THE MACAU METRO MONITOR, SEPTEMBER 18, 2013
GAMING REVENUE EXPECTED TO GROW DURING NATIONAL DAY HOLIDAY Macau Daily News
Gaming operators projected that visitor arrival in the coming National Day holiday will stay flat compared with last year while gaming revenue will go up about one-third compared to normal days. VIP business operators are holding over a hundred rooms for their clients for the long holiday. Wednesday is normally the quietest day in a week; gaming operators tend to provide privileges such as hotel accommodation and coupons for high-end guests in the mass market in order to maintain a steady number of guests across the week.
MACAU LEGEND PLANS TO RAISE $300 MILLION THROUGH SHARE SALE Bloomberg
Macau Legend Development Ltd plans to raise about $300 million by selling new shares next year to fund a redevelopment of Fisherman's Wharf. It expects to spend about $1 billion to revamp its Fisherman’s Wharf and plans to fund that The casino operator expects to spend about $1 billion to revamp its Fisherman’s Wharf gaming complex in the world’s biggest gambling hub. It plans to fund that through the share sale and by raising debt, according to co-chairman Carl Tong.
The proposed share sale may take place as soon as early 2014 and will raise Macau Legend’s public float to about 25-26% from the current 15-16%, Tong said. The company is also looking to refinance existing syndicated loans through debt issuance.
TODAY’S S&P 500 SET-UP – September 18, 2013
As we look at today's setup for the S&P 500, the range is 34 points or 1.45% downside to 1680 and 0.54% upside to 1714.
CREDIT/ECONOMIC MARKET LOOK:
MACRO DATA POINTS (Bloomberg Estimates):
WHAT TO WATCH:
COMMODITY/GROWTH EXPECTATION (HEADLINES FROM BLOOMBERG)
The Hedgeye Macro Team
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“The great thing about fact based decision is that they over rule the hierarchy.”
Many of our large institutional investing clients we speak with here at Hedgeye remain focused (and rightfully so) on the direction of leadership at the Federal Reserve. Given their focus, we thought we would go ahead and highlight a few fun (frightening?) facts about the mighty Fed:
1) The greatest long term period of economic growth in the United States? That was between the Civil War and 1913 when there was no Fed.
2) Prior to the creation of the Federal Reserve, the estimated rate of inflation in the United States was 0.5%. It is estimated to be at 3.5% in the ensuing century.
3) The permanent income tax was introduced the same year as the Federal Reserve.
4) Congress promised in 1913 that if the Federal Reserve Act was passed ... it would eliminate the business cycle.
5) The value of the U.S. dollar has declined, by some estimates by more than 95% since the Fed was created.
6) There have been 10 recessions since 1950 (arguably many Fed induced).
I borrowed some of these points above from a blog called End of the American Dream. It kind of begs the question, as Jeff Bezos would say, whether the best fact-based decision is to overrule the Federal Reserve hierarchy in its entirety.
Now take a moment to ponder the points outlined above, and then ask yourself: Would ending the Fed be the worst decision the Federal Government ever made?
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Last week we held an expert conference call titled "Are Energy Drinks Harmful?" with Dr. Deborah Kennedy, a pediatric nutrition and expert on energy drinks (click for: podcast replay and presentation). Below are our main conclusion on the regulatory concerns and evolution of the space based on Dr. Kennedy’s presentation and our own work. Further below, we size up MNST, which we’re bearish on from a quantitative perspective; however we remain bullish on the outperformance of energy drinks over the beverage category.
Key Considerations for the Industry
The FDA has left the door open for the amount of caffeine that energy drink (ED) manufacturers may put in their products. We do not see this stance changing over the near to intermediate terms, why?
Longer Term Risks
MNST – Bearish Stock, Bullish Category
MNST is a stock that currently is set-up bearish across our quantitative intermediate term TREND price level of $57.56 (dancing below the level, up 3.5% since last Friday).
We continue to believe that energy drinks will maintain their outperformance over the beverage market. That said, MNST fundamentals have significantly eroded over the past 5 quarters. Below we show MNST’s top and bottom line Bloomberg consensus estimates for reference. We believe this slide in performance is attributable to both weak overall beverage trends, including poor weather conditions across recent quarterly results, and litigation concerns. On the last point, we think that the existing litigation is now largely behind the company, as are the associated media headlines, which should buoy sentiment. Our call with energy drink expert Dr. Kennedy only furthered our opinion that despite health concerns related to energy drinks, the FDA is not in a position to act over the near to intermediate term on caffeine content for the reasons we highlighted above. Finally on a comp basis, you’ll notice much more favorable comparisons over the next four quarters, which could prove a tailwind. We’ll be watching our quantitative levels to see if MNST can overcome its bearish intermediate term set-up before we consider it on the long side.
Today the Hedgeye Consumer Staples team hosted an expert call on electronic cigarettes featuring Brent Willis, a leading consumer products executive and Chairman and CEO of Victory Electronic Cigarettes. Below are links to a replay podcast and presentation slides.
Podcast: CLICK HERE
Presentation: CLICK HERE
We encourage you to listen as Brent provides insight into the rapidly evolving electronic cigarette story – perhaps the first truly new consumer category in over a decade.
With e-cigarettes currently only representing a 1% share of the entire tobacco market, Hedgeye sees a significant runway for large and small e-cigarette companies to meet growing demand for alternatives to traditional tobacco. But we believe the implications of this technology go far beyond merely replacing tobacco with a product that is viewed as healthier and cleaner. Some major firms recognize the e-cigarette phenomenon as a key part of societal change, one of a number of disruptive new technologies that are changing the way we live.
Hedgeye believes the e-cigarette category is poised to reach sales of $1-2 Billion this year – up from $500 Million in 2012 – and to show significant growth over the coming years. Certainly there are many questions yet to be addressed, including how this new segment will be regulated? Yet the pace of innovation, marketing, and distribution has already brought significant awareness to the category and the early data shows encouraging signs of strong repeat purchase behavior. We are excited about the developing investment opportunities as this category gains visibility.
DISCLOSURES : Victory (ECIG) is a newly-public company with limited trading history and liquidity. Hedgeye has no investment opinion on Victory and no current plans to publish research on the company. Certain Hedgeye executives may at some point become involved in a transaction with Victory or related entities. This presentation is for information purposes only.
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