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GENTING SINGAPORE: HIGH HOLD SHOULD CONTRIBUTE TO BIG BEAT

In a reversal of recent disappointments, we’re expecting a big beat from Genting Singapore this quarter.  Unfortunately, high hold may have lent a helping hand this quarter.

 

 

Our call for a big quarter is largely predicted on our proprietary analysis of Singapore betting tax data.  According to the January and February data, 1Q12 GGR should contribute to an all-record number, with QoQ growth of at least 10% or S$2.1BN.  MBS reported GGR of S$1.1BN, implying that RWS produced about S$1.0BN compared to S$903MM in 4Q11.   RWS’s 4Q benefited from a huge hold rate as did MBS’s 1Q12.  We think Genting’s 1Q12 numbers were also the beneficiary of lady luck.

 

We estimate that Genting Singapore’s RWS will report property level net revenue and EBITDA of S$843MM and adjusted EBITDA of S$445MM, 9% and 21% ahead of consensus, respectively.  

 

Details:

 

RWS did S$406MM of EBITDA last quarter on S$782MM of revenues which benefited from a huge hold rate.  If our GGR estimate is in the ballpark, we believe that the incremental S$100MM of GGR should easily produce an extra S$39MM of EBITDA, even if fixed expenses creep up QoQ.

  • Gaming revenue, net of commissions of S$698M
    • Gross VIP revenue of S$541MM and net revenue of $313MM
      • We expect RC volume to increase sequentially to S$15.5BN, but still be 18% below a record number produced in 1Q11
      • Hold of 3.5%
      • Rebate of 1.33%
    • Gross Mass table of S$286MM and S$236MM net of gaming points
      • Gaming points equal to 3.75% of drop or S$50MM
    • S$178MM of slot and EGT win
      • The incremental slots/EGT expansion was installed the second week of January so the quarter should have benefited from healthy growth
  • Non-gaming revenue of S$145MM
    • Hotel room revenue of S$38MM
      • Hotel revenues should see a sequential lift with the added capacity of the Equarius rooms
    • S$25MM of F&B and other revenue
    • USS revenue of S$82MM
  • Gaming taxes of S$91MM
  • Implied fixed costs of S$195MM compared to S$185MM/Q in 2H11

European Banking Monitor: France CDS Rise On Election Results

Below are key European banking risk monitors, which are included as part of Josh Steiner and the Financial team's "Monday Morning Risk Monitor".  If you'd like to receive the work of the Financials team or request a trial please email .

 


Key Takeaways:

 

* French Bank Swaps tightened slightly WoW going into Sunday's French presidential election, which saw Francois Hollande, the socialist party candidate, win the presidency. French sovereign swaps widened by 3% this morning compared to last Friday, highlighting an increased risk of default stemming from Hollande's likely rejection of certain austerity policies. 

 

* Spanish Bank CDS tightened over the week while Spanish sovereign CDS widened.

 

If you’d like to discuss the implications of election results across Europe please let me know and we can set up a call.

 

Matthew Hedrick

Senior Analyst

 

(o)

-------------

 

European Financials CDS Monitor – Bank swaps were tighter in Europe last week for 29 of the 39 reference entities. The average tightening was 3.9% while the median tightening was 3.3%. 

 

European Banking Monitor: France CDS Rise On Election Results - 1. banks

 

Euribor-OIS spread – The Euribor-OIS spread (the difference between the euro interbank lending rate and overnight indexed swaps) measures bank counterparty risk in the Eurozone. The OIS is analogous to the effective Fed Funds rate in the United States.  Banks lending at the OIS do not swap principal, so counterparty risk in the OIS is minimal.  By contrast, the Euribor rate is the rate offered for unsecured interbank lending.  Thus, the spread between the two isolates counterparty risk. The Euribor-OIS spread tightened by 1 bps this morning over last Monday to 38 bps.  We have noted previously that the correlation between Euribor-OIS and other risk measures (such as bank CDS or even bank stock prices) was very tight in the fall, but has disintegrated since mid-March.  Thus, at the moment, we are not focused on Euribor-OIS as a key risk indicator. 

