How 'bout them buybacks?  LVS: The anti-HOT.  MBS finally holds well but volumes were ugly.





  • Another record quarter, adjusted profit EBITDA grew 49% to a record $940 million annualized dollars
  • Mass table win for the quarter, a record $1.34 billion annualized dollars
  • Growth rate was 40% faster than the Macau mass market as a whole
  • VIP rolling win +18.2% = $1.456b or  more than $39k/table/day
  • #1 position in Macau for GGR w/ 23.2% share of revenue 
  •  Cotai Strip + dining retail + retail + convention = improved cotai strip now attracting more valuable customer = increased returns across property portfolio

Confident about Macau growth:

  • Increase utilization of hotel & suite inventory on Cotai Strip - current 56% of inventory = 9,000 keys...will increase to 15,000 in late 2015 with addition of St. Regis and Parisian
  • More people visiting properties on Cotai Strip...and visitation will only increase because of Governmental investment in infrastructure (railroad, bridges, highway, and add'l immigration entry stations)
  • Visitors who travel from further distances will stay longer = increased spend on dining & retail as well bring larger gaming budget

Marina Bay Sands Singapore:

  • Hold well above normal (for a change)
  • EBITDA $435m

Current Developments:

  • Parisian Macau on budget and on schedule subject to gov't approvals, expect to open 4Q2015
  • St. Regis tower continuing and target opening 4Q2015, will add 700 rooms

New Opportunities:

  • Japan: activity levels remain robust
  • Korea: Increased potential & looking forward to development opportunities
  • The MICE model positions LVS very well and able to compete


  • take very seriously and lead industry and all constituencies, to lead industry, proud to lead industry in their efforts

Capital Allocation:

  • Will return of excess capital to shareholders
  • as EBITDA & FCF grow, capital not needed will be returned to shareholders
  • no requirement for significant capital needed in near future due to long lead time of new developments
  • $620M stock repurchase authorization remaining as of March 31, 2014
  • expect to repurchase $75M per month
  • leverage: gross leverage 2x debt/ebitda or 3x for future debt needed for new IR markets
  • will maintain strongest balance sheet within the industry




  • VIP play/junket less robust any insights, changes in behavior? - nothing has stopped Chinese or other Asian from challenging luck.  Geopolitical issue impacting VIPs.  SCL's drivers are rooms and mass play, thus SCL less impacted.
  • Potential for supply and demand to meet/cross - no idea, not within the realm of the future, not within my (Mr. Adelson's) lifetime.
  • Share repurchase during Q1, $80.80/share average, update on purchases April to date?  No comment...but still see value in the stock.
  • How value stock vs. growth potential vs. $600M remaining authorization...FCF in 2014, so significant that could repeat buy-back with add'l $2B will make the decision on share repurchase vs. dividends during the course of the year.
  • Mr. Adelson hasn't sold LVS shares in 8 years...
  • Macau strategy shift to mass market - how drive yield per table higher?   Chinese population visitation to Macau ~2%, SCC and Venetian will benefit.  Grew tables 181 tables YoY, target table win of  $15k-$16k/table.  Key is amount of tables coupled with number of rooms.  This year's management bonuses are predicted on increase in table productivity
  • Dragon Palace: not yet open
  • 1928.HK share repurchase/listing requirement - trying to get free of listing in HKSE, but would take $15B - $20B to delist 1928.HK, but would rather payout to shareholders via share repurchase and dividends
  • VIP mix direct vs. junkets: not necessarily increase direct channel, good relations with junkets.  Most significant opportunity is non-Guangdong visitation which could be $600M, $700M, or $800M/qtr opportunity and will comp rooms to high-value casino customers
  • Mass: how use hotel rooms to increase mass play?  Venetian $470m vs. $348m driver was mass conversion 
  • MBS: all big play VIPs are direct, no junket involvement
  • Looking for additional 2,500 to 3,000 rooms in Macau.  Looking at land know as Tropical Garden, would also like to share in land on Lot 7.  Because of infrastructure build-out of bridge and train system.  Currently room constrained during peak holidays
  • Venetian Mass customer = $1,500 to $5,000 per night GGR.
  • Why leverage ceiling decrease from 3.5x from last conf call to 3.0x - no reason other than aversion to debt; earnings and FCF so plentiful
  • MBS: Land request to expand update - Singapore doesn't work quickly, look to all agencies for input and feedback.
  • Retail Mall sale view - as long as growing rents by 20%/year not looking to sell.  When growth slows to mid-single digits to 10%, then look to sell at 4% cap rate or lower.  EBITDA and rental revenue occurs because of percentage of sales, which occurs in 2H of each year.

TGT – Adding To Best Ideas List as a Short

Takeaway: We’re Adding TGT to our Best Ideas list as a short. We’re hosting a call next Wednesday, April 30th to review our thesis. Details to follow.

We’re Adding Target (TGT) to our Best Ideas list as a short, and will be hosting a call next Wednesday, April 30th at 11am to review our thesis. Details to follow.

Poll of the Day Recap: 83% See US #HousingSlowdown

Takeaway: 83% YES; 17% NO.

Poll of the Day Recap: 83% See US #HousingSlowdown  - houses and hotels


#HousingSlowdown is one of Hedgeye’s Q2 Macro Themes. We have been big housing bulls over the last 18 months. But the party is ending. Asymmetry in being long has flattened. Price follows demand on a lag and demand is slowing as affordability declines, regulatory changes drag on liquidity, and institutional interest ebbs. 


