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MACAU: FEBRUARY DETAIL

Here are some more details regarding the February gaming revenues in Macau

 

 

Y-O-Y TABLE OBSERVATIONS

 

Total table revenues grew 12% in February.  Mass revenue growth was strong at 31%, in-line with its 6-month trailing average.  VIP revenues grew 5%, a little better than its 6-month average.  Junket RC volume was the most disappointing, falling -0.4%, the 1st decline since October 2012.  

 

LVS

 

Table revenues grew 28% YoY, led by a 76% surge in mass revenues - the market growth leader for the past month.  We estimate that Sands China held at 2.80% vs 3.17% last year, adjusted for direct play of 16%.  

  • Sands fell 24% YoY, as VIP revenues tumbled 45% due to low hold (1.9% vs 4.1%).
    • Mass grew 15%
    • VIP was down 45%.  We estimate that Sands held at 1.9% compared to 4.1% in the same period last year.  We assume 10% direct play in February vs 11% in February 2012.
    • Junket RC increased 19%, the 2nd consecutive monthly gain
  • Venetian grew 30% YoY 
    • Mass increased 43%, matching its highest growth since November
    • VIP grew 20%
    • Junket VIP RC fell 16%, its 11th decline in the past 12 months
    • Assuming 28% direct play, hold was 3.93% compared to 2.76% in February 2012, assuming 27% direct play 
  • Four Seasons dropped 63% YoY as hold was only 1.6%
    • Mass revenues fell 19%
    • VIP tumbled 68% and Junket VIP RC fell 28%. 
    • If we assume direct play of 14%. hold in February was 1.56% vs. 3.22% in February 2012 when direct play was ~16%
  • Sands Cotai Central produced $221MM in February, a new record
    • Mass and VIP hit new monthly records, $75MM and $146MM respectively 
    • Junket RC volume of $4.077 BN, up 22% MoM and a new high
    • If we assume that direct play was 11%, hold would have been 3.18% 

WYNN

 

Wynn table revenues grew 6% in February. 

  • Mass was up 16% YoY 
  • VIP grew 4%, the 1st growth in 5 months  
  • Junket RC fell 8%.  Aside from a 1% gain in November, 9 of the last 10 consecutive months have been in the red.
  • Assuming 11% of total VIP play was direct, we estimate that hold was 3.12% compared to 2.79% last year (assuming 10% direct play).

MPEL

 

MPEL table revenue only grew 1%.  Hold was very low at 2.40% vs 3.00% last year. 

  • Altira revenues fell 10%, with a 25% increase in Mass and a 14% decline in VIP
    • VIP RC fell 12%
    •  We estimate that hold was 2.63%, compared to 2.72% in the prior year
  • CoD table revenues grew 6% YoY
    • Mass grew an impressive 45%, offset by a 10% drop in VIP
    • RC grew 24%
    • Assuming a 18% direct play level, hold was 2.30% in February compared to 3.17% last year (assuming 16% direct play)

SJM

 

Table revenue grew 2%

  • Mass revenue declined 3%, its 1st decline since December 2008 and the laggard in the market
  • VIP grew 5%
  • Junket RC declined 1%
  • Hold was 3.05%, compared with 2.89% last February

GALAXY

 

Galaxy table revenues grew 25%, aided by high hold.  Mass grew a robust 57%, while VIP grew 17%.  Across its two owned properties, Galaxy held at 3.60% vs. 2.50% in February 2012.

  • StarWorld table revenues rose 13%
    • Mass rocketed 35% higher
    • VIP grew 10%
    • Junket RC fell 26%, marking the 9th month of consecutive declines
    • Hold was normal at 3.34% vs. an easy comparison of 2.26% last February
  • Galaxy Macau's table revenues grew 38%
    • Mass grew 72%
    • VIP grew 29%, while RC fell 6%
    • Hold was high in February at 3.80% vs. 2.75% last  year

MGM

 

MGM table revenue grew 8% in February

  • Mass revenue grew 19%
  • VIP revenue grew 6%, on flat RC growth
  • If direct play was 9%, then February hold was 3.29% compared to 3.19% last year

 

SEQUENTIAL MARKET SHARE

 

LVS

 

LVS’s MoM share increased 1.0% to 21.4%, the biggest monthly share gainer.  February's share was better than its 6 month trailing market share of 20.0% and better than the 2012 average share of 19.0%.