 

European Banking Monitor: France CDS Rise On Election Results - 11. euribor

 

ECB Liquidity Recourse to the Deposit Facility – The ECB Liquidity Recourse to the Deposit Facility measures banks’ overnight deposits with the ECB.  Taken in conjunction with excess reserves, the ECB deposit facility measures excess liquidity in the Euro banking system.  An increase in this metric shows that banks are borrowing from the ECB.  In other words, the deposit facility measures one element of the ECB response to the crisis.  The latest overnight reading is €801.49B.

 

European Banking Monitor: France CDS Rise On Election Results - 111. ecb

 

Security Market Program – For an eighth straight week the ECB's secondary sovereign bond purchasing program, the Securities Market Program (SMP), purchased no sovereign paper for the latest week ended 5/4, to take the total program to €214 Billion.

 

European Banking Monitor: France CDS Rise On Election Results - 11. smp


OK START TO MAY

Our May forecast is HK$27-29 billion, +14-23% YoY growth

 

 

No big surprise out of Macau for the first week of May.  On the surface, HK$975m in average daily table revenue (ADTR) would appear strong when compared to April’s HK$775m.  However, Sands Cotai Central was not open for a third of April and Golden Week was the first week of May.  Our forecast for May GGR (including slots) is HK$27-29 billion which would represent YoY growth of 14-23%.  May could end up being the slowest growth month of the year thus far.

 

OK START TO MAY - MAY2

 

Not surprisingly, hold has impacted the first week.  We are hearing that MGM and especially WYNN held low in the first week.  Sands China market share still looks weak to us after a hold impacted April.  While share is up to 19.0% from the 3 month trend of 17.3%, SCC did add over 4% to Macau table supply.  Galaxy continues to defy expectations with another week of strong share while MPEL looks like they are holding their own.  One potential trend we will be watching is the migration of play from the peninsula to Cotai.  Even though that appears to be happening since the opening of SCC, it is too early to make that definitive claim.

 

OK START TO MAY - MAY1


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THE M3: S'PORE HOTEL RATES

The Macau Metro Monitor, May 7, 2012

 

 

HOTEL ROOM RATES HIT 4-YEAR HIGH IN FEBRUARY 2012 Strait Times

 

According to preliminary Singapore Tourism Board (STB) statistics, the six-day Singapore Airshow in February helped to push hotel room rates to $302.90 in Singapore, a four-year high.  This is the highest since September 2008's $302.90 when the inaugural Singapore Grand Prix Formula One race was held.  The average occupancy rate was 89%.



MONDAY MORNING RISK MONITOR: FRANCE CDS RISE ON ELECTION RESULTS

Key Takeaways 

* French Bank Swaps tightened slightly WoW going into Sunday's French presidential election, which saw Francois Hollande, the socialist party candidate, win the presidency. French sovereign swaps widened by 3% this morning compared to last Friday, highlighting an increased risk of default stemming from Hollande's likely rejection of certain austerity policies. 

 

*Sovereign CDS were mostly wider WoW. Italian sovereign swaps were the only exception, tightening by 1.3%. Spanish Bank CDS tightened over the week while Spanish sovereign CDS widened.

 

* High yield rates fell sharply last week.

