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WYNN 4Q 2013 CONFERENCE CALL NOTES

So not running Macau at full capacity? Mass push really paying off. Wynn beat our Street high EBITDA and EPS estimates with luck a factor in LV.

 

 

WYNN 4Q 2013 CONFERENCE CALL NOTES - wynn

 

 

CONF CALL 

  • Want to launch Wynn Palace in 22-23 months; all-suite hotel will be the conversation piece of Asia
    • Phase 2 will almost double Wynn Palace capacity
  • Do not want Wynn Encore hotel to be a 'stepchild'

Q & A

  • 1Q/2Q 2013 lagged in mass marketing in Macau.  Until they saw an opportunity or when they lagged too much, they didn't change.  They made changes in 4Q, which helped them outperform.
  • Wynn Macau Slot win > Venetian slot win even though WYNN's smaller
  • Macau:  opened new slot room and new premium mass area (15 tables) in Oct 2013; more expansions coming 
  • LV:  saw uptick in retail, convention bookings, and hotel rate and occupancy; hold % a little better than last year
  • 2014 LV will equal or exceed 2013 LV
  • But still cautious on LV
  • Wynn Peninsula capex:  
    • Additional mass space and high-end gaming will be at a level that equals or exceeds Wynn Palace
    • 2013 capex was $60MM: Wynn Tower $35MM; $10MM new junket room; $1.5MM renovated spa
    • 2014 capex will be a little more than 2013
  • Cotai:  Phase 1 and 2 will cost $10bn all together; 95%-97% will be non-gaming
  • MA:  $1.5-1.6 billion investment (borrow $900MM and invest $500MM).  Can make $300MM in equity in Boston
  • No casino player in the USA does not know the Wynn brand
  • Japan:  will only be a study bill that may be passed this year; in 2016, a decision could be made
  • New junket room accounted for the rise in number of tables in Q4.  
  • Cash:  little less than $1 billion onshore, rest is offshore
  • Adelson said if Japanese partners with an American company, it will be under American scrutiny which could be onerous.  Wynn says that could be the case but it's not automatically a problem.
  • If WYNN partners with a local company in Tokyo, company would not have to qualify for suitability in Las Vegas.  
  • Thinks NJ will find MGM suitable again 
  • MA:  Foxwoods may apply on a commercial level for a third license and agree to pay 25%, not with the compact with the state but simply as a a competitive operators like MGM and WYNN.
  • High hold affected LV by ~$20MM
  • Macau is not supply constrained; the market will absorb the new properties on Cotai nicely
  • Added new junket area 3 days ago
  • Table/slot count does not matter much; it's the person gambling that matters
  • Wynn Palace Phase 2:  Two towers/ two buildings; 1,500 additional rooms - all suites (1,400 ft per room)
    • May open two years after Phase 1


Just Charts: Bullish Germany

Takeaway: Our bullish outlook on Germany remains in place as we head into month-end (etf: EWG).

Editor's note: This unlocked research note was originally published January 29, 2014 at 16:00 in Macro. For more information on how you can subscribe to Hedgeye click here.

Our bullish outlook on Germany remains in place as we head into month-end (etf: EWG).

Just Charts: Bullish Germany - german 

Below we refresh the charts of the three confidence bureaus we track  – ZEW, IFO, and GfK.  While the 6-month forward looking ZEW Economic Expectations took a slight dip in the January reading, its first decline in 6 months, it’s but one survey among other very favorable consumer and business sentiment readings and strong Services and Manufacturing PMIs.

 

We continue to be bullish on German equities and maintain our call of strong EURO/strong DAX that is a function of Keith’s quantitative levels and the correlations we’re seeing between high frequency German data sets and the EUR/USD.

 

The major takeaway for us is the purchasing power boost that German consumers and businesses are receiving with a strong currency and decelerating inflation. We see a strong currency positively flowing through to confidence and consumption.  Also, we do not read recent levels in the EUR/USD (the average over the last year has been $1.3321) as prohibitive to German export expansion.

 

In the bottom two charts we show Germany’s positive trade balance versus one of its main peers, France. We also note the trend of underlying strong demand from China for German goods –while the latest reading is from 7/2013 (stale), we believe that recent purchasing data and given the basket of German exports—skewed to high tech/specialized goods—should support strong demand in 2014 despite Chinese growth slowing.

 

As another piece of favorable data, this week the German government reported that it is considering raising its growth forecast for 2014 to 1.8% compared with 1.7% published late last year.