  • Sands' share lost 60bps to 2.9%, a new low.  For comparison purposes, 2012 share was 3.9% and 6M trailing average share was 3.8%.
    • Mass share ticked down to 5.1%, a new low.
    • VIP rev share fell 80bps to 2.0%, a new low.
    • RC share was 2.8%, up 20bps MoM
  • Venetian’s share ticked up 80bps to 9.2%.  2012 share was 7.9% and 6 month trailing share was 8.0%.
    • Mass share rose 110bps to 15.2%, its highest level since April 2012
    • VIP share increased 100bps to 6.7%, its highest level since Jan 2012
    • Junket RC share was unchanged at 4.0%
  • FS lost 90bps to 2.1%.  This compares to 2012 share of 3.7% and 6M trailing average share of 3.1%.
    • VIP lost 140bps to 2.3%
    • Mass share was flat at 1.5%
    • Junket RC gained 80bps to 4.2%
  • Sands Cotai Central's table market share gained 160bps to 6.8%, a new high, and compares to the 6M trailing average share of 4.6%.
    • Mass share rose 1.2% to 7.9%.
    • VIP share jumped 1.9% to 6.4%
    • Junket RC share rose 1.0% to 5.8%

WYNN


Wynn's share gained 0.6% to 11.8% in February.  Wynn’s 2012 share averaged 11.9% and their 6-month trailing share averaged 11.5%.  

  • Mass share of 8.4%
  • VIP share of 13.2%, up 0.7%
  • Junket RC share increased 40bps to 12.3%

MPEL

 

MPEL’s lost 160bps of share, the biggest share donor in February, to 12.8%, below their 6 month trailing share of 13.8% and their 2012 share of 13.5%.  

  • Altira’s share fell 90bps to 3.3%, below its 6M trailing share of 4.0% and below its 12-month share of 3.9%
    • Mass share grew 0.5% to 1.4%
    • VIP tumbled 160bps to 4.1%, a new low
    • VIP RC share fell 60bps to 4.8%
  • CoD’s share fell 80bps to 9.3%.  February’s share was below the property’s 2012 and 6M trailing share of 9.4% and 9.7%, respectively.
    • Mass market share grew 2.2% to 12.2%, a new high
    • VIP share fell 2.0% to 8.1%
    • Junket share rose 30bps to 9.6%

SJM

 

SJM’s share fell 0.8% to 25.5%.  February's share compares to their 2012 average of 26.7% and its 6M trailing average of 26.5%.

  • Mass market share fell 3.3% to 27.1%, an all-time company low
  • VIP share rose 50bps to 25.8%
  • Junket RC share lost 0.6% to 27.7%

GALAXY


Galaxy lost 0.1% share to 18.4%, below its 2012 average share of 19.0% but in-line with its 6 month average

  • Galaxy Macau share increased 0.6% to 10.8%
    • Mass share declined 20bps to 9.5%
    • VIP share increased 1.0% to 11.3%
    • RC share lost 10bps to 9.8% 
  • Starworld share fell 50bps to 6.8%
    • Mass share fell 40bps to 3.0%
    • VIP share fell 70bps to 8.3%
    • RC share decreased 10bps to 9.8%

MGM

 

MGM gained 0.9% share to 10.1%, above their 6M average of 9.8% and above their 2012 share of 9.9%

  • Mass share decreased 0.8% to 6.1%
  • VIP share grew 1.5% to 11.2%
  • Junket RC fell 60bps to 10.2%

 

Slot Revenue

 

Slot revenue grew 17% YoY to $155MM in February.

