LEISURE LETTER (04/24/2014)

TICKERS: PENN, GLPI, MPEL, LHO, CCL

EVENTS TO WATCH

Today

  • WYN Q1 earnings - 8:30 a.m. , Passcode: Wyndham
  • LHO Q1 earnings - 9:30 a.m.
  • PENN Q1 earnings - 10 a.m.
  • RCL Q1 earnings - 10 a.m.
  • HOT Q1 earnings - 10:30 a.m. , Passcode: 12049644
  • LVS Q1 earnings - 4:30 p.m. ; PW: 18236529
  • LA March revenues out

Friday, April 25

  • PEB Q1 earnings – 9:00 a.m.

Monday, April 28

  •  CHH Q1 earnings – 10:00 a.m. , Passcode: 70683172

Tuesday, April 29

  •  NCLH Q1 earnings
  •  VAC Q1 earnings – 10:00 a.m. , Passcode: 4679876
  •  MGM Q1 earnings – 11:00 a.m. , Passcode: 20455736 

COMPANY NEWS

PENN/GLPI  – petitioned the Iowa Racing & Gaming Commission to reconsider their decision last week to shutter the riverboat casino by July 1.

Takeaway:  While we do not practice law, the facts seem to indicated the closing is an inevitable outcome.  Let’s stop spending shareholder capital, come to acceptance with the decision and outcome.

 

PENN Jamul Casino – the lawsuit filed by two relatives of several deceased Jamul tribal members against CalTrans, the agency which controls the permits under which the tribe’s contractors are working, was summarily dismissed by Superior Court Judge Ronald Prager. Thus far, twenty cases to prevent construction of the casino have been dismissed since 1995. Three additional cases remain pending in state and federal court.

Takeaway:  A teflon casino opportunity for PENN?

MPEL – received an Air Operators Certificate to fly/operate an Agusta 109 helicopter between Hong Kong and Macau in a six passenger configuration. Similar aircraft are operated by Sky Shuttle Helicopters Ltd between the two cities but in 12 passenger configuration.

Takeaway: VIP shuttle, management team shuttle or investor shuttle - an elegant way to travel but bring your personal flotation device. There's a long history of helicopters ditching into the South China Sea.

 

Hard Rock Hotels  – named Marco Roca as EVP of Hotel Development for Hard Rock International worldwide in an attempt to further fuel the brand's aggressive development activity and expansion prospects. Most recently, Roca was Senior Vice President Development at Starwood, responsible for franchise and management contract sales for all seven Starwood brands in Eastern United States, Canada and the Caribbean. He also worked for Wyndham and Hilton Hotels.

Takeaway: Could Hard Rock be positioning itself for another run as a public company?

HOT – As we expected, HOT beat the Street nicely for Q1 and provided lower than consensus guidance for Q2 but in-line for 014. No mention of stock buyback...

Takeaway:  We like HOT over the intermediate and long term.  Any weakness associated with Q2 guidance and lack of share repurchases could be a buying opportunity.  We think HOT will be more aggressive with share repurchases and asset sales in the coming quarters and lodging fundamentals remain strong.

LHO – increased its quarterly dividend to $0.375 from $0.28, a 33.9% increase.

Takeaway:  LHO now yields 4.6% on a forward dividend yield basis, more than 2x the S&P 500 Index.

   

INDUSTRY NEWS     

Macau Visitation during Easter (Macau Business Daily) Had 624,588 visitors during the Easter holidays, 27.2% more than in the equivalent period last year.  The busiest point of entry or exit was the Gongbei border crossing, where 660,248 people entered the city and 685,810 left.

Takeaway:  Very positive supporting data point for mass traffic and mass gaming revenues. 

Changi Singapore Airport - visitation ticked down again, -2.5% YoY in March

Takeaway:  Could be an ugly quarter for Mass revenues in Singapore 

LEISURE LETTER (04/24/2014) - c1

Macau March visitation - Visitor arrivals totaled 2,625,997, +10% YoY.  Mainland visitors surged by 24% YoY to 1,769,408, with 738,287 (42% of total) traveling to Macau under the Individual Visit Scheme.  Visitors from Hong Kong fell 15% YoY.  The average length of stay of visitors stood at 1.0 day.

Takeaway:  Solid visitation numbers.  Strong Mainland visitation growth offset a 12th consecutive monthly decline in HK visitors.

LEISURE LETTER (04/24/2014) - macau1

Macau/Hengqin - Shun Tak Holdings Ltd., (0242.HK) noted in its annual results for 2013 that it has applied for a land grant to the Macau government vis-a-vis its plan to launch a hotel development project in Cotai. The firm also expects the foundation works for an integrated property project comprising office, hotel, commercial and serviced apartments in Hengqin to start in the second half of 2014.  Additionally, Ms. Pansy Ho (a Shun Tak managing director) recently increased her shares in the company with 50 million share purchase at HK$4.00/share via Classic Time Developments Ltd.

Takeaway:  Pansy increasing her holdings in Shun Tak and looking to the next big regional development play - Hengqin.  

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.