 

Matthew Hedrick

Associate

 

Just Charts: Bullish Germany - hedrick

 

Just Charts: Bullish Germany - z. 2

 

Just Charts: Bullish Germany - z. 3

 

Just Charts: Bullish Germany - z. 4

 

Just Charts: Bullish Germany - z. 5

 

Just Charts: Bullish Germany - z. 6

 

Just Charts: Bullish Germany - z. 7

 

Just Charts: Bullish Germany - z. 8

 

Just Charts: Bullish Germany - z. 9

 

Just Charts: Bullish Germany - z. 10

 

Just Charts: Bullish Germany - z. 11

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SQUIRREL HUNTING WITH INDONESIA, PHILIPPINES AND NEW ZEALAND

Takeaway: With respect to the intermediate term, both Indonesia and New Zealand look good on the long side (kind of). Philippines looks like a short.

CONCLUSIONS:

 

  1. We’d like to see Indonesia (EIDO) break out above its TREND line (~3% higher) before we allocate capital here. The immediate-term TRADE was built to front-run the TREND, so we like our chances of this occurring in light of Indonesia’s 1H14 rather positive GIP outlook.
  2. Philippines’ sour GIP outlook would suggest selling/shorting the country (EPHE) at your leisure.
  3. We’d like to see New Zealand (ENZL) recapture its TRADE line (~1.5 to 2% higher) before we allocate capital. If the TREND line holds, we’d be comfortable allocating capital to New Zealand as somewhat of a call option on continued commodity reflation. Moreover, we want to be exposed to likely appreciation of the Kiwi dollar.

 

2014 has certainly been a interesting year with respect to my geographic regions of converge (i.e. Asia, LatAm and Emerging Markets). Only six of the 21 countries I follow closely have equity markets that are up for the YTD and, of those six, only three of them are broadly investable (i.e. excluding Argentina, Vietnam and Venezuela we’re left only with Indonesia, Philippines and New Zealand).

 

If you run global equity money, you know how important it is to get big in under-indexed names that subsequently go on to outperform the benchmark. With that in mind, we decided to go “squirrel hunting” in three of the more squirrely countries in the sample with the express intent on finding which country(ies) to overweight/get long of and which country(ies) to sell/short with respect to the intermediate term (i.e. 6-9M+).

 

GROWTH/INFLATION/POLICY

 

Indonesia: As of now, our proprietary GIP model has Indonesian real GDP growth accelerating modestly in 2014, with most of the juice coming in 1H14 where compares are easiest. We currently anticipate Indonesian CPI to accelerate modestly in 2014, though moderation in the back half of the year – where compares are toughest and import price pressures are likely to be the least – is also expected. Indonesia’s most recent quarterly real GDP growth and quarterly CPI readings have z-scores (trailing 3Y) of -2.0x and +1.8x, respectively. Lastly, we expect BI to maintain at least rhetorical hawkishness amid elevated rates of inflation and #EmergingOutflows.

 

SQUIRREL HUNTING WITH INDONESIA, PHILIPPINES AND NEW ZEALAND - INDONESIA

 

SQUIRREL HUNTING WITH INDONESIA, PHILIPPINES AND NEW ZEALAND - Indonesia GDP Comps

 

SQUIRREL HUNTING WITH INDONESIA, PHILIPPINES AND NEW ZEALAND - Indonesia CPI Comps


SQUIRREL HUNTING WITH INDONESIA, PHILIPPINES AND NEW ZEALAND - IDR YoY

 

Philippines: As of now, our proprietary GIP model has Filipino real GDP growth slowing sharply (~170bps) in 2014 (after the best two-year period of growth in ~60 years), with most of the slowing coming in 1H14 where compares are toughest. We currently anticipate Filipino CPI to accelerate by ~100bps in 2014, with much of that acceleration coming in 1H14 where compares are easiest and import price pressures are the greatest. Philippines’ most recent quarterly real GDP growth and quarterly CPI readings have z-scores (trailing 3Y) of +0.4x and -1.0x, respectively. Lastly, BSP is likely to maintain its neutral bias for the time being (on hold since OCT ’12), though it will likely be feeling the pressure to tighten by 2H14. What they choose to do in an environment of slowing growth is beyond our ability to forecast at the current juncture. This conundrum is precisely why the policy response to Quad #3 on our GIP model says, “IN-A-BOX”.

 

SQUIRREL HUNTING WITH INDONESIA, PHILIPPINES AND NEW ZEALAND - PHILIPPINES

 

SQUIRREL HUNTING WITH INDONESIA, PHILIPPINES AND NEW ZEALAND - Philippines GDP Comps

 

SQUIRREL HUNTING WITH INDONESIA, PHILIPPINES AND NEW ZEALAND - Philippines CPI Comps

 

SQUIRREL HUNTING WITH INDONESIA, PHILIPPINES AND NEW ZEALAND - PHP YoY

 

New Zealand: As of now, our proprietary GIP model has New Zealand real GDP growth coming in essentially flat in 2014; a slight deceleration in 1Q14, where compares are toughest, is likely to be overshadowed by an acceleration in 2Q14.We currently anticipate New Zealand CPI to accelerate a noteworthy amount (~70bps) in 2014 due to easy compares that remain in place all year. Those are, however, offset by negligible, if not inverted, import price pressures throughout the balance of the year. New Zealand’s most recent quarterly real GDP growth and quarterly CPI readings have z-scores (trailing 3Y) of +0.7x and -1.0x, respectively. Lastly, with 1Y OIS trading at a ~90bps premium to the benchmark policy rate, RBNZ Governor Graeme Wheeler’s telegraphed hawkish rhetoric has been well understood by the marketplace; the swaps market now sees a ~90% chance +25bps hike by March.

