The Macau Metro Monitor, May 31, 2011



An institutional shareholder is selling 120MM shares in Sands China to raise HK$2.34bn (US$301m). The shares are being offered at a fixed price of HK$19.50, a 3.2% discount to last night's close. Credit Suisse is the sole bookrunner.


Because of the strong IPO response, the greenshoe may get exercised leading Pansy Ho to sell an additional 3% of her shares to investors, reducing her stake to 26% and raising nearly $1.8BN.


RWS FEELS THE HEAT AS AIR-CON FAILS Strait Times, AsiaOne News, Channel News Asia

Due to an central air-conditioner malfunction, RWS closed two shows and its casino, four hotels, and at least 10 restaurants were affected yesterday.  Universal Studios Singapore also had to close much earlier than its extended opening hours during the June holiday period.  Currently, portable AC units are being used.  However, a RWS spokesman said the impact on resort operations is minimal.  RWS said it expects its air conditioning system to be fully restored by Friday.



Singapore bank lending grew by 21.9% YoY to S$351BN in April. Housing loans continued its ascent, expanding 22.2% YoY in April (vs. 18.4% YoY growth in March).

Athletic Apparel Remains Strong – FW Choppy


Athletic apparel sales remain healthy posting a sequential acceleration in the athletic specialty channel while footwear slowed. Volatility remains high in footwear consistent with recent weeks. However, in taking a closer look at footwear ASPs it’s important to keep in mind just how disruptive toning has been and how significantly it can mask underlying core trends. Take a look at the first two charts below. The recent weakness in footwear ASPs is almost as noteworthy as the strength we’re seeing in apparel. Yet, when we strip out the dilutive impact of toning ASPs, core athletic footwear trends reflect not only solid low-to-mid single digit growth, but on a more consistent basis than apparel. Additionally, it’s worth highlighting that toning has represented a 4%-5% drag on core athletic footwear sales growth on average YTD. Back to callouts from the week:

  • In footwear, running continues to be a pocket of strength lead by Brooks up +37% followed by Adidas up +20% due to the new Climacool introduction and Reebok up +19% reflecting the introductions of Zig Pulse and RealFlex. Nike and Adi remain the top share gainers at the expense of Skechers, Puma, and New Balance. This is consistent with monthly trends that reflect running is not only the largest, but also fastest growing category within the athletic specialty channel for the fourth month in a row.
  • In apparel, VF (The North Face) (+30%) edged out Adidas (+28%) as the top performing brand last week reflecting an uncharacteristically strong week in outdoor outerwear perhaps due to more inclement weather. In addition, Under Armour (+20%) continues to post consistently solid sales driven by the success of its charged cotton program. Adidas and Under Armour remain top share gainers while Columbia was the only brand to lose share maintaining a streak of twenty consecutive weeks.
  • The broad-based strength across all channels is also worth noting with both unit volume and ASPs up and sequential sales improvement across the board.
  • Lastly, on a regional basis New England was the clear negative standout as the only region to report a sales decline for the second consecutive week with the Mid-Atlantic and South Central outperforming again up +23% and +28% respectively – not good for DKS (which we’re short in the Hedgeye Virtual Portfolio) and better on the margin for HIBB.

Casey Flavin



Athletic Apparel Remains Strong – FW Choppy - FW APP ASPs 5 11


Athletic Apparel Remains Strong – FW Choppy - FW ASPs ExT 5 27 11


Athletic Apparel Remains Strong – FW Choppy - FW App Agg Table 5 25 11


Athletic Apparel Remains Strong – FW Choppy - FW App FW Table 1 5 25 11


Athletic Apparel Remains Strong – FW Choppy - FW App App Table 1 5 25 11


Athletic Apparel Remains Strong – FW Choppy - FW App App 1Yr 5 25 11


Athletic Apparel Remains Strong – FW Choppy - FW App App 2Yr 5 25 11


Athletic Apparel Remains Strong – FW Choppy - FW App Reg 5 25 11


Athletic Apparel Remains Strong – FW Choppy - FW Mo AthSpec Sales 5 11


Athletic Apparel Remains Strong – FW Choppy - FW Mo Running 5 11




It looks like Macau total gaming revenues will come in around HK$23 billion for May, up 39%. 



Through the 29th, table revenues were just under HK$21 billion.  Add in 2 more days of table revenues and slot revenues of HK$950 million to get to our full month projection.  Business definitely slowed over the past week, dropping to HK$544 million per day versus HK$775 million last week (the first week of Galaxy Macau).  Indeed, total gaming revenues will fall at the low end of our previous estimate of HK$23-24 billion.  We don’t know yet if hold played a part.


There were some surprising shifts in market share post the Galaxy Macau opening.  Not surprisingly, most Macau operators lost share – the exception being Galaxy and MGM.  MGM is off to a solid start in Q2 and should report a strong first Q out of the blocks of its IPO.  The biggest surprise to the Street may be that Wynn lost the most share.  Low hold probably played the biggest role but Wynn Macau/Encore has the highest VIP revenue per table, so theoretically the most to lose.  Galaxy is a pretty fierce VIP competitor and may be going after Wynn’s lucrative VIP business.  We’re pretty sure Galaxy Macau was very aggressive in providing junket liquidity/credit through the opening.


