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LVS 2Q YOUTUBE

In preparation for LVS FQ3 2013 earnings release tomorrow, we’ve put together the recent pertinent forward looking company commentary.

 

 

PARISIAN

  • "The original idea for The Parisian would be a three-star to four-star property, that would have mass market appeal, that's what the government wants there. We want to be middle market in The Parisian, we're positioned just below the Venetian."
  • "Based on our current construction schedule, and subject to timely government approvals, we are targeting the opening of the Parisian Macao for late 2015."

FOUR SEASONS CO-OP

  • "We are also advancing our plans to sell shares in a co-op venture to prospective buyers of Four Seasons branded properties in the Apart Hotel on the Cotai Strip."
  • "We're lining up the project management and the sales team. And we don't need any further approval." 

CHINA MACRO

  • "The macro view about China is not affecting the visitation to Macao. If anything, the visitation is increasing."

 

SCC MASS

  • "SCL mass table games has grown 60% in the last year to $920 million from $577 million a year ago in this segment and the margin is still mid-40s, 45%, 46%, 47%."
  • "Upside in this segment comes from the organic growth in the Macau market, specifically in Cotai, our ability to leverage our hotel and retail asset base in Macau and in Cotai, in particular, to drive much higher win per unit, we're just in a unique position to improve dramatically and see SCL's mass table growth grow to $4 billion to $5 billion, $6 billion years ahead."

JAPAN

  • "If they work on time, their goal is to get the integrated resorts opened, a couple of them open by 2020 for the Olympics which is in the summer of 2020. To do that, they'll have to make decisions in by the end of 2014 or very early 2015. There'll be a lot of competition for those particular facilities at the high-end, the integrated resort, they definitely will pick integrated resorts probably for Osaka and Tokyo, that's our feeling, two major ones. What else they do, we really don't know, there's talk about Okinawa as well as an integrated resort."
  • "We prefer the Singapore model to any of the other models of integrated resorts."

SPAIN

  • "We submitted the feasibility study. We're waiting for the government. There are actually four governments involved, there is the local government, the regional government, the national government and the EU, all of which."

SINGAPORE RC VOLUME

  • "We've been pretty consistent in the range of $12 billion to $16 million roll per quarter. I think that will remain intact for the foreseeable future."

 

DIVIDENDS/STOCK BUYBACK

  • "We publicized last year that our dividends would increase by a minimum of 10% per year, most of the market expectations are that we'll do actually more than that. But there is a dividend bias in the company to continue to increase the yield on our stock, the stock has gone up, so that means we have to increase our dividends to keep the yield at where it should be. We have announced a $2 billion buyback of stock. We are progressing with that buyback and we'll continue to do that until the $2 billion is taken care of."
  • [Special dividend]  "The specials are generally unlikely. We need to save some of the cash for development opportunities that are coming up, although our balance sheet and the cash for our free cash flow as most everybody knows about is pretty significant."

LAS VEGAS

  • On the gaming side, we are very dependent on high-end premium Asian players who come here. And although we've participated, we've done very well in that segment, we're happy to be in it, the entire town doesn't share equally in that.  Slot and mass tables continue to be mediocre. I wouldn't call it a head fake as much as it's just a challenging market that will slowly get better, but I wouldn't look for rapid improvement in the next few quarters."
  • "The word you hear on groups and conventions is it has improved and it certainly has, there's no question about it, our advanced sales on conventions are amongst the highest we've had ever."
  • "The problem we have in Las Vegas is more rate than it is people...so the prices are going up but they're not coming up to 2006, 2007 levels."
  • "I think Vegas gets better on the mass side slowly, slots, ETG slowly getting better, but not rapidly. And on the table game side, very tough sledding on new mass tables and better on the high-end Asian."
  • "Win per unit per day on the pure mass in Las Vegas is very challenging. The premium mass, the better customer who comes in for special events, fights, high frequent, out of Southern California, that is getting better."

FOUR SEASONS PREMIUM MASS

  • "As we move more into this premium mass business there, I think the numbers will get better and the hold percentage will be what it's going to be. We know with that kind of volume, the hold percentage pretty much stays flattish when it's all said and done."
  • "When we sell out the 300 apartments at the Four Seasons, that'll bring us in a lot of premium direct at the high end because anybody spending several million dollars is going to play at the Four Seasons. There'll be direct play or there'll be premium mass. So that's one element that's going to contribute to an increased gross and increased EBITDA number."

