LEISURE LETTER (05/30/2014)

Tickers: H, RCL

EVENTS TO WATCH

  • Monday June 2: Goldman Sachs Lodging, Gaming, Restaurant and Leisure Conference 
  • Monday June 2 - Tuesday June 3: Midwest Gaming Summit, Rosemount, IL
  • Tuesday June 3 - Thursday June 5: REITWeek, New York, NY
  • Wednesday June 4 - Thursday June 5: Russian Gaming Week 2014
  • Thursday June 5 - Todd in Vegas for slot suppliers mgmt meetings
  • Tuesday June 10 - Thursday June 12: Bally Systems User Conference
    Mohegan Sun

COMPANY NEWS

Genting Singapore - Genting Bhd has said the group’s 51.9%-owned Genting Singapore Plc will partner unnamed “Japanese institutions” to bid for an integrated casino resort in Japan.

TAKEAWAY: The only question now is how small of a local minority partner interest can the foreign companies get away with.

Insider Selling:

H – Insider H. Charles Floyd sold 34,996 shares on Tuesday, May 27th at an average price of $59.11. Following the completion of the sale, Mr. Floyd directly owns 156,615 shares.

RCL – CEO Michael W. Bayley sold 19,206 shares Tuesday, May 27th at an average price of $54.08. Following the sale, the chief executive officer now directly owns 53,489 shares.

TAKEAWAY: Continued insider selling in hotel stocks despite strong trends. Gaming insiders remain generally on the buy side.

INDUSTRY NEWS

DPJ nods casino bill talks: but only for lower house (GGR Asia)

Japan’s main opposition party, the Democratic Party of Japan (DPJ), has reached an agreement with the governing Liberal Democratic Party of Japan (LDP) to discuss during the current session of the Diet the issue of legalising casino resorts.  The discussion will only be at Cabinet Committee level in the lower house of Japan’s parliament – known as the House of Representatives.  Mike Tanji, executive advisor for Tokyo-based Gaming Capital Management Inc, said, “Even if that happens, because of the time constraint, the passage of the bill in the Diet – including through the upper house – will likely take place at the Extraordinary Session this fall.”  Tanji added that a reported split in the Japan Restoration Party, which had given 100% backing to an IR bill was unlikely in itself to damage the prospects for the statute.

TAKEAWAY: Now hype will build for Fall 2014

Dragon Boat Festival Delays - (Macau Daily Times) The Sports Development Board (ID) has decided to shorten the Asian Dragon Boat Championships program, and to postpone some races until June 7 and 8, as a mark of mourning for Ma Man-kei. ID president José Tavares has also said that the International Invitational Standard Dragon Boat Races will be cancelled.  

TAKEAWAY:  No impact on GGR

Macau Casino Development (GGR Asia) “After 2016 or 2017, there will be a seven to eight-year period without new properties,” Secretary Francis Tam said. That would allow for some economic consolidation and for society to adapt to the new stage of development.

TAKEAWAY: Not an unreasonable statement given the lack of undeveloped land and huge capacity increases in 2015-2017.

Macau Tourism - The Easter long-weekend in April brought the total number of visitors on package tours to 957,000 for the month, +23% YoY

TAKEAWAY: A positive data point for the Mass segment.

MACRO

Chinese 'mini' stimulus (Bloomberg) 

China's often-discussed "mini" stimulus is beginning to become sizable.  Central government measures announced at the beginning of April including faster railway spending and tax breaks have multiplied. 

Takeaway: How many minis does it take to make a major?


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.