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Weekly European Monitor: Data Slumps

Takeaway: PMI Manufacturing and confidence figures from the Eurozone confirm a continued downturn.

-- For specific questions on anything Europe, please contact me at to set up a call.

 

Positions in Europe: Long German Bonds (BUNL)

 

Asset Class Performance:

  • Equities:  The STOXX Europe 600 closed up +1.6% week-over-week vs -1.3% last week.  Top performers:  Ukraine +6.3%; Austria +3.8%; Spain +2.5%; Netherlands +2.5%; Finland +2.5%; Ireland +2.2%; Hungary +2.2%; Germany +1.8%.  Bottom performers:  Cyprus -8.6%; Greece -8.3%; Slovakia -1.4%. [Other: France +1.7%; UK +1.1%].
  • FX:  The EUR/USD is down -0.80% week-over-week.  W/W Divergences:NOK/EUR +1.45%; TRY/EUR +1.25%; SEK/EUR +0.74%; GBP/EUR +0.25%; CHF/EUR +0.16%; HUF/EUR +0.04%; DKK/EUR 0.00%; CZK/EUR -1.24%.
  • Fixed Income:  The 10YR yield for sovereigns were mixed week-on-week. Greece rose the most at +100bps to 18.21%, followed by Portugal +31bps to 8.35%. Spain and Germany both declined by -7bps to 5.60% and 1.45%, respectively.  France fell -2bps to 2.22% and Italy declined -1bp to 4.92%.   

Weekly European Monitor: Data Slumps - 444. yields

 

Weekly European Monitor: Data Slumps - 44. eur usd

 

Weekly European Monitor: Data Slumps - 44. cftc

 

Data Slumps:

 

This week it’s worth noting that despite signals from some analysts of “green shoots” and optimism that the Eurozone will find a path forward, the data continues to indicate that the Eurozone has not found a bottom.  A look at the PMI Manufacturing figures out this week (Services come out next week and may be slightly higher) indicate levels that are both comfortably below the 50 line indicating contraction and sequentially lower (especially) for the core countries in OCT versus SEPT.

 

Weekly European Monitor: Data Slumps - 44. Manufact PMIs

 

Eurozone Confidence figures showed a similar negative trend, namely declining for a seventh straight month in the October figures.  Given that the largest business and trade partners for European countries are their fellow neighbors, we do not expect one country to sustain a positive growth inflection until the entire region starts to see improvement.  That said, Germany remains the “best of the rest” and we currently have a Real-Time position in BUNL to take advantage of this relative strength.

 

Weekly European Monitor: Data Slumps - 44. econ and consum conf

 

Weekly European Monitor: Data Slumps - 44. conf. manu and serv

 

Weekly European Monitor: Data Slumps - 44. business conf

 

 

The European Week Ahead:


Monday: Nov. Eurozone Sentix Investor Confidence; Oct. UK PMI Services, Official Reserves, BRC Sales Like-For-Like; Oct. Spain Unemployment

 

Tuesday: Oct. Eurozone PMI Composite and Services - Final; Sep. Eurozone PPI; Oct. Germany PMI Services - Final; Sep. Germany Factory Orders; Oct. UK NIESR GDP, BRC Shop Price Index, New Car Registration; Sep. Germany Industrial Production, Manufacturing Production; Oct. France PMI Services – Final; Spain Services PMI; Oct. Italy PMI Services

 

Wednesday: Sep. Eurozone Retail Sales; Oct. Germany Wholesale Price Index (Nov. 7-12); Sep. Germany Industrial Production; Sep. Spain Industrial Output

 

Thursday: ECB Governing Council Meeting; ECB Announces Interest Rates; AFME 7th Annual European Bond Conference in Brussels; Nov. Eurzone Asset Purchase Target; Sep. Germany Exports, Imports, Current Account, Trade Balance; BoE Announces Rates; UK Asset Purchase Target; Nov. UK Bloomberg Economic Survey; Sep. France Trade Balance; Aug. Greece Unemployment Rate

