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BYD 1Q REPORT CARD

In an effort to evaluate performance and as a follow up to our YouTube, we compare how the quarter measured up to previous management commentary and guidance.


 

OVERALL:  BYD beat our expectations and we were way above the Street.  Forward guidance was once again overly conservative and we're surprised investors haven't caught on. 

 

Here is the report card evaluating actual results against management's assertions. 

  • 1Q PERFORMANCE
    • BETTER – 1Q came in above guidance of $0.05-0.09.  Wholly-owned Adjusted EBITDA was $95MM, well above the midpoint guidance of $88-93MM.  Borgata generated EBITDA of $39m versus guidance of $32-34MM.
  • LV LOCALS MARKET
    • SLIGHTLY WORSE:  Characterized the market at "steady" with "very modest growth" but was impacted by slightly elevated marketing expenses and low hold percentage.  Low table game hold at Orleans and Gold Coast negatively impacted EBITDA by $1MM.  With normal hold, the Locals properties would've beaten our estimate.
  • DOWNTOWN
    • SAME:  Rated play increased YoY as Hawaiian visitor play remain robust.  Fremont set a 3-yr record in F&B rev in March.  But jet fuel increased $750k.  BYD reiterated its positive outlook on the new developments on Fremont St and sees no decline in visitation. 
  • BORGATA 
    • MUCH BETTER:  In addition to beating guidance and consensus handily, management stated they have not seen any impact from the Revel opening and they expect the positive performance posted in 1Q12 to continue.  Occupancy is running above expectations and cash ADRs are doing well.
  • IP PERFORMANCE SYNERGIES
    • MUCH BETTER: Improved operating margins by 350bps without all the $5MM synergies being realized.  IP exceeded expectations and sees considerable upside in the property. 
  • MARGARITAVILLE COMPETITION
    • SAME:  Reiterated that there would be minimal, if any, impact 


Bearish: SP500 Levels, Refreshed

POSITIONS: Long Utilities (XLU), Short Basic Materials (XLB) and Industrials (XLI)

 

It’s hard to tell today whether the market is up on the hope that Bernanke debauches the Dollar further tomorrow or if people legitimately believe US Housing is back. Regardless, Apple looks worried (broke my $606 support) and so do my SP500 levels.

 

Across our risk management durations (TRADE, TREND, and TAIL), here are the lines that matter most: 

  1. Immediate-term TRADE resistance = 1377
  2. Immediate-term TRADE support = 1361
  3. Intermediate-term TREND support = 1349 

In other words, after a -3.7% correction (SP500 down 10 of the last 14 days), support is within sight. But so is resistance! Apple definitely has to deliver on expectations tonight. There are 56 analysts covering AAPL – 48 of them have “BUY” ratings.

 

Stay tuned.

KM

 

Keith R. McCullough
Chief Executive Officer

 

Bearish: SP500 Levels, Refreshed - SPX


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BYD: BIG EBITDA BEAT

Despite the great quarter, investors fear a repeat of last quarter's conference call.  Low expectations make that outcome unlikely.

 

 

Since investors seem to be already expecting lower guidance when BYD holds its noon conference call, playing the other side might be the right strategy.  People probably shouldn't believe any Q2 guidance below the current consensus of $0.10.  We were at $0.12 and that was before BYD lowered its cost structure at a number of properties including Borgata. 

 

Consistent with our earnings preview, BYD put up a big quarter, beating our Street high EBITDA estimates by over $1m and consensus by $7.5m.  The quarter was high quality as the beat were driven at the property level - $7.6m better than consensus.  Top line was also strong, besting consensus by $7.8m.  EPS “only” exceeded consensus by 2c but a high tax rate and high interest expense cost the company 2-3c.

 

The regional markets, particularly the Imperial Palace, and Borgata were the standouts.  The newly acquired IP generated EBITDA of $12.7m versus our $9.0m estimate – corroborating management’s assertions of this being a high ROI acquisition.  Heading into the new competition from Revel, Borgata’s margin performance was impressive.  A lower cost structure certainly provides a little more comfort about Borgata’s ability to withstand the additional supply in Atlantic City.  Given the seasonal demand patterns in that market, the real impact from Revel might not be felt until Q4.  Thus, Borgata could continue to exceed consensus quarterly expectations through Q3. 

