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THE M3: NEW COTAI CASINO; OKADA

The Macau Metro Monitor, September 18, 2012

 

 

BOUTIQUE HOTEL CASINO PROJECTED FOR COTAI Macau Business

A group of unidentified investors is proposing to build a US$800 million (MOP 6.4 billion) boutique-style hotel casino just next to the One Oasis Cotai South luxury residential project.  The project is eyeing to have a mid-double digit number of live gaming tables.  Construction could break ground as early as 2013 with the aim of opening in 4Q 2015 or early 2016.  The project doesn’t involve any government land grant, as it is being developed on private land.

 

Business Daily says the casino included in the project would operate under a service provider agreement, but the partnering gaming operator’s name is yet to be disclosed.  The report adds the project was submitted to the government before the 2008 moratorium on new casino projects.  The principals in the boutique scheme are understood to be Stephen Hung, Peter Coker and Walter Power, according to Business Daily.

 

OKADA RELEASES LETTER TO WYNN RESORTS WSJ, Macau Business

Kazuo Okada said investors have lost confidence in WYNN's management and the board.  That loss comes amid a "history of poor corporate governance" and "questionable actions" under Mr. Wynn, the CEO, Okada wrote.  He says that currently only 7 of the 12 board members are independent.  Okada asked a Nevada court earlier in September that he be allowed to nominate new directors for consideration at Wynn’s November annual meeting.  He has already put forward two names.

 

 

 



President Obama’s Reelection Chances

Barack Obama is on fire, with his odds of being reelected jumping +2.2% week-over-week to an all time high (on a closing basis) of 63% according to the Hedgeye Election Indicator, consistent with InTrade odds. It’s now apparent that the President will likely win the November election unless Mitt Romney can pull off a miraculous comeback or if Obama falters in policy over the next month.  

 

Hedgeye developed the HEI to understand the relationship between key market and economic data and the US Presidential Election. After rigorous back testing, Hedgeye has determined that there are a short list of real time market-based indicators, that move ahead of President Obama’s position in conventional polls or other measures of sentiment.

 

Based on our analysis, market prices will adjust in real-time ahead of economic conditions, which will ultimately shape voters’ perception of the Obama Presidency, the Republican candidates and influence the probability of an Obama reelection.  The model assumes that the Presidential election would be held today against any Republican candidate. Our model is indifferent toward who the Republican candidate is as the sentiment for Obama and for any Republican opponent is imputed in the market prices that determine the HEI. The HEI is based on a scale of 0 – 200, with 100 equating to a 50% probability that President Obama would win or lose if the election were held today.

 

President Obama’s reelection chances reached a peak of 63% on September 17, according to the HEI. Hedgeye will release the HEI every Tuesday at 7am ET until election day November 6.

 

 

President Obama’s Reelection Chances - HEI


Chasing The Market

 

Hedgeye CEO Keith McCullough appeared on The Kudlow Report on CNBC tonight. Politics, economics and the stock market were the talk of the night.

 

Corporate profits are a huge concern, especially for the bulls. Growth is slowing and earnings are under pressure and it’s tough to determine exactly what “cheap” stocks really are. This situation has been driven by Ben Bernanke’s central planning policies. Now with the falling dollar and extension of QE3, we’re dealt with rising costs (food, fuel, etc.) and no real economic gains.

 

We’re up 16% year-to-date for the stock market and while people might be inclined to chase gains in the market, we know that’s not proper risk management. We’re surprised Mitt Romney hasn’t come out saying he’ll strengthen the US dollar and will get rid of Ben Bernanke to counter Obama’s rhetoric heading into November.

 

Watch Keith’s full take on the market, inflation expectations and economic growth in the clip we’ve posted.

 


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CHART DU JOUR: MACAU WEEKLIES

Takeaway: Looking up

  • Even beyond seasonality, average daily table revenues improving
  • September comparisons get easier in the back half which should boost the month’s YoY growth into the high teens
  • The typical seasonal slowdown pre-Golden Week could be offset by the opening of SCC’s Pacifico casino and Sheraton hotel rooms

 

CHART DU JOUR: MACAU WEEKLIES - ADTR


Oil Sentiment: Peak-A-Boo

Takeaway: Hedge funds are piled into and full on long WTI crude oil; we think it's looking quite peaky at these levels.

Over the past several weeks, NYMEX open interest contracts on WTI crude oil have been climbing higher and higher, going from 277,212 on August 21 to 305,623 on September 11. Looking at the chart below, you could argue that technicians and pattern readers would have some slick nickname for this pattern along the lines of “triple peak.” As far as we’re concerned, it looks peak-ish to us, especially with the amount of hedge funds piled in that are long WTI crude.

 

Energy Analyst Kevin Kaiser thinks we could be topping out here, noting that “oil sentiment (as measured by hedge fund net length in NYMEX) is climbing back up to the level where it’s been a good spot to sell from.” Keep an eye on it.

 

 

Oil Sentiment: Peak-A-Boo - kaiser oilsentiment


MACAU: Call It A Comeback

Takeaway: While Vegas growth remains stagnant, Macau is making an impressive comeback that bodes well for the likes of $LVS and $MGM

While Vegas struggles to recover, Macau is picking up the pace with strong numbers being put up over the previous week. Average daily table revenues are up 26% year-over-year, 10% over the prior week, and was 12% higher than August. Big money is coming into play, drawing in HK$868 million per day on average. With these numbers, you can see why we remain bullish on Macau-focused gaming stocks.

 

Also worth noting are hold trends for the casinos in Macau. For those of you who are unfamiliar with the term, hold  is the measure of the amount of money a casino table game keeps from the total amount of money that is dropped into the cash box. LVS’ share is climbing back towards normal and MGM is having above trend for the month. 

 

 

MACAU: Call It A Comeback - macau hold


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