  • LVS took the top prize for YoY growth of 60% to $47MM
  • Galaxy’s slot revenue grew 8% to $18MM
  • MPEL grew 9% YoY to $26MM
  • MGM slot revenues grew 46% to $28MM, a new high
  • WYNN had the worst performance, falling 24% to $19MM
  • SJM lost 6% to $16MM

MACAU: FEBRUARY DETAIL - table

 

MACAU: FEBRUARY DETAIL - mass

 

MACAU: FEBRUARY DETAIL - rc


Oil Prices Head Lower

Over the last month, the US dollar has strengthened considerably, which in turn has helped deflate the great commodity bubble brought on by the policies of the Federal Reserve. Over the last month, Brent Crude oil has fallen from $119 to nearly $110 a barrel. Lower oil prices are a tailwind to recovery in the economy and help increase consumption. More consumption is a boon for stocks as consumers spend more instead of worrying about the price at the pump.

 

Oil Prices Head Lower - usdoil


More Evidence of Housing Strength

Takeaway: The MBA Mortgage Application survey is yet another piece of data that confirms our strong housing thesis.

Here’s why Financial Sector head Josh Steiner is highlighting the MBA Mortgage Application Survey that came out earlier this morning. It’s showing year over year strength, up 20.2%, which he says is important because it was one of the few housing indicators that wasn’t signaling strength – at least before today’s report. Here’s a chart that shows the MBA Survey’s year-on-year growth.

 

More Evidence of Housing Strength - housing1


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JCP: Why Firing Johnson Is The Fastest Path To Ch11

Takeaway: Contrary to what others are recommending, we think that firing RJ is the fastest way to realizing the liquidity crunch bear case.

Conclusion: Contrary to what others are recommending today, we think that firing Ron Johnson is just about the stupidest thing that the JCP Board could do right now. If they did fire him, we think that it would be the quickest path to bankruptcy for JCP. Sentiment seems to us that the stock would go up on that news. But if we saw him ousted we’d likely short this name with impunity -- even with the sell-side capitulating at a price of $14/15. We think losing Johnson would pose significant vendor/brand risk, and would back JCP into a corner to liquidate its real estate at a discount.

 

A new CEO would be faced with a binary decision tree. Either A) Return to being the lowest-quality department store in America, or B) carry out Johnson’s shop-in-shop plan better than RJ could on his own. Johnson clearly blew himself up in 2012, but we don’t put blind faith in the ability for anyone to come in and implement this plan any better. Keep in mind that 75% of the problems JCP has had have little to do with changing up the shop format and upgrading the merchandise assortment – it was largely due to RJ getting the pricing/marketing/value proposition wrong on the existing merchandise. Letting RJ run with the current plan might carry more risk as 2013 unfolds – but doing it without him is riskier, with potentially more significant financial pain.

 
1) First off, once a cucumber becomes a pickle, you can’t reverse the process. It already has architected its square footage to new shops, chosen new partner brands, and gotten rid of hundreds of vendors to make room for what is coming down the pike. That cannot be undone, which leads us to the conclusion that a new leader would need to move forward with the current plan – or something pretty darn close to it. Unfortunately, JCP does not have the liquidity for a new CEO to shake the Etch-a-Sketch clean, start over, and create a new plan. The lack of capital deprives JCP of the oxygen needed to go down a new path.
 
2) Ron Johnson has spent easily a third of his time ensuring that the right brands/vendors are chosen, and then collectively working with the brands and his merchants to make sure that the right product is in the right place inside the store. Whether you like RJ or not, the reality is that the vendors still like him – a lot. They buy into the long term vision (even if no one on Wall Street does). We’re relatively certain that at least a few large vendors would balk at rolling out product inside JCP if leadership and strategy changed dramatically.  
 
3) If that were the case, JCP would be left half-pregnant.  It wouldn’t be able to fill the shelves quickly with legacy product (i.e. become the old, poor quality JC Penney), and the product that should ultimately drive traffic under the new plan is at risk of never becoming a reality. Then we can build to an algorithm where comps are down another 20-30%, and not only is JCP forced to use its full revolver, but to liquidate its real estate, which we estimate to be worth about $1.8bn-$2.1bn (see our note from last night “JCP: Duration Matters More Than Ever’) to fund operating losses.
 
