LEISURE LETTER (05/14/2014)

Tickers: PNK, HOT, SHO, PENN, RCL, NCL

EVENTS TO WATCH

Wednesday, May 14:

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

• 12:05pm MCRI and MNTG

• 12:50pm MGM

• 1:35pm ISLE

 

• Atlantic City April Revenues

• Japan Gaming Conference thru Friday, May 16

 

Thursday, May 15

• Japan Gaming Conference thru Friday, May 16

COMPANY NEWS

INSIDER TRANSACTIONS

  • PNK – CEO Anthony Michael Sanfilippo acquired 23,000 shares of the company’s stock on the open market in a transaction dated Friday, May 9th. The shares were purchased at an average cost of $21.99 per share, for a total transaction of $505,770.00. Following the completion of the transaction, Mr. Sanfilippo now directly owns 180,442 shares in the company.

Takeaway:  Could it have something to do with improving May trends? We're seeing it.

  • HOT – Sergio Rivera, Co-President of The Americas, sold 59,234 shares of Starwood Hotels & Resorts Worldwide stock on the open market in a transaction that occurred on Monday, May 12th. The shares were sold at an average price of $80.00, for a total value of $4,738,720.00. Following the completion of the sale, the insider now directly owns 42,871 shares in the company, valued at approximately $3,429,680.

Takeaway:  Hopefully, the company was on the other side of the transaction.

  • SHO – President John V. Arabia sold 140,000 shares of SHO stock on the open market in a transaction that occurred on Friday, May 9th at an average price of $14.27, for a total transaction of $1,997,800.00. Following the completion of the transaction, the president now directly owns 486,299 shares of the company’s stock, valued at approximately $6,939,487. 

 

GLPI – announced a very large $465 million acquisition of The Meadows Racetrack and Casino in Washington, Pennsylvania - subject to regulatory approval.  Based on the ~9x 2013 EBITDA = $52 million EBITDA. 

Takeaway:  This is a large acquisition and should silence the naysayers. However, the purchased is expected to be funded with the issuance of new equity (we estimate 8 million shares) and debt. While accretive to estimates and overall a positive, the pending equity issuance could create an overhang on GLPI stock.

 

PENN – announced that Argosy Sioux City General Manager Lance George has been named general manager at the new Plainridge Park Casino in Plainville, Mass. The 106,000-square-foot racing and gaming facility, featuring live harness racing and simulcasting and 1,250 slot machines, is scheduled to open in 2015.

Takeaway: Now seems like a reasonable conclusion that the property will be closing sooner (June 30th) rather than later. 

 

RCL (Hostelur) Pullmantur confirmed its Sovereign ship will be moved to Marseille in the coming days to undergo repair work.  Sovereign had encountered an engine failure that caused a reduction in navigation speed.  Pullmantur will reimburse all cruise costs and a 60% discount on the next cruise.

Takeaway:  A couple more small incidents like this will materially impact yields.

 

Blue Star Line (Travel Pulse) Titanic II: 'Ship of Dreams' Comes Closer to Reality

Blue Star Line said it has signed memorandum of understanding appointing China’s AVIC as its latest Titanic II project partner. AVIC will promote the Titanic II project and coordinate Titanic II sponsors from mainland China. CSC Jinling Shipyard, a Chinese shipyard where Palmer currently builds cargo vessels for his Australian mining interests, will build the new ship.  The 1st project development phase has been completed.  The ship's source market is China and is scheduled for deployment in 2018.

Takeaway:  This joke ship may be built after all

 

NCL  – (Channel 5 Belize) Minister Hulse shocked by thumbs down given to NCL project

The multi-million dollar Norwegian Cruise Lines tourism project in southern Belize has been all but given a green light by the Government of Belize.  But government’s approval is not the same thing as welcoming arms everywhere. The Belize Tourism Industry Association has filed a lawsuit against the Government of Belize, and there is word that the Placencia Village Council has unanimously voted against the project.

Takeaway:  Relatively small project running into complications

INDUSTRY NEWS

Macau Gaming - Macau casinos will be handed a deadline of July 1, 2014, to eliminate illegal China UnionPay mobile swipe card devices or face a crackdown on the city's multimillion-dollar illegal cash-transfer business.

Takeaway: We doubt the casinos currently have "illegal" mobile swipe devices on their gaming floors given all the news leading up to this pronouncement as well as the operators wanting to maintain a clean image heading into concession renegotiations. 

 

Hotel Transaction - RIU Hotels & Resorts will acquire a luxury 252 room hotel in the French part of the Caribbean island of St. Martin for $45 million and then rebrand the property Rui Palace St. Martin.  Average price per key: $179k.

Takeaway: Seems like a reasonable price without knowing the amount of additional capex investment and expected ADR under the RIU flag. 

 

Ski Industry – Dick Bass announced he sold a majority interest in the Little Cottonwood Canyon (owner of Alta and Snowbird) resort to Ian Cumming, a businessman familiar with Utah’s ski industry since his family owns Park City Mountain Resort (PCMR).  Depsite the change in ownership, the company is proceeding with plans to break ground in July on the two-year Hidden Peak project, to build more biking trails on the mountain, and to renovate the Snowbird Center and Cliff Lodge.

Takeaway: We find it very interesting that neither publicly traded ski resort company (MTN nor SNOW) were the buyers.  Given PCMR's ongoing litigation with Vail over management of Canyons Resort, the PCMR angle may have just become more interesting.

 

European travel – (Hostelur) 54% of Europeans plan to travel during summer vacation this year, flat YoY.  This was an improvement from the previous two years, which recorded declines.  Average budget for the summer holidays is stable, with the UK leading the way.  

Takeaway:  Steady is usually a good sign for the leisure industry, especially in Europe

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.


7 Tweets Summing Up What You Need to Know About Today's GDP Report

"There's a tremendous opportunity to educate people in our profession on how GDP is stated and projected," Hedgeye CEO Keith McCullough wrote today. Here's everything you need to know about today's GDP report.

read more

Cartoon of the Day: Crash Test Bear

In the past six months, U.S. stock indices are up between +12% and +18%.

read more

GOLD: A Deep Dive on What’s Next with a Top Commodities Strategist

“If you saved in gold over the past 20 to 25 years rather than any currency anywhere in the world, gold has outperformed all these currencies,” says Stefan Wieler, Vice President of Goldmoney in this edition of Real Conversations.

read more

Exact Sciences Up +24% This Week... What's Next? | $EXAS

We remain long Exact Sciences in the Hedgeye Healthcare Position Monitor.

read more

Inside the Atlanta Fed's Flawed GDP Tracker

"The Atlanta Fed’s GDPNowcast model, while useful at amalgamating investor consensus on one singular GDP estimate for any given quarter, is certainly not the end-all-be-all of forecasting U.S. GDP," writes Hedgeye Senior Macro analyst Darius Dale.

read more

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