 

Friday: Oct. Germany Consumer Price Index – Final; Sep. UK Total Trade Balance; Oct. BoF Business Sentiment; Sep. France Industrial Production, Central Government Balance, Manufacturing Production; Sep. Italy Industrial Production; Oct. Greece Consumer Price Index; Sep. Greece Industrial Production

 

 

Extended Calendar:


NOV 12 –             Eurogroup Meeting in Brussels

NOV 15 –             Catalonia regional election in Spain

NOV 22 –             ECB Governing Council Meeting

NOV 27 –             AFME 4th Annual Spanish Funding Conference in Madrid

DEC 1 –                 Beginning of the Russian Presidency of G20

DEC 3 –                 Eurogroup Meeting in Brussels

DEC 6 –                 ECB Governing Council Meeting

DEC 12-13 –        First public consultation between the Russian government, B20 Coalition and international civil society representatives on G20 agenda for 2013 (in Moscow)

DEC 20 –               ECB Governing and General Council Meeting

APR 2013 –          Parliamentary elections in Italy

MAY 2013 –        Presidential elections in Italy

 

 

Call Outs:

 

Greece - Kathimerini discussed how Greece's ruling coalition faces an extremely tense next few days ahead of two key votes in parliament next week. The article highlighted concerns about the rising dissent in the Pasok party that could leave the coalition without sufficient support to pass the austerity and reform measures demanded by the troika. It noted that Prime Minister Samaras is due to meet with his 127 deputies on Monday, ahead of the vote on structural reforms on Wednesday and the vote on the 2013 budget, which will be held at midnight on Sunday, 11-Nov (just ahead of the 12-Nov Eurogroup meeting during which a final decision on Greece is expected).

 

Italy – Over the weekend former Prime Minister Berlusconi threatened to bring down the technocratic government led by Prime Minister Monti via a no-confidence vote from his People of Liberty party (PDL), the biggest in parliament. Berlusconi noted that, "We have to recognize the fact that the initiative of this government is a continuation of a spiral of recession for our economy. Together with my collaborators we will decide in the next few days whether it is better to immediately withdraw our confidence in this government or keep it, given the elections that are scheduled." While a no-confidence vote would likely force early actions, there were also thoughts that Berlusconi may no longer have enough support within the PDL to bring down the government.

 

Ireland - Germany has signaled that it is open to a restructuring of the €30B Anglo Irish Bank promissory note to improve the sustainability of Ireland’s adjustment program (rather than tapping the ESM).

 

Spain - Spain's northern region of Cantabria on Monday became the ninth region to request a credit line, recently established by the central government to cover liquidity needs. It said it would tap the €18B fund for €137M. Recall that other regions have already tapped the credit line for close to €17B.

 

Greece - Greek 2013 Govt Debt/GDP at 189.1% vs 175.6% in 2012, according to revised Greek Budget. 

 

Netherlands - The incoming Dutch finance minister said on Thursday that We have agreed to a tight budget and together we are going to implement it. It is a tough package that is going to require sacrifices from everyone in the Netherlands. I see it as my job to keep the finances on the right path.” The government has already agreed to nearly 16 billion euros ($21 billion) in budget cuts.


Slovakia - Prime Minister Robert Fico said on Wednesday that the state will return to having a single, state-run health insurance system and nationalize two private insurers.. "The government that I head rejects the notion of private health insurers making profits from taking public money and then using those profits to realize their ideas of a luxurious lifestyle," Mr. Fico told reporters, saying the newly unified insurance system would be in place by 2014.

