prev

Covering AYT – Trade Update

Conclusion: We are covering our Asian currency basket short in our Virtual Portfolio as Asia is not likely to pick up the pace of rate cuts with oil (inflation) up here in November.

 

Shortly before this afternoon’s close, Keith covered AYT for a modest appreciation vs. our cost basis within our Virtual Portfolio. We remain bearish on emerging Asian currencies vs. King Dollar over the intermediate-term TREND, but we have chosen to manage the immediate-term risk of crude oil prices breaking out from a quantitative perspective on our proprietary factoring – particularly given the inflationary impact of higher energy and transport costs. Be it what we can model (QE3 speculation) vs. what we can’t (Iran/Israel shouting match), we don’t like what we are seeing in the oil markets because it will bring on more Stagflation. Refer to Keith’s 11/8 Early Look titled “Self Indulgence” for additional analysis on this subject.

 

Covering AYT – Trade Update - 1

 

Covering AYT – Trade Update - 2

 

The quick and dirty as it relates to the knock-on effects of higher energy prices across Asian currency markets is that it could slow the deceleration in headline CPI readings across the region and keep Asian central banks on the sidelines in the short term, which limits, on the margin, any near-term scope for further monetary easing – an outcome that has been largely priced into Asian interest rate swaps markets for the past couple of quarters.

 

Covering AYT – Trade Update - 3

 

Of course, a sustained breakout in global energy prices would indeed be a particularly growth-negative event for Asia, as well as the more developed economies such as the U.S. and the E.U. We think the USD is the ultimate winner here as Asian export earnings dwindle and short-term capital flows seek the perceived safety of U.S. instruments. Managing the duration risk will be critical to manage (i.e. don’t short Asian currencies too early in this scenario b/c the beta chase is likely to prevail in the short term). For further analysis behind the extremely damaging side-effects of further U.S. monetary easing from current levels of global growth/inflation, refer to our 10/25 note titled, "Global Growth Update: Incremental Deterioration Forthcoming?".

 

Darius Dale

Analyst

 

Covering AYT – Trade Update - 4




Early Look

daily macro intelligence

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.

Hedgeye's Best Ideas. Period: Conference Call Friday, Nov. 11th at 11 am EST

HEDGEYE'S BEST IDEAS. PERIOD.

CONFERENCE CALL FRIDAY, NOV. 11TH AT 11AM EST

 

Dear Subscribers:

 

We invite you to join us this Friday, November 11th, for our first-annual Best Ideas call. We will be outlining the top investment ideas, both long and short, across each vertical of our world-class research team. In aggregate, we will offer more than ten unique and differentiated investment ideas for the intermediate term.
 
We will be circulating the dial in information and presentation the day before the call.
 
On the call will be:

 

·         Keith McCullough, CEO

·         Daryl Jones, Macro

·         Brian McGough, Retail

·         Todd Jordan, Gaming, Lodging and Leisure

·         Howard Penney, Restaurants

·         Tom Tobin, Healthcare

·         Josh Steiner, Financials
 


ABOUT HEDGEYE


Hedgeye Risk Management is a leading independent provider of real-time investment research. Focused exclusively on generating and delivering actionable investment ideas, the firm combines quantitative, bottom-up and macro analysis with an emphasis on timing. The Hedgeye team features some of the world's most regarded research analysts - united around a vision of independent, uncompromised real-time investment research as a service. For a complete listing of our sector head bios, please click here: https://www2.hedgeye.com/pages/team
 
Regards,
 

 

The Hedgeye Sales Team


HEDGEYE RISK MANAGEMENT                                                        
111 Whitney Avenue
New Haven, CT 06

www.hedgeye.com


HEDGEYE'S BEST IDEAS. PERIOD: CONFERENCE CALL FRIDAY, NOV. 11TH AT 11AM EST

HEDGEYE'S BEST IDEAS. PERIOD.

CONFERENCE CALL FRIDAY, NOV. 11TH AT 11AM EST

 

Dear Subscribers:

 

We invite you to join us this Friday, November 11th, for our first-annual Best Ideas call. We will be outlining the top investment ideas, both long and short, across each vertical of our world-class research team. In aggregate, we will offer more than ten unique and differentiated investment ideas for the intermediate term.
 
We will be circulating the dial in information and presentation the day before the call.
 