4) Allen Questrom, the Godfather of retail (we mean that in a complimentary way), was on CNBC today talking about why RJ should be fired immediately. He said that the Board needs to admit its mistake and move on. At face value this carries a lot of weight given that Questrom is the only person to successfully turn around JC Penney. But let’s be real. When Johnson went down the path of ‘reinventing’ JCP, Questrom did not make the cut of people he leaned on to consult about a solution. Questrom likely viewed that as a snub, and also probably has little patience for anyone that is seemingly destroying something that he worked so hard to fix. Not really a shocker that Questrom is on the short list of people recommending that he’s ousted due to 2012’s failures. Also keep in mind that he’s on the short list of people that would be considered for the top job (though we have no reason to think that he’d want it).

 


FAREWELL "CHAVISMO"?

Takeaway: Hugo Chavez’s death does not necessarily pave the way for an end to hyper-socialist economic policies in Venezuela.

SUMMARY CONCLUSIONS:

 

  • While the death Hugo Chavez – who had nationalized over 1,000 companies during his presidency – represents an opportunity for Venezuela to become less socialist on the margin, it should be stated that two out of the three highest-probability replacement candidates (Nicolas Maduro and Diosdado Cabello) do not represent a material departure from Chavez’s socialist agenda.
  • To the extent Cabello doesn’t fall in-line with Chavez’s pre-death wish that Maduro succeed him, you could see an intra-party (United Socialist Party or “PSUV”) struggle for power that could split the Chavismo vote and ultimately result in essentially handing Capriles a victory due to his [likely] garnering of the lion’s share of the opposition vote.
  • On the margin, that would be particularly positive for Venezuela’s structural economic growth outlook and its capital markets (less socialism and Big Gov’t Intervention).
  • That said, however, assuming this scenario is not without a great deal of risk; the data supports a continuation of the Chavismo movement’s stranglehold of power in Venezuela. In light of this, we find it very prudent for anyone looking to allocate assets to Venezuelan capital markets on the Chavez death news to simply wait for the results of the upcoming by-election.

 

Obviously the key news out of LatAm over the past 24 hours has been former Venezuelan president Hugo Chavez’s unfortunate death at the relatively-young age of 58. We offer our solemn condolences to his survivors and supporters.

 

Per Foreign Minister Elias Jaua, Vice President Nicolas Maduro is poised to take over as interim president of the country while elections are organized over the next 30 days. Technically speaking, per the Venezuelan Constitution, National Assembly President Diosdado Cabello – who fought alongside Chavez in a 1992 coup – is entitled to the powers of the interim presidency, should he choose to wield them.

 

Chavez’s highest-probability potential successors are listed below with the latest hypothetical poll results from an early-FEB Correo poll:

 

  1. Maduro (50%)
  2. Miranda State Governor Henrique Capriles Radonski (36%)
  3. Cabello/other (14%)
  4. NOTE: Chavez had a 64% approval rating in the same poll

 

While the death Chavez – who had nationalized over 1,000 companies during his presidency – represents an opportunity for Venezuela to become less socialist on the margin, it should be stated that two out of the three highest-probability replacement candidates (Maduro and Cabello) do not represent a material departure from Chavez’s socialist agenda.

 

In fact, assuming Chavez was as close to death as we now know he was, the fact that they still proceeded with the early-FEB bolivar devaluation suggests both Maduro and Cabello are still very much on board with Chavez’s hyper-socialist agenda.

 

FAREWELL "CHAVISMO"? - 1

 

To recap that agenda, Chavez has materially devalued the bolivar four times since imposing currency controls in 2003, shut down more than 50 foreign-exchange brokerages in 2010, nationalized farms and energy companies, imposed price caps on dozens of household consumables, routinely used int’l reserves to finance public expenditures and threatened to jail people who trade [currency] in the black market.

 

Such policies have led to shortages of everything from electricity to basic food staples, directly fueling the world’s third-highest inflation rate (+21.3% in 2012).

 

FAREWELL "CHAVISMO"? - 2

 

Capriles represents Venezuela’s highest probability of moving towards the economic and political “right”; unlike Chavez and the vast majority of his supporters, Capriles is from money – his family founded the local unit of Nabisco Inc. and owns the nation’s largest movie theater chain.