From what we can glean from the limited data, Galaxy Macau is off to a great start.  Even after normalizing the current pace somewhat and including cannibalization of Starworld, ROI appears to be trending well above the 20% bogey.  However, it is still very early.


Here is the latest data:



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Distributing The Future

This note was originally published at 8am on May 25, 2011. INVESTOR and RISK MANAGER SUBSCRIBERS have access to the EARLY LOOK (published by 8am every trading day) and PORTFOLIO IDEAS in real-time.

“The future is here. It’s just not evenly distributed yet.”

-William Gibson


Speculative-fiction author Bill Gibson is my kind of guy – he’s an American-Canadian. He also likes to make up his own terms for things and put himself out there with contrarian predictions about the future.


I’m currently in the middle of reading “The World In 2050” by Laurence Smith (excellent research read on resource risk, demographic risk, etc). In the very first chapter of the book, Smith gets your attention with the aforementioned Gibson quote and another by Niels Bohr.


Making market “calls”, or proactively managing risk around the edges of this globally interconnected marketplace, isn’t as hard as people crack it up to be. Sure, the daily grind is hard - but the data is there.


The future of Global Macro Risk Management is here.


Getting what people in this business used to call “edge” doesn’t come without orange jump suit risk. Ask The Raj about that. In economic cycles that are being shortened by Fiat Fool policies, the future of Risk Management Edge is going to be grounded in getting TIME and PRICE right.


To do that, in today’s marketplace at least (and this will change), you really need to get The Correlation Risk right.


To get The Correlation Risk right, you need to get the US Dollar right. To get the US Dollar right, you need to get monetary policy right. To get monetary policy right, you have to grind (or buddy up with The Gopher).


If the future was evenly distributed, you wouldn’t be seeing these massive moves in asset classes from quarter-to-quarter. It was only 6 months ago that Hedgeye had a Global Macro Theme called “Trashing Treasuries” (as in short them). Today, one of my highest conviction positions is long the long-bond (TLT). And in 3-6 months, I am sure that will change too.


What if you don’t change? What if you haven’t evolved your risk management process since 2008?


Dagny Taggart probably has a few answers for us all to those questions. My simple one is this – if you don’t evolve the process, you’ll lose. And I don’t mean lose whatever moneys you’ve made. I mean you’ll lose your confidence in making emotionless decisions. You’ll lose the conviction that it takes to change your mind.


So what is my Global Macro Risk Management process flagging this morning?

  1. Vietnam is the first Asian Equity market to crash – down -4% last night and down -20.5% since May 4th
  2. Japan continues to resemble the Big Government Intervention train wreck that bailout beggars in America want our markets to be
  3. Chinese equities have once again broken their intermediate-term TREND line of support (2811 on the Shanghai Composite Index)
  4. Indian stocks were down another -0.7% overnight to -12.8% YTD and remain one of our best Macro short ideas in 2011
  5. South Korean and Australian Equities have moved to bearish TRADE and TREND in our model – nasty signals for Global Growth
  6. Pakistan was up overnight, hooray
  7. European Equities are starting to look as ugly as their socialist policy to keep Greek and Portuguese bond markets ticking
  8. Germany, which we like, doesn’t look good
  9. Sweden, which we like, doesn’t look good
  10. Spanish and Italian Equities have broken their TRADE and TREND lines (this is new – in Q1 they were bullish on both durations)
  11. Russian stocks have broken their intermediate-term TREND line on the RTSI of 1964 – bearish signal for The Petro Dollar markets
  12. The Euro is testing and intermediate-term TREND breakdown of $1.41 TREND line support
  13. The US Dollar has moved to bullish immediate-term TRADE – what was big resistance at $74.41 is now big support
  14. US stocks have been down for 3 consecutive days and 4 consecutive weeks
  15. TREND lines in the SP500 (1321), Nasdaq (2794), and Russell2000 (826) are all broken as of last price
  16. Only 3 Sectors in our S&P Sector Risk Management Model are bullish TRADE and TREND (Healthcare, Utilities, and Staples)
  17. Volatility (VIX) is bullish on 2 of our 3 core durations (TRADE and TAIL), with a big breakout line at 18.04 daring you to buy the dip
  18. US Treasury Bonds look awesome – as in awesome bullish

Awesome is as awesome does. That’s the future. It’s here. And it’s our job to manage risk around it.


My immediate-term support and resistance ranges for Gold, Oil, and the SP500 are now $1508-1527 (bullish), $96.98-100.93 (bearish), and 1311-1321 (bearish), respectively.


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


Distributing The Future - Chart of the Day


Distributing The Future - Virtual Portfolio

DKS: Shorting (Again)


Keith added to our DKS short today on the day’s high. See updated levels below.


DKS: Shorting (Again) - DKS Levels 5 27 11



The Week Ahead

The Economic Data calendar for the week of the 30th of May through the 3rd of June is full of critical releases and events.  Attached below is a snapshot of some (though far from all) of the headline numbers that we will be focused on.


The Week Ahead - cal1

The Week Ahead - cal2