LEISURE LETTER (05/09/2014)

Tickers:  PENN, OEH, RCL

EVENTS TO WATCH: 

Friday, May 9

• HLT Q1 earnings – 10am , Passcode: 25981567

• AHT Q1 earnings – 11am

 

Monday, May 12

• DRH Q1 earnings – 10am , Passcode: 66393516

• HMIN Q1 earnings – 9pm

• SJM Holdings Q1 earnings 

 

Tuesday, May 13

Nomura Global Gaming & Lodging Conference in New York

• 8am WYN

• 3pm RHP

• 4:30 pm HOT

 

• HTHT Q1 earnings – 9pm , Passcode 28722442

 

Wells Fargo Gaming Conference in Las Vegas (all times EDT)

• 11:40am PNK

• 12:20pm IGT

• 12:20pm CHDN

• 1 pmBYD

• 1 pmMGAM

• 1:40pm PENN

• 2:25pm BYI

• 5:05pm SGMS

• 5:05pm Seminole Gaming

• 5:50pm GLPI

• 5:50pm Golden Nugget

1:1 meetings only – MPEL, Station Casino, Motor City Casino & Hotel, and Jacob’s Entertainment.

 

Wednesday, May 14:

• Altantic City April Revenues

• Japan Gaming Conference thru Friday, May 16

 

Thursday, May 15

• Atlantic City April Revenues

• Japan Gaming Conference thru Friday, May 16

COMPANY NEWS

PENN – CEO Timothy Wilmott has purchased 50,000 shares at an average price of $10.74 each giving him 188,623 shares.  CFO Saul Reibstein has purchased 500 shares at an average price of $10.53 each, giving him 7,950 shares.

Takeaway:  Nice stock purchase right in the face of an analyst downgrade.  Good confidence for a stock in need of some.

 

OEH - The 5-Star Hotel Ritz in Madrid, one of Spain's most prestigious properties, is listed for sale. The property is 50% owned by the private Omega Capital led by billionaire Alicia Koplowitz, and 50% by New York-based Orient Express Hotels. The two bought the property for €125m in 2003 from the Le Meridien hotel group.

Takeaway:  Won't know if this is a positive until we know the price but seems like a good time to sell luxury hotel assets.

 

RCL - orders 4th Oasis-Class Vessel

Oasis III will be 20% more energy efficient than Oasis of the Seas and Allure of the Seas.  The 4th Oasis-class ship will be even more efficient.  Capex guidance for 2014, 2015, 2016, 2017 and 2018 are $1.4b, $1.4b, $2.2b, $0.3b and $1.5b.

Takeaway:  Expected order given the high yielding performance of the Oasis-class ships. As long as the gap between new and old ships continues to widen, expect continued supply increases.

INDUSTRY NEWS

Cyprus Gaming Expansion – Commerce Minister George Lakkotrypis on Thursday told reporters a bill to regulate casinos will be submitted to parliament later this month and, once approved, the fast-track licence process will take eight months via an open tender process. Mr. Lakkotrypis estimated the first licence will be issued around March/April of 2015.  

Takeaway:  A much closer location for VIP gamblers from Europe, Mediterranean, Western Russia and the Middle East.  Could be up to 4,000 slots as well.

 

Las Vegas – The median sales prices of homes in Las Vegas rose 15% YoY but -1.5% YoY in April to $192,000

Takeaway:  Housing related wealth effect will soon outweigh demographic headwinds in LV Locals. We expect BYD and Stations to benefit from exposure to what we believe will be the best performing regional gaming market in the country over the next few years.

 

Hotel M&A - Marcus & Millichap sold a four-property portfolio of La Quinta Inns for $11.8m.  Average price per key of $23,413 for midscale properties.

  • 136 room in St. Louis, MO
  • 104 room in St. Louis, MO
  • 134 mixed corridor hotel in Tallahassee, FL
  • 130 mixed corridor hotel in Knoxville, TN

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.

 


Cartoon of the Day: Acrophobia

"Most people who are making a ton of money right now are focused on growth companies seeing accelerations," Hedgeye CEO Keith McCullough wrote in today's Early Look. "That’s what happens in Quad 1."

read more

People's Bank of China Spins China’s Bad-Loan Data

PBoC Deputy Governor Yi says China's non-performing loan problem has “pretty much stabilized." "Yi is spinning. China’s bad-debt problem remains serious," write Benn Steil and Emma Smith, Council on Foreign Relations.

read more

UnderArmour: 'I Am Much More Bearish Than I Was 3 Hours Ago'

“The consumer has a short memory.” Yes, Plank actually said this," writes Hedgeye Retail analyst Brian McGough. "Last time I heard such arrogance was Ron Johnson."

read more

Buffalo Wild Wings: Complacency & Lack of Leadership (by Howard Penney)

"Buffalo Wild Wings has been plagued by complacency and a continued lack of adequate leadership," writes Hedgeye Restaurants analyst Howard Penney.

read more

Todd Jordan on Las Vegas Sands Earnings

"The quarter actually beat lowered expectations. Overall, the mass segment performed well although base mass lagging is a concern," writes Hedgeye Gaming, Lodging & Leisure analyst Todd Jordan on Las Vegas Sands.

read more

An Update on Defense Spending by Lt. Gen Emo Gardner

"Congress' FY17 omnibus appropriation will fully fund the Pentagon's original budget request plus $15B of its $30B supplemental request," writes Hedgeye Potomac Defense Policy analyst Lt. Gen Emerson "Emo" Gardner USMC Ret.

read more

Got Process? Zero Hedge Sells Fear, Not Truth

Fear sells. Always has. Look no further than Zero Hedge.

read more

REPLAY: Review of $EXAS Earnings Call (A Hedgeye Best Idea Long)

Our Healthcare Team made a monster call to be long EXAS - hear their updated thoughts.

read more

Capital Brief: 5 Things to Watch Right Now In Washington

Here's a quick look at some key issues investors should keep an eye on from Hedgeye's JT Taylor and our team of Washington Policy analysts in D.C.

read more

Premium insight

[UNLOCKED] Today's Daily Trading Ranges

“If I could only have one thing of the many things we have it would be my daily ranges." Hedgeye CEO Keith McCullough said recently.

read more

We'll Say It Again: Leave Your Politics Out of Your Portfolio

If your politics dictates your portfolio positioning, the Democrats and #NeverTrump crowd out there have had a hell of a week.

read more

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