THE LEISURE LETTER (3/14/2014)

TICKERS:  IGT  

EVENTS TO WATCH:  UPCOMING EARNINGS/CONFERENCES 

TODAY

  • Hyatt Investor Day

Monday, March 17

  • SNOW 5 p.m. earnings call

Tuesday, March 18

  • Hedgeye Expert Call with REIT Attorney at 11am, details to be announced shortly 

Wednesday, March19

  • Galaxy Entertainment:  FY 2013 annual results 

COMPANY NEWS

IGT:  providing additional 850 new VLTs to Oregon State Lottery, on top of the 1,500 units the Lottery committed to last year from IGT.  Also, 2,700 IGT Trim Line and Game King machines will be upgraded.

Takeaway:  Positive news but likely reflected in consensus

INDUSTRY

Tam expects stable labor market after 2017 Macau Business

Demand for labor until 2017 will be the same as in the past few years – enough for the market to meet.  The strains in the labor market will ease after 2017.

 

Takeaway:  Labor concerns will remain under the spotlight for Cotai 2015/2016.  While the government may not be worried, we think shortages in dealer labor are possible with huge wage inflation as the Cotai properties open.  Remember that as of now, regulations insist that dealers be Macau citizens and the unemployment rate in Macau is sub 2%.

HK billionaire Lau found guilty in Macau land deal case-media Reuters

Takeaway:  A corruption crackdown remains the biggest risk to Macau's momentum in our opinion. 

 

Japan – Japanese municipalities Hokkaido and Nagasaki are pushing ahead with studies on integrated resorts (IRs) development, while the new governor of Tokyo remains undecided, says Gambling Compliance, a UK company familiar with the gaming aspirations of a country now attracting covetous glances from some of the world's foremost gaming corporations.

Takeaway:  Everyone is so positive on Japan - and they should be - but the play is crowded and it's not a done deal.

MACRO

Singapore's January retail sales up just 0.1% YoY Channel News Asia

Takeaway:  Singapore GDP to GGR correlations are higher than Macau GGR to China GDP so this number matters.

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.