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THE M3: GRAND HO TRAM; JUNKETS

THE MACAU METRO MONITOR, JUNE 11, 2013

 

 

HO TRAM CASINO TO OPEN ON JULY 26 Macau Business

Ho Tram Project Co announced that its first resort, "The Grand Ho Tram Strip" in Ho Tram, Vietnam, will open on July 26. The casino will be operated by Ho Tram Project Co itself.

 

The first phase of The Grand Ho Tram Strip includes 541 five-star rooms, gaming facilities, meeting and convention space, ten bars and restaurants, a spa, three swimming pools and luxury retail shops.

 

Ho Tram Project Co announced last October that it had broken ground on the second phase of the project, which will include a second tower of 559 rooms and additional leisure facilities.

 

GOVT MUST DISCLOSE WHICH CASINOS JUNKETS PARTNER WITH Macau Business

The Court of Second Instance has sided with lawyer Vong Chong Kio in his request that the Gaming Inspection and Coordination Bureau disclose which casinos two junket operators are doing business with.  He had requested the Gaming Inspection and Coordination Bureau to disclose the information but the bureau denied the request, saying Vong had no cause to have access to the information, which was restricted.

 

Vong first appealed to the Administrative Court, which sided with the regulator.  Now, the Court of Second Instance has ruled in his favor.  The court says “there is nothing restricted, confidential, intimate or secret” about which casinos junket operators work with.


THE HEDGEYE DAILY OUTLOOK

TODAY’S S&P 500 SET-UP – June 11, 2013


As we look at today's setup for the S&P 500, the range is 38 points or 1.14% downside to 1624 and 1.17% upside to 1662.         

                                                                                                                      

SECTOR PERFORMANCE


THE HEDGEYE DAILY OUTLOOK - 1

 

THE HEDGEYE DAILY OUTLOOK - 2

 

EQUITY SENTIMENT:


THE HEDGEYE DAILY OUTLOOK - 10


CREDIT/ECONOMIC MARKET LOOK:

  • YIELD CURVE: 1.94 from 1.90
  • VIX closed at 15.44 1 day percent change of 1.98%

MACRO DATA POINTS (Bloomberg Estimates):

  • 7:30am: NFIB Small Business, May, est. 91.5 (prior 92.1)
  • 7:45am: ICSC weekly sales
  • 8:55am: Johnson/Redbook weekly sales
  • 10am: Wholesale Inventories, April, est. 0.2% (prior 0.4%)
  • 10am: JOLTs Job Openings, April, est. 3.900m (prior 3.844m)
  • 11am: Fed to buy $1.25b-$1.75b notes in 2036-2043 sector
  • 11:30am: U.S. to sell 4W bills
  • 1pm: U.S. to sell $32b 3Y notes
  • 4:30pm: API weekly inventory data

GOVERNMENT:

    • Obama meets w/ President Ollanta Humala of Peru to discuss proposed Trans-Pacific Partnership, other issues; will also give remarks on Senate immigration bill
    • ITC holds hearing on probable economic effect of duty-free treatment for imports in TPP free trade agreement, 9:30am
    • Senate Appropriations subcommittee hears from Defense Sec. Chuck Hagel, Joint Chiefs Chairman Martin Dempsey, 10am
    • Senate Finance Committee votes on nomination of Michael Froman to become U.S. trade representative, 10am
    • Senate panel holds hearing on Puerto Rico’s status, 10am
    • Senate scheduled to hold cloture vote on motion to proceed to immigration legislation, 2:15pm

WHAT TO WATCH

  • Softbank raises Sprint bid by 7.5% to $21.6b to counter Dish
  • Paulson, #2 Sprint holder, to vote for Softbank deal
  • Bank of Japan left unaltered 1-yr fixed-rate loan facility
  • News Corp. holders to OK plan to spin off publishing unit
  • Sony unveils PlayStation 4 console pressing fight w/ MSFT
  • Nestle’s Nespresso to face new copycat from Mondelez
  • MSCI to announce mkt classification review after 5pm
  • Goldman to expand in Poland even as economy slows
  • ANA says it canceled Boeing 787 flight yday to check engine
  • Safety net scaled back as Senate passes agriculture bill
  • EU seeks air-traffic charge cuts, challenging controllers
  • Most banks expect salary increases to offset EU bonus cap

