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MACAU: DECEMBER DETAIL BETTER THAN HEADLINE

Adjusting hold to normal for both periods, December GGR would’ve grown a whopping 26% (off of a tough 20% compare) rather than the nominal 18% growth disclosed last week.  Of course, Mass led the way with 35% growth vs “only” 12% VIP revenue growth.  However, Rolling Chip volume actually grew over 23%.  The better than advertised December gives us more comfort in our January projection of 22-28% YoY growth.

 

Here are some Market and Operator takeaways from December:

 

Macau Market

  • Estimated VIP hold (adjusted for Direct VIP) was only 2.85% versus normal of 3.00% and 3.14% last year
  • The December comp of +20% was the most difficult since April
  • Even slot revenue participated, up 10% 

LVS

  • December was an outstanding month for the best positioned operator
  • LVS came within 60bps of share of overtaking SJM as top dog, driven in part to low hold
  • VIP hold (adjusted for Direct VIP) was higher at 3.3% vs 3.2% last year and normal of 2.8%
  • Mass share was slightly above trend but Rolling Chip share was well below trend due in part to the House playing lucky
  • GGR grew 31% YoY, 2nd only to Wynn
  • Mass growth of 57% led the market

WYNN

  • WYNN is a growth story again! As we’ve discussed, Wynn Macau has made a more aggressive marketing/promotional push the last few months.
  • YoY growth led the market for the first time in years, despite lower than normal VIP hold
  • Mass growth of 30% was the property’s 2nd highest in 2 years
  • Encouragingly, Wynn’s Rolling Chip growth led the market
  • Mass and Rolling Chip share came in above recent trend

MPEL

  • Share climbed above trend in December due to high hold – 50bps and 40bps above last year and normal, respectively
  • Mass share was higher than trend while Rolling Chip continues to trend lower – possible losing share to LVS and Wynn
  • GGR grew 25% YoY
  • RC was up only 2%
  • We think MPEL could be a market share loser in 2014

MGM

  • Hold fell well below last year but was close to normal
  • Mass revenue actually declined YoY – 1st time in 4 years -  no doubt as a result of Wynn’s aggressive Mass push
  • VIP volumes remain strong

GALAXY

  • Mass growth of “only” 28% was the lowest in 4 years
  • Rolling Chip volume growth remained strong
  • Market share was the 2nd lowest of 2013, due in part to low VIP hold 

SJM

  • VIP hold fell below last year's and normal, resulting in below trend market share
  • GGR grew only 8%, 2nd slowest behind MGM
  • On a YoY basis, SJM grew Mass 26% - the highest growth rate in nearly 2 years

MACAU: DECEMBER DETAIL BETTER THAN HEADLINE  - macau


THE M3: E-TABLE CAP; MGM COMMENTS; RESORTS WORLD MACAU

THE MACAU METRO MONITOR, JANUARY 7, 2014

 

 

GOVT STUDIES E-TABLE CAP, CLOSING SLOT PARLOURS Macau Business

According to Secretary Tam, the government is considering a cap on electronic gaming in casinos and restricting the operations of slot machine parlours.  It is unclear if Mr Tam was referring to electronic table games with a live dealer, slot machines or both.  Tam said the government wanted to close all slot machine parlours outside casino premises.  A formal request to close slot parlours and the cap on “live” tables would be reviewed in tandem with the renewal of casino concessions next year and in 2016.  The cap on live tables may continue after 2022, Tam said.

 

GAMING: MASS MARKET AND ELECTRONIC TABLES EXPECTED TO GROW Macau Daily Times

MGM Macau’s Executive Director of Business Development – Casino Market, Michael Jensen said, “We expect that the market-wide growth of VIPs would probably be between 10-15%, and growth in the mass market may be between 25-30%, from a market perspective.”  Jensen said that they have been progressively increasing the minimum bets across the mass floor, and will continue to raise the amount in 2014. “The main reason for that is, particularly, the lack of supply or the lack of tables available for the mass market”.   As for the revenue during the Chinese New Year period, Jensen refused to predict the percentage growth for the period, only revealing that their hotel rooms have been fully booked. “We think there will be a substantial increase in players and people coming to Macau over that period. We are expecting growth year after year definitely."  

 

GENTING ARM MAKES PLANS FOR RESORTS WORLD MACAU Macau Business

Treasure Island Entertainment Complex Ltd, a company linked to Genting Hong Kong Ltd, has outlined plans to build a boutique hotel on reclaimed land opposite the Casino Lisboa.  Chairman Yany Kwan said the proposal did not cover gaming facilities, but an unnamed source said gaming may be included.  The development, in Praça de Ferreira do Amaral near Nam Van Lake, could include a low-rise boutique hotel with hundreds of rooms, shops, and facilities for entertainment, meetings and exhibitions.  The working name for the project is Resorts World Macau, using the same brand as Malaysia’s Genting Group uses for its casino-resorts.  Treasure Island said the 8,100-square-metre site was granted in 2008.


