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MACAU APRIL DETAIL

April was a surprisingly strong month, despite only 30 days and it being a seasonal shoulder month between March and May. MPEL was the standout. 

 

 

Total gaming revenue increased 44% YoY to HK$19.9 billion.  Certainly, hold played a part as junket volume declined 5.5% from March while total VIP revenue increased 4.4% sequentially.  Nevertheless, April was much better than expected.  Importantly, high margin Mass increased 31% YoY, putting in the 2nd best Mass month ever, falling only 2% below March 2011.

 

In terms of market share, MPEL was the big winner, generating 17.2% of the total gaming market, by far its best showing since September 2009.  MPEL’s 6 month average share was 14.6%.  Most importantly, MPEL was able to grow its mass share significantly, up to 11.2% and 90bps higher than its 6 month average.  Overall, MPEL grew its total gaming revenue 91% YoY in April.  We still think low hold in March may cause MPEL to disappoint the Q1 whisper EBITDA number of $145 million but the company is certainly off to a great start in Q2.

 

Wynn was also a market share gainer – 150bps over its 6 months average, driven mostly by a higher than normal VIP hold percentage.  Mass market share actually declined.  LVS’s share held steady relative to its average but Mass share continues to trend below its moving average.  Market share losers were SJM and Galaxy (low hold).  While MGM’s share was consistent, the property led the market in growth with total gaming revenue up 128%.

 

 

Y-o-Y Table Revenue Observations:

 

Total table revenues grew 45% YoY this month despite a difficult comp of 73% YoY growth in April 2010, with Mass growth of 31% and VIP growth of 50%.  Junket RC also grew 50% in April.

 

LVS table revenues grew 13% - the slowest of the concessionaires

  • Sands was up 19%, driven by a 23% increase in VIP and a 12% increase in Mass
    • Sands benefited from high hold this month.  Adjusted for 10% direct play (in-line with 1Q11), hold was about 3.6%, compared to 3.2% hold in April 2010, assuming a 14% direct play estimate (in-line with 2Q10).  Junket RC was up 18.5%.
  • Venetian was up 28%, driven by a 12% increase in Mass and 39% increase in VIP
    • Junket VIP RC increased 82%, compared to a 23% decline in April 2010.  Assuming 19% direct play, in-line with 1Q11, we estimate that hold was 2.8%, compared to 3.4% hold in April 2010 (assuming 24% direct play).
  • Four Seasons was down 43% driven by 61% decline in VIP which was somewhat offset by 76% Mass growth
    • The decline that FS experienced in April is partly due to difficult hold comparisons and low hold this month
    • Assuming 40% direct play, hold was 2.2% compared to an estimated hold of 3.8% in April 2010 assuming direct play levels were in-line with 2Q10 at 50%.
    • Junket VIP RC decreased 15%.

Wynn table revenues were up 71%

  • Mass was up 53% and VIP increased 75%
  • Junket RC increased 58%
  • Assuming 10% of total VIP play was direct, we estimate that hold was 3.4% compared to 3.1% last year (assuming 11% direct play)

MPEL table revenues grew 97%, driven by Mass growth of 62% and VIP growth of 104%

  • Altira was up 42% with Mass continuing its tear, up 73% while VIP grew 41%
    • VIP RC was up 25%
    • We estimate that hold was 3.4% compared to 3.0% last year.
  • CoD table revenue was up 149%, driven by 60% growth in Mass and 189% growth in VIP (the most of any property in Macau)
    • Junket VIP RC grew 81%
    • Massive VIP growth was due to very easy April 2010 comps and very strong RC growth. Assuming 19% direct play, hold was 2.9% compared to 1.9% in April 2010, assuming 18% direct play (in-line with 2Q2010)

SJM revs grew 28%

  • Mass was up 22% and VIP was up 31%
  • Junket RC was up 41%

Galaxy table revenue was up 15%, driven by 65% growth in Mass and VIP growth of 11%

  • Starworld table revenues grew 25%, driven by 104% growth in Mass and 21% growth in VIP
  • Junket RC grew 34% at Galaxy Group and 35% at Starworld

MGM table revenue was up the most in April, growing 131%

  • Mass revenue growth was 61%, while VIP grew 157%
  • Junket rolling chip growth also grew the fastest at 117%

Assuming direct play levels of 10%, we estimate that hold was 3.1% this month vs. 2.6% in April 2010

 

 

Sequential Market Share (property specific details are for table share while company-wide statistics are calculated on total GGR, including slots):

 

LVS share rose 1.2% in April to 16.9% from 15.6% in March. This compares to 6 month trailing market share of 17.1% and 2010 average share of 19.5%

