As we wrote in our preview on 4/7/2011, we believe WYNN had a big Q1 in Vegas and Macau.  In preparation for WYNN’s Q1 earnings release tomorrow, we’ve put together the pertinent forward looking commentary from WYNN’s Q4 earnings call. 





  • “We’ve been adding junket operators, and we’ve got one or two more coming this spring [2Q].”
  • “With two additional junkets, you could see that ratio [10-15% direct] go to the lower side, for sure. But the direct business is still up, well over 50% for the year, and is continuing to grow. But Linda grows them one customer at a time.”
  • “In Macau, the credit balances outstanding with our associates in the junket business are very large. We, on our own account, reserve 3% or 4% for bad debt.”
    • “Our reserve as a percentage of receivables is 47% right now in Macau, which is very, very comfortable.”
      • Q: How does that compare to the other operators?
        • A: Much higher
  • “And I’m hoping that we can get started in March, or April, at the latest. It’s a landfill, as you know, at Cotai, and so there’s remediation that takes place for the foundation work that adds six or seven months to normal construction time.”
  • [Cotai opening] “I think late ‘14, early ‘15 would be my best guess.”
  • [2011] “Somewhere between 20% and 22% of our room nights will be convention this year.”
  • [Wynn Encore Macau] “There’s actually still room to grow there. So, especially on the weekends, we were always capacity-constrained with our rooms, so adding the 414 rooms and suites really helped us out. Another thing that we’ve done is, as everybody’s mentioned, we’ve added some junkets. And, in fact, we continue to modify our floor, to increase capacity with both our VIP and, especially, also our high-limit mass areas. That’s been extremely well received.”
  • “We actually built spaces [in Wynn Encore Macau] that were smaller on purpose. And you just heard what Matt said, what’s the multiple?....Three-and-a-half times for fourth quarter and two-and-a-half times for the year…. Also, there’s a lot of opportunity in our slot revenue. We’ve restructured our slot operation for 2011. It will be completed here in a few days, and we’re going to have a jump there.”
  • [Cotai] Well, now that the plans are finished, it’s in the hands of Wynn Design & Development to create a construction budget, and that process has just begun, and I’m not quite ready to say, but I think $2.5 billion is a comfortable number for us. We’d have no compunction about spending that kind of money on the facility, with all of its entertainment potential. And so – and as far as I mentioned a few minutes ago, as far as when we get started, that’s up to the government. They’ll tell us. And I expect that it’s not very far away.” 
  • “I would not tell you that our credit has loosened. I would say that our business volumes have increased. We’ve kept our reserve methodology the same throughout, and we’ll continue to do so in the future. We continue to be very prudent about junket partnerships. We have more people interested than we require, and we add very organically. We’re very careful in our due diligence, and the relationships we have with our junket partners are true partnerships.” 
  • “I think if you look at the very peak times that happen in the city over the Golden Week holidays, everybody manages to get in. We’re able handle incredibly high volumes. I think the infrastructure side of things is a bit over talked about. There are good things happening in the next 18 to 24 months. We have the Pac-On Ferry Terminal goes through a considerable expansion. The Gongbei border gate is increasing capacity of daily arrivals by up to 60%. And there’s more ferry services being put online to Macau. So the market seems to be able to handle the additional customer arrivals, so I don’t foresee an imminent problem. And the beauty of Cotai coming on stream in late ‘14, early ‘15, is the monorail system will be up and running from the Pac-On Ferry Terminal around our property on two sides. So the government has reacted. There’s more taxis in the marketplace. Macau is a small city. When it’s very busy, it does get a little bit choked at key times, but that’s the same everywhere in the world.” 
  • [Galaxy Macau impact] “It should be good for the market, too, because the market does not have enough hotel rooms to accommodate the people on the weekends. So I think it will be good for Cotai and good for the market overall.” 



  • “Our room rates are up a little. Our occupancy is okay. Our convention bookings are ahead of last year. I’m saying that these indicators are pointing up. Slots are still weak, but the indicators about visitation and room rate and convention bookings, which are very important for the mid-week period, are pointing up.”
  • “In terms of areas of opportunity for growth in 2011, we’re continuing to see improvements in domestic business, and so we’re seeing lots of opportunity there. Obviously, Matt already talked about the convention opportunities that we have here in Las Vegas. We’re expecting that to really help us on the room side this year.”
  •  “We raised rates – we have just remodeled the entire Wynn facility.  We have between 2% and 3% of our rooms still under remodel. We finish by April, the end of April. And the amount of rooms that are out of order – suites and villas – is down to 2% or 3% now, so it really doesn’t matter a lot.”
  • “We are running at around 9,300 FTEs right now, and we think that is a good run rate, even if business volumes do increase. So our fixed costs right now, we feel pretty comfortable with, and any increase in cost should really be more on the variable side. So that’s the beauty of these hotels with operating leverage, as things get better, your margins get better.” 



  • [Corporate expense] “Better run rate is closer to the third quarter – which was, excluding stock-based comp, around $18 million – as a run rate going forward.”
  • “So at 12/31, about half of the cash is at the parent – a little more than half – and the rest is at subsidiaries, mainly Wynn Macau, which was $1.3 billion.”
  • [Q] “I believe you said that it would be a very long time before you would develop anything in the United States again, and I wondered if you still think that’s true.”
    • [A]I don’t still think it’s true. I changed my mind.”

