LEISURE LETTER (06/23/2014)

Tickers:

EVENTS

  • Tuesday June 24:  CCL F2Q CC;

COMPANY NEWS

 

MGM – On Friday, the Company announced workers started removing scrap metal and other materials from inside the Harmon tower, the initial steps which began the dismantling of the structurally flawed Harmon tower. 

Takeaway: The clearing of a valuable piece of Las Vegas Boulevard real estate...what will replace the Harmon Tower? 

 

PENN – Argosy Sioux City embarks on a last-ditch effort to save the embattled riverboat casino. Recall, the Iowa Racing and Gaming Commission ordered Argosy Sioux City casino to shut down July 1 because its state gaming license has expired. Argosy parent Penn National Gaming asked the five-member IRGC to suspend its own order and allow the boat to remain open until resolution of Argosy's lawsuit that challenges that decision and a series of other IRGC actions related to the Argosy license. The IRGC will hear arguments and testimony from Argosy attorneys at a special meeting that begins at 8 a.m. Wednesday at Prairie Meadows Racetrack and Casino in Altoona. The commission is scheduled to render a decision upon conclusion of the hearing.  A formal rejection by the IRGC, would exhaust Argosy's administrative appeals, something that must happen before the company can pursue its emergency stay of the IRGC's order in Iowa District Court the following day.  Judge Eliza Ovrom will hear oral arguments on Argosy's request beginning at 8:15 a.m. Thursday in Des Moines.

Takeaway:  The next steps of the Sioux City debacle

 

LVS / 1928:HK – Sands Macao received the first Macau installation of a Bitcoin exchange kiosk on Friday.  

 

WYN – SkyNews reported that WYN made the £6B ($10.21B) preliminary offer for IHG, which IHG's Board of Directors subsequently rejected. 

Takeaway: Could WYN's core growth be slowing and new management is looking for a creative way to financially engineer growth?

 

NCLH - (Travel Agent Central) Guests who book a new Hawaii cruise reservation, from June 22 through June 30, 2014, will receive up to $100 to spend on board, plus guests who book a Hawaii Cruise Tour will receive an additional $200 to spend on board.  

Takeaway: Another Hawaii promotion - no surprise given lower pricing YoY.

 

Property Transaction

Various media outlets are reporting Goldman Sachs sold the 2,941-room LVH (Las Vegas Hilton) to Westgate Resorts for $150 million in a transaction that will be finalized by the end of the month.  Westgate has plans to convert the LVH into a time share property.  Westgate currently owns the Westgate Flamingo Bay resort, which opened in 2001. It sold its interest in the Westgate Planet Hollywood, which opened in 2010, to Resort Finance America LLC, which in turn appointed Hilton Grand Vacations to rebrand the property.

 

Insider Transactions

MTN - CAO Mark L. Schoppet sold 10,000 shares of stock on Thursday, June 19th at an average price of $75.58 and now owns 5,214 share.

INDUSTRY NEWS

Illegal World Cup Ring in Macau Busted (Macau Business) The Macau police have dismantled an illegal betting network suspected of collecting MOP5.1 billion (US$645 million) in wagers during the opening stages of the football World Cup, including a single wager of HKD40 million (US$5.1 million) Police raided a hotel in Macau's ZAPE area on Thursday, arrested 26 people and seized computers, mobile phones and over HK$2 million (US$258,029) in cash.

Takeaway: This was nearly one week's Macau GGR allegedly gambled on the World Cup just through this betting ring! Maybe the VIP biz ain't so bad...

 

Macau Visitation - (DSEC) Overall May Macau visitation rose 8% YoY to 2,525,026.  Mainland visitors increased by 14% YoY to 1,699,778; Mainland visitors traveling under the Individual Visit Scheme rose substantially by 21%, at 727,356.  Visitors from Taiwan, the Republic of Korea and Japan increased by 23%, 20% and 18% YoY, respectively  while those from Hong Kong decreased by 8%.  The average length of stay of visitors was 1.0 day

 

LEISURE LETTER (06/23/2014) - mva

 

Takeaway: Solid visitation numbers despite the decline in HK visitors. Very short-term stays (1 day) still the norm.

  

Changi - (Changi Airport Group) Singapore's Changi Airport passenger traffic rose 2% YoY to 4.369 million. 

 

LEISURE LETTER (06/23/2014) - mva2

 

Takeaway: At least visitation isn't negative.

 

Brisbane Casino Bid (Bloomberg) Hong Kong jewelery shop chain owner Chow Tai Fook Enterprises Ltd, Hong Kong property developer Far East Consortium International Ltd and Australia’s Echo Entertainment Group Ltd will jointly bid to build a casino in the northeastern Australian city of Brisbane. According to Echo Entertainment, each of the Hong Kong companies will own 25% of the joint venture.  Last month, the government of the state of Queensland shortlisted Echo Entertainment and Chow Tai Fook build a casino-resort at Queen’s Wharf in Brisbane. Chow Tai Fook founder Cheng Yu Tung, is a long-standing investor in SJM’s parent company Sociedade de Turismo e Diversões de Macau SA.

Takeaway: A strong and viable contender for the license.

 

Reportable Transactions – A Federal District Court in California has ruled that US Citizens must report offshore gambling accounts over $10,000 for tax purposes.  Companies handling such accounts, PokerStars, PartyPoker and FirePlay, are functioning as banks, and thus fall within the definition for a reportable account, the court ruled

Takeaway: The US tax and off-shore funds crackdown continues.

 

New York Racinos Secure New Operating Rules – New York racinos will get to stay open until 6 a.m. and offer additional free play to slot customers for up to 15% of their play, up from the current limit of 10%.

Takeaway: A modest positive for NY racinos.


Portugal & Online Poker – Portuguese government approved a new bill to regulate online poker, casino games, and sports betting.  The bill, now requiring only the national assembly’s approval to be finalized, paves the way for games to go online in the European country by the end of the calendar year. The Portuguese bill will necessitate the appointing of an authoritative body to review applications and provide licenses to entities wishing to become part of the new online gaming industry.  Such a body will also audit licensed companies going forward to ensure they are operating according to the new regulations.

Takeaway: A small but previously not mentioned market discovers online gaming. 

MACRO

China HSBC June Flash Manufacturing PMI - Chinese HSBC June flash manufacturing PMI came in at 50.8 vs the final reading of 49.4 in May, and market expectations for 49.7.

 

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.



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

REPLAY: Review of $EXAS Earnings Call (A Hedgeye Best Idea Long)

Our Healthcare Team made a monster call to be long EXAS - hear their updated thoughts.

read more

Capital Brief: 5 Things to Watch Right Now In Washington

Here's a quick look at some key issues investors should keep an eye on from Hedgeye's JT Taylor and our team of Washington Policy analysts in D.C.

read more

Premium insight

[UNLOCKED] Today's Daily Trading Ranges

“If I could only have one thing of the many things we have it would be my daily ranges." Hedgeye CEO Keith McCullough said recently.

read more

We'll Say It Again: Leave Your Politics Out of Your Portfolio

If your politics dictates your portfolio positioning, the Democrats and #NeverTrump crowd out there have had a hell of a week.

read more