 

Data Dump:

 

Eurozone CPI Est 2.5% OCT Y/Y vs 2.6% September

Eurozone Unemployment Rate 11.6% SEPT vs 11.5% AUG

 

Germany Retail Sales -3.1% SEPT Y/Y (exp. -1.1%) vs -1.1% AUG

Germany CPI 2.1% OCT Prelim Y/Y (exp. 2.0%) vs 2.1% SEPT

Germany Unemployment Chg 20K OCT vs 12K SEPT

Germany Unemployment Rate 6.9% OCT vs 6.9% SEPT

 

UK GfK Consumer Confidence -30 OCT (exp. -28) vs -28 SEPT

UK Nationwide House Prices -0.9% OCT Y/Y vs -1.4% September

UK Construction PMI 50.9 OCT vs 49.5 September

UK M4 Money Supply -3.5% SEPT Y/Y vs -4.0% AUG

 

France Producer Prices 2.9% SEPT Y/Y vs 2.8% AUG

France Consumer Spending -0.3% SEPT  Y/Y vs -0.6% AUG

 

Italy CPI 2.8% OCT Prelim Y/Y vs 3.4% SEPT

Italy Unemployment Rate 10.8% SEPT  Prelim vs 10.6% AUG

 

Spain Total Housing Permits -31.7% AUG Y/Y vs -37.1% JUL

Spain Q3 GDP Prelim -0.3% Q/Q (exp. -0.4%) vs -0.4%    [-1.6% Y/Y (exp. -1.7%) vs -1.3%]

 

Spain CPI 3.5% OCT Y/Y Prelim vs 3.5% SEPT

Spain Retail Sales -12.6% SEPT Y/Y vs -2.0% AUG 

 

Norway Unemployment Rate 3.1% AUG vs 3.0% JUL

Finland Business Confidence -11 OCT vs -8 September

Finland Consumer Confidence -1.6 OCT vs 3.4 September

Sweden Retail Sales 4.6% SEPT Y/Y vs 1.6% AUG

 

Belgium Unemployment Rate 7.4% SEPT vs 7.4% AUG

Belgium CPI 2.79% OCT vs 2.76% SEPT

 

Switzerland Retail Sales 5.4% SEPT Y/Y vs 6.0%

Switzerland UBS Consumption Indicator 1.07 SEPT vs 1.02 AUG

Austria PPI 0.7% SEPT Y/Y vs 1.0% AUG

Iceland Unemployment Rate 5.0% in Q3 vs 7.2% in Q2

Ireland Unemployment Rate 14.8% OCT vs 14.8% SEPT

 

Portugal Consumer Confidence -55.3 OCT vs -51.4 September

Portugal Economic Climate -4.6 OCT vs -4.2 SEPT

Portugal Retail Sales -5.7% SEPT Y/Y vs -6.1% AUG 

Portugal Industrial Production -9.2% SEPT Y/Y vs -2.1% AUG

 

Greece Retail Sales -7.2% AUG Y/Y vs -8.0% JUL

 

Hungary Unemployment Rate 10.4% SEPT  vs 10.4% AUG

Hungary Producer Prices 2.5% SEPT Y/Y vs 5.1% AUG

 

Romania PPI 6.6% SEPT Y/Y vs 7.2% AUG

 

 

 

Interest Rate Decisions:

 

(11/1) Czech Repo Rate Announcement CUT from 0.25% to 0.05%

(11/2) Romania Interest Rate Announcement UNCH at 5.25%

 

Matthew Hedrick

Senior Analyst


CHART OF THE DAY: Weekly European Monitor: Data Slumps

 

CHART OF THE DAY: Weekly European Monitor: Data Slumps - 444. yields


Still Dicey: SP500 Levels, Refreshed

Takeaway: The market is doing precisely what it should here – confuse people.

This note was originally published November 02, 2012 at 12:54 in Macro

POSITIONS: Long Utilities (XLU), Short Industrials (XLI)

 

The market is doing precisely what it should here – confuse people.

 

Don’t forget that the market has really only had 1 up day in the last 8, so there’s still plenty of anxiety post The Bernanke Top (SEP14) and a ratty October (Tech -6.3%). We’ve recaptured the TREND (1419) line, but failed at the TRADE (1432) line – so there’s plenty of risk to consider into the Election.