 

 

BYD: BIG EBITDA BEAT - byd1

 

BYD: BIG EBITDA BEAT - BYD2


SCC NOT IMPACTING LVS SHARE YET

No change in our April forecast

 

 

Average daily table revenues (ADTR) actually declined 2% sequentially this past week, but up 39% YoY.  There is no change to our monthly forecast of HK$23.5-24.5 million, up 18-23% YoY.  With the opening of Sands Cotai Central (SCC) and recent higher expectations, GGR probably needs to grow around 25% for the investment community to get excited. 

 

SCC NOT IMPACTING LVS SHARE YET - MACAU1

 

Surprisingly, Sands China’s share is falling below trend this month despite the opening of SCC.  Moreover, market share has gone from 17.8% to 17.2% to 16.6%, respectively, in the first 3 weeks of April, with SCC opening in the middle of week 2.  We have heard that Sands China may have played unlucky on the VIP tables and it is still too early to make any lasting judgments.  Surprisingly, WYNN and Galaxy are the clear winners so far this month.  Galaxy is maintaining the strong share it attained in March.  Galaxy Macau still looks vulnerable given its location and likely Mass overlap with SCC but so far so good for that company.   

 

SCC NOT IMPACTING LVS SHARE YET - macau2

 


THE HBM: CMG, WEN, EAT, CAKE, BWLD

THE HEDGEYE BREAKFAST MONITOR

 

HEDGEYE VIRTUAL PORTFOLIO POSITIONS

 

LONGS: JACK, SBUX

 

SHORTS:

 

MACRO NOTES

 

Commentary from CEO Keith McCullough

 

Most Read (Bloomberg) story this morning is “Bundesbank’s Weidmann Says What No Politician Wants To Hear” –

evidently we have company on the Strong Currency front – big issue for the US General Election:

  1. JAPAN – sadly, the Japanese have entered the final stage of the Currency War where both currency and equity markets start going down at the same time (think Europe from April 2011 to the 2011 crash bottom). The Yen’s decline was 1st, and now the Nikkei has been down for 13 of the last 15 trading days – BOJ bureaucrats begging for bond buying bailouts.
  2. GERMANY – the DAX snapped my intermediate-term TREND line of 6688 support yesterday, so I’m watching that market very closely on this morning’s no-volume bounce to 6568 so far. German growth data started to slow in Feb/Mar and that matters. So does the German voice of “Strong Euro” overriding Bernanke’s politicized one on the US Dollar.
  3. OIL – they will not come down like other commodities have until Bernanke says something explicit about no Qe4; our model’s show you’d need to see a sustained breakdown on Brent and WTIC below $96/barrel to stabilize Consumption Growth. We’re nowhere near seeing that yet, but Energy stocks seem to be sniffing that out.

Immediate-term SP500 range = 1.

 

SUBSECTOR PERFORMANCE

 

THE HBM: CMG, WEN, EAT, CAKE, BWLD - subsector

 

 

QUICK SERVICE

 

CMG: Chipotle was downgraded to Neutral at Credit Suisse.

 

WEN: Wendy’s has launched new “signature” sides for $2.49.  The Mac & Cheese, Baked Sweet Potatoes, and Chili Cheese Fries were reviewed on grubgrade.

 

 

CASUAL DINING

 

EAT: Brinker’s strong quarter yesterday led to several names trading strongly intraday.  Our thought is that this was primarily a short covering-fueled move; Brinker and Cheesecake Factory led the group yesterday and are two of the most heavily shorted names in casual dining. Buffalo Wild Wings did not move higher on the news.

 

EAT: Brinker was raised to Positive versus Negative at Susquehanna.

 

EAT: Brinker was raised to Neutral at Stern Agee

 

NOTABLE PERFORMANCE ON ACCELERATING VOLUME:

 

EAT: Brinker was the clear standout yesterday, gaining 10.7% on accelerating volume. 

 

CAKE: Cheesecake Factory gained 2% on accelerating volume.

 

BJRI: BJ’s Restaurants continues to trade poorly, declining just over a point on strong volume.

 

BWLD: Buffalo Wild Wings reports after the market close today.

 

THE HBM: CMG, WEN, EAT, CAKE, BWLD - stocks

 

 

Howard Penney

Managing Director

 

Rory Green

Analyst

 


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