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As a follow up to our previous note...



August GGR grew 18% YoY to HK$29.85 billion (US$3.85 billion).  Mass, VIP, and slot revenues increased 44%, 8%, and 15% YoY, respectively.  VIP hold % (including direct play) was 2.89% - below trailing 24-month average of 2.98%.  With normal VIP hold in both periods, GGR growth would have been +23%


Here is the detail:




Total table revenue grew 18% YoY.  Mass market growth actually accelerated at 44% growth.  VIP volume rose 16% while VIP revenue gained 8%.



LVS led the market in table win at +41%.  Mass revs soared 72% (highest growth in the market) while VIP RC grew 25%. Including direct play, we estimate that LVS held at 2.9% in August, in-line with last August, assuming direct play of 17% vs. 21% last year.  

  • Sands fell 16%, 1st decline since February 2013
    • Mass grew 17%
    • VIP revenue fell 41%, while RC fell 24%
    • Sands held at 2.1% vs 2.8% in the same period last year.  We assume 10% direct play in August vs 8% in August 2012.
  • Venetian grew 18% 
    • Mass increased 46%
    • VIP revenue fell 6%, 2nd consecutive month of declines
    • Junket VIP RC gained 25%
    • Assuming 28% direct play, hold was 2.9% compared to 3.7% in August 2012, assuming 30% direct play 
  • Four Seasons gained 45%
    • Mass revenue soared almost 200% on a comp of -33%
    • VIP revenue grew 28% and junket RC rose 9%. August hold (assuming 15% direct play) was 3.4% vs 2.8% in August 2012 when direct play was 16%.
  • Sands Cotai Central rocketed 157% higher
    • Mass jumped 190% 
    • VIP revenues grew 137% 
    • Junket RC gained 79%
    • If we assume that direct play was 10%, hold would have been 3.0% vs 2.2% in August 2012 when direct play was 9%. 


MPEL gained 31% in table revenues.  Mass growth continued to excel at 69% while VIP growth was 17%. We estimate that MPEL held at 3.3% vs 2.9% last August.  Estimated direct play was 11%, in-line with last year, but up sequentially.

  • Altira table revenues grew 36%.  
    • VIP revs soared 41%, on a comp of -45%
    • VIP RC gained 6%
    • Mass gained 9%
    • We estimate that hold was 2.8%, compared to 2.0% in the prior year
  • CoD table revenues grew 29% YoY
    • Mass increased 78%, continuing its impressive streak of strong YoY double-digit gains since the property opened
    • VIP win grew 10% but RC was flat
    • Assuming a 16% direct play level, hold was 3.6% in August compared to 3.4% last year (assuming 15% direct play)


Wynn table revenues grew 11%

  • VIP revenues grew 12%, while VIP RC increased 17% 
  • Wynn held at 3.3% (assuming direct play of 8%) vs 3.3% last August (assuming direct play of 10%)
  • Mass revenues gained 3%


MGM table revenues grew 18%

  • We estimate that hold was 2.9% adjusted for direct play of 7% vs hold of 3.1% last year assuming 8% direct play
  • VIP RC and Mass grew 25% and 32%, respectively


Galaxy table revenues slipped 1% on poor hold, 1st decline since April 2013.  VIP revenues declined 13% while RC volumes grew 11%.  On the bright side, Mass growth was strong at 43%.  Hold was 2.8% in August 2013 vs. 3.6% last year.

  • Starworld table revenues fell 2%
    • Mass soared 51%
    • VIP declined 10%.  
    • Junket RC rose 18%
    • Hold was 2.2% vs 2.9% last year
  • Galaxy Macau's table revenues was flat
    • Mass had another great month at 54% growth
    • VIP fell 14%
    • Hold was 3.3% vs 4.1% last July


Total table revenue grew 13%, with mass and VIP growth of 24% and 7%, respectively. RC volume gained 19%.  SJM held at 2.6% vs 2.8% last year.



SEQUENTIAL MARKET SHARE - July to August (property specific details are for table share while company-wide statistics are calculated on total GGR, including slots):



Market share slipped 10bps to 22.7%.  August’s share is above its 6-month average of 21.4% and better than its 2012 average share of 19.0%. 

  • Sands' share fell 90bps to 2.6%, its lowest ever.  For comparison purposes, 2012 share was 3.9% and 6M trailing average share was 3.2%.
    • Mass share dropped 60bps to 4.5%
    • VIP rev share fell 120bps to 1.6%
    • RC share lost 30bps to 2.0% 
  • Venetian’s share gained 60bps to 8.6%.  2012 share was 7.9% and 6 month trailing share was 8.3%.
    • Mass share increased 110bps to 14.5%
    • VIP share was unchanged at 5.5%
    • Junket RC share gained 50bps to 4.2%
  • FS gained gained 30bps to 3.8%.  This compares to 2012 share of 3.7% and 6M trailing average share of 3.0%
    • VIP was up slightly to 4.5%
    • Mass share gained 70bps to 2.4%
    • Junket RC gained 30bps to 3.5%
  • Sands Cotai Central's table market share fell 20bps to 7.3%, which compares to the 6M trailing average share of 6.5%.
    • Mass share was flat at 9.2%
    • VIP share fell 30bps to 6.4%
    • Junket RC share gained 30bps to 6.0%


MPEL jumped 120bps in share in August to 14.4%. Its 6 month trailing share is 14.1% and their 2012 share was 13.5%.  