 

Across our core risk management durations, here are the lines that matter to me most:

 

  1. Immediate-term TRADE resistance = 1432
  2. Intermediate-term TREND support = 1419
  3. Immediate-term TRADE support = 1392

 

In other words, the immediate-term Risk Range is now 1392-1432 (a little tighter day over day, which is bullish) and the trigger line for beta  remains 1419.

 

Strong Dollar (down Gold, Commodity Bubbles, etc.) continues to price in that the media’s political “experts” (polls) may have the Election wrong. Only time will tell. In the meantime, we’ll let the market tell us what to do next.

 

KM

 

Keith R. McCullough
Chief Executive Officer

 

Still Dicey: SP500 Levels, Refreshed - SPX


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IDEA ALERT: SHORT GES. IT SHOULD BE DOWN MORE

Takeaway: The COO/CFO resignation stinks big time. We did not trust the company's accounting in the first place. Now 30-40% downside is in play.

We’re shorting $GES on today’s intra-day bounce. Quite frankly, with the news that the COO and CFO both resigned we presumed that the stock would get shellacked. This is a company where we’ve never been completely comfortable with its accounting, and in justifying margin levels – even after a 600bp slide to 11% -- in its Europe and Licensing businesses. Michael Prince joined from Nike (Converse) to be COO in November 2010, and CFO Dennis Secor has been with the company through most of the Carlos Alberini days (when the company’s reported numbers were actually headed in the right direction). Having Paul Marciano more directly involved in running this business is not a comforting event as it relates to creating shareholder value.

 

Yeah yeah…GES looks cheap at 10x next year’s consensus. But (we’ve been saying this a lot lately) valuation is not a catalyst. Margins are now at 11%, and we have more confidence that they see 6% before they see 13% without sacrificing meaningful top line growth. If this name sees 8% margins, we’re looking at about $1.65 in earnings on a negative growth rate (obviously a multiple killer). Give that an 8-10x multiple and you’re looking at a 14-17 stock. That’s 30-40% downside from here.

 

IDEA ALERT: SHORT GES. IT SHOULD BE DOWN MORE - GES TTT


OUR TAKE ON THE FINAL PRE-ELECTION JOBS REPORT: GOOD FOR THE CONSUMER; MIXED BAG FOR OBAMA

Takeaway: A demographically-based breakout of the US labor market paints a mixed message for Obama’s odds of reelection.

SUMMARY BULLETS:

 

  • Taking a careful and consistent eye to the OCT Jobs Report, we are of the view that the underlying trends in domestic labor market conditions sequentially improved in OCT.
  • From a headline perspective, these improvements bode well for President Obama’s reelection chances in pre-election polls. From a analytical perspective, however, there’s little to be gleaned from the OCT Jobs Report as it relates to the actual election next week. Still, the data did improve and is in-line with the general string of sequentially less-bad economic data (particularly on the PMI front) emanating from Europe, Asia and Latin America in the month of OCT.
  • Judging by deltas in unemployment across core demographics from the start of his presidency, President Obama may find it very difficult to galvanize his voter base in order to get them to support him at the polling booth(s) with the same fervor and magnitude as they did four years ago. That said, however, he just might be able to overcome this non-consensus view that he won’t have nearly as much support in 2012 as he experienced in 2008 from a voter turnout perspective – especially if he is able to adequately assign all of the blame for various post-crisis peaks in unemployment to George W. Bush and all of the credit for the trend of multi-year improvement to himself.
  • As it relates to what to do next from an investment perspective – irrespective of which candidate and Party controls the White House and Congress – please refer to our OCT 18 note titled: “COULD THE ELECTION, THE FISCAL CLIFF AND THE DEBT CEILING ALL BE BULLISH CATALYSTS FOR THE MARKET?” for more details.

 

With the general election only a few days away, it’s natural to analyze today’s Jobs Report with a political lens. In reality, however, we learned from our 10/24 conference call with Professor Ken Bickers of the University of Colorado, most voters tend to make up their minds on the economy well before the final hours of campaigning (likely in the late summer/early fall periods).

