong, Director, Business Development to my question regarding the Macau impact of the declining Chinese stock market: “Chinese invest in the stock market for the long term. Best way for Chinese to make money near term is to go to casino”. A different mindset from what I’m used to, but very instructive. Needless to say, they don’t believe the stock market decline has had any impact.

Nick Niglio, Neptune COO, provided most of the conference call commentary and it should not be taken lightly. Neptune is the number 2 junket operator in Macau and could soon be #1. The company operates 102 tables which will increase to 142 on October 5th through the addition of 40 tables at Galaxy’s Starworld. Neptune is currently in 6 properties in Macau with its best performing room at Wynn Macau.

  • I’ve had a negative outlook on Macau stocks for quite some time, with one exception: the visa situation. My contacts in Macau believe that a new 6 month visa restriction is NOT forthcoming. Mr. Niglio agrees. Beijing remains a bit of a black box but as I speculated in my 8/25 post “MACAU: QUID PRO QUO ON VISA RESTRICTIONS”, the timing of the announcement of aid to the earthquake stricken Sichuan province by the Macanese government was very interesting.
  • More positive commentary from Mr. Niglio. Neptune generated a 9% sequential increase in gaming volume from July to August, and he has seen no effect in September from the enacted 2 month visa restriction. Certainly, the impact on the operators’ mass market clientele will be greater than Neptune’s VIP business. However, the level of VIP volume is still encouraging.
  • As should be expected, government intervention was a key topic of the conference call. Mr. Niglio believes the 1.25% junket commission cap may be enacted in January. I’m still somewhat skeptical that anything formal will come out of the government but wouldn’t rule out “informal” pressure to conform.
  • It wasn’t all roses and chocolates. Mr. Niglio spoke about the potential negative Singapore impact on Macau. Neptune will likely benefit from the opening of that market and, in fact, the junket operator is already in discussions with Las Vegas Sands and Genting regarding a Neptune VIP room in both casinos. Other Macau junket operators are interested in Singapore as well. If you were a junket operator where would you bring your top players; Singapore with a VIP gaming tax rate of 5% or Macau at 35%?
Demand has kept up with supply recently but 9/1 visa restrictions will slow mass market growth

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This is a brief note written by Hedgeye U.S. Macro analyst Christian Drake on 4/28 dispelling media reporting that “US GDP collapses to 0.7%, the lowest number in three years with the worst personal spending since 2009.”

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Cartoon of the Day: Crash Test Bear

In the past six months, U.S. stock indices are up between +12% and +18%.

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“If you saved in gold over the past 20 to 25 years rather than any currency anywhere in the world, gold has outperformed all these currencies,” says Stefan Wieler, Vice President of Goldmoney in this edition of Real Conversations.

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We remain long Exact Sciences in the Hedgeye Healthcare Position Monitor.

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UnderArmour: 'I Am Much More Bearish Than I Was 3 Hours Ago'

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"Buffalo Wild Wings has been plagued by complacency and a continued lack of adequate leadership," writes Hedgeye Restaurants analyst Howard Penney.

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Todd Jordan on Las Vegas Sands Earnings

"The quarter actually beat lowered expectations. Overall, the mass segment performed well although base mass lagging is a concern," writes Hedgeye Gaming, Lodging & Leisure analyst Todd Jordan on Las Vegas Sands.

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An Update on Defense Spending by Lt. Gen Emo Gardner

"Congress' FY17 omnibus appropriation will fully fund the Pentagon's original budget request plus $15B of its $30B supplemental request," writes Hedgeye Potomac Defense Policy analyst Lt. Gen Emerson "Emo" Gardner USMC Ret.

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