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TICKERS: CZR, LVS, MPEL, RCL


EVENTS TO WATCH:  UPCOMING EARNINGS/CONFERENCES/RELEASES 

 Friday, March 28 

  • Nevada gaming revenues release for February 
  • MPEL board meeting
  • Wynn Macau board meeting

Tuesday-Thursday, April 8-10

  • Mid-America Gaming Congress (Columbus, OH)

Wednesday, April 9

  • SHO Investor Day

Thursday, April 10

  • HST Investor Day


COMPANY NEWS

CZR – announced its intention to close Harrah’s Tunica in Mississippi on June 2, resulting in 1,300 job losses.  "There’s just too much supply in that market.  The Harrah's has not been profitable for a while,” said John Payne, president of the company's central markets division. 

TAKEAWAY:  Another sign of the tough times.  Interesting there are no interested buyers for the property...or maybe there is a lack of funding for such acquisitions.

CZR – the company announced, via an SEC filing, it received correspondence from a law firm representing a group of its bond holders who want the company to shutter Caesars Growth Partners.  The bond holders assert the parent company violated its fiduciary duties to the creditors when the parent company opted to sell certain assets to the Caesars Growth Partners.

TAKEAWAY:  Never attempt to run-over your bondholders as they never forget and doing so will jeopardize future borrowing negotiations. 

MPEL – unveiled final plans for its newest hotel at City of Dreams. The 40 story hotel will include 780 guestrooms, suites, and villas as well as spa, ultra lounge, and sky pool.  The property will open in early 2017.

TAKEAWAY:  City of Dreams needs the additional hotel capacity.

LVS – reduced the payout for blackjack at its Venetian and Palazzo tables from 3:2 to 6:5, resulting in the payout falling from $15 to $12 on a $10 bet. 

TAKEAWAY:  Hold could be higher for the coming quarters. Media contrasting that with Sheldon's "concern" for the average joe who could be duped with on line gaming.

LaQuinta – proposed ticker LQ, offering 37.2m shares, IPO Price $18-$21, proceeds of $678 million used to prepay long-term debt.  Post offering Blackstone to own 66.7% or 63.8% if underwriters option exercised.  

TAKEAWAY:  We're favorably inclined on the lodging cycle although near-term revpar may be under pressure.

Four Season Hotels – recently has made several announcements regarding leadership appointments at the executive vice president level. 

TAKEAWAY:  While we didn’t take note individually of each appointment/promotion, when viewed in totality, it would appear Four Seasons is getting ready to go public.  

RCL –  RCL introduced a more flexible dining program for its newbuilds Quantum of the Seas and Anthem of the Seas. Called Dynamic Dining, the new program will give passengers a choice of 18 restaurants, of which seven will be fee-free for all guests: four full-service and three casual eateries.  A new reservations system also will be used onboard so passengers can decide when, where and with whom they want to eat each night. 

TAKEAWAY:  This innovative change will help onboard spending - an area which RCL had led in growth recently 

  

INDUSTRY NEWS              

US Gaming Industry to vet gamblers funds – the United States Department of Treasury Financial Crimes Enforcement Network (FinCEN) is considering rules which would require US casinos to fully vet the source and origin of a gambler’s funds.  FinCEN is also investigating possible compliance lapses at other Las Vegas casinos.

TAKEAWAY:   The US Treasury efforts are to explicitly regulate casinos like a financial institution in an attempt to crack down on potential money laundering activities.  Political payback to Wynn and Adelson?

Las Vegas casinos subject to anti-money laundering probe – the United States Department of Treasury Crimes Enforcement Network is currently investigating un-named Las Vegas Casinos for possible anti-money laundering compliance lapses.  This investigation follows, Las Vegas Sands August 2013 agreement with the Department of Justice to pay $47 million fines for anti-money laundering lapses at LVS’ Venetian and Palazzo properties in Las Vegas.

TAKEAWAY:   Stay tuned, more headlines and fines forth coming...

New Jersey Casino Expansion Bill – despite outspoken opposition by various elected officials, legislation was introduced to allow casinos at Meadowlands and Monmouth Park racetracks.   As we noted last week, officials indicated no expansion of gaming would be considered until after 2016, when the Atlantic City revitalization plan expires.

TAKEAWAY:  We doubt this legislation will pass given the Governor's vocal opposition. 

Federal Legislation to ban internet gaming – legislation was introduced in the US House of Representatives and the US Senate to reinstate the Wire Act of 1961 regulations which would thus make internet gambling illegal.

TAKEAWAY:  The proposed legislation appears to strictly prohibit all existing  and considered forms of internet gambling including online poker and lottery activities.  No grandfathering provisions were offered. We doubt this passes.

  

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.