LEISURE LETTER (04/08/2014)

TICKERS:  6889.HK, MPEL, 27.HK, 880.HK, WYNN, HLT, CCL

EVENTS TO WATCH:  UPCOMING EARNINGS / CONFERENCES / RELEASES 

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

Dynam - Pachinko operator in talks to build Japan casino with Asian partner Reuters

Dynam has already held talks with MPEL, SJM, Galaxy as well as South Korea's Paradise Group and NagaCorp Ltd.  Proponents of the bill expect debate to start next month, and aim to pass it before parliament session ends in June.  Paradise said it has looked at opportunities in Japan but for now has decided not to pursue them.

Dynam CEO Sato said he wanted to target regional markets outside big cities, such as potential sites in Hokkaido to the north and the southern Kyushu area.  That would match Dynam's strategy for the pachinko market.   "I think the local area is better. There you can run a stable operation targeting the mass market, with high-rollers accounting for about 10-20% of your business," Sato said. 

TAKEAWAY:  Japan interest heating up ahead of pivotal debate in May

WYNN - recognized as one of the most trustworthy companies in the United States by Forbes Magazine's "2014 - 100 Most Trustworthy Companies" list.  

TAKEAWAY:  An appropriate recognition for a premier gaming and lodging operator. 

HLT – announced a new strategic supplier agreement with DIRECTV for a new in-room entertainment experience.

TAKEAWAY:  The company continue to improve the in-room guest experience.


CCL - Carnival to sail 11-day cruises from Galveston Travel Weekly

Carnival Cruise Lines said that it will offer the Texas market longer cruises for the first time, with four 10- and 11-day sailings between Galveston and San Juan.  Carnival said a desire for longer, more varied itineraries was one of the themes that emerged from its series of Carnival Conversations meetings with travel agents.

TAKEAWAY:  Whatever you gotta do to tackle the challenges in the Western Caribbean market.

INDUSTRY NEWS           

UK Slots - PM David Cameron called for further crackdown on fixed odds betting terminals. He proposed stricter regulations on the machines and limiting clustering of bookmaking shops.

TAKEAWAY:  Incremental negative for SGMS

Korea bets on casinos to boost economy Korea Times

Officials from at least 5 local governments - Incheon, Busan, North Jeolla Province, South Jeolla Province and Jeju Province - said they already plan or are considering IRs.  Jeju Province runs 8 of the 16 casinos nationwide.  It said it plans to build up to 4 additional ones, considering that the resort island has been popular among Chinese visitors for years.

TAKEAWAY:  Until local play is allowed, these casinos will be insignificant and pose no threat to Singapore or Macau.

Horse-racing:  The amount wagered on horse racing fell 1.92% in March to $964.459 million, despite the addition of one more race day to 388. 

TAKEAWAY:  Pari-mutuel wagering not immune to sluggish domestic trends

Atlantic City - the 12 casinos that operated in 2013 (the Atlantic Club shut down in January of 2014) posted a collective gross operating profit of $235 million, down from $360 million in 2012.  The casinos saw their gross operating profits decline by nearly 35 percent last year.

TAKEAWAY:  Despite the current efforts to reinvigorate Atlantic City, surrounding jurisdictions continue to cannibalize Atlantic City. 

 

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.