  • Sands' share increased 90bps to 5.7% off of the properties all-time low share in March
    • The decrease was driven by a 120bps increase in VIP market share to 5%, off of an all-time property low in March.  RC share was 3.9%, down 30bps sequentially, and below the 2010 average of 4.5%.
    • Mass market share ticked down 10bps sequentially to 7.9%
  • Venetian’s bounced 1.3% to 9.3% share off of March's all-time lows
    • VIP share increased 1.9% to 7.9%
    • Junket RC increased 90bps to 6.7%, which compares to an average of 6.3% share in 2010. Perhaps they are making some inroads with their junket strategy?
    • Mass share decreased 30bps to 13.8% hitting an all time low for the property. 2010 average share was 15.9% and 6 month trailing share (ex. April) is 15.2% for the property
  • FS share decreased 110bps to 1.4%
    • VIP share decreased 160bps to 1.1%
    • Mass share increased 70bps to 2.5%, the property's 2nd best share month after December 2008      
    • Junket RC share decreased 60bps to 0.9%, the property’s lowest share since July 2009

WYNN was a big share gainer in April, with share up 2.7% to 16.8%, driven by a combination of high VIP hold and easy sequential hold comps, and above market growth in both Mass and Junket RC.  April’s share is above Wynn’s 6 month trailing average share (ex April) of 15.3% and 2010 average share of 14.9%.

  • Mass market share decreased 1% to 10.9%, compared to an average of 10.1% in 2010
  • VIP market share increased 4.6% to 18.4% sequentially, nicely above its 2010 average of 16.0%
  • Junket RC share increased 60bps to 15.3%, in-line with Wynn’s 2010 average of 15.2%

MPEL was the largest share gainer in April, with market share increasing to 17.2% from 14.1% in March – beating out LVS for 2nd place behind SJM!  April’s share compares with an average 6 month trailing and 2010 share of 14.6%

  • Altira’s share increased 80bps to 6.0%, compared to 5.6% average share in 2010
  • CoD’s share increased 2.4% sequentially to 11% - 180bps above Venetian’s table market share!
    • Mass market share increased 1.7% to 9.7%, the properties’ second best share after February's all-time high of 10.3%
    • VIP market share decreased 2.5% to 11.4% while Junket RC share decreased 40bps sequentially to 10% (compared with 6.7% share for Venetian).

SJM went from the biggest share gainer in March to the biggest loser in April.  SJM’s share fell 4.3% to 29.6%.  April share compares with an average share of 31.3% in 2010 and a 6 month trailing average of 31.6% (ex April)

  • Mass market share decreased 70bps to 40.1% while VIP share plummeted by 5.4% to 27.4%
  • Junket RC share decreased to 32.8% from 34.2% in March

In a reversal of last month’s trend, Galaxy was the 2nd largest share loser in April, with share declining to 9% from 11.4% in March. April share compares with an average share of 10.9% in 2010 and a 6 month trailing average of 10.3% (ex April)

  • Starworld's market declined 1.4% to 8.2%
  • Share gains were entirely driven by VIP which lost 2% share to 9.8% despite Junket RC share increasing 80bps to 11.7%.
  • Most of Galaxy’s share losses were caused by low hold, which we estimate was below 2.5% in April compared to 3.1% in March

 MGM's share decreased 50bps to 10.5%, from 11% in March. April share compares with an average share of 8.8% in 2010 and a 6 month trailing average of 11.2% (ex April)

  • Mass share increased 60bps to 8.9% - the 3rd highest property share after Venetian and CoD
  • VIP share decreased 70bps to 10.8% - the 2nd highest property share (that we track) after CoD
  • Junket RC decreased 10bps to 10%,but remained above the property’s 2010 average of 8.4%

 

Slot Revenue:

 

Slot revenue grew 32% YoY in April to $108MM

  • MGM slot revenues grew the most at 94% reaching $15MM
  • At 39% YoY, LVS had the second best growth, impressive given the large base. Slot revenues were $32MM.
  • Galaxy grew 37% to $3MM
  • Wynn’s slot revenue grew 31% reaching $20MM
  • MPEL’s slot revenues grew 28% reaching $23MM – in-line with March’s all-time high for the company
  • SJM was the only concessionaire to experience a decline in slot growth. SJM slot revenue fell 5% to $15MM.

