LEISURE LETTER (06/19/2014)

Tickers: LVS


  • Thur June 19: Todd in Macau for meetings
  • Thurs June 19:  Hedgeye Cruise survey (pre-CCL F2Q)
  • Thurs June 19: LA May revs released
  • Thurs June 19-20:  2014 Asia Cruise Forum (Taiwan)
  • Tuesday June 24:  CCL F2Q CC


LVS / 1928:HK - Sands Cotai Central announced a retail expansion with the addition of 150,000 square feet (13,935 square metres) called Shoppes at Cotai Central, the third phase of the shopping mall, which will bring the total number of stores to 140 and increases the size of the mall in operation by 70%.

Takeaway:  Adelson has repeatedly said the Company would only consider selling the retail assets when the growth has matured - which is clearly not the case.  Upside to retail revenues at SCC.


Macau VIP Junkets(Macau Business) Daiwa Securities believes some small VIP gaming promoters have stopped operating and that some medium-size promoters have reduced their operations and attributes this slowdown to insufficient liquidity and inability to meet minimum rolling chip turnover guarantees. 

Takeaway:  We heard annedotal commentary of a slowdown in "casual" junket more than four weeks ago. 


Macau Competition(GGR Asia) Australia-listed Donaco International Ltd says the newly opened Aristo International casino hotel in Vietnam is drawing strong interest from high rollers and junket operators from mainland China. The property had its soft opening on May 18 and is Donaco’s only gaming operation. The property is located in the northern province of Lao Cai, bordering China’s Yunnan province. The casino can have up to 50 gaming tables and most of those will be allocated for baccarat, the company previously said. Aristo’s VIP players check in a minimum of RMB600,000 (US$96,287), with a minimum bet size of RMB3,000, according to Donaco’s data.

Takeaway: A small threat to Macau and Singapore.


Malaysia – expects dip in Chinese tourists, eyes more visitors from Singapore (Strait Times) 

The Malaysian government hopes to make up for an expected dip in visitors from China by getting more Singaporeans to go for holidays across the Causeway.  Malaysia's Minister for Tourism and Culture, Datuk Seri Nazri Aziz, said that more than 60 flights from China to Malaysia have been cancelled because of poor take-up rates from Chinese travellers since March when Beijing-bound Malaysia Airlines Flight MH370 disappeared.

Takeaway: LVS/Genting have downplayed the Malaysian impact but we are concerned about the decline in visitors to Singapore.


Japan Gaming Legislation – Japanese legislators discussed the idea of an entry levy on all gamblers including foreigners as well as locals were casinos to be legalized in Japan.

Takeaway: An entry fee on foreigners would be a departure from the Singapore and Macau models and a deterrent to promoting visitation.


Singapore Pawn Shops(MDT) Pawnbrokers are proliferating across Singapore as gamblers seeking short-term loans add to demand for quick cash from people struggling to make ends meet in the world’s most expensive city. The number of pawnshops across Singapore increased to 214 in 2014, up from 114 in 2008, according to a report by DMG & Partners Securities Pte. Loans disbursed by the industry jumped to S$5.5 billion (USD4.4 billion) in 2013 from S$1.6 billion in 2007, according government data show.

Takeaway:  We expect more negative headlines around this issue as such data will not likely be received well by the Singapore government.


Rhode Island Gaming – The Rhode Island House of Representatives pass a bill allowing Twin River’s casino the ability to offer up to $50,000 in credit to gamblers.  However, the legislation will not go to conference committee to reconcile the differences as compared to the Senate legislation.

Takeaway: The state is likely trying to remain competitive against an every increasingly competitive landscape with the expansion of gaming in neighboring states. 


Taiwan Cruise – (Taiwan Today, Seatrade Insider)  "It is projected that next year, no less than 350 cruise ships will include local ports in their itineraries, bringing 1 million tourists and NT$7 billion [US$233.3 million] in revenue,” a TIPC official said on the sidelines of the Asia Cruise Forum in Kaohsiung City.  Taiwan is strategically located along popular cruising routes in the Asia Pacific – from Japan along the Western rim to Singapore and the Straits of Malacca.  

Takeaway: Another Asian market to keep an eye on


Chinese Debt(China Daily) Total Chinese debt according to Standard Chartered is 142T yuan ($22.7T) - or 245% of GDP - as of the end of March, is up from 133T yuan, or 233% of GDP, at the end of 2013. However, Standard Charted pointed out that debt expansion slowed to 18% y/y during Q1, compared with 24% in the same period of 2013. The article noted that the buildup in debt is leading to mounting repayment pressures. The bank estimates that interest payments were equivalent to 13% of GDP in March, up from an average of 7-8% in recent years.


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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