EARNINGS:

    • Oxford Industries (OXM) 4pm, $0.78
    • Ulta Salon Cosmetics (ULTA) 4pm, $0.62

COMMODITY/GROWTH EXPECTATION (HEADLINES FROM BLOOMBERG)

  • Copper Touches a Five-Week Low on Concern About Stimulus Curbs
  • Record U.S. Soybean Crop Seen Extending Bear Market: Commodities
  • Wheat Drops a Fifth Day on Prospects for Better Crop Conditions
  • WTI Crude Declines a Second Day on Forecast of U.S. Supply Gain
  • Gold Falls to Lowest in More Than Two Weeks on Stimulus Outlook
  • Coffee Declines on Outlook for Growing Production; Sugar Climbs
  • Shale Boom Curbing OPEC’s Grip as Saleri Sees a $120 Oil Cap
  • Iraq Plans to Boost Wheat Output, Become Exporter in Three Years
  • Oil-Tanker Demand Seen Falling 5% as Bookings and Distances Slip
  • Gold ‘Triangle’ Signals Price Drop to $1,250: Technical Analysis
  • Australia 2013 Wheat Crop May Be 25 Mln T, Grain Trade CEO Says
  • Commodities for Rest of 2013 Seen by UBS Heading for 1994 Redux
  • Car Carriers Fill Up as Global Trade Expands to Record: Freight
  • Iron Ore Seen Rebounding as China Restocks in Year’s Second Half

THE HEDGEYE DAILY OUTLOOK - 5A

 

CURRENCIES


THE HEDGEYE DAILY OUTLOOK - 6A

 

GLOBAL PERFORMANCE

 

THE HEDGEYE DAILY OUTLOOK - 3

 

THE HEDGEYE DAILY OUTLOOK - 4

 

EUROPEAN MARKETS


THE HEDGEYE DAILY OUTLOOK - 7

 

ASIAN MARKETS


THE HEDGEYE DAILY OUTLOOK - 8

 

MIDDLE EAST


THE HEDGEYE DAILY OUTLOOK - 9

 

 

The Hedgeye Macro Team

 

 

 

 

 

 

 

 

 

 

 

 


LULU: Meaningful Margin Risk

Takeaway: LULU needed to shore up confidence after 1Q product issues. They blew it. There's margin risk. Maybe not a short. But definitely not a long.

Conclusion: LULU had to do one thing and one thing only this qtr -- instill confidence in the investment community that the recent product issue was a one-off, and it that management is on offense. Unfortunately, LULU blew it. Its quarter was hardly squeaky clean, the outlook is cloudy, and the CEO tendered the most surprising resignations we've seen in retail in a while. This remains a great global growth story in retail -- one of the best, actually. But there's margin risk to the downside. That matters at 33x earnings. It might be a lousy short. But we'd avoid it long.

 

DETAILS 

In the wake of the Luon pant fiasco throughout the first quarter, there was one thing and one thing alone that LULU needed to do with this print -- and that's instill confidence with the investment community that the right team is steering this ship, and that the issues that caused the stumble are temporary and not a sign of more systemic issues at the company. Unfortunately, the company dropped that ball with the announcement that Christine Day is resigning her post of CEO after 5 1/2 years on the job.

 

Quite  frankly, we were stunned by the announcement. For investors, this is the corporate equivalent of being bitten by your Golden Retriever. There was no warning. Usually when something happens so suddenly, it is the Board's decision, but this one sounds like it was all Christine. Could it be that the Luon pant debacle took its toll on her? Perhaps. But she already canned LULU's Chief Product Officer in April, and the company is in the process of broadening its executive team.  We'd be surprised if her departure was due to this issue alone.

