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APRIL KNAPP TRACK

The Knapp Track numbers for April suggest a slight sequential improvement in casual dining sales trends from March. 

 

Malcolm Knapp released his Knapp Track casual dining sales numbers for April this weekend.  This release was a departure from Knapp’s usual release, which comes in the form of a longer text report offering different insights into consumer trends during the month concerned; this weekend Knapp released the numbers alone with the text report, presumably, to follow in the coming days.

 

Estimated Knapp Track casual dining comparable restaurant sales grew 0.8% in April versus an estimated -0.7% in March.  The sequential change from March to April, in terms of the two-year average trend, was 30 bps.  While this is an improvement, the two year average trend is still well below the strength we saw in December through February. 

 

Estimated Knapp Track casual dining guest counts declined -1.9% in April versus an estimated -3.4% in March.  The sequential change from March to April, in terms of the two-year average trend, was +50 bps.  This is an improvement but the decline in March was so substantial that a more sustained move higher will be necessary to convince investors that traffic can get back to positive territory. 

 

 

Takeaways

 

Besides the broader casual dining group, for Darden and Brinker this result is especially meaningful since those companies’ systems represent a large portion of the unit base from which the numbers are calculated.

 

Traffic trends remain disappointing; it seems likely that weather was supporting traffic trends for much of 1Q.  Now that the weather impact has dissipated, we are seeing numbers more representative of the true traffic trends in casual dining.

 

The price action is confirming our CASUAL DINING CAUTION stance we took ahead of 1Q earnings season.  The group’s performance versus the broader market is slowing markedly.  BWLD, however, remains a volatile name and outperformed the market last week by 4%.  We still like BWLD on the short side but there are no catalysts until the company reports earnings on July 26th.  The stock has not been performing very strongly relative to its peers over the last three months; we think consensus is too bullish on FY12 EPS.

 

APRIL KNAPP TRACK - cd rel spx

 

Howard Penney

Managing Director

 

Rory Green

Analyst

 


Gnarly: SP500 Levels, Refreshed

POSITIONS: Long Healthcare (XLV), Short Industrials (XLI)

 

Friday morning’s bounce was a Selling Opportunity (see 11:44AM EST note 5/11). Today is a wait and watch.

 

There is no immediate-term support to 1329 and, over the intermediate-term, the mean reversion zone we have been focused on is the long-term TAIL of support down at 1282.

 

Here are the lines across risk management durations that I am focused on: 

  1. Intermediate-term TREND resistance = 1369
  2. Immediate-term TRADE support = 1329
  3. Long-term TAIL support = 1282 

I see zero irony in this market giving back essentially its entire gain from the January 25thPolicy To Inflate day (where Bernanke arbitrarily pushed 0% policy to 2014).

 

Quantitative Easing, from here, only spikes oil and slows real consumption growth further. The only way out of this is to Deflate The Inflation in food, energy, etc. so that the 71% (US Consumption as a % of US GDP) can stop slowing and solidify itself (like it did in December and January).

 

Letting free-market prices clear – I know – the horror of the idea.

KM

 

Keith R. McCullough
Chief Executive Officer

 

Gnarly: SP500 Levels, Refreshed - SPX


MACAU: A SLOW WEEK FOLLOWING GOLDEN WEEK

We are lowering the top end of our May forecast range from HK$29 billion to HK$28 billion. 

 

Our new range of HK$27-28 billion would represent YoY growth of 14-19%.  This could be seen as a disappointment by investors. 

 

Average daily table revenues (ADTR) declined to HK$714 million from HK$975 million last week and was below the April rate of HK$773 million.  However, ADTR was 35% above the comparable week last year. 

 

MACAU: A SLOW WEEK FOLLOWING GOLDEN WEEK - macau333

 

Sands China had another disappointing week with MTD market share dropping back down to the mid 17s%, in-line with pre-Sands Cotai Central levels.  Obviously, share should be much higher considering that SCC added about 4% to table market share.  Galaxy and SJM are trending above recent share while Wynn and MGM are below.