 


19 Questions for Kinder Morgan

This note was originally published October 16, 2013 at 14:36 in Energy

 

19 Questions for Kinder Morgan - km1

 

Kinder Morgan (KMI, KMP / KMR, and EPB) is scheduled to release 3Q13 distributable cash flow at 4pm EST today, closely followed by its quarterly conference call at 4:30pm EST.

 

In advance of the call, we've compiled a list of questions that we'd like management to answer.  As Kinder Morgan will not respond to our questions, perhaps someone else will ask them for us...

 

1.  Does PricewaterhouseCoopers audit, or deliver an opinion on, KM's sustaining capital expenditures?

 

2.  How does KM define "capacity" in its E&P business?

 

3.  Why does KM feel that relying upon a partnership agreement written in 1992 is relevant 21 years later, especially considering that E&P assets were not in the partnership at that time, and the industry defines maintenance CapEx for E&P assets completely differently?  

 

4.  Why doesn't KM acquire a large E&P company or asset given how accretive such a deal would be to KMP's DCF/unit with $0 sustaining CapEx?

 

5.  Or, if KM wants to de-emphasize its E&P business, why not sell those assets today?  What does KM believe fair / market value is for its E&P assets?

 

6.  How is the St. John's Dome project (CO2) going?  How much capital has been put into the project to date?  Discuss the well results?

 

7.  Please discuss KM’s intentions with respect to investing in “coal / other natural resources.”  How much capital will be dedicated to this effort?  What has been done so far?

 

8.  Is KM considering a corporate acquisition to kick off this new “coal / other natural resources” business?

 

9.  More importantly, how will KM define sustaining CapEx for this business?  Will there be a replacement reserve to reflect the fact that these will be depleting assets?  Or will it be similar to how KM currently defines E&P sustaining CapEx (i.e. $0)? 

 

10. Over the last several years, KM has spent an enormous amount of expansion CapEx in both its refined products and bulk terminals businesses, yet unit volumes, at each, has not increased.  This cannot be explained by a single project gone wrong or a bad economy; what, exactly, is this expansion CapEx going towards?

 

11. Within KMP’s Natural Gas Pipelines segment, there is a large gathering & processing (G&P) business, made more significant with the CPNO acquisition. For 2013, what is G&P sustaining CapEx vs. expansion CapEx (including JVs)?  What is G&P organic volume growth expected for 2013 and 2014, respectively? 

 

12. Over the long-term, how much capital would KMP need to spend on an annual basis to keep gathering throughput and NGL production flat (including CPNO)?

 

13. Does KMP include new well connections needed to keep gathering throughput flat in sustaining CapEx?  Does KMP include or reserve for processing capacity refurbishment / replacement in sustaining CapEx?

 

14. If KMP were to retire a 300 MMcf/d processing plant and build a new 300 MMcf/d processing plant next to it, would the CapEx incurred be sustaining CapEx or expansion CapEx?

 

15. On the 9/18/13 conference call, management noted that, “Everything that you do eventually gets into the rates you charge for your transportation services.”  How will the significant spending cuts at the former El Paso subsidiaries affect rates going forward?

 

16. On the 9/18/13 conference call, management cited a Goldman Sachs report that listed KMP’s 2012 maintenance CapEx as a % of EBITDA as 11.1%.  But in KMP’s 1/30/2013 IR presentation, it states that sustaining CapEx was $285MM and EBITDA (ex. items) was $4,144MM, for a ratio of 6.9%.  Which number is accurate?  Why did management cite the Goldman figure? 

 

17. In the FERC financials, which expense line includes “anomaly repairs” for the former El Paso subsidiaries?

 

18. In the FERC financials, where can we find the increase in O&M expenses to make up for the significant decline in maintenance CapEx on the former El Paso subsidiaries?

 

19. What does KM have for natural gas transmission contract roll-offs over the next few years?  Can KM quantify it in terms of EBITDA impact?