On the call will be:

 

·         Keith McCullough, CEO

·         Daryl Jones, Macro

·         Brian McGough, Retail

·         Todd Jordan, Gaming, Lodging and Leisure

·         Howard Penney, Restaurants

·         Tom Tobin, Healthcare

·         Josh Steiner, Financials
 


ABOUT HEDGEYE


Hedgeye Risk Management is a leading independent provider of real-time investment research. Focused exclusively on generating and delivering actionable investment ideas, the firm combines quantitative, bottom-up and macro analysis with an emphasis on timing. The Hedgeye team features some of the world's most regarded research analysts - united around a vision of independent, uncompromised real-time investment research as a service. For a complete listing of our sector head bios, please click here: https://www2.hedgeye.com/pages/team
 
Regards,
 

 

The Hedgeye Sales Team


HEDGEYE RISK MANAGEMENT                                                        
111 Whitney Avenue
New Haven, CT 06

www.hedgeye.com



CZR 3Q11 CONF CALL NOTES

"While weather-related property closures in the Atlantic City Region impacted our overall third-quarter results, we saw strengthening fundamentals in our Nevada and international operations.  We also made significant progress on an exciting growth agenda aimed at expanding our distribution network, increasing the strength of our core brands and streamlining our organization."

 

Gary Loveman, chairman, chief executive officer and president of Caesars Entertainment Corporation

 

 

CONF CALL NOTES

  • Horseshoe Cincinnati opening in 2Q13
  • MA: Last week the House and Senate voted in favor of 3 casinos in the state and slots at one racetrack
  • International: Formed CZR Global Life earlier this year to pursue international opportunities in gaming and non-gaming jurisdictions.  Expect to develop 25 resorts through China over the next 5 years.
  • Las Vegas: Group business is growing, hotel occupancy is in the mid 90's.  Expect continued growth in this region.
  • Mid-West and South were impacted by heightened competition although rated spend per visit has increased
  • They will be facing continued pressure from Des Plaines casino - especially on their retail play
  • If not for Irene, trends would have improved in AC
  • $21.4BN of face value debt at the end of the Q
  • Capex spend for 2011: $280MM and $350MM
  • VIP segment was particularly strong in Las Vegas
  • Trends for group bookings look strong for the balance of the year in Las Vegas
  • Net revenues were down just 2.3% in AC excluding August. 
  • Trips were impacted by refinements in their marketing strategy - namely, they are only focused on their higher end customer / higher value customers
  • Lake Tahoe properties had a particularly strong quarter

 

Q&A

  • The competitive onslaught is abating slightly from Des Plaines casino.  We haven't seen it yet.
  • Their results were negatively impacted by lower hold in Las Vegas - hold impact was over $20MM. 
  • They try to have a value proposition in front of their higher value customers but otherwise they are not getting more promotional
  • Iowa and Missouri - while revenues were flat, margins improved.  MS and Chicago area: they were negatively impacted by competition and that's where their tepid demand comments were targeted.
  • Rates for Vegas in 2012 so far?
    • Looks pretty strong despite some difficult comps in 1H. 
  • Process and timing for Baltimore.  Present their qualifications on Monday November 14th to the authorities. Hope to get a favorable ruling by early 2012 at which point they can proceed.
  • Ohio horseman and transfer tax: Bid ask spread between the horseman and the tracks. Expect to reach a resolution shortly on the tax rate.
  • MA:  Gary Loveman's guess - Expect that bidders can present themselves - makes RFP submissions around Easter next year.  Think that winners would be announced towards YE in 2012.  Then the question is whether they would allow temporary facilities or just permanent ... so in theory you could have something as early as 2013. 
  • Impact from Aqueduct: 
    • Volumes at their AC haven't changed since Aqueduct opened (only 8-9 days) 
  • Why didn't they purchase any debt during the 3rd quarter?
    • Have a tremendous amount of high growth opportunities to invest in 
  • Trends that they are seeing in the beginning of the 4Q are the same as the 3rd.  Good in Vegas, stable in AC, and moderating competitive trends elsewhere.
  • Project Renewable will continue into 1Q12
  • They do not have business interruption insurance for closures in AC
  • Discussion has picked up momentum in allowing Integrated Resorts in the Asian Region given the success in Macau and more recently Singapore.  Does think that there is interest in Japan as well as in Taiwan. 
  • Baltimore: They are targeting about 1-1.5 miles from Wrigley Field- towards I-95.  There would be a number of equity participants including themselves should they win the license.
  • Mix was 17% Group in Las Vegas, 50% casino, and the remainder FIT and wholesale.  Wholesale room declined and group bookings increased in the quarter.
  • Florida opportunity?
    • Very desirable to them.  If they pursue that opportunity, it would be in partnership with someone else.  There should be other opportunities in regional Florida that are also attractive to them.
  • Feels favorably that a poker bill will pass 
  • $150MM of spending on the Octavius and Link project
  • Not sure about the impact of Revel on their AC property.  Decisions about non-union and non-smoking were aggressive by Revel.
  • Planet Hollywood is doing very well for them; they are very confident that they will hit $100MM of EBITDA there - are close on a run-rate basis now.
  • Maintenance covenant: well within compliance
  • How quickly after a legalization vote can CZR offer online poker? 
    • Thinks a year to 14 months is probably the fastest 