  • Altira’s share was flat at 3.3%, below its 6 month trailing share of 3.6% and 2012 share of 3.9%
    • Mass share slipped 10bps to 1.1%
    • VIP gained 20bps to 4.4%
    • VIP RC share fell 20bps to 4.7%
  • CoD’s share rose 130bps to 11.1%, above the property’s 2012 and 6M trailing share of 9.4% and 10.3%, respectively.
    • Mass market share gained 60bps to 12.9%, its highest ever
    • VIP share gained 150bps to 10.1%
    • RC share dropped 40bps to 7.3%


Wynn GGR share was 11.6%, up 140bps MoM.  2012 average share was 11.9% and their 6M trailing average share has been 10.8%.

  • Mass share fell 140bps to 6.3%
  • VIP share gained 320bps on higher hold 
  • Junket RC share gained 30bps to 12.4%


MGM’s market share gained 80bps to 10.3%, above its 6M and 2012 average of 10%

  • Mass share gained 30bps to 6.9%
  • VIP share soared 130bps to 11.8%
  • Junket RC gained 120bps to 11.6%


Galaxy's share lost 280 bps to 17.1%, below its 2012 average and 6-month average share of 19.0% and 18.7%, respectively

  • Galaxy Macau share declined 90bps to 10.7%
    • Mass share was flat at 10.3%
    • VIP share declined 130bps to 10.9%
    • RC share lost 130bps to 10.3%
  • Starworld share tumbled 210bps to 5.5%
    • Mass share fell 90bps to 3.2%
    • VIP share dropped 250bps to 6.7%
    • RC share fell 60bps to 9.3%


SJM share lost 50bps to 23.9%, below their 2012 average of 26.7% and their 6M trailing average of 25.0%

  • Mass market shares slipped 10bps to 26.5%
  • VIP share lost 100bps to 23.4%
  • Junket RC share rose 10bps to 28.2%


Slot Revenue


Slot revenue grew 15% YoY to US$155MM in August

  • LVS had the best YoY growth at 35% to $51MM
  • Galaxy grew 17% to $20MM
  • MPEL gained 12% to $26MM
  • WYNN gained 12% to $19MM
  • MGM gained 4% to $22MM  
  • SJM had the worst YoY slot performance for the 2nd consecutive month, -8% to $17MM


#RatesRising: Rinse and Repeat

In case you were at the beach last week and missed it, we'll fill you in on the earth-shattering news: The 10-year US Treasury yield? It corrected a whopping 4 basis points.




For the record, the 10-year is making yet another higher-low today trading back to 2.85%. There's no resistance up to 2.93%. Our Hedgeye immediate-term risk range is 2.71-2.93%.


Yes. We are still bearish on bonds. Emphatically. It's Hedgeye's #1 Q3 Macro Theme for good reason.


#RatesRising: Rinse and Repeat - 10Y


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Takeaway: We believe MCD's decision to sell its Mighty Wings this fall could potentially be disastrous for the company.

This note was originally published August 27, 2013 at 15:40 in Restaurants

We’re bearish on MCD, so one could argue we have a bearish bias, but we remain present and well-grounded in reality.  Make no mistake, MCD has a top line issue and not a cyclical one.  That said, we don’t believe management is willing to acknowledge the secular issues the company faces and new products like Mighty Wings seem like a desperate attempt to hide from reality.


We think MCD’s decision to sell its Mighty Wings this fall could potentially be disastrous for the company.  We have three main issues with the current MCD menu strategy:

  1. Mighty Wings will not enhance the McDonald’s brand (Premium Wraps have not helped either)!
  2. Both new products (Mighty Wings and Premium Wraps) have slow service times.
  3. Adding new products to an already complex menu is the wrong direction for the company to go.

Selling chicken wings may temporarily boost sales during the LTO, but it could end up doing more harm than good.  Asking the currently disgruntled franchisee community to prepare yet another new product, with a slower than normal preparation time, will only add to the service issues the company is already experiencing.  In our view, this is likely to lead to the further deterioration of the MCD brand.


McDonald’s franchisees that sold wings in the test markets have suggested that the above average cooking time for the new menu item was an impediment to their service times.  If this is indeed true, we expect drive through times to slow significantly.  What it ultimately comes down to is the margin on Mighty Wings relative to other products on the menu.  If wings generate a lower margin than a core sandwich and slow service time, then MCD could be headed for a 4Q13 disaster.


