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MACAU STILL BOOMING IN APRIL

Though still early, April revenues have been impressive.

 

 

Macau is off to another great start to a month with April table gaming revenues of HK$6.7 billion through the 10th.  Adding in slots and taking into account the number of weekend and weekdays, we are making an early projection of HK$19.0-20.0 billion for the full month.  That range of revenues would produce a YoY increase of 44-52%, fairly spectacular given the +70% comparison last April.  We would caution that with only 1/3rd of the month in, it is still early.  We think we’ve taken into account a likely slowdown in late April ahead of the May Golden Week, but that week may be a bit unpredictable. 

 

MPEL is the clear winner in terms of market share here in April, climbing to 19.5% versus the 14.5% trailing 3 month average.  MPEL’s high teens share in early April is likely unsustainable but we are hearing volumes have been strong.  It is likely that MPEL will post another strong month of share.  Wynn’s share was also strong while Galaxy, SJM, and LVS have taken a hit.  It’s probably not as prudent to be overly focused on market share given the overall strength of the market, however.

 

Here are the details:

 

MACAU STILL BOOMING IN APRIL - macau1


Q1 HOTEL TRANSACTIONS UPDATE

Big jump on transaction volume in Q1

 

 

Market M&A Trends for Q4 and Year 2010

  • Q1 US transaction volume soared close to $5BN, more than half of total volume for 2010
  • Biggest deal: Ashford Hospitality’s acquisition of 28 Highland Hospitality hotels for $1.28BN in a foreclosure deal
  • Consistent with 2010, REITS (existing and newly formed) dominated the M&A market in Q1
  • Hotel delinquencies have stabilized. The latest data from Fitch showed hotel delinquencies in February hit 14.3%, a rate similar to Q4 2010

Luxury Segment

  • Average Price per Key
    • Q1 2011 Global average: $279,697
      • US average: $289,733 (4 transactions)
    • Q4 2010 Global average: $998,687.  In Q4, there were several sales in Europe (London, France, Dubai) that surpassed $1MM in average price per key.
      • No US transactions

Upper Upscale Segment

  • Average Price per Key 
    • Q1 2011 Global average: $250,532 
      • US average: $261,559 (20 transactions)
    • Q4 2010 Global average: $257,295
      • US average: $291,945 (7 transactions)

Q1 HOTEL TRANSACTIONS UPDATE - hotel trans


TALES OF THE TAPE: MCD, JACK, WEN, DIN, YUM, KKD, RT

Notable news items from the past few days and price action from Friday.

  • MCD CEO, Jim Skinner, received a total of $9.7 million in compensation in 2010, including his roughly $42,000 annual salary increase as well as a 38% rise in his annual performance bonus.
  • JACK was cut to “Underperform” from “Neutral” at Credit Suisse.
  • WEN is challenging its biggest rival, McDonald’s, by putting its marketing dollars behind gaining more French fry market share.  A “national taste test” carried out by Wendy’s claims that 56% of consumers preferred Wendy’s fries to McDonald’s, with 39% taking the opposite view and 4% having no preference.  Wendy’s fry unit sales were up 16% during the national media in December versus the base period.
  • DIN is carrying out an internal investigation after a toddler at a Madison Heights, Michigan, Applebee’s location was served alcoholic margarita mix.  Police are looking into the incident and Applebee’s has pledged to cooperate and conduct its own investigation.
  • YUM gained on strong volume on Friday. 
  • KKD gained on strong volume on Friday, also.  The stock has declined sharply since 3/31, when the company announced disappointing earnings.
  • RT declined once more, on accelerating volume, as confidence in the company’s ability to meet the Street’s expectations waned. 

TALES OF THE TAPE: MCD, JACK, WEN, DIN, YUM, KKD, RT - stocks 411

 

 

Howard Penney

Managing Director


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WEEKLY RISK MONITOR FOR FINANCIALS: SWAPS SIGNAL FALLING RISK

This week's notable callouts include swaps tightening across the board, particularly the European banks and European sovereigns (except Greece).  The only negative on the short-term duration was a significant decline in the Baltic Dry Index, which fell 144 points WoW.


Financial Risk Monitor Summary (Across 3 Durations):

  • Short-term (WoW): Positive / 6 of 11 improved / 1 out of 11 worsened / 4 of 11 unchanged
  • Intermediate-term (MoM): Positive / 5 of 11 improved / 1 of 11 worsened / 5 of 11 unchanged
  • Long-term (150 DMA): Neutral / 4 of 11 improved / 4 of 11 worsened / 3 of 11 unchanged

 

WEEKLY RISK MONITOR FOR FINANCIALS: SWAPS SIGNAL FALLING RISK - summary

 

1. US Financials CDS Monitor – Swaps were mostly tighter across domestic financials, tightening for 22 of the 28 reference entities and widening for 6. 