 

SQUIRREL HUNTING WITH INDONESIA, PHILIPPINES AND NEW ZEALAND - NEW ZEALAND

 

SQUIRREL HUNTING WITH INDONESIA, PHILIPPINES AND NEW ZEALAND - New Zealand GDP Comps

 

SQUIRREL HUNTING WITH INDONESIA, PHILIPPINES AND NEW ZEALAND - New Zealand CPI Comps

 

SQUIRREL HUNTING WITH INDONESIA, PHILIPPINES AND NEW ZEALAND - NZD YoY

 

IDIOSYNCRATIC RISKS

 

Indonesia’s key idiosyncratic risk is its bloated current account deficit, which contributes to its rather poor Pillar I score on our propriety EM Crisis Risk Index. The results of July’s presidential election may serve to create consternation in the eyes of foreign investors; it could also lead to reform-minded admiration. Right now it’s too early to tell. From our purview, the key idiosyncratic risk to investing in the Philippines right now are its souring GIP trends and its lack of size/liquidity amid index-driven #EmergingOutflows. That said, however, its current account surplus and healthy score on our EM Crisis Risk index should protect it from experiencing material capital outflows. In New Zealand, the key idiosyncratic risk we see right now is the fact that the RBNZ may very well be the developed world’s most hawkish central bank over the intermediate term. While that may weigh on expectations for economic growth, it might also attract incremental capital flows that are very much needed to finance the country’s bloated current account deficit. Continued commodity reflation would also be a boon to New Zealand’s current account deficit financing (see our 1Q14 Macro Theme titled: #InflationAccelerating for more details).

 

SQUIRREL HUNTING WITH INDONESIA, PHILIPPINES AND NEW ZEALAND - Explaination Table

 

SQUIRREL HUNTING WITH INDONESIA, PHILIPPINES AND NEW ZEALAND - Summary Table

 

SQUIRREL HUNTING WITH INDONESIA, PHILIPPINES AND NEW ZEALAND - Pillar I

 

SQUIRREL HUNTING WITH INDONESIA, PHILIPPINES AND NEW ZEALAND - CAB to GDP

 

SQUIRREL HUNTING WITH INDONESIA, PHILIPPINES AND NEW ZEALAND - CRB Index

 

QUANTITATIVE SETUPS

 

Indonesia: Bullish TRADE/Bearish TREND. We’d like to see the EIDO ETF break out above its TREND line (~3% higher) before we allocate capital here. The immediate-term TRADE was built to front-run the TREND, so we like our chances of this occurring in light of Indonesia’s 1H14 rather positive GIP outlook.

 

SQUIRREL HUNTING WITH INDONESIA, PHILIPPINES AND NEW ZEALAND - EIDO

 

Philippines: Demonstrably broken from both a TRADE and TREND perspective. Philippines’ sour GIP outlook would suggest selling/shorting the EPHE ETF at your leisure.

 

SQUIRREL HUNTING WITH INDONESIA, PHILIPPINES AND NEW ZEALAND - EPHE

 

New Zealand: Bearish TRADE/Bullish TREND. We’d like to see the ENZL ETF recapture its TRADE line (~1.5 to 2% higher) before we allocate capital. If the TREND line holds, we’d be comfortable allocating capital to New Zealand as somewhat of a call option on continued commodity reflation. Moreover, we want to be exposed to likely appreciation of the Kiwi dollar.

 

SQUIRREL HUNTING WITH INDONESIA, PHILIPPINES AND NEW ZEALAND - ENZL

 

Best of luck out there risk managing the gong show that 2014 has morphed into!

 

DD

 

Darius Dale

Associate: Macro Team


Beware of Chinese Tea Leaves

Takeaway: The indicators in China look less than rosy.

In case you missed it, the HSBC China manufacturing PMI just came out showing a decline below 50. Not good.

 

The last time it dipped below this threshold was back in August. (A reading above 50 typically signals expansion, below 50 signals contraction).

 

Beware of Chinese Tea Leaves - 90

 

On a related note, here’s an eye-catching chart from Hedgeye Industrials analyst Jay Van Sciver revealing weakness in Chinese construction materials prices.

 

Again, not good.

Beware of Chinese Tea Leaves - rebar1

Van Sciver highlights falling inflation-adjusted average rebar prices (that metal rod used to reinforce cement) as an additional sign that fixed asset investment growth in China may be slowing.

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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 80.65%
  • SHORT SIGNALS 78.64%
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