 

 

Kevin Kaiser

Senior Analyst

kkaiser@hedgeye.com

203-562-6500


Jones: Congress Is An Embarrassment

Hedgeye Risk Management Director of Research Daryl Jones discusses the debt ceiling shenanigans and market reaction on BNN.

 

Click here to watch.

 

Jones: Congress Is An Embarrassment - boehner reid


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Questions for Kinder Morgan (Edition 1)

Kinder Morgan (KMI, KMP / KMR, and EPB) is scheduled to release 3Q13 distributable cash flow at 4pm EST today, closely followed by its quarterly conference call at 4:30pm EST.

 

In advance of the call, we've compiled a list of questions that we'd like management to answer.  As Kinder Morgan will not respond to our questions, perhaps someone else will ask them for us...

 

1.  Does PricewaterhouseCoopers audit, or deliver an opinion on, KM's sustaining capital expenditures?

 

2.  How does KM define "capacity" in its E&P business?

 

3.  Why does KM feel that relying upon a partnership agreement written in 1992 is relevant 21 years later, especially considering that E&P assets were not in the partnership at that time, and the industry defines maintenance CapEx for E&P assets completely differently?  

 

4.  Why doesn't KM acquire a large E&P company or asset given how accretive such a deal would be to KMP's DCF/unit with $0 sustaining CapEx?

 

5.  Or, if KM wants to de-emphasize its E&P business, why not sell those assets today?  What does KM believe fair / market value is for its E&P assets?

 

6.  How is the St. John's Dome project (CO2) going?  How much capital has been put into the project to date?  Discuss the well results?

 

7.  Please discuss KM’s intentions with respect to investing in “coal / other natural resources.”  How much capital will be dedicated to this effort?  What has been done so far?

 

8.  Is KM considering a corporate acquisition to kick off this new “coal / other natural resources” business?

 

9.  More importantly, how will KM define sustaining CapEx for this business?  Will there be a replacement reserve to reflect the fact that these will be depleting assets?  Or will it be similar to how KM currently defines E&P sustaining CapEx (i.e. $0)? 

 

10. Over the last several years, KM has spent an enormous amount of expansion CapEx in both its refined products and bulk terminals businesses, yet unit volumes, at each, has not increased.  This cannot be explained by a single project gone wrong or a bad economy; what, exactly, is this expansion CapEx going towards?

 

11. Within KMP’s Natural Gas Pipelines segment, there is a large gathering & processing (G&P) business, made more significant with the CPNO acquisition. For 2013, what is G&P sustaining CapEx vs. expansion CapEx (including JVs)?  What is G&P organic volume growth expected for 2013 and 2014, respectively? 

 

12. Over the long-term, how much capital would KMP need to spend on an annual basis to keep gathering throughput and NGL production flat (including CPNO)?

 

13. Does KMP include new well connections needed to keep gathering throughput flat in sustaining CapEx?  Does KMP include or reserve for processing capacity refurbishment / replacement in sustaining CapEx?

 

14. If KMP were to retire a 300 MMcf/d processing plant and build a new 300 MMcf/d processing plant next to it, would the CapEx incurred be sustaining CapEx or expansion CapEx?

 

15. On the 9/18/13 conference call, management noted that, “Everything that you do eventually gets into the rates you charge for your transportation services.”  How will the significant spending cuts at the former El Paso subsidiaries affect rates going forward?

 

16. On the 9/18/13 conference call, management cited a Goldman Sachs report that listed KMP’s 2012 maintenance CapEx as a % of EBITDA as 11.1%.  But in KMP’s 1/30/2013 IR presentation, it states that sustaining CapEx was $285MM and EBITDA (ex. items) was $4,144MM, for a ratio of 6.9%.  Which number is accurate?  Why did management cite the Goldman figure? 

 

17. In the FERC financials, which expense line includes “anomaly repairs” for the former El Paso subsidiaries?

 

18. In the FERC financials, where can we find the increase in O&M expenses to make up for the significant decline in maintenance CapEx on the former El Paso subsidiaries?

 

19. What does KM have for natural gas transmission contract roll-offs over the next few years?  Can KM quantify it in terms of EBITDA impact?

 

 

Kevin Kaiser

Senior Analyst


KO & PEP Q3 Update: Carbonated Soft Drinks Disappoint; Beverages Remain Overvalued

While broadly Consumer Staples names could now be considered a “defensive” play given the political uncertainty in Washington and Bernanke’s no-taper call (pushing yields lower, making staples names relatively more attractive), we think beverages remain overvalued with macro forces playing against the group.