Breakdown: SP500 Levels, Refreshed...



Life is good. Risk management is hard.


Given the heightening probability of a US Currency Crisis (see slides and replay from our Q2 Global Macro Themes call we hosted on Friday), it shouldn’t be a conceptual surprise to see the SP500 slicing through both our immediate and intermediate-term levels of risk management support: 

  1. TRADE = 1319
  2. TREND = 1302 

As I wrote on Friday, citing Baupost’s Seth Klarman, “There’s an invisible tipping point – when we get there, it’s far too late.”


We didn’t need a ratings agency to remind us of that.


The long-term TAIL of support for the SP500 is still intact, but it’s a lot lower – down at 1186.



Keith R. McCullough
Chief Executive Officer


Breakdown: SP500 Levels, Refreshed... - 1


Trending +HK$20BN for April



Macau continues to defy expectations with this past week actually accelerating from already strong weekly revenues.  Through April 17th, total table gaming revenues were HK$11.7 billion and average daily revenue exceeded HK$688 million month to date.  Total April gaming revenues including slots are now on pace for HK$20.0-21.0 billion, up 52-59%, and that assumes a pre-holiday slowdown the rest of the month.


In terms of market share, MPEL and WYNN are the standouts while Galaxy and SJM are “struggling”.  Of course, with market numbers like these, market share probably isn’t such a concern.  Here is the data:



Early Look

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Relied upon by big institutional and individual investors across the world, this granular morning newsletter distills the latest and most vital market developments and insures that you are always in the know.


Notable news items from the past few days, Friday’s price action, and our fundamental view on select names.

  • PZZA President and Co-CEO Jude Thompson resigned from the pizza chain Friday, leaving the company in the hands of founder and co-CEO John Schnatter.
  • PZZA was cut to Hold from Buy at Stifel Nicolaus.
  • PZZA shares gained prior to the news announcement (AMC) by 1.9% on accelerating volume.
  • MSSR many delay its AGM if Tilman Fertitta has his way.  Fertitta is calling for shareholders of the company to sign a gold proxy card giving LSRI, a subsidiary of Fertitta’s Landry’s Restaurants Inc., power over their share for the meeting.  This would prevent a quorum being reached, effectively impeding the company from addressing its business at the meeting until first discussing LSRI’s unsolicited tender offer.
  • DRI made the cut for JPM’s “Best Equity Near-Term Ideas” report led by Thomas Lee.  JPM's price target is $56.
  • WEN gained on accelerating volume on Friday.
  • BJRI shares gained 2.82% on accelerating volume.



Howard Penney

Managing Director



Sovereign debt concerns in Europe are mounting, once again, as Greek two- and ten-year government bonds slumped, driving yields to the highest level since before the inception of the Euro.  Oil has declined as Saudi Arabia’s oil minister says that markets are “oversupplied”. 


THE HEDGEYE DAILY OUTLOOK - daily sector view







  • ADVANCE/DECLINE LINE: 1105 (+878)  
  • VOLUME: NYSE 1040.22 (+16%)
  • VIX:  15.32 -5.84% YTD PERFORMANCE: -13.69%
  • SPX PUT/CALL RATIO: 2.11 from 1.50 (40.67%)


  • TED SPREAD: 21.32 -0.075 (-0.351%)
  • 3-MONTH T-BILL YIELD: 0.07%
  • 10-YEAR: 3.43 from 3.51
  • YIELD CURVE: 2.72 from 2.74



  • 08:30 a.m.: Housing Starts: est. 520k, prior 479k
  • 08:30 a.m.: Building Permits: est. 540k, prior 517k
  • 08:30 a.m.: Housing Starts MoM % Chg: est. 8.6%, prior -22.5%
  • 08:30 a.m.: Building Permits MoM% Chg: est. 1.1%, prior -8.2%
  • 10:00 a.m.: Fed’s Fisher, Lockhart to discuss globalization in Atlanta
  • 11:00 a.m.: Export Inspections (corn, wheat, soybeans)
  • 11:30 a.m.: U.S. to sell $30b in 3-mo., $28b in 6-mo. bills.
  • 12:30 p.m.: Fed’s Bullard to speak on banking rules in Kentucky
  • 04:00 p.m.: Crop progress report


  • U.S. 2yr yield falls to 3-week low before housing data at 10 a.m, median est. 17 by 39 analysts:
  • Pulitzer Prize winners announced, 3 p.m.
  • ECB’s Bonello urges caution against rate hikes at the expense of economic growth
  • Deutsche Telekom, France Telecom agree on JV to save EU1.3b
  • Ferrari IPO should be worth $7.3b, Marchionne says