 

Moreover, Capriles represents the strongest opposition-led challenge to the Chavismo movement to-date. Recall that his 10ppt. loss in last year’s presidential election was easily the narrowest defeat of any opposition candidate since Chavez took office back in 1999; the previous minimum margin among Chavez's electoral victories was 16ppts.

 

To the extent Cabello doesn’t fall in-line with Chavez’s pre-death wish that Maduro succeed him, you could see an intra-party (United Socialist Party or “PSUV”) struggle for power that could split the Chavismo vote and ultimately result in essentially handing Capriles a victory due to his [likely] garnering of the lion’s share of the opposition vote.

 

On the margin, that would be particularly positive for Venezuela’s structural economic growth outlook and its capital markets (less socialism and Big Gov’t Intervention).

 

That said, however, assuming this scenario is not without a great deal of risk; the data supports a continuation of the Chavismo movement’s stranglehold of power in Venezuela. In light of this, we find it very prudent for anyone looking to allocate assets to Venezuelan capital markets on the Chavez death news to simply wait for the results of the upcoming by-election.

 

Darius Dale

Senior Analyst


MACAU FEB VOLUMES WEAKER THAN WE THOUGHT

We’ve got the property by property detail for the month of February and while GGR grew almost 12% YoY, the month benefited from better luck.  VIP hold percentage was approximately 15-20bps higher than last year and 8-10 bps higher than normal.  Normalizing VIP hold in both periods would have reduced YoY growth to 8%.  While 8% is still solid growth remember that CNY occurred in February of this year but in January of last year.  Mass growth was once again strong, up 31% YoY, consistent with recent trends.  Somewhat troubling and potentially related to the China corruption crackdown, VIP volume growth actually fell slightly YoY.   The aforementioned higher hold boosted VIP revenue up 5%.  The favorable CNY calendar shift did aid slots, however, fueling 17% YoY growth.

 

March looks a little dicey to us on the volume side, owing to a difficult Mass comparison and the China corruption crackdown.  However, low hold in March of 2012 makes for an easier VIP revenue comparison.  Our sources in Macau indicate that the Mass floors are off to a sluggish start.  Operators spread their CNY business over the second half of February thus extending the post CNY hangover.

 

February was a good month for the American operators in terms of market share.  Here are some individual takeaways:

 

LVS

  • Solid market share gains above recent trend driven by a big jump in Mass and VIP
  • VIP hold was well below normal, yet VIP volume and revenue market share improved
  • No surprise that LVS led the market in YoY GGR growth including a 76% increase in Mass growth, highest in 4.5 years
  • LVS should continue to be a market share gainer all year long, absent hold issues

WYNN

  • Not surprisingly, Wynn held above normal on VIP which drove most of the market share growth
  • High hold also boosted Wynn into its first GGR growth month since September, albeit only 4%
  • Mass market grew 16%, its highest in a year but VIP volume fell 8% YoY

MPEL

  • MPEL got hit by bad luck with VIP hold at its lowest rate since March 2011
  • Low hold kept GGR growth at only 1% but Mass rev grew 42% and VIP volume managed a 9% gain
  • Assuming normal hold, MPEL would’ve gained share and posted 16% YoY GGR
  • While there is some concern surrounding MPEL’s dip in share, when you open up the hood you realize that they continue to fire on all cylinders

MGM

  • MGM’s market share gain in the month was exclusively driven by high hold
  • Mass share actually fell to its lowest level ever
  • MGM also lost VIP volume share
  • GGR grew 10% but with consistent VIP hold, growth would’ve been only 6% (VIP hold was high last year too) 

GALAXY

  • Galaxy posted a strong month driven in part by high hold
  • Mass grew 57%, the 2nd highest among the operators
  • VIP volume fell 18% YoY, the 7th consecutive monthly decline
  • Despite the big growth, Mass share fell from recent levels as did VIP volume

Hedgeye Statistics

The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.

  • LONG SIGNALS 80.28%
  • SHORT SIGNALS 78.51%
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