LEISURE LETTER (04/14/2014)

TICKERS: BYD, MGM, PENN, WYNN, RCL

EVENTS TO WATCH:  UPCOMING EARNINGS / CONFERENCES / RELEASES

Monday, April 14

  • Atlantic City March revenues released

Wednesday, April 16

  • HTZ at BAML Auto Summit

Thursday, April 17

  • GE 1Q14 Earnings – 8:30 a.m. call – real estate comments?
  • BX 1Q14 Earnings – 11 a.m. PIN 149 943 55 – lodging comments & color?
  • TZOO  Earnings – 11 am Call
  • DIS – Investor Day – cruise & parks commentary?

Monday, April 22

  • IGT FQ2 earnings - 5 p.m. , Passcode: IGT

Thursday, April 24

  • PENN Q1 earnings - 10 a.m.  
  • HOT Q1 earnings - 10:30 a.m. , Passcode: 12049644

 

COMPANY NEWS

BYD & MGM - The Borgata Hotel Casino & Spa filed a federal lawsuit against Phillip Ivey Jr., claiming he won $9.6 million in a card-cheating scheme in baccarat.  The lawsuit alleges Ivey and an associate exploited a defect in cards made by a Kansas City manufacturer that enabled them to sort and arrange good cards in baccarat.

TAKEAWAY:  While we are not attorneys, this case seems to be a product liability/product defect case. This does explain some of the low hold experienced by Borgata in the 1H of 2012. 

 

PENN - CEO Tim Wilmott at last week's Mid-America Gaming Congress commented "there’s no question Ohio will be a $2 billion casino state (by 2019/2020) - assuming no added competition from neighboring states."

TAKEAWAY: Many media outlets conveniently left out the latter part of his comment.  A bold prediction on its own but does he really believe there will be no more regional competition?  

 

WYNN - Anthony Gattineri, co-owner of the site where Wynn Resorts has proposed to build greater Boston’s only casino, has refused to sign the pledge even though the Massachusetts Gaming Commission says it will not approve a casino without assurances that criminals won’t profit from it or the land sale. Gattineri’s refusals are fueling speculation that convicted felon Charles Lightbody is still part owner of the land, an assertion Lightbody’s lawyer denies.

TAKEAWAY: Wynn attempting to keep arm's length from any gray matter dealings. More hurdles to overcome.

  

RCL - (Baltimore Sun)  Hundreds of passengers on The Grandeur of the Seas became severely ill due to norovirus.  It's the 2nd incident in two weeks as the same ship also had a viral outbreak on March 28 with more than 100 sick passengers. 

TAKEAWAY: This ship is cursed.  A major fire last year, now 2 norovirus cases. The media attention on norovirus is larger than usual this year. A bad omen for the cruise industry.

INDUSTRY NEWS

LRT costs still up in the air Macau Business Daily

Macau and Taipa will not be linked by the light rail transit system before 2018/2019.  Taipa will be the first section completed, and is scheduled to be operational by 2016.  The initial project was budgeted at 4.2 billion patacas (US$525 million) but the figure soon ballooned to MOP7.5 billion (US$937 million) in 2009.  Two years later, the budget would be revised up to 11 billion patacas (US$1.37 billion).

TAKEAWAY:  This project is turning into a political joke

 

Hard Rock Hotel & Casino Sioux City - has already received about 1,500 online job applications, or nearly three for every one of the 500 positions that will be filled at the downtown gaming and entertainment venue over the next few months.  With construction of the $128.5 million project at least two months away from completion, hiring remains in the early stages. Only nine employees are on the payroll so far, including the general manager and directors of human resources, finance, slots, table games and security. The casino plans to hire about 150 dealers.

TAKEAWAY: Another negative data point for the future of Argosy Sioux City (PENN & GLPI). 

 

Texas Gambling - this Wednesday, the Texas Lottery Commission is scheduled to consider letting bingo players use “video confirmation” to show whether pull-tag tickets, which are similar to lottery scratch-off tickets, are winners.  Lottery officials say they don’t consider video confirmation an expansion of legalized gambling.

TAKEAWAY: Could this be the next, progressive step toward gaming in Texas? 