 

MACAU APRIL DETAIL - table

 

MACAU APRIL DETAIL - mass

 

MACAU APRIL DETAIL - rc


WATCH YOUR WALLET: INITIAL CLAIMS JUMP TO HIGHEST LEVEL IN SEVEN MONTHS

Initial Claims Rocket 45k

The headline initial claims number rose 45k WoW to 474k (43k after a 2k upward revision to last week’s data).  Rolling claims rose 22k to 431k.  A Labor Department spokesman said that the increase was due to temporary layoffs in the auto sector, and also noted an effect from some New York school employees, who can claim unemployment during spring break.  On a non-seasonally-adjusted basis, reported claims rose 27k WoW, an atypical seasonal move. 

 

Big picture, regardless of whether this week's number was artificially higher due to one-time events, the takeaway from this morning's data is that rolling jobless claims are now up for the past 9 weeks, and even more importantly we're now at the YTD high in rolling claims. We use claims as our primary frequency determinant in thinking about losses for the consumer book of balance sheet dependent financials. The last time we saw such an inflection in the trend in jobless claims was summer 2010, a period in which the XLF lost roughly 20% of its value. Given the XLF is only modestly off its recent highs, we would be cautious given this continuing development on the jobs front. To this end, take a look at our fourth chart showing the overlay of jobless claims with S&P 500. The current divergence is among the widest we've seen in the last few years suggesting that either the market is due for a significant correction in the near-term or claims should fall precipitously in the next few weeks.

 

We have been looking for claims in the 375-400k range as the level that can begin to bring unemployment down.  If claims return to this level, we expect to see unemployment improve. We consider unemployment to be ~200 bps higher than the headline rate due to decreases in the labor force participation rate. In other words, if the labor force participation rate were at the long-term average level of the last decade, unemployment rate would be 10.8% rather than 8.8%. So when we say that claims of 375-400k will start to bring down the unemployment rate, we are actually referring to the 10.8% actual rate.

 

WATCH YOUR WALLET: INITIAL CLAIMS JUMP TO HIGHEST LEVEL IN SEVEN MONTHS - rolling

 

WATCH YOUR WALLET: INITIAL CLAIMS JUMP TO HIGHEST LEVEL IN SEVEN MONTHS - reported

 

WATCH YOUR WALLET: INITIAL CLAIMS JUMP TO HIGHEST LEVEL IN SEVEN MONTHS - NSA

 

Two relationships that we are watching closely are the tight correlation between the S&P and claims and between Fed purchases (Treasuries & MBS) and claims.  With the end of QE2 looming, to the extent that this relationship is causal, it is quite concerning. 

 

WATCH YOUR WALLET: INITIAL CLAIMS JUMP TO HIGHEST LEVEL IN SEVEN MONTHS - s p and

 

WATCH YOUR WALLET: INITIAL CLAIMS JUMP TO HIGHEST LEVEL IN SEVEN MONTHS - fed and

 

Yield Curve Remains Wide

We chart the 2-10 spread as a proxy for NIM. Thus far the spread in 2Q is tracking 5 bps tighter than 1Q.  The current level of 264 bps is 7 bps tighter than last week.

 

WATCH YOUR WALLET: INITIAL CLAIMS JUMP TO HIGHEST LEVEL IN SEVEN MONTHS - spreads

 

WATCH YOUR WALLET: INITIAL CLAIMS JUMP TO HIGHEST LEVEL IN SEVEN MONTHS - spreads QoQ

 

Financial Subsector Performance

The table below shows the stock performance of each Financial subsector over four durations. 

 

WATCH YOUR WALLET: INITIAL CLAIMS JUMP TO HIGHEST LEVEL IN SEVEN MONTHS - perf

 

 

 

Joshua Steiner, CFA

 

Allison Kaptur


TALES OF THE TAPE: DPZ, MRT, CPKI, BJRI, DIN, DRI, RUTH, CAKE, EAT, PZZA, CBOU

Notable news items and price action from the past twenty-four hours along with our fundamental view on key names.

  • DPZ reported impressive earnings, easily beating consensus.  EPS came in at $0.42 versus $0.39, driven by total domestic comps of -1.4% versus consensus -4% and international comps at +8.3% versus consensus +6.5%. 
  • MRT reported after the close yesterday.  1Q11 EPS came in at $0.16 versus $0.13 with comparable restaurant sales up 7.5% versus consensus of 7%.  Food and beverage costs came in at 31% of sales which was slightly higher than expected.  2Q guidance is for EPS of $0.03 to $0.05 versus consensus $0.05 but FY11 guidance was raised by a penny on each end of the range to $0.45 to $0.49 versus consensus $0.45.  The company guided to 2Q and FY11 comps up 6-8%.  Beef gained 10% in the quarter for MRT but rising commodity costs were successfully offset by price increases.
  • CPKI has responded to those affected by the recent Alabama tornado with a two-day fundraiser.
  • BJRI was upgraded to “Overweight” from “Neutral” at Piper Jaffray.
  • MSSR’s board has decided to put the company up for sale.  Tilman Fertitta/Landry’s has responded by withdrawing the proxy seeking to contest a quorum at the 2011 AGM.  Mr. Fertitta said in a statement that his group hopes that the Board is “committed to conducting a process in which all acquisition proposals are fairly evaluated”.
  • DIN, DRI, RUTH, CAKE, EAT, PZZA and CBOU both traded higher on accelerating volume yesterday.
  • COSI, TXRH, and SONC all traded down on accelerating volume.