 

Financial Risk Monitor Summary  

• Short-term(WoW): Neutral / 3 of 12 improved / 3 out of 12 worsened / 6 of 12 unchanged  

• Intermediate-term(WoW): Neutral / 3 of 12 improved / 3 out of 12 worsened / 6 of 12 unchanged  

• Long-term(WoW): Positive / 5 of 12 improved / 2 out of 12 worsened / 5 of 12 unchanged

 

MONDAY MORNING RISK MONITOR: FRANCE CDS RISE ON ELECTION RESULTS - Summary 4

 

1. US Financials CDS Monitor – Swaps widened for 18 of 27 major domestic financial company reference entities last week.   

Widened the most WoW: WFC, MTG, RDN

Tightened the most WoW: C, UNM, MBI

Widened the most MoM: MTG, RDN, GNW

Tightened the most MoM: COF, MBI, AIG

 

MONDAY MORNING RISK MONITOR: FRANCE CDS RISE ON ELECTION RESULTS - US CDS2

 

2. European Financial CDS - Bank swaps were tighter in Europe last week for 29 of the 39 reference entities. The average tightening was 3.9% while the median tightening was 3.3%. 

 

MONDAY MORNING RISK MONITOR: FRANCE CDS RISE ON ELECTION RESULTS - EURO CDS

 

3. European Sovereign CDS – European Sovereign Swaps mostly widened over last week. Italian sovereign swaps tightened by 1.3% (-6 bps to 441 ) and Portuguese sovereign swaps widened by 4.9% (47 bps to 1010).

 

MONDAY MORNING RISK MONITOR: FRANCE CDS RISE ON ELECTION RESULTS - Sov table

 

MONDAY MORNING RISK MONITOR: FRANCE CDS RISE ON ELECTION RESULTS - Sovereign CDS 1

 

MONDAY MORNING RISK MONITOR: FRANCE CDS RISE ON ELECTION RESULTS - Sovereign CDS 2

 

4. High Yield (YTM) Monitor – High Yield rates fell 15.6 bps last week, ending the week at 7.07 versus 7.23 the prior week.

 

MONDAY MORNING RISK MONITOR: FRANCE CDS RISE ON ELECTION RESULTS - HY

 

5. Leveraged Loan Index Monitor – The Leveraged Loan Index rose 10 points last week, ending at 1671.

 

MONDAY MORNING RISK MONITOR: FRANCE CDS RISE ON ELECTION RESULTS - LLI

 

6. TED Spread Monitor – The TED spread rose 1.5 points last week, ending the week at 39 this week versus last week’s print of 37.7.

 

MONDAY MORNING RISK MONITOR: FRANCE CDS RISE ON ELECTION RESULTS - TED

 

7. Journal of Commerce Commodity Price Index – The JOC index rose 1.8 points, ending the week at -3.7 versus -5.5 the prior week.

 

MONDAY MORNING RISK MONITOR: FRANCE CDS RISE ON ELECTION RESULTS - JOC

 

8. Euribor-OIS spread – The Euribor-OIS spread (the difference between the euro interbank lending rate and overnight indexed swaps) measures bank counterparty risk in the Eurozone. The OIS is analogous to the effective Fed Funds rate in the United States.  Banks lending at the OIS do not swap principal, so counterparty risk in the OIS is minimal.  By contrast, the Euribor rate is the rate offered for unsecured interbank lending.  Thus, the spread between the two isolates counterparty risk. The Euribor-OIS spread tightened by 1 bps this morning over last Monday to 38 bps.  We have noted previously that the correlation between Euribor-OIS and other risk measures (such as bank CDS or even bank stock prices) was very tight in the fall, but has disintegrated since mid-March.  Thus, at the moment, we are not focused on Euribor-OIS as a key risk indicator. 

 

MONDAY MORNING RISK MONITOR: FRANCE CDS RISE ON ELECTION RESULTS - Euribor OIS

 

9. ECB Liquidity Recourse to the Deposit Facility – The ECB Liquidity Recourse to the Deposit Facility measures banks’ overnight deposits with the ECB.  Taken in conjunction with excess reserves, the ECB deposit facility measures excess liquidity in the Euro banking system.  An increase in this metric shows that banks are borrowing from the ECB.  In other words, the deposit facility measures one element of the ECB response to the crisis.  