 

Avian Flu - found among chickens that died at a poultry farm in Taragi, Kumamoto Prefecture, Japan.  The prefecture began culling about 112,000 chickens - 56,000 chickens at the Taragi farm and 56,000 at another farm operated by the same person at another farm in the same prefecture. Kumamoto Prefecture is located in very southern Japan. 

TAKEWAY: Another Bird Flu case, this time larger but in a more remote region of the Asia. 

 

MACRO

China Lending Policies - IMF Asia-Pacific director Changyong Rhee called reining in credit growth, especially outside the banking sector, a "very important task to secure (China's) long-term stability".  Rhee further noted China risks a financial crisis that could cripple the world's second-largest economy and wreak global economic havoc without stronger oversight of its lending practices.  Finally, IMF financial counselor Jos Vials has said Beijing needs to ensure that lending rates more accurately reflect risks. One way to do that would be to raise borrowing costs, he said.

TAKEAWAY:  Macro risks are piling up on the mainland but so far no material impact on Macau gaming. 

  

Singapore GDP - for the three months to March 31 grew by just 0.1% on a seasonally adjusted and annualized basis compared with a revised 6.1% increase in the fourth quarter, according to the Ministry of Trade and Industry. The city-state's economy is estimated to have expanded 5.1% on year, compared with a median 5.2% increase tipped by the economists. GDP had risen a revised 5.5% on year in the fourth quarter.

TAKEAWAY:  Flat growth in Singapore

 

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.

 


Cartoon of the Day: 'Biggest Tax Cut Ever'

President Donald Trump's economic team unveiled what he called last week, "the biggest tax cut we’ve ever had.” Before you get too excited about that hang on a sec. "Trump Tax Reform ain’t gettin’ done anytime soon," Hedgeye CEO Keith McCullough wrote in today's Early Look.

read more

Neurofinance: The Psychology Behind When To Sell A Bull Market

"Most momentum investors stay invested too long, under-reacting and holding tight after truly bad news finally arrives to break the trend," writes MarketPsych's Richard Peterson.

read more

Energy Stocks: Time to Buy the Dip? | $XLE

What the heck is happening in the Energy sector (XLE)? Energy stocks have trailed the S&P 500 by a whopping 15% in 2017. Before you buy the dip, here's what you need to know.

read more

Cartoon of the Day: Hard-Headed Bears

How's this for "hard data"? So far, 107 of 497 S&P 500 companies have reported aggregate sales and earnings growth of 4.4% and 13.2% respectively.

read more

Premium insight

McCullough [Uncensored]: When People Say ‘Everyone is Bullish, That’s Bulls@#t’

“You wonder why the performance of the hedge fund indices is so horrendous,” says Hedgeye CEO Keith McCullough, “they’re all doing the same thing, after the market moves. You shouldn’t be paid for that.”

read more

SECTOR SPOTLIGHT Replay | Healthcare Analyst Tom Tobin Today at 2:30PM ET

Tune in to this edition of Sector Spotlight with Healthcare analyst Tom Tobin and Healthcare Policy analyst Emily Evans.

read more

Ouchy!! Wall Street Consensus Hit By Epic Short Squeeze

In the latest example of what not to do with your portfolio, we have Wall Street consensus positioning...

read more

Cartoon of the Day: Bulls Leading the People

Investors rejoiced as centrist Emmanuel Macron edged out far-right Marine Le Pen in France's election day voting. European equities were up as much as 4.7% on the news.

read more

McCullough: ‘This Crazy Stat Drives Stock Market Bears Nuts’

If you’re short the stock market today, and your boss asks why is the Nasdaq at an all-time high, here’s the only honest answer: So far, Nasdaq company earnings are up 46% year-over-year.

read more

Who's Right? The Stock Market or the Bond Market?

"As I see it, bonds look like they have further to fall, while stocks look tenuous at these levels," writes Peter Atwater, founder of Financial Insyghts.

read more

Poll of the Day: If You Could Have Lunch with One Fed Chair...

What do you think? Cast your vote. Let us know.

read more

Are Millennials Actually Lazy, Narcissists? An Interview with Neil Howe (Part 2)

An interview with Neil Howe on why Boomers and Xers get it all wrong.

read more