 

TALES OF THE TAPE: DPZ, MRT, CPKI, BJRI, DIN, DRI, RUTH, CAKE, EAT, PZZA, CBOU - stocks 55

 

 

Howard Penney

Managing Director


Hedgeye Statistics

The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.

  • LONG SIGNALS 80.65%
  • SHORT SIGNALS 78.64%

THE HEDGEYE DAILY OUTLOOK

TODAY’S S&P 500 SET-UP - May 5, 2011


As we look at today’s set up for the S&P 500, the range is 39 points or -1.14% downside to 1332 and 1.76% upside to 1371.

 

SECTOR AND GLOBAL PERFORMANCE


Energy and Financials remain broken on the TRADE duration leaving 7/9 sectors broken on TRADE and 8/9 broken on TREND.    

 

THE HEDGEYE DAILY OUTLOOK - levels 55

 

THE HEDGEYE DAILY OUTLOOK - daily sector view

 

THE HEDGEYE DAILY OUTLOOK - BEST PERFORMING GLOBAL

 

THE HEDGEYE DAILY OUTLOOK - WORST PERFORMING GLOBAL

 

 

EQUITY SENTIMENT:

  • ADVANCE/DECLINE LINE: -1138 (-227)  
  • VOLUME: NYSE 1069.11 (+6.62%)
  • VIX:  17.08 +2.28% YTD PERFORMANCE: -3.77%
  • SPX PUT/CALL RATIO: 2.08 from 1.84 (+12.60%)

 

CREDIT/ECONOMIC MARKET LOOK:

  • TED SPREAD: 25.30 -0.200 (-0.784%)
  • 3-MONTH T-BILL YIELD: 0.03%
  • 10-Year: 3.25 from 3.28
  • YIELD CURVE: 2.65 from 2.67 

 

MACRO DATA POINTS:

  • 8:30 a.m.: Jobless claims, est. 410k, prior 429k
  • 8:30 a.m.: Non-Farm productivity, est. 1.1%, prior 2.6%
  • 8:30 a.m.: Net export sales
  • 9:15 a.m. Fed’s Evans speaks at Chicago conference
  • 9:30 a.m. Fed’s Bernanke speaks at Chicago conference
  • 9:45 a.m. Bloomberg Consumer Comfort Index, est. (-45.0), prior (-45.1)
  • 10 a.m.: Freddie Mac mortgage
  • 10:30 a.m.: EIA natural gas storage change
  • 1:15 p.m. Fed’s Kocherlakota speaks on monetary policy in California

WHAT TO WATCH:

  • Intl Game Technology launches tender offer to buy Swedish gaming company Entraction Holding AB for $115m
  • Ralcorp board unanimously rejects improved $86-shr bid from ConAgra Foods.
  • General Motors reports Q1 EPS $0.95 ex-items vs Reuters $0.91
  • Large Canadian banks look for ways to derail London Stock Exchange's (LSE.LN) takeover of TMX Group - Globe and Mail
  • British government review of solar subsidies proposes a cut in subsidies for large projects - FT
  • Google, Facebook have both held joint venture talks with Skype - Reuters
  • Monster Employment Index rises 9 points m/m in April to 145

COMMODITY/GROWTH EXPECTATION


THE HEDGEYE DAILY OUTLOOK - daily commodity view

 

 

COMMODITY HEADLINES FROM BLOOMBERG:

  • Silver Investors Dump Futures as Comex Boosts Speculator Trading Costs 84%
  • World Food Prices Rise to Near-Record High as Inflation Speeds Up, UN Says
  • Coal’s Two-Year High May Spur Rebound in Chinese Imports: Energy Markets
  • Copper Falls to Seven-Week Low on Concern Policy Tightening May Sap Demand
  • Silver Extends Bear-Market Decline on Margins; Gold Trades Little Changed
  • Grains, Soybeans Drop, Erasing Gains, as Elevated Prices May Erode Demand
  • Wheat in China Unlikely to Get Enough Rain to Avoid Yield Cuts, DTN Says
  • Cocoa Falls on West Africa Mid-Crop Speculation; Sugar and Coffee Retreat