Mother of All Doves

Client Talking Points

US Dollar

The greenback was back down yesterday on the heels of a #GrowthSlowing ISM Services report in the USA. That piece of economic news increases market speculation that Janet Yellen will back off on Fed taper talk – she is the Mother of All Doves, don’t forget. The US Dollar Index fails @Hedgeye TAIL resistance of $81.12.

UST 10YR

The 10-Year Treasury yield holds yet another higher-low (and every line of support that matters in my model) at 2.96% ahead of the US employment report. There's no resistance to fresh highs of 3.05%. So yes, we’ll stay short Gold on that. $1185 support on that.

EUROPE

Simple math: If the Buck Burns, Euros win. It's hard for Keynesians to get this, but UK auto sales just hit their highest level since 2007 on a #StrongPound too. Why? A strong currency means strengthening confidence and higher European consumption growth. #EuroBulls.

Asset Allocation

CASH 30% US EQUITIES 16%
INTL EQUITIES 18% COMMODITIES 6%
FIXED INCOME 0% INTL CURRENCIES 30%

Top Long Ideas

Company Ticker Sector Duration
GHL

Hedgeye's detailed and constructive view on the improving fundamentals in the M&A market with a longer term perspective is a contrarian idea at odds with the rest of the Street which is overly focused on short-term results. From an intermediate term perspective, M&A is poised to break out in 2014. We are witnessing record amounts of cash on corporate balance sheets, continued low borrowing costs and the first positive fund raising round for Private Equity in four years. Moreover, a VIX in secular decline (this has historically benefited M&A), recent incrementally positive data points from leading M&A firms that dialogue has improved, and an improving deal tally from Greenhill & Company (GHL) themselves coming out of the summer all bode favorably for GHL.  So is a budding European economic recovery that would assist a global M&A market that has been range bound over the past three years. GHL stands out as a leading beneficiary of these developments.

FXB

Our bullish call on the British Pound was borne out of our Q4 Macro themes call. We believe the health of a nation’s economy is reflected in its currency. We remain bullish on the regime change at the BOE, replacing Governor Mervyn King with Mark Carney. In its October meeting, the Bank of England voted unanimously (9-0) to keep rates on hold and the asset purchase program unchanged.  If we look at the GBP/USD cross, we believe the UK’s hawkish monetary and fiscal policy should appreciate the GBP, as Bernanke/Yellen continue to burn the USD via delaying the call to taper.

WWW

WWW is one of the best managed and most consistent companies in retail. We’re rarely fans of acquisitions, but the recent addition of Sperry, Saucony, Keds and Stride Rite (known as PLG) gives WWW a multi-year platform from which to grow. We think that the prevailing bearish view is very backward looking and leaves out a big piece of the WWW story, which is that integration of these brands into the WWW portfolio will allow the former PLG group to achieve what it could not under its former owner (most notably – international growth, and leverage a more diverse selling infrastructure in the US). Furthermore it will grow without needing to add the capital we’d otherwise expect as a stand-alone company – especially given WWW’s consolidation from four divisions into three -- which improves asset turns and financial returns.

Three for the Road

TWEET OF THE DAY

Yellen’s Senate confirmation vote (56-26) was the worst in Fed history – that’s progress @KeithMcCullough

QUOTE OF THE DAY

"Hell, there are no rules here - we're trying to accomplish something." - Thomas Edison

STAT OF THE DAY

Forget about Las Vegas. Macau has cemented its status as the undisputed heavyweight champion of the gambling industry. The Chinese territory reported gambling revenue of 360 billion patacas ($45 billion) for 2013, an increase of almost 20% over the previous year. If that sounds like a lot of cash, it is. Las Vegas will be lucky to make $6.5 billion, or 15% of Macau's total. (CNN)


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 80.33%
  • SHORT SIGNALS 78.51%

What's New Today in Retail (1/7)

Takeaway: Abysmal ICSC reading…but marking meteoric rise of dot.com? UA takes winter torch from NKE? Shrewd move by Li&Fung. SHLD PVH OXM MW UNIQLO

EVENTS TO WATCH

 

LULU: Consumers Challenge Our Bearish View - Friday 1/10 1:00pm EST

 

We reversed course and turned bearish on LULU in November for several reasons - such as concern over increased competitive pressure, waning relative value proposition, lack of focus inside the company, and the financial cost (and margin implication) for focus to return. But the purpose of this Black Book is not to tout our bear case, but rather to step back, open up our thought process, and challenge our thesis. We'll present our key issues to consumers in an unbiased non-leading way, and then we'll see how LULU customers chime in. We don't know what the results will be yet, but based on the results we expect to either a) back off of our bearish view, or b) gain conviction that the business is likely to get worse before it gets better. We're equally open to either option. The data will speak for itself.