 

MACAU: A SLOW WEEK FOLLOWING GOLDEN WEEK - macau444


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SINGAPORE Q1 2012 REVIEW

A new quarterly record 

 

 

Singapore gross gaming revenues rose 11% YoY and 9% QoQ to a new quarterly high in Q1 2012.  GGR crossed the S$2 billion mark to S$2.093 billion.  For comparison, Macau GGR grew 1% QoQ and 27% YoY in Q1.  Singapore property EBITDA rose 3% QoQ to S$985MM, also setting a new record.  

 

VIP RC grew QoQ by 22%, but was down slightly YoY at S$31.7BN and 14% below the market high set in 3Q11. Mass drop and slot handle were up YoY by 4% and 31%, respectively to S$2.8BN and S$6.8BN, however, both categories were down QoQ.  YoY we have seen the number of slots and ETG's expand by 20% to 4,919 and the number of VIP tables expand 15% to 315, while Mass table growth has only been 2% to 855. 

 

Q1 hold was 3.49%, slightly lower than Q4’s 3.58% but higher than Q1 2011's hold of 3.25%.  Average hold for the 2 IR’s since 1Q10 has been close to 3.09%. 

 

Q1 MARKET SHARES

 

GGR:

  • MBS:  52.3%
  • RWS:  47.7%

Net Revenue:

  • MBS:  57.5%
  • RWS:  42.5%

Property EBITDA:

  • MBS:  60.7%
  • RWS:  39.3%

Mass Table Revenue:

  • MBS:  52.7%
  • RWS:  47.3%

Mass Table Drop:

  • MBS:  53.4%
  • RWS:  46.6%

VIP Table Revenue:

  • MBS:  52.3%
  • RWS:  47.7%

VIP RC:

  • MBS:  51.1%
  • RWS:  48.9%

Slot Revenue:

  • MBS:  51.2%
  • RWS:  48.8%

Slot Handle:

  • MBS:  45.7%
  • RWS:  54.3% 

 

SINGAPORE Q1 2012 REVIEW - PROP

 

SINGAPORE Q1 2012 REVIEW - s pore0

 

SINGAPORE Q1 2012 REVIEW - s pore2

 

SINGAPORE Q1 2012 REVIEW - spore10

 

SINGAPORE Q1 2012 REVIEW - mass rev

 

SINGAPORE Q1 2012 REVIEW - mass drop 

 

SINGAPORE Q1 2012 REVIEW - vip rin

 

SINGAPORE Q1 2012 REVIEW - vip rc

 

SINGAPORE Q1 2012 REVIEW - 1

 

SINGAPORE Q1 2012 REVIEW - 2 

 


THE M3: MACAU TOUR AND HOTEL DATA; CHINA RRR CUT

The Macau Metro Monitor, May 14, 2012

 

 

PACKAGE TOURS AND HOTEL OCCUPANCY RATE FOR MARCH 2012 DSEC

Visitor arrivals in package tours surged by 51.1% YoY to 754,163 in March 2012.  Visitors from Mainland China (531,096) increased by 45.8%, with 174,477 coming from Guangdong Province; besides, those from Taiwan (70,556); Hong Kong (35,765); the Republic of Korea (28,449); and Japan (23,402) soared by 163.7%, 87.0%, 42.9% and 20.3% YoY respectively.

 

In the first quarter of 2012, visitors in package tours totaled 2,050,476, up by 45.6% YoY to account for 29.5% of the total visitor arrivals, higher than the 21.9% from the same period of 2011.

 

Number of available guest rooms of the 95 hotels and guest-houses totaled 22,272 at the end of March 2012, an increase of 2,143 rooms (+10.6 YoY), with those of the 5-star hotels accounting for 63.7% of the total.  The average length of stay decreased by 0.08 night to 1.4 nights.

 

PEOPLE'S BANK OF CHINA CUTS BANKS' RESERVE REQUIREMENT RATIOS 50 BPS, EFFECTIVE 18-MAY Reuters

On May 18, for large banks, the required reserve ratio will be cut to 20.0% from 20.5%.


