LEISURE LETTER (06/09/2014)

Tickers: LVS, MGM, 1928, 0880, 1680, CCL

EVENTS

  • Tues June 10: HLT lock-up expiration
  • Tues June 10-Thurs June 12: Bally Systems User Conference Mohegan Sun
  • Thurs June 12: Blackstone Investor Day 8:00 am

COMPANY NEWS

LVS & 1928.HK – The Macau government has ordered Sands China and its contractor to suspend the construction works for Parisian Macao as well as review and improve safety standards as a result of falling scaffolding which injured a worker on Saturday.  The government did not indicate when construction would resume.

Takeaway: Not expected to delay the opening.

 

MGM – This week the Massachusetts Gaming Commission will hold a series of final vetting meetings in Springfield and Boston leading up to Friday's Commission vote for the awarding of the Western Region casino license.  MGM wants to build a $800 million, casino-294-room hotel-convention center resort in Springfield. 

Takeaway:  MGM has repeatedly requested permission to delay paying the initial deposits ($200 million) until at least early July when the MA Supreme Judicial Court decides on whether to allow a voter referendum in November.

 

Macau Legend 1680.HK– confirmed the first of three new hotels in the Macau Fisherman’s Wharf theme park will open in 3Q 2014 - earlier than the 4Q 2014 opening.  Also, construction on the second hotel Legend Palace casino-hotel is ahead of the original schedule and should be ready in 2Q 2015 vs 3Q 2015.  The two new casinos are still subject to the approval of Macau’s Gaming Inspection and Coordination Bureau.  They are expected to accommodate 350 new gaming tables, if approved by the gaming regulator.  Macau Legend intends to allocate 20% to 40% of the new gaming tables to VIP rooms in the new hotels.

Takeaway: Good to see construction progress better than forecasted for a change. 

 

SJM 0880.HK – CEO Ambrose So indicated the Lisboa Palace project currently under construction in Cotai may go over budget due to higher salary and material costs. During the Company's shareholder meeting the chief executive of SJM also conceded that the project could be delayed. The project was originally budgeted at HK$25 billion (25.7 billion patacas) but its first budget has already been increased to HK$30 billion (31 billion patacas).

Takeaway: Definitely not the first to raise capex projection for a Cotai project.

 

Insider Transactions

CCL - Insider 1994 B. Shares LP Ma (Micky Arison's irrevocable trust) sold 521,077 shares of stock on Wednesday, June 4th at an average price of $40.11 and now owns 97,252,408 shares. The shares were sold pursuant to a Rule 10b5-1(c) sales plan dated February 28, 2014.

 

NCLH - Andy Stuart, EVP global sales and passenger services, netted $2.37m from the sale of 70,000 NCLH shares at a weighted average price of $33.93.  According to a filing, Stuart still holds 225,126 shares.

INDUSTRY NEWS 

Nevada May Consider Videogaming – The Nevada Gaming Commission commission wants the State of Nevada to change its laws so that the commission itself would be allowed to decide on its own ways to expand the gaming market, and at a legislative study committee vetted the subject of allowing skill-based games in casinos

Takeaway: This would be a positive for casino gaming as skill-based games appeal to Generation X, Y and Millennials. Baby Boomers appear to be the last of the traditional slot players so a change is necessary.  We've only been talking about this for 4 years.

 

China Visitation to Hong Kong – during the Tuen Ng (Dragon Boat) Festival holiday period that lasted from May 31 to June 2, Hong Kong, whose tourist arrival base is bigger than Macau’s, recently recorded a rare 1.6% YoY drop in mainland visitor arrivals at about over 387,700 during the 3-day Labour Day holiday starting on May 1, a fall beyond the expectations of the local tourism sector.

Takeaway: A concerning negative headline for visitation.

 

Macau Infrastructure (Macau Daily Times) The Marine and Water Bureau Director Wong Soi Man claimed that the sea passenger transportation industry is waiting to review the impact of the Hong Kong-Zhuhai-Macau Bridge. As a result, her department has gone two years without receiving any application for new routes between Hong Kong and Macau. “Everybody is waiting to see how the opening of the Hong Kong-Zhuhai-Macau Bridge in 2016/17 will influence the sea passenger transport."

Takeaway: Interesting to us as we've heard anecdotal stories about peak hours ferry sold out for hours which would imply the need and demand for immediate additional ferry service. 

  

Revel Employees Vote for Union – Revel had been Atlantic City's only non-union casino since its 2012 opening. However, Revel employees voted late Friday night to join Local 54 of the Unite-HERE union. About 80% of the workers who cast ballots voted to join the union.

Takeaway: A negative overhang to the potential sale of Revel.

 

Fire Damages Anthem of the Seas (Cruise Critic UK) – RCL's Anthem of the Seas has suffered €50,000 (approx $68,000) of damage after fire broke out on June 5 at the shipyard where it is being constructed.

Takeaway:  Could be a slight delay to April 2015 launch

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.


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