LEISURE LETTER (07/03/2014)

Tickers: BYD, MGM, WYNN, WYN, LQ

COMPANY NEWS

 

678:HK Genting Hong Kong Ltd – announced David Chua Ming Huat tendered his resignation with effect from January 2, 2015. But in the interim, his ultimate boss, Lim Kok Thay, the chairman of Genting Hong Kong’s parent, Malaysia’s Genting Bhd, takes over as acting president with immediate effect

Takeaway:  A seemingly unexpected departure for the senior executive. 

BYD & MGM – A magistrate judge has announced there will be an Aug. 5 scheduling conference in the matter of Borgata casino vs. Phil Ivey, the legendary poker player, over the $9.8 million that Ivey won playing mini-baccarat during four visits to Atlantic City in 2012. The suit alleges that the some of the cards used in the marathon mini-baccarat sessions turned out to not have a perfectly symmetrical design on the back of the card. Ivey, the suit claims, was able to figure out fairly precisely what the first card to be dealt in each hand was – giving him a significant advantage over the “house,” or casino. Ivey wants to keep his whole $9.8 million and Borgata says he should give it all back.

Takeaway: We again ponder why Borgata is not pursuing a case against the card manufacturer... However, such an effort might be the fallback plan in the event Borgata is unsuccessful against Ivey.

MGM – the Aria casino has agreed to pay $100,000 to settle allegations that a supervisor shooed away state agents who were watching a high-stakes roulette table, even though state law requires all gambling to be open to the public. 

Takeaway: All games are public

Tropicana Entertainment – Tropicana Entertainment sold the 1,000-room River Palms casino in Laughlin, NV, for $6.75 million in cash to Nevada Restaurant Services and Laughlin Hotel LLC. The land based casino-resort has more than 1,000 slot machines, a poker room and a bingo club.

Takeaway: A small price for a once vibrant destination casino, Sam's Town Gold River. 

WYNN & 1128:HK – announce that the Wynn Macau Employee Ownership Scheme was formally adopted on 30 June 2014 and the trust deed between the Company and the Trustee was entered into on 30 June 2014.  In approving the Limited Employee Ownership Scheme, shareholders granted a mandate to the directors of the Company to allot, issue, procure the transfer of and otherwise deal with up to 50,000,000 Shares in connection with the Scheme during the Relevant Period were passed at the 2014 AGM.  Additionally, the Board has also supplemented the Scheme to provide that as an alternative to issuing Award Shares to the Trustee, the Trustee will also be able to receive funds from the Company to acquire Shares through on-market transactions at the prevailing market price to hold on Trust for Selected Participants of the Scheme.

LQ & WYN – the former Wyndham O'Hare, located in Rosemount, Illinois, left for dead after the global financial crisis is rising again as two hotels - a 200-room La Quinta Inn and a 200-room Hyatt Place.  The hotel was recently acquired by an investor group who paid $5.1 million for the property and expect to invest an additional $20 million in conversion capital expenditures. The capital was primarily raised from Chinese investors through the US Government's EB-5 visa program.

Takeaway: Two more limited service hotels in an already very crowded O'Hare sub-market.

INDUSTRY NEWS

Sands Chief Supports Non-Gaming Options (MacauBusiness) The chairman and chief executive of casino operator Las Vegas Sands Corp, Sheldon Adelson, has praised the efforts of the Macau government to give tourists a greater variety of reasons to visit. “The government wants to diminish the reliance upon gaming and they want to attract leisure customers that will come there for sightseeing,” Mr Adelson said. “We’ve done a lot of surveys and the surveys show that, particularly in Asia, people travel for two reasons: one is sightseeing and the other is shopping,” he said.

Takeaway: Singing the government party line.

Chinese Mainlanders More Discerning (Bloomberg) The co-chairman of Macau casino operator MGM China Holdings Ltd, Pansy Ho, has said Chinese visitors to the city are becoming more discerning. “We’re already beginning to see that the customers walking through our doors are more demanding. They now know how to differentiate,” Ms Ho said.

Takeaway: The impact of affluence on the Chinese middle class...higher expectations.

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.