TICKERS: SJM, BYI, CZR, H, MAR, RCL
EVENTS TO WATCH: UPCOMING EARNINGS / CONFERENCES / RELEASES
Wednesday, April 2
- March ADP Employment report
Friday, April 4
- March NFP report
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
SJM – (Macau Business Daily) SJM may increase leverage to fund its 2017 Lisboa Palace but the company is under no financial pressure, says SJM’s CEO Ambrose So. So said that they may have to vie for labor with other gaming operators like WYNN and MGM. MGM Cotai expected to open in 2016, requires at least 8,000 employees (same as SJM Cotai), while Wynn Palace needs “9,000 to 10,000 workers” when it opens by 2016. “In these two or three years there will be numerous university graduates which can supplement the labor shortage,” Mr So said yesterday. “But we still have to see the human resources situation by then to decide any policy.”
TAKEAWAY: We worry less about demand and more about labor shortages.
BYI – acquired the land-based distribution rights to a selection of social casino titles currently live on New Jersey-based developer High 5 Games’ Facebook apps. Bally gains the rights to ten titles from the High 5 Casino and Asian-facing Shake the Sky Casino apps: Gypsy, Madame Monarch, Pasión y Fuego, Foxy Dynamite, Valkyrie Queen, Palace of Magic, Zen Panda, Night Jasmine, Silk & Steel and MISS Universe Crowning Moment. The deal follows the companies agreeing to extend their supplier partnership in December last year following the first roll-out of H5G’s slot games repurposed as land-based games. Under the terms of the partnership H5G retains the exclusive online, social and mobile rights to the titles.
TAKEAWAY: Setting the stage for national online gaming while trying to attract the new generation of younger gamblers who do not play slot machines.
CZR – the High Roller, the 550 feet tall observation deck wheel officially opened yesterday at 1 p.m. The High Roller includes 28 cabins that can spaciously fit up to 40 people each.
TAKEAWAY: While we expect the opening to draw immediate visitor attention, it remains to be seen if the attraction has sustainability.
H – the Park Hyatt is scheduled to open July 20, 2014 in NYC and will feature 210 luxurious guestrooms, including 92 premier suites, all with floor-to-ceiling windows and nestled within the first 25 floors of the iconic, 90-story One57 skyscraper. Nightly rates for a standard room start at $795 to $1,295.
TAKEAWAY: This property will likely become a go to property for NYC visitors and tourists due to its central location, newness, and up-scale amenities.
MAR - $200MM Protea deal completed
TAKEAWAY: MAR does not expect the acquisition to have a material impact on 2014 earnings
RCL – will send the Explorer of the Seas to Southampton, England in the summer of 2015 instead of the Adventure of the Seas as previously announced. Prior to starting European service, Explorer will have a month-long drydock to be revitalized and receive features such as virtual balconies. RCL said, "The deployment of Explorer of the Seas to the UK is not associated with any issues with Adventure of the Seas. Stay tuned as the reason for Explorer of the Seas' deployment will become evident shortly."
INDUSTRY NEWS
Macau March GGR – totaled HKD 34.42 billion (MOP 35.453 billion, USD 4.44 billion), up 13.14% YoY and down 6.72% MoM. For the first quarter 2014, total GGR was HKD 99.222 billion (MOP 102.199 billion), up 19.83% YoY.
TAKEAWAY: Total March GGR was slightly better than our estimate. For April, we forecast GGR, up 15% YoY
Gaming facilities are not a priority for Kinmen Macau Business
Establishing casinos on Taiwan’s Kinmen islands is not a priority. Deputy mayor of Kinmen, Wu Yu Chin, said residents were worried that casinos would bring security problems. The Kinmen group is close to the mainland and was one of the candidates Taipei considered as a gambling destination. Kinmen officials have been in Macau seeking foreign investment.
China Graft & Corruption Crackdown – 1) Chinese authorities have seized assets worth at least 90 billion yuan (S$18.3 billion) from family members and associates of retired domestic security czar Zhou Yongkang, who is at the center of China's biggest corruption scandal in more than six decades. 2) More than 300 of Mr Zhou's relatives, political allies, proteges and staff have also been taken into custody or questioned in the past four months. 3) A former Zhou Yongkang aide Ji Wenlin had been removed from his post as a vice governor of the southern island province of Hainan.
TAKEAWAY: Visible signs the Central Government won't allow officials to set outside of Central Government mandates and policy.
New York State Gaming Commission Facility Location Board – released application details for the three regions: Capital, Catskills and Southern Tier. All applications are due by June 30th and must include a $1 million. Additionally, the licensing fees will be:
- Capital Region: $50 million
- Eastern Southern Tier: Broome, Chemung, Schuylor, Tioga or Tompkins Counties: $35 million; Wayne or Seneca Counties: $50 million; if a license is awarded in Wayne or Seneca Counties, the fee for the remaining counties in the region would be $20 million.
- Catskills/Hudson Valley: Dutchess or Orange Counties: $70 million. If no license is awarded in Dutchess or Orange Counties, the licensing fee for the remaining five counties in the region (Columbia, Delaware, Greene, Sullivan and Ulster Counties) would be $50 million. If a license is awarded in Dutchess or Orange Counties, the fee for the remaining counties would be $35 million.
Source: New York State Gaming Commission
The Resort Gaming Facility Location Board will evaluate applications on the following scale and issue a finding on each:
- 70% Economic activity and business development factors
- 20% Local impact and siting factors
- 10% Workforce enhancement factors
The timeline for the casino siting process:
- June 30, Bids due
- July-August, Gaming Facility Location Board reviews, evaluates submissions
- Early fall, commission commences licensing review of applicants
- Early fall, casino siting and operators formally announced
TAKEAWAY: We expected the media and public relations machines to hit full speed as the battle of sound bites begins. Expect commentary from current pari-mutuels Tioga Downs, Monticello Casino & Raceway, and Saratoga Raceway.
New York State & Internet Poker – Senate Gaming Chairman John Bonacic introduced Senate Bill 6913, which would amend the current racing and pari-mutuel regulations, and allow 10 online poker licenses, each for 10 years and a $10 million licensing fee. Internet poker would be taxed at 15%.
TAKEAWAY: If New York passes this legislation, we expect additional states to quickly follow. SB 6913, however, disqualifies any company charged with accepting online wagering following the UIGEA in 2006.
MACRO
China March Official PMI was 50.3 versus 50.2 in February; however, new export orders index was 50.1 an improvement from 48.2 in February.
TAKEAWAY: In-line with Street expectations
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.