 

Bickers, whose model has accurately forecasted each Presidential election outcome going back to 1980, suggests Romney is likely to win the US Presidency with a demonstrable margin from an electoral college perspective.  We’ve posted a link to the presentation below if you have yet to view it:

 

http://www.youtube.com/watch?v=PzzFuAE14cY&feature=youtu.be&noredirect=1.

 

All that being said however, we are increasingly of the view that domestic economic data warrants unprecedented scrutiny, as headline figures for jobs and GDP have arguably become far more subject to government assumptions about seasonal adjustment effects, the rate(s) of inflation, etc. than in years past. Even taking a careful and consistent eye to the OCT Jobs Report, however, we are of the view that the underlying trends in domestic labor market conditions sequentially improved in OCT:

 

  • Subtracting out the now-infamous Birth-Death Adjustment from the NSA employment data, MoM Non-Farm Payrolls growth accelerated to +42k YoY form -67k in SEP;
  • Adjusting the unemployed headcount for a 10yr average Labor Force Participation Rate, the Unemployment Rate SA improved to 10.5% in OCT from 10.8% in SEP; and
  • Adjusting the unemployed headcount for the JAN ’09 Labor Force Participation Rate (Obama’s “starting position”), the Unemployment Rate SA improved to 10.9% from 11.1% in SEP. On this score, Obama has seen a +310bps rise in the seasonally-adjusted Unemployment Rate since he’s taken office.

 

OUR TAKE ON THE FINAL PRE-ELECTION JOBS REPORT: GOOD FOR THE CONSUMER; MIXED BAG FOR OBAMA - 1

 

OUR TAKE ON THE FINAL PRE-ELECTION JOBS REPORT: GOOD FOR THE CONSUMER; MIXED BAG FOR OBAMA - 2

 

OUR TAKE ON THE FINAL PRE-ELECTION JOBS REPORT: GOOD FOR THE CONSUMER; MIXED BAG FOR OBAMA - 3

 

From a headline perspective, these improvements bode well for President Obama’s reelection chances in pre-election polls. From a analytical perspective, however, there’s little to be gleaned from the OCT Jobs Report as it relates to the actual election next week. Still, the data did improve and is in-line with the general string of sequentially less-bad economic data (particularly on the PMI front) emanating from Europe, Asia and Latin America in the month of OCT.

 

HOW DOES OBAMA’S BASE FEEL ABOUT FOUR MORE YEARS?

Accepting the following headline figures at face value, we highlight a few critical deltas in President Obama’s key demographics ahead of Tuesday’s election:

 

  • The seasonally-adjusted unemployment rate among 18-19 year-olds has backed up +280bps since JAN ‘09 to 22.7%, though demonstrably improved from the 25.5% post-crisis peak recorded in MAY ’10;
  • The seasonally-adjusted unemployment rate among 20-24 year-olds has backed up +80bps since JAN ’09 to 13.2%, though demonstrably improved from the 17.1% post-crisis peak recorded in APR ’10;
  • The seasonally-adjusted unemployment rate among women has backed up +70bps since JAN ’09 to 7.7%, though demonstrably improved from the post-crisis peak of 9% recorded in NOV ’10;
  • The seasonally-adjusted unemployment rate among African-Americans has backed up +160bps since JAN ’09 to 14.3%, though demonstrably improved from the post-crisis peak of 16.7% recorded in AUG ’11; and
  • The seasonally-adjusted unemployment rate among Latinos is at 10% – the same level seen in JAN ’09 – though demonstrably improved from the post-crisis peak of 13.1% recorded in NOV ‘10.

 

Judging by the aforementioned deltas from the start of his presidency, President Obama may find it very difficult to galvanize his voter base in order to get them to support him at the polling booth(s) with the same fervor and magnitude as they did four years ago. That said, however, he just might be able to overcome this non-consensus view that he won’t have nearly as much support in 2012 as he experienced in 2008 from a voter turnout perspective – especially if he is able to adequately assign all of the blame for those post-crisis peaks to George W. Bush and all of the credit for the trend of multi-year improvement to himself.