 

To not mince words, but we’re not interested in getting long the trend of a ~ 3% annual decline in carbonated soft drink (CSD) volumes across the industry and a weakening emerging market  environment – well-established as the growth engine for the sector.  PEP is of course more diversified with 51% of its portfolio food, and we think the stock could continue to be supported on activist breakup news within the beverage business, however we’re not buyers of KO or PEP on the quarter’s print.

 

KO – There was much macro commentary on the call.  The company again cited a “volatile” emerging market business, which we do not expect to inflect in Q4, despite management’s claim that it’s only a “temporary” impact.   Europe broadly remains weak, with outperformance from Northwestern Europe (Germany in particular) and underperformance across the South.

 

Strong marketing plans for Q4, easier comps in the back half, and any pricing taking it’s able to capture, could help insulate Q4 performance, however, given the consumer moving out of CSD (including diet), and a still very weak macro environment globally, we’ll remain on the sideline on KO on the trend duration.   

 

On Q3 2013 results: KO reported earnings yesterday morning, inline revenues ($12.03B vs $12.05B), declining -2.5% year-over-year, and inline EPS of $0.53 (incl. 5 cent FX headwind), up +3.9% year-over-year. 

  • Total volume was up +2.0% in the quarter (Americas +1%, International +3%)
  • Company forecasts a currency headwinds of 5-6% in Q4
  • CEO Kent said that the Mexican government’s decision to increase taxes on soda is the wrong step: regressive taxes have proven in the past not to work and that consumers are the ones that suffer in the end (article). He made no comment on how the company may handle/prepare for the results in Mexico
  • Optimism around volume growth in China going forward. Volume +9% in the quarter
  • Volume weakness (flat) in LatAm (Brazil and Mexico greatest neg. contributors) on more difficult +5% comp

 

PEP – We believe the stock could continue to get support on activist news, including such options that PEP acquires Mondelez (MDLZ) and spins off the beverage business or PEP separates the existing business between beverage and food. CEO Nooyi addressed questions on the call by saying the company is looking into “sensible value-creating structural solutions” on beverages. All that said, we’re not buyers of the stock here. As our charts below suggest, we think the stock price has more risk than reward given the trend of declining earnings estimates and its premium P/E valuation over an overvalued group. 

 

On Q3 2013 results: this morning, PEP reported revenues that slightly missed consensus estimates (reported $16.9B vs $17B), up 1.5%, and EPS outperformance ($1.24 vs $1.17). The 10.7% EPS increase year-over-year was driven primarily by a lower than expected tax rate (25.5% or 80bps below last year) that contribute 6 cents of upside. The company reaffirmed its FY2013 EPS growth guidance of 7%.

  • Total volume was up +3% on the quarter (Snacks 3%/Beverages 1%)
  • Asia, Middle East & Africa (AMEA) sales underperformed,  down -3.4% Y/Y
  • Frito Lay North America sales were strong at +4.7% Y/Y
  • PepsiCo Americas Beverages sales were down -2.2% Y/Y with volume down -4%
  • Took price up ~$3 in the quarter

 

Valuation:  While we never base our investment preference on valuation alone, the chart below shows that both the Beverage group and KO and PEP are overvalued and trading well above historical averages.  Further, we think the direction of earnings estimates going into next quarter is flat to lower, suggesting that price has more downside than upside going forward.  

 

KO & PEP Q3 Update: Carbonated Soft Drinks Disappoint; Beverages Remain Overvalued - zz consumer

 

KO & PEP Q3 Update: Carbonated Soft Drinks Disappoint; Beverages Remain Overvalued - zz. bev

 

KO & PEP Q3 Update: Carbonated Soft Drinks Disappoint; Beverages Remain Overvalued - z

 

KO & PEP Q3 Update: Carbonated Soft Drinks Disappoint; Beverages Remain Overvalued - z. pepee

 

KO & PEP Q3 Update: Carbonated Soft Drinks Disappoint; Beverages Remain Overvalued - zz.eps table

 

 

Matthew Hedrick

Senior Analyst



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