prev

PNK 3Q 2013 CONFERENCE CALL NOTES

Muddy quarter but a big underlying miss. October was better in regional gaming land, however.

 

 

"Overall, operating trends were generally soft during the 2013 third quarter. The revenue environment was challenging across all of the Company's key markets due primarily to macroeconomic weakness, and in some isolated instances, an increase in the number of competing gaming facilities. In response to this, we began making adjustments to operating and marketing expense levels of our properties in the third quarter, and will address any persistent revenue softness with continued expense reductions over time. Beyond these normal course operating and marketing expense refinements, the Company expects synergies and cost efficiencies from the acquisition and integration of the operations of Ameristar to provide additional support and to offset the impact of revenue softness on the cash flow produced by our properties."

 

-Carlos Ruisanchez, President and Chief Financial Officer of Pinnacle Entertainment

 

 

CONF CALL

  • Operating environment challenging
  • Since close of transaction, paid $71MM of term loans
  • $20MM synergies:  public company costs, labor (moving to select leadership teams for combined company) and scale efficiencies
    • Marketing/healthcare efficiencies to come
    • Still believe they will exceed synergy target of $40MM
  • Trends:  October was better than September (it could be as good as July)
  • Will roll out of combined Discovery loyalty program in Q2 2014 
  • L'Auberge Lake Charles table drop, table rev and retail rev hit records; hotel did well 
  • St. Louis:  River City significantly outperformed the market; new hotel opened in August 28.  37% increase in guest satisfication.
  • Indiana/Southern markets:  increased competition.  Adjusting marketing spend to reflect current business conditions.
  • L'Auberge Baton Rouge:  growing the market, 53.4% market share (highest since opening); hotel demand remains high (property producing the 2nd highest REVPAR at combined company)

Q & A

  • Corporate expenses:  apples-to-apples basis down $4MM YoY
  • 16th straight quarterly REVPAR improvement in PNK
  • Business fairly in great shape
  • Saw softness in August and September; spend (including marketing) will adjust to current business conditions
  • Focused on profitability, not market share 
  • 4Q:  synergies - consolidating marketing program 
  • Remaining $20MM of synergies:  will be achieved without any revenue; more positive on the synergies than a quarter ago
  • Baton Rouge margins:  20%
  • Bossier City been impacted by Margaritaville and Oklahoma; Margaritaville has not grown the market
  • Feel very good about New Orleans; continuing to build a hotel there
  • Baton Rouge:  guest satisfication high; market remains underpenetrated
  • Very bullish on Lake Charles market
  • Revenue synergy opportunities:  1) putting PNK's hotel yield automated system in ASCA portfolio 2) combining myChoice program next Spring 3) legacy PNK has established marketing infrastructure and will leverage it.
  • Ohio internet cafes have stopped operating
  • River Downs: will open with 1,600 VLTs 
  • Belterra: has held up very well.  Has mitigated competition from Cincinnati.
  • Leverage goal: 3.5x-4.0x
  • Cash flow of combined firm should continue to grow
  • Colorado floods in September impact on ASCA Black Hawk:  not meaningful
  • Expect Landry to get Lake Charles license by end of year 
  • Would like $100-110MM in cage cash
  • Depreciation run rate: +/- $50MM off of the $200MM number in a previous quarter
  • Capitalized interest guidance:  couple of $MMs - Lake Charles, Belterra Park (minimal cap interest), and stopped capitalizing interest in River Downs



get free cartoon of the day!

Start receiving Hedgeye's Cartoon of the Day, an exclusive and humourous take on the market and the economy, delivered every morning to your inbox

By joining our email marketing list you agree to receive marketing emails from Hedgeye. You may unsubscribe at any time by clicking the unsubscribe link in one of the emails.

Record Domestic Equity Inflow

Takeaway: Domestic equity funds put up a record weekly inflow last week above the prior record from the first week of '13 and also higher than 2007

This note was originally published October 31, 2013 at 11:02 in Financials

Record Domestic Equity Inflow - cashcircle

Investment Company Institute Mutual Fund Data and ETF Money Flow:

 

Total equity mutual fund flow broke to near all-time highs for the week ending October 23rd with a $13.5 billion total inflow into both domestic and world equity funds. Domestic equity mutual fund flow of $9.1 billion last week was an all-time record for U.S. stock funds in any 5 day period and eclisped the prior weekly record of $7.7 billion from the first week of 2013.  As a result, total equity mutual fund trends in 2013 now tally a $2.8 billion weekly average inflow, a complete reversal from 2012's $3.0 billion weekly outflow.

 

Fixed income mutual funds conversely continue to have persistent outflows. This week's tally, although a sequential improvement, measured another $2.3 billion withdrawn from bond funds which has pushed the 2013's weekly average fund flow to a negative $719 million. This compares to very strong trends which marked last year when bond mutual funds averaged a $5.8 billion weekly inflow.

 

ETFs also experienced strong subscriptions last week, with inflows in both equity and fixed income products. Passive equity products experienced inflows of $13.0 billion for the 5 day period ending October 23rd with bond ETFs contributing $1.3 billion during the same time period. ETF products also reflect the 2013 asset allocation shift, with the weekly averages for equity products up year-over-year versus bond ETFs which are seeing weaker year-over-year results.