 

This we know: Barack Obama is a great politician; the best bet is that he has been able to do so through careful messaging and populist politicking. As such, one can reasonably infer that his base will actually be energized enough to cut into what a minority in the analytical community believe is likely to be a clear advantage for the Republican Party with regards to Tuesday’s voter turnout. That could spell disaster for Mitt Romney’s chances of securing victory, as he likely needs Democrat voter participation to decline demonstrably from 2008 levels to have a reasonable expectation of victory.

 

As it relates to what to do next from an investment perspective – irrespective of which candidate and Party controls the White House and Congress – please refer to our OCT 18 note titled: “COULD THE ELECTION, THE FISCAL CLIFF AND THE DEBT CEILING ALL BE BULLISH CATALYSTS FOR THE MARKET?” for more details.

 

Have a great weekend and best of luck to our clients on the East Coast with their respective recovery efforts in the aftermath of Hurricane Sandy.

 

Darius Dale

Senior Analyst


LVS: NOW THAT WE GOT Q3 OUT OF THE WAY…

The shorts were right about Singapore but low hold is not good enough in the face of accelerating market trends, growing share in Macau and a more shareholder friendly capital deployment strategy.

 

 

It was pretty well understood that Singapore would miss consensus expectations.  While the magnitude of the miss was huge, it was mostly due to a very low hold percentage.  We think the good clearly outweighs the bad here for LVS.  Macau had a great Q3 and more importantly, market growth is accelerating.  Moreover, LVS’s market share is growing and we think that trend will continue consistently over the next year, similar to the ramp up of Galaxy Macau.  +20% market share in October was better than recent expectations and LVS may just be scratching the surface on share gains.  Is 22-24% share out of the question?  We don’t think so.  LVS’s announcement of a 40% increase in the dividend was a nice positive and we are encouraged with management’s enthusiasm for further dividend increases.  We think LVS will begin to attract a whole new investor base without losing interest from growth-oriented funds.  It’s not often you find a growth stock (wait until new international markets begin to open – South Korea?) with the kind of cash flow profile of LVS.  Strong cash flow, a willingness on the part of management to return that cash to shareholders and a potentially huge pipeline of high returning projects is a powerful combination.

 

 

MACAU


Macau revenue and EBITDA came in 1% above the Street, but 4% below our EBITDA estimate.  We believe that most of the discrepancy vs. our numbers is attributable to unfavorable mix at FS & Sands Macau, along with weaker overall results at SCC, offset by slightly better results at Venetian. Based on our calculations, hold had minimal impact on EBITDA this quarter—a $3.5MM benefit.  Sands China held at 2.81% across the portfolio. Direct play was 17%. 

 

Venetian Macau

  • After poor results in 2Q, Venetian bounced back this quarter, reporting EBITDA 8% above consensus and 1% above our projection
  • We estimate that high hold benefited the quarter by $28MM on net revenue and $16MM on EBITDA
    • Venetian historical hold rate since opening has been 2.93% vs. 3.32% in 3Q.
  • Direct play increased to 30% of total RC drop
  • Rebates were 32.2% of win or 107bps
  • Variable expenses of $355MM
    • $308MM of gaming taxes
    • $27MM of estimated junket commissions
  • Estimated fixed expenses of $94MM, up 10% YoY but down $2MM QoQ

Four Seasons

  • Four Seasons produced a disappointing Q missing our EBITDA estimate and the Street’s by 18%
  • We knew that hold would be poor, so what drove the miss?
    • Higher rebates/junket commissions
    • We suspect that not only was hold poor, but the mix was also unfavorable.  Otherwise, costs just went through the roof –which is less likely.
  • We estimate that low hold negatively impacted Four Seasons EBITDA by $3MM.
    • Four Seasons’s historical hold rate since opening has been 2.74% vs. 2.58% in 2Q.
  • Direct play was 16% of total RC drop, consistent with 1H levels
  • Rebates were 35.5% of win or 92bps
  • Variable expenses of $140MM
    • $108MM of gaming taxes
    • $25MM of estimated junket commissions
  • Estimated fixed expenses of $23MM, up 21% YoY

