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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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THE M3: GALAXY MACAU BLOCK SELL

The Macau Metro Monitor, April 24, 2012

 

 

GALAXY MACAU SHAREHOLDER SELLS $141 MM STAKE Reuters

An undisclosed institutional investor in Galaxy Macau sold about $141 million stake in the company.  A block of 50 million shares was sold at HK$21.80, a discount of nearly 4% to Galaxy's last traded price, the source said.  The shares were offered in a range of HK$21.70-21.90 each.

 

Citigroup and Goldman Sachs were the joint book runner, said the source.

 

 

 

 



Willing To Learn

“No nation is fit to teach unless it is also willing to learn.”

-Teddy Roosevelt

 

That was just an outstanding leadership quote from President Theodore Roosevelt as he was working his way towards getting the “Gentlemen’s Agreement” in 1908 between San Franciscans and the Japanese.

 

While I was on my pseudo vacation last week, I thought about the context of this leadership lesson while I was reading “Pacific Crucible” by Ian Toll. Then I thought about it again, and again, and again.

 

If you don’t have empathy, you don’t have much. As the world becomes more politically polarized, we run the greatest risk of all – we stop learning. The only way to lead is to learn the other side’s perspective. If you don’t take the time to understand it, you’ll never be able to resolve it. Leadership includes not making the same mistakes, over, and over, and over again.

 

Back to the Global Macro Grind

 

You don’t have to read much to understand that the divide between segregation and immigration is always bridged by education. Neither do you have to study economic history much to acknowledge the wide gap between Keynesian and Hayekian economics.

 

When I moved to this country, I learned quickly that people want to label other people in buckets. ‘Oh he’s a Democrat and she’s a Republican’ or ‘he’s a socialist and she’s a capitalist.’ But, somewhere along the way, I also learned that’s ridiculous. Maybe it’s because I was a 20 year-old bumpkin from 22 hours north of Toronto. Maybe it’s just because I don’t like being put in a bucket.

 

With the upcoming election in France you are starting to see the outcrop of political polarization that we’ll likely see in the US Presidential Election. The Germans are taking this opportunity to call the French Socialists, and the French are preparing to call the Germans something back. In the meantime, that’s not going to solve the European Debt Crisis, just fyi.

 

Neither are we going to solve the world’s debt problems with more debt. We aren’t going to solve anything by printing more and more moneys either.

 

I’m not saying that there shouldn’t be a time and place for printing money. I’m just saying that you shouldn’t have a policy to be perpetually printing money and debauching your country’s currency. History is already littered with politicians making that mistake.

 

If you want a European and American perspective on politicizing money consider the following:

  1. Give me control of a nation’s money and I care not who makes its laws.” –Mayer Rothschild
  2. I believe that banking institutions are more dangerous to our liberties than standing armies.” –Thomas Jefferson

When you read those quotes, you should feel something. If you are a central banker, you don’t like the Jefferson quote – but that’s not the point. Neither is feeling what it means to you – being empathetic to what the other side feels is leadership.

 

What I feel about this is no longer a minority voice. The Most Read story on Bloomberg this morning has the following title:

 

“Bundesbank’s Weidemann Says What No Politician Wants To Hear”

 

That’s a critical quote at a critical time because our politicians have put us all in a critical position. If the fiscally and monetarily conservative voice of the Bundesbank in Germany is Willing To Learn from the history of the Weimar Republic’s mistakes, I suggest you and I should too. Printing money and debauching Dollars doesn’t end well, so stop cheering it on.

 

Think about that, again and again. I beg you.

 

Rather than begging for bailouts from Ben Bernanke at tomorrow’s FOMC meeting, take a step back and try to learn what all of us who haven’t been blowing up your hard earned capital since late 2007 are saying.

 

We’re not crazy. We’re Willing To Learn from whomever can show us why the Germans are wrong this time. We’re Willing To Learn how this time really is different.

 

But fear-mongering about what could have been in 2008 is no longer teaching anyone anything. It’s 2012 and now we need to see some positive proof on price stability and employment that lasts more than a few quarters to believe that the Fed, ECB, and BOJ Policies To Inflate aren’t going to slow global growth. They just did, again.

 

My immediate-term support and resistance ranges for Gold, Oil (Brent), US Dollar Index, Japanese Yen (vs USD), EUR/USD, and the SP500 are now $1, $118.35-119.28, $79.04-79.49, $81.09-82.14, $1.30-1.32, and 1, respectively.

 

Best of luck out there today,

KM

 

Keith R. McCullough
Chief Executive Officer

 

Willing To Learn - Chart of the Day

 

Willing To Learn - Virtual Portfolio


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