Tightened the most vs last week: XL, AIG, HIG

Widened the most vs last week: PMI, RDN, GNW

Tightened the most vs last month: MET, XL, C

Widened the most vs last month: PMI, RDN, MBI

 

WEEKLY RISK MONITOR FOR FINANCIALS: SWAPS SIGNAL FALLING RISK - us cds

 

2. European Financials CDS Monitor – Banks swaps in Europe were tighter, tightening for 35 of the 39 reference entities and widening for 3, with one unchanged.

 

WEEKLY RISK MONITOR FOR FINANCIALS: SWAPS SIGNAL FALLING RISK - euro cds

 

3. European Sovereign CDS – Sovereign CDS fell sharply across Europe, particularly in Ireland and Portugal.  Greek CDS rose slightly on the news that Greece may require another extension of the terms of repayment or another cut in the bailout rate. 

 

WEEKLY RISK MONITOR FOR FINANCIALS: SWAPS SIGNAL FALLING RISK - sov cds

 

4. High Yield (YTM) Monitor – High Yield rates fell slightly last week, ending at 7.82, 3 bps lower than the previous week.  

 

WEEKLY RISK MONITOR FOR FINANCIALS: SWAPS SIGNAL FALLING RISK - high yield

 

5. Leveraged Loan Index Monitor – The Leveraged Loan Index rose last week to end the week at 1620.   

 

WEEKLY RISK MONITOR FOR FINANCIALS: SWAPS SIGNAL FALLING RISK - lev loan

 

6. TED Spread Monitor – The TED spread rose last week, hitting a new high mid-week and ending the week at 24.0 versus 23.6 the prior week.

 

WEEKLY RISK MONITOR FOR FINANCIALS: SWAPS SIGNAL FALLING RISK - ted spread

 

7. Journal of Commerce Commodity Price Index – Last week, the JOC index rose to end the week at 37.4, 4.5 points higher than the prior week.

 

WEEKLY RISK MONITOR FOR FINANCIALS: SWAPS SIGNAL FALLING RISK - JOC

 

8. Greek Bond Yields Monitor – We chart the 10-year yield on Greek bonds.  Last week yields rose 11 bps.

 

WEEKLY RISK MONITOR FOR FINANCIALS: SWAPS SIGNAL FALLING RISK - greek bonds

 

9. Markit MCDX Index Monitor – The Markit MCDX is a measure of municipal credit default swaps.  We believe this index is a useful indicator of pressure in state and local governments.  Markit publishes index values daily on four 5-year tenor baskets including 50 reference entities each. Each basket includes a diversified pool of revenue and GO bonds from a broad array of states. Our index is the average of their four indices.  Last week spreads fell to 122. 

 

WEEKLY RISK MONITOR FOR FINANCIALS: SWAPS SIGNAL FALLING RISK - mcdx

 

10. Baltic Dry Index – The Baltic Dry Index measures international shipping rates of dry bulk cargo, mostly commodities used for industrial production.  Higher demand for such goods, as manifested in higher shipping rates, indicates economic expansion.  Early in the year, Australian floods and oversupply pressured the Index, driving it down 30%. Since then it has bounced off the lows.  Last week it fell once again, dropping 144 points to 1376. 

 

WEEKLY RISK MONITOR FOR FINANCIALS: SWAPS SIGNAL FALLING RISK - Baltic dry

 

11. 2-10 Spread – We track the 2-10 spread as a proxy for bank margins.  Last week the 2-10 spread widened out to 277 bps. 

 

WEEKLY RISK MONITOR FOR FINANCIALS: SWAPS SIGNAL FALLING RISK - 2 10

 

12. XLF Macro Quantitative Setup – Our Macro team sees the setup in the XLF as follows:  1.6% upside to TRADE resistance, 0.4% downside to TRADE support.

 

WEEKLY RISK MONITOR FOR FINANCIALS: SWAPS SIGNAL FALLING RISK - xlf

 

 

Joshua Steiner, CFA

 

Allison Kaptur


THE M3: LRT LAWSUIT DROPPED; LAND AUCTION POSTPONED

The Macau Metro Monitor, April 11, 2011

 

 

BOMBARDIER DROPS LAWSUIT OVER LRT TENDER: REPORT macaubusiness.com

The consortium between Bombardier Transportation and China Road and Bridge Corporation has dropped a lawsuit related to the Macau Light Rail Transit public tender.

 

GOVT POSTPONES LAND AUCTIONS macaubusiness.com

Macau CEO Chui said the auction of two land parcels will be postponed.  He reaffirmed the building of 19,000 public housing units by next year and new measures to fight inflation if average 12-mth CPI reaches 5%.


CHART OF THE DAY: Paving Serfdom's Road in Getting More Expensive by the Day

 

 

CHART OF THE DAY: Paving Serfdom's Road in Getting More Expensive by the Day -  Chart


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