So in today’s poll we asked: Is the U.S. housing market slowing down?

At the time of this post, the clear majority went toward 83% voting YES; 17% responding NO.


(Voters sharply swung so much in one way, that we didn’t receive any comments on why people voted NO.)


Here’s a sampling of some of the responses we received:

  • “Yes, slowing down fast, and for a while now as I mentioned before. PARTICULARLY interesting rebuttal to the bulls is that the weakness was bigger in the West while the Northeast region was the most resilient. Sort of refutes the weather excuse the bulls make, no?”
  •  “Housing stats have definitely slowed on the latest reports. But the big picture in housing is long-term distorted, so today's ‘slowing’ doesn't mean what it did pre-2007.”
  • “No wage increase to match increase home prices.”
  • “Low inventories and lower rates equate to a one percenters recovery and the continuing disconnect between the Fed/Admin and the middle-class.”
  • “I hope so, need the price to drop for me to buy in a couple years... keep them rates low for me too Yellen #30Fixedrateat3.0anda10%discount.”


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We’re projecting a +15-20% increase in Strip gaming revenues for March



Based on strong airport traffic and a high number of taxi trips – both statistically significant in driving gaming revenues – March may have been a blockbuster.  Moreover, some pent up Baccarat demand could’ve favorably impacted the high end along with potentially above normal hold percentage.  In total, we’re projecting YoY GGR growth of +15-20%.  For the first 2 months of the quarter combined, GGR as reported by the State of Nevada fell 12%.  Adding our +15-20% projection for March, GGR will have fallen only 3-4%.  Tables should lead the way in March as we only project flat slot volume.  Here are our projections:



Rising Oil Prices Aren’t Going to Help What Ails US Consumers

Takeaway: Another #ConsumerSlowing catalyst for the U.S.

After holding CEO Keith McCullough’s TREND line of support yesterday, WTI crude is up to $101.91 today. It has no resistance to $105.03.


It is another #ConsumerSlowing catalyst for the United States. Never mind CRB Food Stuffs which is up over 21% YTD.  Sure, the 7:1 iSplit from AAPL was cool, but there’s this other thing called Global Macro risk. That’s still going on.


On the other hand, if you don’t eat, and you don’t put gas in your car, you’re all set.

Rising Oil Prices Aren’t Going to Help What Ails US Consumers - Crude

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UA - Brand Heat Has A Price

Takeaway: UA could not afford even the slightest blemish this qtr, unfortunately. We were more impressed w Plank than anything else in 1Q.

Conclusion: Not the quarter a 50x multiple needed. We remain confident that this company will double – at least – over 5-years. But will continue to spend heavily to achieve that goal. One thing we’ve got to give UA regardless of margin trajectory – this management team is as focused as any we know. LULU should pay attention. So should Nike, for that matter.  The bottom line on UA is that despite the Brand heat, we have zero interest in owning the stock at this stratospheric valuation.


Overall, it was a great quarter for UnderArmour when viewed in isolation.  Unfortunately, the market does not view things in isolation – nor do we.  Let’s be real about something…when you trade at over 50x earnings and nearly 30x EBITDA with short interest at a 30-month low, and are following a blow-out quarter where you added $1.7bn in Enterprise Value in a single day (to what was a mid-cap stock) there is literally zero room for any blemishes in the quarter. That’s not our rule, but it is the market’s. There were one or two minor blemishes in this print.


People obviously did not love UA’s guidance for the upcoming year. UA beat by $43mm in revenue, but only took up full-year guidance by $40mm. Yes, we realize how punitive of a statement that is for a company that will double in size over the next five years, and is probably sandbagging guidance anyway. UA is no better or worse than other companies at the guidance game. But at this valuation, it matters more than it does for others.


There’s a couple of things related to the company’s revenue strength that really stand out to us.

  • Investment: The first is it’s level of investment. While margins were up 132bp this quarter, we should look at it over a longer time period. Over the past 5-years UA added $440mm in 1Q revenue – a huge feat given that it has largely done so in a singular market (the US). But at the same time, it has only added $19mm in incremental 1Q EBIT. That’s an incremental margin of only 4.3%. Nothing to write home about by any stretch.  We’re not knocking UA by any means. It’s doing what it should – a) have confidence in strategic plan, b) spend around the highest growth opportunities, and c) grow top line at 2-3x the rate of competitors. We’re still probably a few billion in revenue away from the efficacy of this model being at risk. This is great for growth, but anyone holding out for margin expansion should probably look elsewhere.
  • The Plank Factor: The other major factor as it relates to UA’s Brand Heat rests with its fearless leader. In the company’s early years, we were critical of Kevin Plank as he came across as arrogant, unfocused, and seemed to foster a ‘clubby’ environment within the company. While this evolution has taken place over a number of years, there was something about Plank today on the call that seemed exceptionally mature, seasoned, focused, and not only a great Brand ambassador (which he’s always been) but a flat-out solid leader for UnderArmour. The interesting comparison is with Nike, which we’ve followed very closely since the 1990s. We never thought we’d say this, but Kevin Plank appears to be a better leader than Phil Knight was at a similar point as CEO.





UA - Brand Heat Has A Price - UA financials


UA - Brand Heat Has A Price - UA sigma


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