Another solid quarter.



“Ameristar’s fourth quarter financial performance capped off a record-breaking year that was driven by our consistent delivery of a superior guest experience, focus on cost management and effective marketing... Our ability to generate significant free cash flow has allowed us to make substantial debt repayments, increase our quarterly dividend and opportunistically repurchase shares and pursue growth"

- Gordon Kanofsky, Ameristar’s Chief Executive Officer




  • Excluding share repurchases, YoY EPS would have still increased by 6% YoY
  • Continued to implement central best practices across all properties, which clearly helped their results
  • Promotional efficencies and favorable weather helped the quarter
  • There was a one time $5.6MM stock comp impact in the quarter resulting from equity reward modifications that accelerated the recognition of the expense. This impacted EPS by $0.16
  • The only gaming company that continued to pay dividends from 2008-2011 - only missing one quarter during that period 
  • Dividend for 2012 is only 10% of their FCF and therefore a very sustainable level
  • New Kansas City facility will open next quarter and the bridge by their St Charles facility will have some construction - which will lead to a complete bridge closure by November 2012 for about a year and that will negatively impact them. However, there are alternative routes to get to their facility
  • $15-20MM will be a normal maintenance capex run rate per quarter in 2012
  • Will pay down $155-165MM of debt for the year and $xxMM in 1Q12
  • Shares should be about 34MM in 1Q12
  • MA: 25% gaming tax rate, no limit on positions, 3 casinos in 3 regions and a racino with a 40% tax rate
    • ASCA site in Springfield, MA: 27 miles from Hartford and 86 miles from Albany, 74 miles from the closest existing casino
    • Springfield has the largest population in Western MA
    • There are 2.45MM adults within a 50 mile radius with a total household income of $106BN with only 1 future casino within a 50 mile radius. This compares to St Charles which has 1.98MM adults within a 50 mile radius with a total household income of $82.6BN and 6 casinos within a 50 mile radius 
    • Minimum of $500MM spend and $85MM licensing fee


  • Nebraska gaming legislation is very preliminary, they are hopeful that nothing will move forward in the term
  • To maximize their chances in Springfield it doesn't make a lot of sense to pursue a lot of other greenfield opportunities - would rather look at an acquisition. They do look at everything however
  • They are looking at pursuing I-gaming
  • MA will be a substantial facility, enough to compete with the CT facilities although not as large. It will be a full scale facility for them
  • Goal is to be in a position to present a license application to show that they will have no financing contingency for whatever they want to build in MA
  • Seeing decent degree of stabilization across their markets. There are some indicators that point to a recovery but its too soon to tell.
  • Yes the farm economies are doing well
  • Flow-through in 2012 should continue to be strong
  • The bridge won't be completely closed near St Charles - just a partial closure. So they think it will be a short term, manageable impact. They learned how to manage around this sort of thing in East Chicago.
  • Corporate expense increase is mostly due to their development efforts in MA
  • Thinks that their gains in East Chicago are sustainable
  • Gaming tax rate reduction will be a topic of discussion in Colorado this year
  • They are pushing maximum margins at their properties until revenues increase
  • 4Q tax rate:
    • Costs that were built into the stock buyback that weren't deductible and hit them in the 4Q
  • CZR's is still a formidable competitor and not asleep at the switch, but the competitive environment has remained stable and rational
  • Cline Avenue Bridge- replacement talks are going on behind close doors. Its been radio silent over the last 60 days. Plan is for the state to turn over the bridge to the city and for the city to enter into an agreement with a private contractor using tolls to pay for the repair.
  • One of their core goals is to strive for continuous improvement.   