 

Record Domestic Equity Inflow - cast1

 

For the week ending October 23rd, the Investment Company Institute reported the second strongest weekly inflow into both domestic and world stock products in the history of the data set of $13.5 billion. The only other larger weekly inflow for total equities was during the first week of 2013 where $14.3 billion came into both fund classes. The domestic equity result of a $9.1 billion inflow was the largest U.S. weekly stock fund in history, larger than the prior record of $7.7 billion in the first week of the year and over 2.5x the best week in 2007. World stock fund inflows totaled $4.3 billion last week, the best 5 day result since the beginning of February 2013 and resulting in now 25 consecutive weeks of foreign stock fund flow. Including this week's new record high in domestic stock fund flows, the year-to-date weekly average for 2013 for all equity mutual funds has moved to a $2.8 billion inflow, a complete reversal from the $3.0 billion outflow averaged per week in 2012.

 

On the fixed income side, bond funds continued their weak trends for the 5 day period ended October 23rd with outflows staying persistent within the asset class. The aggregate of taxable and tax-free bond funds booked a $2.3 billion outflow, a sequential improvement from the $5.7 billion lost in the 5 day period prior, but still exhibiting weak trends. Both categories of fixed income contributed to outflows with taxable bonds having outflows of $1.3 billion, which joined a $1.0 billion outflow in tax-free or municipal bonds. Taxable bonds have now had outflows in 16 of the past 21 weeks and municipal bonds have had 21 consecutive weeks of outflow. While the sharp outflows that marked most of the summer and the start of the third quarter have moderated, the appetite for bonds has hardly rebounded. The 2013 weekly average for fixed income fund flows is now a $719 million weekly outflow, a sharp reversal from the $5.8 billion weekly inflow averaged last year.

 

 

Record Domestic Equity Inflow - ICI 2

Record Domestic Equity Inflow - ICI 3

Record Domestic Equity Inflow - ICI 4

Record Domestic Equity Inflow - ICI 5

Record Domestic Equity Inflow - ICI 6

 

 

Passive Products:

 

 

Exchange traded funds mirrored the trends in mutual funds with a strong result from equity ETFs and a weak performance from fixed income passives. Equity ETFs posted a $13.0 billion inflow, the third largest weekly inflow for equity ETFs all year. The 2013 weekly average for stock ETFs is now averaging a $3.3 billion weekly inflow, a 50% improvement from last year's $2.2 billion weekly average inflow.

 

Bond ETFs managed an inflow for the 5 day period ending October 23rd with a $1.3 billion subscription, breaking a trend of 3 consecutive weeks of passive bond outflows, but hardly a robust number. Despite this slight net new subscription in bond ETFs, 2013 averages are flagging with just a $275 million average weekly inflow for bond ETFs, much lower than the $1.0 billion average weekly inflow for 2012.

 

 

Record Domestic Equity Inflow - ICI 7

Record Domestic Equity Inflow - ICI 8

 

***Contact sales@hedgeye.com for more information.

 

Jonathan Casteleyn, CFA, CMT

203-562-6500

jcasteleyn@hedgeye.com 

 

Joshua Steiner, CFA

203-562-6500

jsteiner@hedgeye.com


PNK: MUDDY WATERS

An accounting change – but only for this period – obscures a significant miss at the property level


  • PNK missed our adjusted EBITDA estimate of $111 million by $5 million and the Street by $8 million.  On an adjusted EPS basis, the miss looks even worse $0.11 vs the Street at $0.32. 
  • As we suspected, PNK is adopting ASCA’s method of accounting for corporate expense which essentially boosts property level margins while elevating corporate expense.  This is part of the reason ASCA’s property level margins looked so strong on a relative basis.  To our knowledge, PNK is now the only operator to account for corporate expense in this manner.
  • The benefits of the accounting change are clear:  analysts place a higher multiple on property level EBITDA than they do on corporate expense.  Unfortunately, PNK did not adjust the prior year’s corporate in the same manner so margins look better on a YoY basis than they otherwise would.
  • With the acquisition of ASCA, the quarter was already messy but the accounting change further muddies the water.  Our takeaway is that Q3 was indeed a miss and forward estimates need to come down.

PNK: MUDDY WATERS - PNK2

 


CALL TODAY: Can Twitter Fix Its Business and Live Up To Expectations?

CALL TODAY: Can Twitter Fix Its Business and Live Up To Expectations? - TwitterDialin 11.06.13

 

"Expectations are the root of all heartache."  -Shakespeare

 

CALL DETAILS

  • Toll Free Number: 
  • Direct Dial Number: 
  • Conference Code: 629758#
  • Materials: CLICK HERE (slides will download prior to the start of the call)

 

Please join Hedgeye's resident social media experts, Director of Research Daryl Jones and Hesham Shaaban, for an in-depth overview and discussion of Twitter ahead of its initial public offering. The key question we will be looking to answer is whether Twitter management can fix its business model in order to achieve its longer-term growth potential.

 

The call titled "Can Twitter Fix Its Business and Live Up To Expectations?" will be held today, November 6th at 11:00am EST and will include a detailed 50-page presentation. As an independent research firm, with no investment banking and no trading of our own, Hedgeye is able to bring you our unconflicted, objective analysis of Twitter's forthcoming IPO.

 

KEY TOPICS OF DISCUSSION WILL INCLUDE:

  • A brief overview of Twitter's history and a detailed review of its business model
  • Analysis of the company's stated growth objectives vs. the key challenges/opportunities facing Twitter management
  • Detailed comparison of user  growth and revenue metrics versus Facebook
  • An overview of our recommendations for monetizing the business model
  • Analysis of its longer term growth potential and discussion on valuation

 

Contact  for more details.


  


Attention Students...

Get The Macro Show and the Early Look now for only $29.95/month – a savings of 57% – with the Hedgeye Student Discount! In addition to those daily macro insights, you'll receive exclusive content tailor-made to augment what you learn in the classroom. Must be a current college or university student to qualify.

next