LEISURE LETTER (03/28/2104)

03/28/14 08:29AM EDT

TICKERS: CZR, PNK, WYNN

EVENTS TO WATCH:  UPCOMING EARNINGS/CONFERENCES/RELEASES 

 Friday, March 28 

  • Nevada gaming revenues release for February 
  • 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 an offering of 7 million shares of its common stock.  Caesars expects to grant the underwriter of the offering an option to purchase up to 1.05 million additional shares of its common stock.

TAKEAWAY:  The equity offering seems unusual given the recently announced transaction where Caesars will sell assets to Caesars Growth Partners for cash and assumption of debt.

PNK – the Missouri Gaming Commission approved the sale of Lumiere Place to Tropicana Entertainment.  Pinnacle and Tropicana plan to complete the $260 million, all-cash transaction by the end of 1Q14.  he divestiture is structured as a 338(h)(10) transaction. The book carrying value for Lumiere Place Casino and Hotels was $401.5 million at June 30, 2013

TAKEAWAY:  Transaction appears on track.  We note PNK should generate a significant NOL at closing. 

WYNN / 1128.HK - Ltd will offer shares in the company to all 7,500 of its employees.  The company announced that it would offer each employee 1,000 shares.  Wynn Macau also said it would pay its employees two bonuses a year from this year until 2017 – one in the summer and one in winter.

TAKEAWAY:  A creative way to hand cuff workers in a tight and getting tighter labor market as the new Cotai properties begin to recruit for their 2016 and 2017 openings.

WYNN - Garth Brooks, the best-selling solo musician in U.S. history, ended his semi-retirement on Thursday when he announced 15 concert dates at Wynn Resorts Ltd’s Encore theater in Las Vegas. Brooks will perform on three consecutive nights beginning December 11, with another six dates in January & six in February at Wynn Resorts’ hotel, casino & performance complex, which opened late last year.

TAKEAWAY:  Given the long history between Garth Brook and Steve Wynn we are not surprised.  Bringing Garth Brooks back just prior to and just after the very busy Christmas/New Year Holidays is a creative way to create incremental room and casino business. 

  

INDUSTRY NEWS              

An Illinois Senate committee has passed a bill (SB3144) upping the number of VLTs allowed at truck stops from five to 10. 

TAKEAWAY:  A plus for the suppliers if it goes through the process. Meanwhile, the number of new VLTs approved dropped to a monthly low in February.

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.

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