 

MONDAY MORNING RISK MONITOR: FRANCE CDS RISE ON ELECTION RESULTS - ECB Liquidity

 

10. Markit MCDX Index Monitor – The Markit MCDX is a measure of municipal credit default swaps. We believe this index is a useful indicator of pressure in state and local governments. Markit publishes index values daily on six 5-year tenor baskets including 50 reference entities each. Each basket includes a diversified pool of revenue and GO bonds from a broad array of states. We track the 16-V1. Last week spreads widened, ending the week at 150.8 bps versus 146.8 bps the prior week.

 

MONDAY MORNING RISK MONITOR: FRANCE CDS RISE ON ELECTION RESULTS - MCDX

 

11. Baltic Dry Index – The Baltic Dry Index measures international shipping rates of dry bulk cargo, mostly commodities used for industrial production. Higher demand for such goods, as manifested in higher shipping rates, indicates economic expansion. Last week the index rose 1 point, ending the week at 1157 versus 1156 the prior week.

 

MONDAY MORNING RISK MONITOR: FRANCE CDS RISE ON ELECTION RESULTS - Baltic

 

12. 2-10 Spread – We track the 2-10 spread as an indicator of bank margin pressure.  Last week the 2-10 spread tightened to 162 bps, 5 bps tighter than a week ago.

 

MONDAY MORNING RISK MONITOR: FRANCE CDS RISE ON ELECTION RESULTS - 2 10

 

13. XLF Macro Quantitative Setup – Our Macro team’s quantitative setup in the XLF shows 2.1% upside to TRADE resistance and 1.2% downside to TREND support.

 

MONDAY MORNING RISK MONITOR: FRANCE CDS RISE ON ELECTION RESULTS - XLF

 

Margin Debt - March: +0.91 standard deviations 

We publish NYSE Margin Debt every month when it’s released. NYSE Margin debt hit its post-2007 peak in April of 2011 at $320.7 billion. The chart below shows the S&P 500 overlaid against NYSE margin debt going back to 1997. In this chart both the S&P 500 and margin debt have been inflation adjusted (back to 1990 dollar levels), and we’re showing margin debt levels in standard deviations relative to the mean covering the period 1. While this may sound complicated, the message is really quite simple. First, when margin debt gets to 1.5 standard deviations or greater, as it did last April, it has historically been a signal of extreme risk in the equity market - the last two times it did this the equity market lost half its value in the ensuing period. We flagged this for the first time back in May 2011. The second point is that margin debt trends tend to exhibit high degrees of autocorrelation. In other words, the last few months’ change in margin debt is the best predictor of the change we’ll see in the next few months. We would need to see it approach -0.5 to -1.0 standard deviations before the trend runs its course. There’s plenty of room for short/intermediate term reversals within this broader secular move. Overall, however, this setup represents a long-term headwind for the market. One limitation of this series is that it is reported on a lag.  

 

The chart shows data through March. 

 

MONDAY MORNING RISK MONITOR: FRANCE CDS RISE ON ELECTION RESULTS - Margin Debt

 

Joshua Steiner, CFA

 

Allison Kaptur

 

Robert Belsky

 

Having trouble viewing the charts in this email?  Please click the link at the bottom of the note to view in your browser. 

 

 


Exporting Dogma

This note was originally published at 8am on April 23, 2012. INVESTOR and RISK MANAGER SUBSCRIBERS have access to the EARLY LOOK (published by 8am every trading day) and PORTFOLIO IDEAS in real-time.

“Currency devaluation as a path to increased exports is not a simple matter.”
-Jim Rickards, Currency Wars

 

My week of family vacation would not have been complete without thinking about Keynesians. Sadly, from the gas pumps in Fort Myers, Florida to those in New Haven, CT, centrally planned Policies To Inflate are now part of the cost of everyday American life.

 

If you didn’t know that the world’s markets are globally interconnected, you might actually believe the Academic Dogma that a “cheap currency” is going to provide you the yellow brick road to Export prosperity. If you’ve analyzed the last 5 years of US Export versus US Consumption growth data, you probably think otherwise. America is a Consumption economy. Period.

