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MPEL: TRADE UPDATE

Keith bought MPEL in the Hedgeye Virtual Portfolio at $9.61.  According to his model, there is TRADE resistance at $9.98 and TREND support at $9.19

 

 

As we mentioned yesterday in "MACAU: A DETAILED ANALYSIS OF THE DECEMBER #S", we believe MPEL should exceed consensus Q4 EBITDA estimates by the largest margin among the Macau operators.  Currently, we're 12% ahead of the Street.  MPEL’s continued growth in Mass revenues should boost margins and the company will benefit from a strong January due to the timing of Chinese New Year.  MPEL trades at a 30-40% discount to the peer group and at under 7x 2012 EV/EBITDA is near an all-time low.

 

MPEL: TRADE UPDATE - mpel


WMT: Buying

KM buying WMT back on retail weakness after selling higher last week. We like WMT over all three of Hedgeye’s risk management durations for the following reasons…

 

1) US business is inflecting after years of investing to turn the cruise ship. This is partially apparent in WMT outperforming peers this holiday -- in part due to layaway plan, but also due to better alignment outside of consumables.    

     

2) Great play on stronger dollar heading into 2012. 


3) Street estimates are low next year by 3-4%. Not huge, but meaningful for WMT. 


4) Though not really 'new' is share repo is a part of many investors' thesis, the fact is that the Walton Family is slowly but surely taking the company private. 


5) Sentiment (per our backtested indicator) has never been worse.  

 

WMT: Buying - WMT update

 

WMT: Buying - WMT sentiment


Q4 HOTEL TRANSACTIONS

Scarce US transactions in Q4 but 2011 was a better year overall

 

 

Market M&A Trends for Q4

  • Q4 US hotel transaction volume fell to $1BN from $3BN in Q3 2011 and $4BN in Q2 2011.  But US transaction volume ended 2011 almost doubling that of 2010’s total.
    • The number of US hotel transactions in Q4 was significantly lower QoQ
    • US Average Price per key in the Upper Upscale segment has dropped steadily since Q2 2011
    • The European market, particularly in the UK, was more active than that of the US
  • REITs/JVs accounted for the majority of the market activity
  • Accor took part in several deals as part of the firm’s Group Asset Management strategy 
  • According to Fitch, hotel delinquencies continue to improve as November’s 12.7% rate was below September’s 13.3%

Luxury Segment

  • Average Price per Key
    • Q4 2011
      • US average: $224,785 (3 transactions)
      • Elsewhere average: $621,382 (6 transactions)
    • Q3 2011
      • US average: $632,270  (2 transactions)
      • Elsewhere average: $858,612 (2 transactions)
    • Q2 2011
      • US average: $406,250 (4 transactions)
      • Elsewhere average:  $788,461 (3 transactions)

Upper Upscale Segment

  • Average Price per Key
    • Q4 2011
      • US average: $207,026 (6 transactions)
      • Elsewhere average: $348,667 (5 transactions)
    • Q3 2011
      • US average: $253,736 (8 transactions)
      • Elsewhere average: $338,661 (4 transactions)
    • Q2 2011
      • US average: $355,382 (13 transactions)
      • Elsewhere average: $250,152 (2 transactions)

Chain Scale

L: Luxury

UU: Upper Upscale

U: Upscale

M: Midscale

E: Economy

 

Q4 HOTEL TRANSACTIONS - 111


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JOBLESS CLAIMS: THE POSITIVE TREND CONTINUES THROUGH THE LAST PRINT OF 2011

Initial Claims: Closing Out the Year on a Positive Note

The headline initial claims number fell 9k WoW to 372k (down 15k after a 6k upward revision to last week’s data).  Rolling claims fell 3.25k to 373k. On a non-seasonally-adjusted basis, reported claims rose 37k WoW to 535k.

 

We've pointed out for the last several weeks that in the last two years claims have shown a tailwind from week 36 through year-end, and then tend to reverse that trend in the opening 1-2 months of the new year. This morning's print is consistent with that trend as this was the last print of 2011 (it reflects claims through 12/31/11). That said, the larger, secular trend in place at the moment is ongoing improvement in claims. This is obviously a tailwind for lenders from a delinquency standpoint. That said, it will be dwarfed by the elimination of reserve release that will rear its head in 4Q earnings when companies start reporting in two weeks. We often look at Discover as a leading indicator on this front as they're an off-cycle reporter (November fiscal year-end). Discover's quarter told the tale quite clearly. Although they beat estimates and generally reported solid metrics, the optical sequential slowdown driven by the absence of reserve release led the stock to get sold. Don't be surprised when the impact is far greater at the big banks. 

 

We'd also highlight the sizeable divergence that has emerged between claims and the S&P. Historically these divergences have not persisted. Right now the divergence is suggesting that either claims back up to ~425k or the S&P 500 puts on a move to ~1390. Last time a comparable divergence emerged it was in the Fall of 2011. The mean reversion instrument at that time was the market, as claims showed resilience, and, ultimately, improvement.   

 

As a final point, for those astute observers who notice a 53rd week in our charts below, we're not crazy. There are, in fact, 52.14 weeks per year (365/7) which means that every 7 years there is an extra week in the year. We've selected this year (2011) to be that 53-week year simply because it ended on 12/31/11. 