Sands Macau

  • Sands came in below our number, despite having better revenues.  We suspect that mix may have been unfavorable, or fixed costs were just higher than we expected.
  • Hold of 2.96% is just 2bps above Sands’ historical hold rate of 2.94% so any benefit to EBITDA was likely immaterial
  • Direct play fell to 8% of total RC drop
  • Rebates were 36.1% of win or 107bps
  • Variable expenses of $175MM
    • $148MM of gaming taxes
    • $17MM of estimated junket commissions
  • Estimated fixed expenses of $55MM, down 5% YoY but up $8MM QoQ

Sands Cotai Central

  • SCC EBITDA was 10% below our estimate and the Street's
  • Revenues were $23MM below our estimate
    • Net gaming revenues were $17MM below our estimate
      • Direct play was lower than we estimated but hold was in-line, causing $6MM less of gross VIP win
      • Rebates were also higher than we estimated, accounting for another $5MM of lower results
        • 38% or 87bps vs. our estimate of 34% or 79bps
      • Mass table revenues were $6MM lower than we estimated due to lower table hold
  • Net non-gaming revenue was $6MM below our estimate due to lower F&B and other revenues and higher promotional expenses
  • We estimate that low hold negatively impacted EBITDA by $9MM
    • We used a 2.85% rate to normalize EBITDA
  • Direct play of 9% of total RC drop
  • Variable expenses of $157MM
    • $137MM of gaming taxes
    • $14MM of estimated junket commissions
  • Estimated fixed expenses of $54MM, just $2MM above 2Q

 

SINGAPORE

  • While a miss in Singapore was not likely a surprise, a miss of this magnitude definitely led to some jaw drops. Most of the miss vs. the whisper number was hold-related, although trends across the board were disappointing
  • 3Q saw continued deceleration from 2Q
    • Slot handle was fell 6% YoY – the first YoY decline-- and 4% QoQ.  Slot handle has been slowly declining since 3Q11.
      • 3Q11 slot handle ($MM): $2,793
      • 4Q11 slot handle ($MM): $2,745
      • 1Q12 slot handle ($MM): $2,741
      • 2Q12 slot handle ($MM): $2,741
      • 3Q12 slot handle ($MM): $2,621
  • Mass drop decreased 6%- the first YoY decline since opening
    • Over the last 6 quarters, mass drop has fluctuated between $1,115MM and $1,206MM (8% range)
  • RC volumes declined 29% YoY, marking the 2nd Q in a row of declines
  • There were YoY declines in F&B, convention, retail and other revenues
  • Since the hotel is already running at full capacity, and rates are already at $360/night, there likely is not much upside from here as far as hotel revenues go.  The lack of hotel rooms is a general constraint for growing the Singapore gaming market
  • The hold impact of $105MM on EBITDA that LVS indicated in their release was in-line with our calculation
  • The rebate increased to 1.26%
  • Promotional spending decreased a bit to 21% of non-gaming revenue
  • Variable expenses were $104MM
    • GST: $31MM
    • Gaming tax: $68MM
  • We estimate that fixed expenses were $260MM, up 5% YoY

 

LAS VEGAS

  • Vegas net revenue and EBITDA came in 2% and 5% ahead of our estimate.  The “strength” in Vegas was entirely driven by some Asian play and high hold. 
  • Over the past 4 years, average table hold for LVS in LV has been 19%.  We estimate that high hold benefited EBITDA in the quarter by $39MM
  • The rebate rate was 6.1% (vs. 5.2% last year and 3.8% in 2Q12)
  • Promotional expenses were 11.2% of GGR, much lower than last quarter's 17.6%
  • Operating expenses, excluding taxes, increased 4% YoY to $252MM 

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