 

Debauching the US Dollar to all-time lows into the Spring of both 2008 and 2011 inspired bouts of global food and energy inflation like the world has never seen. With sovereign debt levels having crossed the Rubicon (structurally impairing long-term growth), Ben Bernanke had no business imposing another inflation policy on January 25th, 2012. Growth started slowing in February.

 

Back to the Global Macro Grind

 

Growth Slowing in February? Yes, most major Asian and European stock markets stopped going up in February (Hong Kong, India, Spain, etc). This morning’s abruptly bearish reaction in global equity markets is simply a function of consensus catching up to where we’ve been. This isn’t our first rodeo calling for a sequential slowdown in growth. It won’t be our last.

 

What would change my view? I’ll give a free tank of natural gas to the first best guess.

 

Strong Dollar is the only way out. The best way to achieve that is to get these un-elected Keynesian policy makers out of the way.

 

A Strong Dollar will: 

 

A)     Deflate The Inflation

B)     Strengthen (inflation adjusted) Consumption Growth

 

That’s the 71% of the US Economy that matters, not Exports.

 

Not seeing US Exports work drives the Keynesians right batty. It should - look at the US Export contribution to US GDP for the last 3 quarters:

  1. Q2 2011 = 0.48%
  2. Q3 2011 = 0.64%
  3. Q4 2011 = 0.37%

Oh, and by the way, you have to net out Imports from Exports to get to US GDP (calculating GDP = C + I + G + (EX-IM)), so Exports aren’t doing anything for US Growth where it matters most, on the margin.

 

The biggest concern that Keynesian politicians from Nixon/Carter to Bush/Obama have had is seeing the stock market go down. During periods of economic stagflation, stock markets get addicted to inflation inasmuch as the politicians do. If you Deflate The Inflation, stocks and commodities fall. So, in the short-term, they’re right.

 

But what’s right for the long-term prosperity of a country’s economy, attempting to centrally plan stock and commodity prices, or maintain price “stability” and “full” employment?

 

This is why The People are so upset. This is why US Equities in particular have zero inflows. The People don’t trust this game of gaming policy anymore – and they shouldn’t.

 

This morning’s Global Macro “news” is laden with stagflation – unless we see WTIC Oil prices snap and stay below $96/barrel, that’s just the way it’s going to be. Global Growth has never NOT slowed with Oil prices at these levels. Never is a long time.

 

Rather than have some Keynesian Economist who takes car service or a NYC cab to work tell you to put some natty gas in your truck and like it, look at what the rest of the world is reporting this morning:

  1. French Services PMI slows, big time, to 46.4 in April versus 50.1 in March
  2. Italian Consumer Confidence hits an all-time lows (all-time is a long time)
  3. Singapore Consumer Price Inflation for March accelerated to 5.2% versus 4.6% in February

That last data point is stale news now (March), and should start to ease in April/May if we see a continued Deflation of The Inflation. That’s the best news I can tell you this morning. But, like it was during the Q1 to Q3 stock market draw-downs of 2008, 2010, and 2011, this will be a process, not a point. Global Consumption doesn’t turn on a futures broker’s dime.

 

In the meantime, we’ll be using the same research and risk management process to monitor changes on the margin. While it’s alarming that Old Wall Street has not changed what it is that they do in the last 5 years, we don’t want to interrupt them as they continue to make the same mistakes, confusing short-term stock and commodity market inflations with real growth.

 

Our immediate-term support and resistance ranges for Gold, Oil (Brent), US Dollar Index, and the SP500 are now $1623-1655, $116.95-119.41, $79.11-79.54, and 1356-1394, respectively.

 

Best of luck out there this week,

KM

 

Keith R. McCullough
Chief Executive Officer

 

Exporting Dogma - Chart of the Day

 

Exporting Dogma - Virtual Portfolio


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