 

 

CURRENCIES

 

THE HEDGEYE DAILY OUTLOOK - daily currency view

 

 

EUROPEAN MARKETS

  • king keeps rate, asset plan steady as reports show UK economy is fading
  • European stocks slide for third day; Lloyds, Socgen tumble after earnings
  • Spain’s borrowing costs rise as demand declines at sale of five-year debt
  • Greek yields signal failure in region’s fiscal crisis policy  - euro credit
  • UK Apr services pmi 54.3 vs consensus 55.7 and prior 57.1

THE HEDGEYE DAILY OUTLOOK - BEST PERFORMING EURO

 

THE HEDGEYE DAILY OUTLOOK - WORST PERFORMING EURO

 

 

ASIA MARKETS

  • Asia Stocks Fall on Concern U.S. Economic Recovery Waning; Bharti Slides
  • Philippine Central Bank Raises Key Rate to 4.5% as Inflation Accelerates
  • Hong Kong Banks May Boost Lending to Small Companies on Property Slowdown
  • Indonesia’s Economic Growth Slows, Giving Central Bank Room to Hold Rates
  • Malaysia Raises Key Interest Rate to 3%, Boosts Reserve Ratio on Inflation
  • Australia March retail sales (0.5%) m/m vs consensus +0.5%.
  • Japan was closed for Children’s Day.
  • South Korea was closed for Orininal.
  • Thailand was closed for Coronation Day.

THE HEDGEYE DAILY OUTLOOK - BEST PERFORMING ASIA

 

THE HEDGEYE DAILY OUTLOOK - WORST PERFORMING ASIA

 

 

MIDDLE EAST

 

THE HEDGEYE DAILY OUTLOOK - MIDEAST PERFORMANCE

 

 

 

Howard Penney

Managing Director


IGT ENTRACTION ACQUISITION CONF CALL

On the surface, this looks like a decent acquisition: 2x revs, not dilutive, and strengthens IGT's online positioning.

 

 

"The addition of Entraction advances IGT's position in legalized Interactive gaming markets.  It strengthens our interactive portfolio by adding poker, bingo, casino, and sports betting. This combination will drive enhanced value for our global customers and partners."

- Patti Hart, President and CEO of IGT

 

"This transaction represents a fantastic opportunity for our employees, customers, and shareholders alike. Entraction will be able to utilize IGT's global scale and distribution to advance our short and long term objectives in exciting, new ways and we look forward to joining the IGT team."

Peter Astrom, President and CEO of Entraction

 

HIGHLIGHTS FROM THE RELEASE

  • IGT launched a cash tender to purchase all the outstanding shares of Entraction Holding AB for $11.11/share ($115MM)
  • The Entraction board has recommended the transaction to its shareholders
  • "Established in 2000 and based in Stockholm, Sweden, Entraction operates one of the world's largest, legal online poker networks and has quickly grown into one of the leading suppliers of online gaming products and services."
    • Over 4 million registered players
    • Partnerships with over 60 operators
    • "Provides a comprehensive suite of services needed to operate a successful gaming site such as content management, payment solutions, and fraud protection."
  • "IGT expects to fund the transaction from available cash on its balance sheet. The tender offer is projected to close within IGT's current fiscal year and is subject to conditions customary for Swedish public companies as well as certain regulatory approvals."

 

CONF CALL NOTES

  • Their offer for Entraction serves to further IGT's objective of growing their international and online gaming business
  • Entraction has 40 turnkey customers and 20 poker customers that use their technology
  • Premature to estimate impact on IGT's FY11 guidance, but the acquisition will enhance IGT's online business in FY12
  • No change to guidance

 

Q&A

  • What is the status of Entraction's remake of their poker product?
    • Too early for IGT to have input on Entraction's platform
    • According to IGT's due diligence, they believe that the platform is good base for online poker
  • This transaction is in support of an ex-US strategy. It's really about participating in existing legal markets.
  • They do generate positive cash from operations and have roughly $54MM of revenue
  • It's really important for them to have the regulatory approvals and they believe that they will be able to take this platform into markets where Entraction didn't have the size and financial ability to pursue. Also complements their existing suit of products that they already have in order package a complete online casino offering. 
  • Entraction has not pursued other takeout opportunities to IGT's knowledge. Have just north of 20% of the shareholders that have already indicated support for the transaction.


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