 

Our sense is that Ms. Day -- who is held in extremely high regard by the investment community -- simply sees that the next leg of growth will be tougher to come by. To her credit, she saw the company through the period in '09 when it was a $3 stock and drove it up to $80. That's $11.2bn in value creation -- or a 27-bagger for those keeping score.

 

While LULU had several wins this quarter, like golf, tennis, men's and e-commerce, in the end, this quarter was hardly squeaky clean. Aside from the Luon issue, the company noted certain misses from a styling perspective, higher expected landed costs in 2H due to factory/production issues, SG&A deleverage through 2H14 as LULU ramps up its East Coast distribution center, and difficulty in finding store locations to facilitate Hong Kong expansion.

 

We still think that LULU is one of the few iron-clad brands in retail that can put up 20%+ organic top-line growth on a consistent basis for the next 3-5 years (the others are RH, FNP, UA and KORS). But unlike these other brands, we think that LULU has risk to the downside in its mid-20s margin as the company spends more to facilitate its growth. If we compare it to UnderArmour (or FNP or RH), for example, we see that UA has only an 11% margin, and even it is stepping up spending on the margin to maintain top line growth. We think that LULU will maintain a significant premium to UA, NKE, RH and FNP. But in doing so we still think that the risk is to the 20% range as margins (and even high teens) look to find a final resting place.

 

This still nets us a respectable 20%-ish EPS growth rate by any stretch (25% top line growth less 500bp due to margin erosion). But with the stock trading at 33x earnings (per the after-hours sell-off) we find it really tough to get excited about on the long side.


Early Look

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Sell Some: SP500 Levels, Refreshed

Takeaway: Every time this US stock market corrects we get a whole new bear case and each bear case is different than the one prior.

This note was originally published June 10, 2013 at 11:02 in Macro

POSITIONS: 6 LONGS, 5 SHORTS @Hedgeye

 

Sell Some: SP500 Levels, Refreshed - bullbear

 

Ok, I sold more than some. I actually sold ½ my long positions this morning. But not because I am all beared up or anything like that – it’s just process. We bought the oversold signal well last week < 1601, and now the SP500 is 50 handles higher!

 

I usually don’t use exclamation marks but, this year deserves one. Every time this US stock market corrects we get a whole new bear case. Each bear case is different than the one prior, but it feels equally as tough to buck up and buyem when you should.

 

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

 

  1. Immediate-term TRADE overbought = 1662
  2. Immediate-term TRADE support = 1624
  3. Intermediate-term TREND support = 1583

 

In other words, now we’re just trying to manage the risk of the intermediate-term TREND range (1582-1662). If you want to think about where I’d be as a % of a full intermediate-term TREND position in US Stocks, I went to 97% of my max allocation last week.

 

If we test 1583 again this summer, I’ll probably do that again.

 

Keep moving out there,

KM

 

Keith R. McCullough
Chief Executive Officer

 

Sell Some: SP500 Levels, Refreshed - SPX


Twitter Exchange of the Day

Takeaway: We love it when we help our clients make money. A case of free beer for the effort? Icing on the cake.

Twitter Exchange of the Day - hein

 

Any questions?

@KeithMcCullough 3:50 PM

 

did the case of beer I sent to 111 whitney arrive last Friday?

@CFRamseyer 3:53 PM

 

was that you? I don't think it had a name on it!

@KeithMcCullough 3:54 PM

 

yes it was. Thx for $9k from late thurs thru fri close

@CFRamseyer 3:55 PM


Trade of the Day: XLF

Takeaway: We sold the Financials (XLF) at 9:59AM at $20.03.

We bought the Financials right as it was about to v-bottom. Not a time to get piggy. Book the tidy 3.2% risk-managed gain. That's the TRADE. We remain bullish on the Financials from a TREND perspective.

 

Trade of the Day: XLF - XLF

 


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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