This is all too reminiscent of the period from 1998-2002, when we witnessed the sad decline of a mismanaged McDonald’s brand.  During that time, the company was focused on unit growth and cost reduction rather than driving high margin, top line sales.  As the image of the brand began deteriorating, management failed to invest in the brand and customer experience.  Rather, they turned to monthly promotional tactics to in order to drive short-term sales at the expense of brand equity and margins.  This strategy did not end well for either the company or investors and we’d be surprised if this time was any different.







Howard Penney

Managing Director




Mass up huge, low hold on VIP



Here are some observations for August.  We will follow up with a more detailed analysis.




  • GGR increased 18% YoY
  • Market hold (including direct play) was actually a little low:  2.89% vs trailing 24-mth avg of 2.98%
  • August GGR growth hold-adjusted in both periods:  +23.1%
  • Mass revenue grew a whopping 44%, the highest rate since January 2012
  • Lower hold drove VIP revenue growth of only 8% but junket volume increased 16% 


  • VIP hold was in-line with last year and near normal
  • GGR and Mass YoY growth of 41% and 72%, respectively, led the market
  • VIP and slot revenue growth also led the market
  • Market share of 22.3% almost met July’s big jump to 22.5% - increase from June was all volume driven


  • Hold was meaningfully higher than normal but below last August
  • Mass revenue grew only 3% but Junket volume growth was strong at +16%
  • Market share jumped sequentially due to VIP volume and high hold
  • Mass share fell to 6.3%, tying its lowest ever


  • MPEL held high on VIP and well above last year's
  • GGR and Mass growth of 30% and 69%, respectively - trailed only LVS in the market
  • VIP revenue growth was also the 2nd highest due to high hold
  • Junket volume only grew 2% and remains a concern for us – Junket share fell nearly to a 6 year low
  • Meanwhile, Mass share hit an all-time high at 14.1%


  • Hold was normal but well below August 2012's
  • Still, GGR grew 17%, in-line with the market
  • Mass growth trailed the market but Junket volume led the market


  • Held well below last year which caused a drop of 1% in GGR
  • Mass grew exactly in-line with market but VIP revenue fell 13%
  • Junket volume growth of only 11% also trailed the market
  • GGR market share fell to its lowest level in 9 months
  • Mass revenue share also fell below trend


  • Hold was below normal and last August's
  • Mass revenue growth of 24% was SJM’s highest in a year and a half but still trailed the market
  • GGR market share fell to its 2nd lowest level ever at 23.9%


Morning Reads on Our Radar Screen

Takeaway: A quick look at some stories on our radar screen.

Keith McCullough – CEO

Dollar hits over one-month highs (via Reuters)

Manufacturing ISM Rises To 55.7, Beats Expectations, Highest Since April 2011 (via Zero Hedge)

Hangar Haggling With Ballmer Girds Twitter’s CFO for IPO (via Bloomberg)

Syria crisis: UN says more than 2m have fled (via BBC)


Morning Reads on Our Radar Screen - doll999


Daryl Jones – Macro

Nobody Watches Business TV Anymore (via New York)


Josh Steiner – Financials

August Home Prices rose +12.3% Y/Y  (via CoreLogic)

Inventory crunch easing up for home buyers (via Sun Sentinel)


Jonathan Casteleyn – Financials

PIMCO highlights its stock funds: Expect continued weakness in bonds  (via Twitter)


Matt Hedrick – Macro

SNB Franc Shield Reaps Reward of Growth Defying Euro Area (via Bloomberg)


Kevin Kaiser – Energy

Decades of Ruptures From Defect Show Perils of Old Pipe (via Bloomberg)

Brent Crude Climbs On Missile Test Report (via WSJ)


Howard Penney – Restaurants

Starbucks Pastor-to-Be Shows Shift in U.S. Part-Time Job Market (via BusinessWeek)

Bullish Growth: SP500 Levels, Refreshed

Takeaway: Does US #GrowthAccelerating data support a stock market holding its TREND line? Today, the market’s answer to that is yes.



I finally caught a post-summer beach wave to the upside here – and for the right reasons; summer is over, and US growth expectations continue to make a comeback.


Post the best NSA rolling Jobless Claims print we have seen all year (last Thursday = -10.6% y/y), and a solid PMI Friday, we just got a barn burner of a New Orders print out of the ISM (63.2! for AUG). Good looking end to the world there.


Additionally, across our core risk management durations here are the lines that matter to me most right now:


  1. Immediate-term TRADE resistance = 1661
  2. Intermediate-term TREND support = 1630


So, does US #GrowthAccelerating data support a stock market holding its TREND line? Today, the market’s answer to that is yes. And if you look at the growthier components of the stock market (QQQ), the answer is a resounding yes.


The new bear case is going to be that they were so wrong on growth’s slope change in 2013 that its really bearish now (from a much higher price).


Meanwhile, the real bear case to be made in 2013 was in bonds. #RatesRising for the right reasons.



Keith R. McCullough
Chief Executive Officer


Bullish Growth: SP500 Levels, Refreshed - SPX

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