Galaxy is scheduled to report their 3Q results in the wee morning hours (at least for those of us in the states) tomorrow, and we’re expecting a pretty strong quarter with bullish commentary about their prospects.  Of course they will be positive since they are holding well in the first half of what should be the biggest month ever in Macau.  However, going forward, market share will moderate with hold and Galaxy Macau is vulnerable to the opening of Sands Cotai Central.



3Q Detail:

We project Galaxy Group will report HK$13.44BN of revenue and HK$2.08BN of EBITDA (US$268MM).

  • We estimate that Starworld will report HK$6.44BN of revenue and Adjusted EBITDA of HK$902MM
    • VIP gross win of HK$5.83BN
      • VIP turnover of HK$179.4BN, up 31% YoY and a 3.25% win percentage
      • 45.5% rebate rate (in-line with last quarter) or 1.48% - this likely includes rebates for Mass play as well
    • Mass win of HK$434MM and slot win of HK$64MM
    • HK$114MM of net non-gaming revenue
    • Variable expenses of HK$5,164MM
      • Rebates and commissions: HK$2.65BN
      • Gaming taxes & premium: HK$2.48BN
    • HK$375MM of assumed fixed expenses
    • Net comparable US GAAP revenue would be HK$3.8BN (netting out of rebates) and would result in a comparable GAAP margin of 23.8% vs. a reported margin of 14%
  • We estimate that Galaxy Macau will report HK$6.54BN of revenue and Adjusted EBITDA of HK$1,188MM (US$152MM)
    • VIP gross win of HK$5.035BN
      • VIP turnover of HK$168.4BN, assuming 4% direct play and a 3% win percentage
      • 33.5% rebate rate (in-line with last quarter) or 1%
    • Mass win of HK$1,045MM and slot win of HK$240MM
    • HK$222MM of net non-gaming revenue
    • Variable expenses of HK$4,754MM
      • Rebates: HK$1.69BN
      • Commissions: HK$470.5MM (25bps/ 10% of win)
      • Gaming taxes & premium: HK$2.46BN
    • HK$600MM of assumed fixed expenses
    • Net comparable US GAAP margin of 24.5% vs. a reported margin of 18.2%
  • We estimate that City Clubs will report HK$150MM of revenue and Adjusted EBITDA of HK$37.5MM
    • Most of City Clubs had miserable hold this quarter – which came in at just 1.9% in 3Q (September was actually negative for 2 properties) vs. low hold of 2.3% last quarter.
    • RC volumes at City Clubs declined 11% YoY – in-line with the YoY decline experienced in 2Q11
  • We estimate that Construction Materials will report HK$310MM of revenue and Adjusted EBITDA of HK$76MM
  • Other:
    • Net corporate expenses of HK$125MM
    • D&A:  HK$269MM
    • Finance costs:  HK$155MM
    • JV share of PNL:  HK$40MM 

Did the US Economy Just “Collapse”? "Worst Personal Spending Since 2009"?

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.”

read more

7 Tweets Summing Up What You Need to Know About Today's GDP Report

"There's a tremendous opportunity to educate people in our profession on how GDP is stated and projected," Hedgeye CEO Keith McCullough wrote today. Here's everything you need to know about today's GDP report.

read more

Cartoon of the Day: Crash Test Bear

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

read more

GOLD: A Deep Dive on What’s Next with a Top Commodities Strategist

“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.

read more

Exact Sciences Up +24% This Week... What's Next? | $EXAS

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

read more

Inside the Atlanta Fed's Flawed GDP Tracker

"The Atlanta Fed’s GDPNowcast model, while useful at amalgamating investor consensus on one singular GDP estimate for any given quarter, is certainly not the end-all-be-all of forecasting U.S. GDP," writes Hedgeye Senior Macro analyst Darius Dale.

read more

Cartoon of the Day: Acrophobia

"Most people who are making a ton of money right now are focused on growth companies seeing accelerations," Hedgeye CEO Keith McCullough wrote in today's Early Look. "That’s what happens in Quad 1."

read more

People's Bank of China Spins China’s Bad-Loan Data

PBoC Deputy Governor Yi says China's non-performing loan problem has “pretty much stabilized." "Yi is spinning. China’s bad-debt problem remains serious," write Benn Steil and Emma Smith, Council on Foreign Relations.

read more

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

“The consumer has a short memory.” Yes, Plank actually said this," writes Hedgeye Retail analyst Brian McGough. "Last time I heard such arrogance was Ron Johnson."

read more

Buffalo Wild Wings: Complacency & Lack of Leadership (by Howard Penney)

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

read more

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.

read more

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.

read more