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CZR dominates the company news today. February blockbuster in Macau.


EVENTS TO WATCH:   

TODAY

  • CZR announces $2.2b asset sale to CACQ 
    • 8:30am call: ; pw: 3889366
  • HOT – at  2:15 p.m. Raymond James Institutional Investor Conference
  • HLT – 3:35 pm Citi Global Property CEO Conference

Tuesday, March 4

  • CONEXPO-CON/AGG – Las Vegas thru Friday
  • PEB –  8:50 a.m. Citi Global Property CEO Conference           
  • HST – 9:30 a.m. Citi Global Property CEO Conference
  • SHO – 10:10 a.m. Citi Global Property CEO Conference
  • MAR – 11 a.m. Raymond James Institutional Investor Conference
  • HOT – 2:15 p.m. Raymond James Institutional Investor Conference
  • DRH – 4:15 p.m. Citi Global Property CEO Conference

Wednesday, March 5

  • STAY – 7:30 a.m. Citi Global Property CEO Conference
  • LHO – 9:30 a.m. Citi Global Property CEO Conference
  • RHP – 10:10 a.m. Citi Global Property CEO Conference
  • FCH – 11:30 a.m. Citi Global Property CEO Conference
  • HT – 12:10 p.m. Citi Global Property CEO Conference
  • MAR – Mitsubishi Seattle Consumer Conference
  • BYD – 4Q13 earnings, after market close, 5pm conf call

COMPANY NEWS

CZR – The company held the inaugural lighting of The Las Vegas High Roller for media and locals on Friday evening.  The world's largest observation wheel is the centerpiece of the $550 million Linq located on the Las Vegas Strip. The High Roller is scheduled to be open later this year.

Takeaway:  We saw a preview of the High Roller two weeks ago and were impressed its grandeur, brilliantly colored lighting scheme and striking appearance in the Las Vegas skyline.  It should be a draw.

CZR – More restructuring and negative Q4 pre-announcement.  

Takeaway:  Caesars Entertainment sells $2.2b of asset s to Caesars Growth Partners.  Meanwhile, the core business remains awful with Q4 EBITDA now expected to be roughly 10% below consensus.

INDUSTRY NEWS

GAMING               

Feb GGR DSEC

GGR soared to MOP 38.007 billion (US$ 4.76 billion, HK$ 36.90 billion) in February, up 40.3% YoY.

Takeaway:  So much for worrying about the January "weakness".  YTD, GGR grew 24%.  We would caution that the math suggests march will show a significant deceleration in growth.  April should also look relatively slow.

 

'Certain' govt won't grant all tables for Cotai projects: Tam Macau Daily Times

Secretary for Economy and Finance Francis Tam Pak Yuen said the government would not grant all gaming tables the casino operators have requested for their new resorts in Cotai – at least until 2022. That hands the problem on to someone else, as the former factory boss is expected to retire from his post within 12 months, after serving as economy secretary since the handover from Portuguese administration in 1999.  Tam said, “We do not rule out that the projects can get all the tables they have requested – namely 500-700 tables each – 10 years later... As you all know there will be no more land zoned for gaming after the completion [of the resorts] in 2016-17.”

Takeaway:  We're not too worried about the table cap.  The casinos should get enough tables.  Tam's commentary can be read to indicate that annualized growth in tables won't exceed 3% - that doesn't mean that in certain years, the number of table games could increase more than 3%.  Limiting new suppply beyond what is planned is a positive.

 

Saipan Casino Legislation -  Gaming legislation was introduced today in Saipan.  The proposed legislation allows one casino license holder on Saipan and requires $30 million payment upfront and $15 million every year thereafter until the duration of the license.  The license is for 25 years, with the option to extend for another 15 years or a total of 40 years.

Takeaway:  Asia gaming expansion good for LVS, WYNN, Genting, and to a lesser extent, MGM and MPEL.


Atlantic City Visitation – The number of visitors to Atlantic City fell in 2013, dropping to 26.7 million visitor trips last year, down 2 percent from the 27.2 million in 2012 - reflecting the eighth straight year of declines in a resort town that depends on tourists and casino gamblers for its livelihood.  Atlantic City’s visitor numbers peaked at nearly 35 million in 2005 and have declined every year since then.

Takeaway:  While a number of US commercial airlines have announced additional service to AC for beginning later this spring, it's hard to imagine AC posting any meaningful growth in the coming years. 

MACRO

Hedgeye remains negative on consumer spending and believes in more inflation.  Following  a great call on rising housing prices, the Hedgeye Macro/Financials team is turning decidedly less positive. 

Takeaway:  We’ve found housing prices to be the single most significant factor in driving gaming revenues over the past 20 years in virtually all gaming markets across the US.

MACRO MEDLEY: SOFT WITH A SIDE OF MIDDLING

  • The softness in New Durable & Capital Goods Orders extends itself in January.  The labor market continues to improve but at a slowing rate. 
  • Durable Goods declined for two consecutive months for the first time since October 2011 as January New Orders declined -1.0% MoM, unable to comp Decembers -5.3% MoM decline
  • The great 2014 capex resurgence narrative remains in a holding pattern as Core Capex Orders growth retraced Decembers MoM decline but posted its first YoY decline in 10 months.
  • Meanwhile, the preponderance of domestic, fundamental macro data continues to suggest slowing growth – a trend the market continues to discount as utilities, bonds, and gold/commodities continue to outperform pro-growth leverage.
  • After last week’s counter-trend move to 4-weeks of steadily deteriorating improvement in the initial claims data, this morning’s data again reflects a deceleration in the rate of improvement in the domestic labor market. 
  • On a seasonally-adjusted basis, initial jobless claims rose 14k to 348k from 334k WoW, as the prior week's number was unrevised lower by 2K. Meanwhile, the 4-week rolling average of seasonally-adjusted claims was flat WoW at 338K.

Takeaway:  Macro teaming up with demographics and bad weather as headwinds against US gaming.