MONDAY MORNING RISK MONITOR: CDS WIDEN ACROSS THE BOARD

Key Takeaways

* Domestic financial company CDS widened considerably last week on the heels of the JPM announcement.  JPM itself saw swaps widen 22% from 103 bps a week ago to 134 bps as of Friday. Only WFC has lower default risk, as measured by CDS.  Other moneycenters and broker-dealers saw CDS increase by 7 - 13%.  

 

* Nearly all European Bank CDS widened last week.  Two of the four big French banks are now trading above 300 bps on CDS, while the major Spanish banks we track are all above 400 bps.  European Sovereign CDS all widened last week as well, with Spanish CDS rising 11.5% to 541 bps. 

 

Financial Risk Monitor Summary

 

MONDAY MORNING RISK MONITOR: CDS WIDEN ACROSS THE BOARD - Summary

 

1. US Financials CDS Monitor – Swaps widened for 25 of 26 major domestic financial company reference entities last week.  

Widened the most WoW: JPM, AXP, MBI

Tightened the most/widened the least WoW: MTG, RDN, UNM

Widened the most MoM: MTG,RDN, GNW

TIghtened the most MoM: COF, AIG, C

 

MONDAY MORNING RISK MONITOR: CDS WIDEN ACROSS THE BOARD - US CDS

 

2. European Financial CDS - Bank swaps were wider in Europe last week for 37 of the 39 reference entities. The average widening was 5.4% while the median widening was 4.9%. 

 

MONDAY MORNING RISK MONITOR: CDS WIDEN ACROSS THE BOARD - EURO cds

 

3. European Sovereign CDS – European Sovereign Swaps mostly widened over last week. Spanish sovereign swaps widened by 11.5% (56 bps to 541 ) and French sovereign swaps widened by 9.8% (19 bps to 214).

 

MONDAY MORNING RISK MONITOR: CDS WIDEN ACROSS THE BOARD - Sov Table

 

MONDAY MORNING RISK MONITOR: CDS WIDEN ACROSS THE BOARD - Sov CDS 1 2

 

MONDAY MORNING RISK MONITOR: CDS WIDEN ACROSS THE BOARD - Sov CDS 2 2

 

4. High Yield (YTM) Monitor – High Yield rates rose 4 bps last week, ending the week at 7.11 versus 7.07 the prior week.

 

MONDAY MORNING RISK MONITOR: CDS WIDEN ACROSS THE BOARD - HY

 

5. Leveraged Loan Index Monitor – The Leveraged Loan Index rose 3.4 points last week, ending at 1675.

 

MONDAY MORNING RISK MONITOR: CDS WIDEN ACROSS THE BOARD - LLI

 

6. TED Spread Monitor – The TED spread fell -1.9 points last week, ending the week at 37.3 this week versus last week’s print of 39.2.

 

MONDAY MORNING RISK MONITOR: CDS WIDEN ACROSS THE BOARD - TED

 

7. Journal of Commerce Commodity Price Index – The JOC index fell 2.8 points, ending the week at -7.76 versus -5.0 the prior week.

 

MONDAY MORNING RISK MONITOR: CDS WIDEN ACROSS THE BOARD - 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 3 bps to 35 bps.

 

MONDAY MORNING RISK MONITOR: CDS WIDEN ACROSS THE BOARD - 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: CDS WIDEN ACROSS THE BOARD - ECB

 

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 152.25 bps versus 150.75 bps the prior week.

 

MONDAY MORNING RISK MONITOR: CDS WIDEN ACROSS THE BOARD - 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 fell 19 points, ending the week at 1138 versus 1157 the prior week.

 

MONDAY MORNING RISK MONITOR: CDS WIDEN ACROSS THE BOARD - 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 158 bps, 4 bps tighter than a week ago.

 

MONDAY MORNING RISK MONITOR: CDS WIDEN ACROSS THE BOARD - 2 10

 

13. XLF Macro Quantitative Setup – Our Macro team’s quantitative setup in the XLF shows 2.4% upside to TRADE resistance and 0.9% downside to TRADE support.

 

MONDAY MORNING RISK MONITOR: CDS WIDEN ACROSS THE BOARD - 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: CDS WIDEN ACROSS THE BOARD - 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. 

 


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