  • "Council Bluffs... benefited from market share growth and overall market strength."
  • "East Chicago had a 2.6% year-over-year decline in net revenues that was mostly attributable to a new competitor in Des Plaines, Illinois, partially offset by market share growth in the more immediate Northwest Indiana market."
  • "Notably, Jackpot and Black Hawk delivered Adjusted EBITDA margin improvements of 8.4 percentage points and 5.3 percentage points, respectively."
  • Balance sheet info:
    • $257MM of borrowing capacity under the R/C
    • Total Net Leverage Ratio: 5.04x vs. a 7.0x covenant
    • Senior Secured Net Leverage: 2.53x vs. a 4.5x covenant
    • Interest Expense Coverage: 2.62x vs. a 2.0x covenant
  • 4Q Capex: $36.5MM, "included a $9.3 million settlement payment to the general contractor for our St. Charles hotel construction project completed in 2008."
  • In 4Q, ASCA repurchased 200k shares for $2.4MM
  • 1Q12 outlook: 
    • D&A: $26.5MM to $27.5MM
    • Interest expense (net of capitalized interest): $26.5MM to 27.5MM (including $1.4MM of non-cash interest)
    • Tax rate: 43-44%
    • Stock comp: $4.5MM to $5.0MM
    • Capex: $31MM to $36MM (including $16MM MA land purchase)
    • Corporate expense (ex stock comp): $12.5MM to $13MM
  • 2012 outlook: 
    • D&A: $105MM to $110MM
    • Interest expense (net of capitalized interest): $103.5MM to $108.5MM (including $5.5MM of non-cash interest)
    • Tax rate: 43-44%
    • Stock comp: $14.8MM to $15.8MM
    • Capex: $85MM to $90MM (including $16MM MA land purchase)
    • Corporate expense (ex stock comp): $52MM to $53MM

Short Selling Opportunity: SP500 Levels, Refreshed

POSITION: Long Energy (XLE), Short SP500 (SPY)


So, the HedgeyEconomics model says that as inflation expectations (prices) accelerate, growth slows sequentially. That’s the fundamental reason why I am shorting the SP500 (SPY) today. I think most late January and early February growth data slows.


On the other side of that, I’m long Bernanke’s Policy To Inflate (Energy –XLE). Not good for the country (real-growth), but it’s good for our P&L’s while it lasts. Perverse, but true.


Across all 3 durations in my risk management model, the quantitative view supports this Short Selling Opportunity:

  1. Immediate-term TRADE overbought = 1327
  2. Immediate-term TRADE support = 1317
  3. Long-term TAIL support = 1267

So, theoretically, I’m in this short position for at least 10 SP500 points. But the beauty of embracing uncertainty is that I can, at any time, throw the theoretical out the window. If 1317 breaks, then it’s a long way to 1267.


Right here, right now, this is the high probability move in my model, so I’m making it for the 1sttime in 2012.




Keith R. McCullough

Chief Executive Office



Short Selling Opportunity: SP500 Levels, Refreshed - SPX.02.01.12

WMT: Trade Update

Keith managing risk around one of our high conviction TREND and TAIL longs by selling WMT from the Hedgeye Virtual Portfolio.


WMT is immediate-term TRADE overbought; no change to the fundamental call.


WMT: Trade Update - WMT






Comments from CEO Keith McCullough


It’s February, welcome to round 2 of the inflation/deflation/reflation game of expectations:

  1. CHINA – immediate-term growth expectations are coming down in a hurry now that commodity inflation expectations are rising – last night’s PMI print of 50.5 was not only a miss vs uninformed whispers (sad), but was a sequential deceleration in the slope of improvement (hard to beat the DEC v-bottom vs NOV). Chinese stocks closed down -1.1% on the news, and they should have.
  2. GERMANY – just absolutely ripping this morning on a big breakout above my long-term TAIL line for the DAX of 6503. Germany’s stock market is now up +11.7% YTD! (vs SPX +4.3%) as the old Bundesbankers prove out that there is an economic model that resides right of left-center (Keynes).
  3. TREASURIES – kaboom! US Growth expectations are getting hammered into the hole now w/ 10yr yields hitting YTD lows this morn at 1.81%. A lot of people will convince themselves that US stock futures up is whatever they want it to be, but I see that simply as inflation expectations rising which, in turn, slow growth even further. The Yield Spread hitting its lowest YTD at 161bps wide – should put a lid on the Financials at $XLF 14.24.


After 4 consecutive down days in the SP500, we’re due for another low-volume bounce to another lower long-term high. Immediate-term resistance = 1323.





THE HBM: WEN, JACK, MRT - subsector fbr





WEN: Wendy’s was cut to “Neutral” at Roth Capital.


JACK: Jack in the Box was initiated “Buy” at Lazard.





WEN: Wendy’s traded down -6.4% on accelerating volume. See our note from Monday; this concept needs $3.7 billion to right itself and become competitive again. 





MRT: Tilman Fertitta announced today that this wholly-owned company, Fertitta Morton’s Restaurant’s, Inc., has successfully completed a tender offer for all of the outstanding shares of common stock of MRT at $6.90 per share.