 

TCS - Earnings Call: Tuesday 1/7 4:30 pm

 

ECONOMIC DATA

 

ICSC - Chain Store Sales Index

 

Takeaway: This reading is simply bad. Numbers are still growing, which is good, but the growth rate isn't even in the same ball park as what we saw over the past two years. Our sense -- which unfortunately we cannot yet quantify -- is that this shows a dramatic shift to online shopping both pre and post holiday. Yes, we've been shopping online for years. But we think that online as a percent of total went parabolic this year. When we look at the 2013 holiday season in retrospect, it will be known as the point in time where bricks & mortar really started to take it on the chin. What this also goes to show is that so many 'sales monitoring' data sources that the Street has relied upon for years are losing relevance -- fast.

 

What's New Today in Retail (1/7) - chart3 1 7

   

COMPANY NEWS

 

JOSB, MW - Jos. A. Bank Urges Shareholders to Take no Action With Respect to Men's Wearhouse Tender Offer or Director Nominees

(http://phx.corporate-ir.net/phoenix.zhtml?c=113815&p=irol-newsArticle&ID=1888188&highlight=)

 

  • "The Board of Directors of Jos. A. Bank Clothiers, Inc. today confirmed that The Men's Wearhouse, Inc. has commenced an unsolicited tender offer to acquire all outstanding common shares of the Company at a price of $57.50 per share."
  • "The Board said that, consistent with its fiduciary duties, it will carefully review all aspects of the Men's Wearhouse offer in consultation with its financial and legal advisors and make a recommendation to shareholders, which will be outlined in a Statement on Schedule 14D-9 filed with the Securities and Exchange Commission on or before January 17, 2014."
  • "The Company's stockholders are advised to take no action on the tender offer until the Company's Board of Directors has announced its recommendation to stockholders."

 

Takeaway: So JOSB says it will uphold its fiduciary duties and fully evaluate the MW offer on its own merits. Does anyone want to bet that they come out against it after that fiduciary evaluation?

 

UA - UA has big presence at US Short Track Speed Skating Olympic Trials

 

What's New Today in Retail (1/7) - chart1 1 6

 

Takeaway: Short track speed skating has emerged as on of the most exciting events of the winter Olympics -- thanks in large part to Apolo Anton Ohno, who was a Nike poster-boy.  But there's a changing of the guard. Whether you look at the men's or women's competitors, UnderArmour's logo completely dominated in the Olympic Trials this past weekend. The only catch is that UA seems to have put its logo on the wrong side -- when the athletes are constantly making left turns on such a compressed track, the TV has a better shot at capturing the logo when its on the right side. But it made up for it by super-sizing the logo, which rivals the massive polo ponies Ralph Lauren uses at the US Open.


PVH - PVH CORP. Announces License Agreement with Axis Golf Pty. Limited for IZOD Brand

(http://www.pvh.com/investor_relations_press_release_article.aspx?reqid=1888312)

 

  • "PVH Corp. announced that it had entered into a license agreement with Axis Golf Pty. Limited under which Axis Golf will market and distribute men’s sportswear, golf apparel and related accessories under the IZOD brand in Australia, New Zealand, Fiji, and other South Pacific islands. The initial term of the license agreement runs through December 2018."
  • "IZOD products will be sold at Golf World and Golf Mart, two golf retail store chains owned by an affiliate of Axis Golf and into selected golf retail, sports retail, department stores and IZOD stores to be operated by Axis Golf. The license permits Axis Golf to manufacture, market and distribute IZOD dress shirts, neckwear, and underwear, in addition to the categories mentioned above, and distribute belts, headwear, watches, umbrellas and flip flops purchased from other licensees of IZOD across the region."

 

Takeaway: On one hand, we have to hand it to PVH -- these guys are striking new license deals across its portfolio at the speed of light. But on the flip side, the scope of this deal seems extremely broad. The 5-year deal basically allows the licensee to design, manufacture and sell Izod products across categories. We hope that PVH is maintaining the right to veto any product designs that it thinks are inconsistent with the brand. In fairness, the contract includes minimum sales hurdles on which royalties are generated. If Axis misses minimums due to poor product planning, then the royalty rate goes up, before ultimately going back to PVH if it doesn't perform. 

 

9983 - Fast Retailing Dec sales rise 4.1%

(http://www.fibre2fashion.com/news/garment-company-news/newsdetails.aspx?news_id=157966)

 

  • "Fast Retailing announces December 2013 sales report. December 2013 same-store sales increased by1.1% year on year while sales at our own stores increased by 3.7%. Total sales including online sales increased by 4.1%."