 

HIGHLIGHTS FROM THE RELEASE

  • 3Q11 "revenues decreased 1.5 percent to $2,254.0 million...The decrease primarily reflects... Hurricane Irene..., which... caused temporary closures of four of our properties in the Atlantic City region during one of the final weekends of the peak summer season. The Company estimates that the closures reduced revenues by approximately $22 million to $27 million and reduced Income from operations and Property EBITDA by approximately $15 million to $20 million. New competition in July 2011 caused unfavorable comparisons in the Illinois/Indiana region. These declines were partially offset by positive fundamentals in the Las Vegas and Other Nevada regions as well as the Uruguay and London Clubs properties"
  • 3Q'11 performance stats/regional datapoints:
    • Consolidated trips: -5.1% 
      • LV: +3.0%
      • AC: -3.3% for lodgers and 7.0% for non-lodgers
      • Other markets: -6.7%
    • Spend per trip: +3.0%
      • LV: +3.1%
      • AC: -2.2% for lodgers and 1.5% for non-lodgers
      • Other markets: +4.1%
    • Cash ADR: +7.4%
      • LV: +9.5%
    • Occupancy: +1.3%
      • LV: +3.3%
    • Hotel revenues:
      • LV: +10.8%
    • [Declines in Other Markets (non-AC/LV)] "Trip declines in both periods can be attributed to more focused marketing targeted to certain customer segments."
    • LA/MS: "Net revenues in the region decreased for the 2011 third quarter due to decreased trips. However, spend per trip increased"
    • IA/MO: "Net revenues in the region decreased... due to increased competitive pressures in the region and reduced trips. However, spend per trip increased."
    • IL/IN: "Revenues in the region decreased ... due to new competition and limited direct access by customers to one of our properties caused by a bridge closure, both of which resulted in a decline in trips, although, spend per trip increased."
    • Other Nevada: "Net revenues... rose... due in part to increased trips"
    • Managed/International: "Net revenue increases ... were attributable to increases in spend per trip at the Company's Uruguay and London Clubs properties"
  • "During the quarter, our efficiency initiatives and organizational realignments not only produced $85.0 million in additional cost savings but are also expected to expedite decision-making and increase our effectiveness"
  • "We also made great strides during the third quarter on our two casino-development projects with Rock Gaming LLC in Ohio, the first of which is scheduled to open next March, and on the 662-room expansion of the Octavius Tower in Las Vegas, which is scheduled to open in early January. Caesars leads the group that is the only qualified bidder for a slot facility gaming license in Baltimore and we are closely following gaming-expansion opportunities in Massachusetts, where we've formed a partnership with Suffolk Downs"
  • "Caesars Palace Longmu Bay, a five-star luxury resort on Hainan Island -- broke ground during the third quarter. We are working with a subsidiary of Jiangsu Guoxin Investment Group Limited, one of the premier investment and development companies in China, to develop and manage the non-gaming resort. We continue to seek other opportunities in the region for both gaming and non-gaming development projects"

GET THE HEDGEYE MARKET BRIEF FREE

Enter your email address to receive our newsletter of 5 trending market topics. VIEW SAMPLE

By joining our email marketing list you agree to receive marketing emails from Hedgeye. You may unsubscribe at any time by clicking the unsubscribe link in one of the emails.

next