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Tickers:  HT, IHG.LN, HTZ

EVENTS TO WATCH

  • Mon June 9: HTZ earnings
  • 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

SJM - (Macau Business) SJM CEO Ambrose So forecasts Macau GGR will grow 10% YoY in 2014 to MOP400 billion (US$50.09 billion).  So added that May's GGR growth of only 9.3% 'wasnt bad.'

Takeaway:  SJM historically have been conservative in their yearly revenue forecasts.  Maybe not this year.

ZNGA - CEO Don Mattrick said Zynga's audience has stabilized after many quarters of steep DAU/MAU losses.  The company is open to using part of Zynga's $1.1 billion cash on new acquisitions/partnerships.

Takeaway:  Social gaming have been the only bright spot recently for the slot suppliers.  While there are many growth opportunities, It remains a volatile, competitive environment.

HT – acquired the newly constructed Hilton Hotel in Manhattan for $85.2 million from lodging developer Sam Chang's McSam Hotel Group.

Takeaway: Another Manhattan asset for this Greater New York City focused lodging REIT.

IHG.LN – EU Commission clears Katara Hospitality's acquisition of joint control over 5 European hotels located in Amsterdam, Rome, Frankfurt, Cannes, and Madrid from InterContinental Hotels Group.  Katara Hospitality is owned Qatari sovereign wealth fund and owns, manages and develops hotels globally

Takeaway: As expected. 

HTZ – provided an update on the Company's accounting review and delayed Q1  Form 10-Q filing and disclosed new material weakness conditions over internal controls and financial reporting as of December 31, 2013.  Additionally, a thorough review of the company’s internal financial records is being conducted for fiscal years 2011, 2012 and 2013, and their impact, if any, on 2014.

Takeaway: We ponder the following - when were these issues discovered...during the prior CFO's tenure (Elyse Douglas who stepped down on Sept 23, 2013, during the interim period and prior to the appointment of Thomas Kennedy on Dec 9, 2013, or subsequent to Kennedy's arrival.  Recall, Kennedy was CFO at Hilton Worldwide until Aug 2013.

 

NCLH - (S-8 filing)  proposing to issue up to $2 million ordinary NCLH shares to be offered pursuant to the company's employee stock purchase plan.  The proposed maximum offering price per share would be $33.44, based on the average high and low prices of NCLH shares on May 30.

Insider Transactions:

HOT - EVP Jeffrey M. Cava sold 13,518 shares on Tuesday, June 3rd at an average price of $80.30 and he now owns 34,509 shares.

HST - VP Elizabeth A. Abdoo sold 50,000 shares on Wednesday, June 4th at and average price of $22.17 and she now owns 95,147 shares.

INDUSTRY NEWS

Japanese Gaming (Reuters) Tokyo Governor Yoichi Masuzoe today indicated that developing a casino in the capital was not a priority and that there had not been enough debate on money laundering and other potential problems that could arise should casinos be legalized in Japan. 

Takeaway: Tokyo has never really been a leading candidate.  

Macau Suspicious Financial Transactions - The Financial Intelligence Office received 1,595 reports of suspicious transactions for 2013 -- 245 cases fewer than 2012, or 13.3 percent less, despite the city experiencing continuous growth in gaming revenues.  Similar to previous reports, about 70% of suspect transactions (1,138 cases) were reported by the gaming sector.

Takeaway: A positive trend despite pressures from the US Department of State to increase levels of scrutiny. 

Chinese World Cup Betting – China is expected to issue its first online sports betting licenses in time for the World Cup. The first licenses are likely to go to those already operating with the Finance Ministry’s approval under a pilot scheme -- recently the share price of NYSE traded 500.com rose on the news. By comparison, China’s two state sanctioned lotteries, the Welfare Lottery and the Sports Lottery, have seen rapid growth, with a combined wager of RMB309 billion ($49 billion) last year. However, the penetration rate remains low by international standards and estimates put the illegal market at some 10-20 times that of the legal business, suggesting huge growth potential.

Takeaway: Regardless the size, we expect World Cup Soccer which runs from Thursday June 12 through Sunday July 13 to modestly impact Macau GGR.

World Cup Betting (Hong Kong Standard) Police from Macau, Hong Kong and mainland China are stepping up enforcement action against illegal football betting as the World Cup nears. Police from both Special Administrative Regions and from Guangdong province have launched a month-long crackdown on illegal football gambling.  The 2014 FIFA World Cup in Brazil kicks off on June 12 with the final set for July 13. In June 2010, Macau’s casino revenue declined 20 percent from the previous month, a drop that was attributed by some financial analysts to the World Cup keeping some gamblers away from gaming tables and slot machines

Takeaway: During 2010's World Cup more than 5,000 people were arrested across China, Malaysia, Singapore and Thailand while a Chinese gang was busted for running an illegal online better network related to the World Cup that was alleged to have accumulated more than CY100 billion (US$14.8bn). 

World Cup Impact on Macau (Macau Business Daily) Grant Bowie, Chief Executive Officer (CEO) of MGM China, conceded that the World Cup might affect the industry but stressed that it was not possible to assess the impact it will have on gaming business. “The impact caused by the World Cup, if there is one, is that customers may be allocating more time to watching the World Cup rather than travelling to Macau,” he said.

Takeaway:  According to statistics we found, in 2006 Chinese soccer fans bet more than 500 billion Yuan on online gambling during during the 2006 World Cup finals in Germany. 

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.