BWLD: Traded up 2.2% a week ahead of earnings.  We think the forward commentary will be bearish for the stock.


KONA:  Traded down -13% on accelerating volume after appointing Berke Bakay as president and CEO



THE HBM: WEN, JACK, MRT - stocks



Howard Penney

Managing Director


Rory Green



JCP: Shorting Again

Keith adding JCP to the Hedgeye Virtual Portfolio again into yesterday's close. We’re on board with this one big time. It’s definitely time to short JCP again.


Per Keith – “JCP, shorting - Been a while for us on the short side here but finally my risk management setup is in line with McGough's catalyst (i.e. no more love-fest catalyst).”


JCP: Shorting Again - jcp


In preparation for HOT's Q4 earnings release tomorrow, we’ve put together the recent pertinent forward looking company commentary.



Starwood Says Hotel Conversion Opportunities in North America Expected to Rise in 2012 with Uptick in Portfolio Transactions (1/24/2012)

  • “We ended 2011 with a renewed sense of momentum in the North American deal environment and, as we enter 2012, we’ve got a close eye on several transactions which may lead to an increase in conversion opportunities”
  • “Announced today that it opened 27 hotels in North America in 2011, more than it had predicted”
  • “Looking ahead to 2012, Starwood is slated to open 20 new properties in North America, not including late breaking in-the-year conversions which are expected to result in additional new hotels this year.”
  • “Conversions continue be the primary driver of new hotel growth in developed markets. In 2011, 75% of Starwood’s openings and 63% of its new deal signings in North America were conversions.”

St. Regis Hotels & Resorts Continues Remarkable Global Growth with the Debut of The St. Regis Bal Harbour Resort & Residences (1/20/2012)

  • “The St. Regis Bal Harbour Resort offers guests a new dimension of bespoke luxury with 243 guest rooms and suites and 245 private residences, all offering expansive private balconies with ocean views, in three glass towers rising 27 stories above a sprawling stretch of beach.”