 

Takeaway: These numbers don't seem impressive at face value. But keep in mind that we're talking about a Japanese company here. Any positive comp is good news. Granted, we suspect that most of the comp was driven by its International operations -- most notably US and Western Europe. But we'll take what we can get on this one. For those unfamiliar with the name, its primary concept is UNIQLO -- the same brand that sponsors Novak Djokovic.  Here's some useless trivia for you… The company started off with the name Unique Clothing Warehouse. But they shortened it to UniClo. But when they registered the subsidiary in Hong Kong, there was a clerical error that substituted the 'C' with a 'Q'. The embraced the mistake and never changed back. 

 

SHLD - Sears And Kmart Shoppers Can Now Score Rewards Points By Getting Fit

(http://www.chicagogrid.com/reviews/tech/sears-kmart-shop-your-way-rewards-fitstudio/)

 

  • "Starting Friday, members of Sears’ loyalty program can earn points toward purchases at Sears and Kmart by logging into the Hoffman Estates-based retailer’s fitness site, FitStudio.com, and tracking their physical activity."
  • "The Points for Progress program works with fitness apps and devices — the device must be a Fitbit or BodyMedia brand, both sold by Sears — and with Netpulse-enabled fitness equipment at more than 500 gyms in the U.S. and Canada."

 

Takeaway: We're fans of any initiative that is designed to boost fitness/activity levels -- even for Sears. But we question whether the average Sears customer will actually care -- especially when a significant purchase is required to earn points. Nonetheless, the company will likely get a tax credit, which is good because it needs every dollar it can get.

 

OXM - Tommy Bahama Dives Deep Into Footwear

(http://www.wwd.com/footwear-news/markets/tommy-bahama-dives-deep-into-footwear-7331379)

 

  • "Tommy Bahama...just relaunched its footwear collection to include everything from flip-flops and boat shoes to espadrilles." 
  • "For spring ’14, women’s footwear features ocean-inspired elements, such as flip-flops with beaded starfish uppers, boat-shoe inspired espadrilles and cork-bottom platform slides. On the men’s side, offerings include barefoot driving mocs, canvas slip-ons and fisherman sandals."
  • "Currently, men’s accounts for 60 percent of the footwear mix and retails from $58 to $198. Women’s product is priced from $28 to $148."

 

Takeaway: The irony that Tommy Bahama makes a splash about warm-weather footwear on one of the coldest days on record.

 

494 - Li & Fung Sets Up Factory And Worker Safety Unit

(http://www.wwd.com/business-news/financial/li-fung-sets-up-factory-and-worker-safety-unit-7331837?module=hp-topstories)

 

  • "Li & Fung Ltd. has created a new business unit to focus on factory and worker safety."
  • "The new unit, called Vendor Support Services, is part of the firm's new three year business plan that will be disclosed more fully when the company reports full-year results in March."
  • "The new unit will be led by group chairman Dr. William K. Fung. It will incorporate the firm's existing range of support services to factories."
  • "'As the leading sourcing company in the world, we feel our responsibility is to play an even bigger role in bringing about and speeding up systematic positive change in the industry,' Fung said."

 

Takeaway: The guy is right. This is the right thing from a workplace safety perspective -- that's obvious. But it also raises the bar for virtually everyone else in the industry, many of whom can't financially afford to keep up. Ironically, by driving forward a workplace safety agenda, Li & Fung could shake out some marginal capacity in this business.

 

Loehmann's - Loehmann's IP Assets Sold

(http://www.wwd.com/retail-news/financial/loehmanns-ip-assets-sold-7335182?module=hp-topstories)

 

  • "According to bankruptcy court records docketed on Monday, Esopus Creek Value Series Fund LP is the successful bidder for the Loehmann’s intellectual property assets and customer lists. Madison Capital Holdings won the bidding for the 39 store leases and a joint venture among SB Capital Group, Tiger Capital Group and A&G Realty Partners has acquired the inventory that will be liquidated, furniture and fixtures, accounts receivable and cash in a court-approved auction held on Friday and Saturday. The auction results are still subject to Manhattan bankruptcy court approval this afternoon."

 

Takeaway: So few retailers that go bankrupt actually go away. But make no mistake, Loehmann's is history. Unlike what we've seen with consumer electronics retailers like Circuit City that go under and many locations are reborn as similar shops -- like PC Richard -- we think it's pretty safe to assume that the lion's share of this capacity will leave the apparel industry for quite some time.

 

INDUSTRY NEWS

 

More Than $250M Lost During Cambodia Strikes

(http://www.wwd.com/business-news/government-trade/more-than-250-million-lost-during-cambodias-strikes-7331862?module=hp-business)

 

  • "The Cambodian apparel industry suffered estimated losses of more than $250 million in sales and investment during the nearly two-week nationwide strikes staged by its workforce to protest for higher wages."

January 7, 2014

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BULLISH TRENDS

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BEARISH TRENDS

January 7, 2014 - Slide9

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