THE HEDGEYE DAILY OUTLOOK - daily commodity view



  • Snickers-to-Noodles Surge Drives Cooking Oil Supplies to Three-Decade Low
  • China Said to Limit Industrial Corn Use to Meet Demand For Livestock Feed
  • Oil Declines in New York After Saudi Arabia Says Market Is `Oversupplied'
  • Hedge Funds Raise Bearish Gas Bets After ‘Dead Cat Bounce’: Energy Market
  • Corn Falls for Second Day as China Raises Reserve Ratios to Cool Inflation
  • Coffee Climbs as Rains May Delay Colombian Harvest; Cocoa Prices Advance
  • Gold Falls as Some Investors Sell Following Advance to Record-High Price
  • Copper for Three-Month Delivery Declines 0.5% to $9,360 a Ton in London
  • Minmetals Will Raise Up to $864 Million in Share Sale to Fund Zinc Project
  • China Has ‘Pent-Up Demand’ for Sugar, May Buy 1.8 Million Tons, ANZ Says
  • Palm Oil Gains After Drop to Lowest Price in Four Months Lures Some Buyers
  • Corn, Soybeans May Rise as Wet, Cool Weather Stalls Planting, Survey Shows
  • Singamas May Raise Container Prices 11% on Higher Steel Cost, Japan Quake
  • Gold-Shortage Threat Drives Texas Schools Hoarding 664,000 Ounces at HSBC




THE HEDGEYE DAILY OUTLOOK - daily currency view



  • Bonello Urges ECB Caution in Raising Rates as Most-Indebted Nations Trail
  • European Stocks, U.S. Futures Slide as Banks, Insurance Companies Retreat
  • Greek, Portuguese Government Yields Surge to Records on Default Concerns
  • Ferrari Should Be Valued at $7.3 Billion in IPO, Marchionne Tells Bankers
  • Czech Central Bank Governor Says Mixed ‘Signals’ Are Clouding Rate Outlook
  • Allied Irish Swaps Decline on Concern Payout at Risk in Any Restructuring
  • France Telecom to Make Joint Purchases With Deutsche Telekom to Save Money
  • London Homes' Asking Prices Rise to Record Amid Shortage, Rightmove Says
  • Sberbank Joins Credit Suisse to Set Up $1 Billion Investment Russia Fund
  • Czech Central Banker Says Preventing Crises by Regulation Is ‘Nonsense’
  • BOE Should Maintain Key Rate at Record Low as Recovery Struggles, E&Y Says
  • Ruble Eurobond Yield Lowest to Domestic Spurs Second Sale: Russia Credit







  • China Raises Reserve Ratio to Curb Inflation as Zhou Pledges More to Come
  • Most Asian Stocks Retreat on China Policy Tightening Concern; AIA Surges
  • BOJ Said to Forecast Inflation Accelerating to 0.5% for Year to March 2012
  • G-20 Targets ‘Too Big to Ignore’ Economies as Growth Will Outweigh Shocks
  • Hysan Says Causeway Bay Rents to Narrow Price Gap With Hong Kong’s Central
  • ‘Ugly’ Inflation Drives Biggest Bond Selloff Since January: India Credit
  • China's Huawei Closes In on Ericsson After Revenue Triples Over Five Years
  • Kissinger’s ‘Basket Case’ Bangladesh Targets Record Growth in Three Years
  • Pimco ‘Open to Adding’ Investments Across Asia as Gross Shuns Treasuries
  • Temasek's Mapletree Commercial Raises $718 Million in Singapore Share Sale
  • Hong Kong's Home Prices to Drop When Fed Policy Shifts: Chart of the Day
  • Hong Kong Canary Singing Commodities Boom Peaking in Aussie Mine: Real M&A








Howard Penney

Managing Director


We’re expecting Q2 guidance below the Street and mediocre full year guidance.  Given MAR’s negative pre-announcement, how will that be perceived by investors?


We estimate that Starwood will report an in-line number on April 28 and give guidance for a below consensus 2Q11 and mediocre full year.  We’re at $207MM of Adjusted EBITDA and $0.27 of Adjusted EPS.  More importantly, we remain concerned with the extremely difficult comparisons (absolute dollar RevPAR) in the May through July period of 2010.  Thus, we think RevPAR growth could materially disappoint relative to the Street’s 6-9% expectations.


1Q2011 Detail:

  • Non-same store WW RevPAR of 8.5% (the reported SS number is usually higher)
  • We estimate owned, leased and consolidated JV revenue and gross margin of $410MM and $61MM
    • Owned RevPAR of $135, up 8% YoY and RevPOR (revenue per occupied room) of $323.43, up 4% YoY
    • Room revenues of $257MM, up 6% YoY
    • F&B revenue of $153MM, up 10% YoY
    • CostPAR of $275.31 up 3% YoY, producing a 120bps expansion in EBITDA margins
  • We estimate management, franchise & other income of $177MM with management and franchisee fees up 17% to $142MM
    • Base fees of $69MM and incentive fees of $32MM
    • Franchisee fees of $41MM
    • $29MM of amortization of deferred gains, termination fees and other income
    • $6MM of “other revenues”
  • VOI sales and services revenue of $132MM and operating profit of $31MM
  • Other details:
    • SG&A: $79MM
    • Income statement D&A of $68MM and a $78MM addback for the Adjusted EBITDA calculation
    • Interest expense: $56MM
    • 25% tax rate

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