  • We see the balance of this year in-line with what we said on our Q2 call.”
    • Full year EBITDA: $980 to $990MM
    • EPS will come in at around $1.75 to $1.79
    • Full year RevPAR remains at 7% to 9%
    • Owned EBITDA margins: 150 to 200bps
    • SG&A: +3% to 4%
    • “SVO will be at the high end of expectations.”
    • “Year-to-date we have opened 53 hotels and remain on track to open approximately 80 hotels in 2011.”
  • “Our Q4 EBITDA range of $270 million or $280 million was negatively impacted by $4 million to $5 million since we last spoke, due to the strengthening of the dollar.  Owned EBITDA in Q4 will be negatively impacted by approximately $8 million versus last year due to renovations and pre-opening costs at our new St. Regis Bal Harbour. In the fourth quarter, we will recognize income from Bal Harbour residential unit closings in addition to ur core EBITDA.”
  • “Overall for 2012, group pace is up mid single digits. Corporate rate negotiations are only just beginning but unlike last year, our customers expect higher rates as they see occupancy and virtually no new supply in key cities.”
  • 2012 guidance:
    • "Our worldwide RevPAR range of 4% to 8% reflects a sustained recovery at the high end and a more anemic one at the low end”
    • "6% to 8% RevPAR growth and the upper half of our EBITDA range would be in-line with this Q4 momentum being sustained through 2012.
    • “If we actually have 4% RevPAR growth, the bottom of our range, owned EBITDA growth becomes hard to realize, despite our cost containment initiatives. SVO is relatively flat in all scenarios, in synch with our strategy for this business. So whatever growth we get at a 4% RevPAR scenario will have to come from our fee business.”
    • EBITDA: $1.03 to $1.12BN
    • EPS: $1.96 to $2.25
    • “RevPAR implies a continued growth in market share of at least 100 basis points and it implies rigorous cost control. You'll note that between 2010 and 2012, we expect SG&A to be up only about 2% to 3% per year.”
    • “An estimated impact of about $20 million from completed asset sales this year, planned renovations, and foreign exchange.”
  • “We expect to have ample cash from these investments, generated by operations, Bal Harbour, and timeshare.”
    • “In North America… group pace heading into Q4 is good, with more than 90% of group business already on the books. Secondary indicators like leads and cancellations also remain positive. Transient booking momentum remains strong and at this point we're not seeing any changes in trend. As such, we are projecting that Q4 RevPAR growth in North America will remain generally in-line with what we saw in Q3. We are closely watching Canada, which is showing some signs of softness, partially due to the strong Canadian dollar.”
      • Europe: “We have seen some softening in booking trends as we entered September. As such, we are projecting that Q4 RevPAR growth in Europe will be in the 3% to 4% range. At this point it is too early to tell if this is a generalized trend or some local soft spots.”
      • North Africa and ME: “Year-over-year fee growth comparisons will suffer in Q4 since we do not expect to earn any incentive fees in North Africa, which are generally recorded in the fourth quarter. In total, our 2011 fees in North Africa will be down $10 million, which is in-line with what we had estimated early this year.”
      • “As we enter Q4, booking pace remains on trend, leads are up, and cancellations are down. India is weak and Thailand is severely disrupted by the floods. As such, we expect a small sequential slowdown in Asia RevPAR growth in Q4.”
      • “We do not expect this [3Q] level of growth to continue into Q4 based on current booking trends, nevertheless Latin America will grow in the double digits.”
      • “At SVO, tours are up as are close rates versus last year. The business remains stable and predictable. We hope to complete a securitization in the fourth quarter if terms are attractive. Default trends continue to improve and are now at 2006 levels. Assuming we complete the securitization, SVO will generate over $200 million in cash in 2011.”
      • “We will have some significant capital projects underway next year including the shutdown of the Gritti Palace in Venice and the Maria Cristina in Spain. Major renovations will also be on at the Westin Maui, the Westin Peachtree, and the Sheraton Rio. We are also shutting down two other hotels in the U.S. to convert them to Alofts.”“In terms of exchange rate impacts, as we have done for the past several years, we have hedged about half our euro profit exposure in 2012 at $1.44 to mitigate the euro risk as best we can.”
      • “Not included in our 2012 outlook range is income from residential unit closings at Bal Harbour. TCOs are coming in as planned and we anticipate starting closings in mid November. We have been in contact with buyers and expect that we will have several closings before the end of the year. The bulk of the closings of contacts previously signed will be in 2011. There will be significant revenue, income and cash from Bal Harbour in 2012. We will separately identify Bal Harbour numbers so you can clearly track performance of our core hotel business. As Bal Harbour flows through our income statement, it will affect our reported tax rate and our interest expense, as capitalized interest is expensed.”
      • For 2011 we're estimating approximately $10 million in earnings, $0.03 in EPS and $30 million in cash. The numbers for 2012 will be substantially higher. We continue to expect that we will generate almost $1 billion in revenue from selling all 307 condos at the St. Regis Bal Harbour. By the end of this year, we expect that 70% of this value will be under contract. Average price per square foot on units under contract exceeds $1,300. Sales have been robust year-to-date in 2011, well above our initial expectations. And since we're close to completion, we've asked for and received almost 50% in cash deposits on 2011 contracts.”
      • “Our priorities for cash use remain reinvesting in our business to drive growth in our pipeline and our owned hotels, paying down maturing debt, and returning cash to shareholders. We will shortly announce our 2011 dividend and will execute stock buybacks as we have in the past, if our criteria are met.”
      • [2012 FCF] “We would estimate free cash flow at least in the $250 million to $300 million range after payment of dividends, so maybe a little higher than that once you consider dividends. So let's say $350 million to $400 million in free cash flow.”
      • [Group Bookings] “Our pace going into the fourth quarter is up roughly 6%, with the majority of that being rate-driven. We continue to look for higher rate of business so we're pushing for rate. And occupancies and year-over-year gain in room nights is roughly flat
      • “There isn't a lot of downside [to 2012 RevPAR guidance] if RevPAR is flatlined in Continental Europe, because that would be factored into the ranges that we've given.”
      • “In terms of extra F&B spend, we're seeing some strength there. We've also worked, by the way, on continuously improving our margins from our food and beverage and our catering operations. And so even if we weren't to see a complete recovery on the spend there, we're absolutely seeing better flow-through from what we have.”
      • “A solid BBB, the way the rating agencies calculate it, which is very different than a simple net debt to EBITDA calculation, would be somewhere in the two and a half to three times debt to EBITDA range. And we should be in those ranges based on current trends by the latter part of next year.”

      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 80.43%
      • SHORT SIGNALS 78.35%