 

JOBLESS CLAIMS: THE POSITIVE TREND CONTINUES THROUGH THE LAST PRINT OF 2011 - Rolling

 

JOBLESS CLAIMS: THE POSITIVE TREND CONTINUES THROUGH THE LAST PRINT OF 2011 - Raw

 

JOBLESS CLAIMS: THE POSITIVE TREND CONTINUES THROUGH THE LAST PRINT OF 2011 - NSA chart

 

JOBLESS CLAIMS: THE POSITIVE TREND CONTINUES THROUGH THE LAST PRINT OF 2011 - S P

 

JOBLESS CLAIMS: THE POSITIVE TREND CONTINUES THROUGH THE LAST PRINT OF 2011 - Fed Claims

 

2-10 Spread

The 2-10 spread widened 7 bps versus last week to 172 bps as of yesterday.  The ten-year bond yield increased 6 bps to 198 bps.

 

JOBLESS CLAIMS: THE POSITIVE TREND CONTINUES THROUGH THE LAST PRINT OF 2011 - 2 10 spread

 

JOBLESS CLAIMS: THE POSITIVE TREND CONTINUES THROUGH THE LAST PRINT OF 2011 - 2 10 QoQ change

 

Financial Subsector Performance

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

 

JOBLESS CLAIMS: THE POSITIVE TREND CONTINUES THROUGH THE LAST PRINT OF 2011 - Subsector Performance

 

Joshua Steiner, CFA

 

Allison Kaptur

 

Robert Belsky

 

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THE HBM: MCD, SONC, DNKN

THE HEDGEYE BREAKFAST MONITOR


We are hosting a call detailing our short thesis on Buffalo Wild Wings on January 19th at 11am.  Stay tuned for details.  

 

MACRO NOTES

 

Initial Claims

 

Initial jobless claims came in at 372k versus 375k consensus and 387k (revised) the week prior.

 

THE HBM: MCD, SONC, DNKN - claim

 

 

Comments from CEO Keith McCullough

 

Fascinating to watch the Correlation Risk in Global Macro markets start to burn off as consensus keeps focusing on stale indicators:

  1. ASIA – Growth Slowing at a slower rates as a Deflating The Inflation is starting to slow the pace of declines on Asian Equity market down days; India’s Services PMI 54.2 for DEC (vs 53.2 NOV) was a positive surprise and Thailand reporting lower sequential inflation for DEC at 3.5% vs 4.2% in NOV was more of what we are seeing across Asia.
  2. DAX – can I get a live quote/recap of a European Bond Auction? Cmon. That mattered 12 months ago when few were focused on it – now, every time European equities have a downtick my tweet-stream lights up w/ the same known knowns. What isn’t obvious yet is how strong German stocks and bonds act on these down moves. DAX holding 5 range of support is bullish. Period.
  3. EUR/USD – is the Euro getting blasted to a 15 month low because of Unicredit or b/c a Romney win in NH is a big time stabilizer for the USD? Or both? Markets don’t move on a 1-factor model – I think this Presidential debate is going to be USD bullish inasmuch as insolvent European banks blowing up is bearish.

 

EUR/USD immediate-term TRADE oversold at $1.28 so make some gross/net exposure moves on that. Buying more US Equity exposure provided that my TAIL line of 1267 holds. Waiting and watching first.

KM

 

SUBSECTOR PERFORMANCE

 

THE HBM: MCD, SONC, DNKN - subsector fbr

 

 

QUICK SERVICE

 

MCD: McDonald’s Japan same-store sales gained 5% in December and 1% in 2011. 

 

MCD: McDonald’s Hong Kong raising average prices 2.3% this month.

 

SONC: Sonic reported Q1FY12 EPS of $0.09 versus consensus $0.09.  Comps at franchise restaurants came in at +0.2% versus consensus +0.3% and company-owned restaurants’ comps came in at -0.1% versus consensus of +0.8%.

 

THE HBM: MCD, SONC, DNKN - sonc company pod1

 

THE HBM: MCD, SONC, DNKN - sonc franchised pod 1

 

 

DNKN: Dunkin’ Donuts is going to double its store base in 20 years, according to the NY Post.  Where is the backlog?

 

 

THE HBM: MCD, SONC, DNKN - stocks

 

 

 

 

Howard Penney

Managing Director

 

Rory Green

Analyst

 


THE M3: SINGAPORE OCT VISITATION; NEW YEAR VISITATION

The Macau Metro Monitor, January 5, 2012

 

 

INTERNATIONAL VISITOR ARRIVALS BY REGION/COUNTRY OF RESIDENCE STB

Singapore visitation hit 1,084,189 in October 2011, up 10.9% YoY.  Mainland China visitors rose 44% YoY and accounted for 12% of total visitation.

 

THE M3: SINGAPORE OCT VISITATION; NEW YEAR VISITATION - SPORE

 

NEW YEAR BROUGHT 324,000 TOURISTS Macau Daily Times, Macau Business

A total of 324,394 tourists visited Macau over the New Year holidays, an increase of 8.1% YoY.  The Border Gate remained the busiest checkpoint with 414,000 arrivals (including visitors and residents), followed by the outer harbor ferry terminal with 71,000, and the Taipa temporary ferry terminal with 29,000. 

 


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