LEISURE LETTER (07/24/2014)

Tickers: BYI, BYD, MGM, LVS, WYNN

EVENTS

  • July 24:  
    • PNK 2Q call (9am) ; pw: 27759616
    • LHO 2Q call (930am)
    • RCL 2Q call (10am)
    • PENN 2Q call (10am)
    • HOT 2Q call (1030am) ; pw: 61542222
    • AWAY 2Q call (4pm)
    • LA June revs released
  • July 25: PEB 2Q call (9am)
  • July 29: 
    • IGT 2Q release
    • GLPI 2Q call (10am)
  • July 30: 
    • MGAM 2Q earnings
    • MAR 2Q call (10 am) : , pw: 59383825

COMPANY NEWS

BYI – released its newest Asian themed slot game, Jewel of the Dragon. The slot game boasts a magical theme, enchanting sound effects and mesmerizing visuals. Jewel of the Dragon has 5 reels and 40 paylines, with special features including Wilds, Scatters and spin features such as Hot Zones, Drop Zones, Dragon Nudges, and Free Spins

Takeaway: The latest Asian themed game for the industry and second title in four weeks from BYI.

BYD & MGM – Attorneys for Marina District Development Company, LLC, the parent company of Atlantic City’s Hotel Casino & Spa, have filed a countering brief in response to a motion to dismiss the casino’s $9.8 million lawsuit against poker pro Phil Ivey.  Marina District Development restated their assertion that Ivey could be criminally charged. The casino’s amended complaint against Ivey includes civil RICO (racketeering claims), which the early motion to dismiss declared were invalid, but which the latest filing clarifies and reasserts.

Takeaway: Expect more allegations and developments over the coming months.

LVS & 1928:HK – Yesterday's ‘Occupy Venetian’ protest staged by local gaming labor union Forefront of Macau Gaming saw around 2,000 gaming workers chose to publicly voice their demands yesterday, primarily to complain about the promotion system practiced by Sands China.

Takeaway: Worker unrest and discord is increasing as gaming operator profits rise and labor remains tight.

WYNN & 1128:HK – confirmed it has been contacted by Macau’s anti-corruption agency regarding the company’s land purchase for its new resort-casino on the Cotai Strip. The agency is investigating why Wynn Resorts was made to pay 400 million patacas (USD50 million) for the land rights. The investigation follows a public records request submitted recently by the International Union of Operating Engineers to two government bodies in Macau asking for information regarding the commitment of land rights in Cotai to individuals from Beijing. The anti-graft body had declined to comment on the report as the case is under investigation.

Takeaway: We don't think Wynn is being accused of any wrong doing.

INDUSTRY NEWS

Russian Gaming – Russian President Vladimir Putin signed a bill allowing the establishment of gambling zones in Sochi and Crimea, in a bid to boost casino and tourism revenues. Casinos will be legal in certain areas of the former Winter Olympic park in Sochi, while local authorities will designate their own casino zones in Crimea. A final decision has not yet been made but acting Crimean head Sergey Aksyonov has said the gambling zone will most likely be located in Yalta, a Crimean resort city, according to media reports. Crimea will host a gaming congress on August 22 – the Crimea Gaming Congress – organized by Smile Expo.

Takeaway: FCPA is a big hurdle for US operators thinking about a Russian bid.

Macau Visitor Arrivals – during June were 2.43 million, an increase of 4.6% year/year and Mainland China arrivals were 1.6 million, up 9.1% year/year.

Takeaway: We highlighted the slowing year/year in Macau Visitation note yesterday.  Mainland visitation was the lowest of any month since November 2013. 

Las Vegas Airport Traffic – during June, LAS passenger traffic increased 1.3% year/year, up from the 0.3% increase in May.

Takeaway: A slight increase but positive nonetheless. 

South Korea Foot-and-Mouth Disease – South Korea confirmed a case of foot-and-mouth disease at a hog farm, the country's first outbreak in more than three years. Testing confirmed a foot-and-mouth case at a hog farm in Uiseong county, more than 250 km (155 miles) southeast of Seoul

Takeaway: Get out the biomasks...

MACRO

China Macro – China July HSBC flash manufacturing PMI 52.0 vs Reuters 51.0 and 50.7 in June.

Takeaway: A potential catalyst for the VIP segment. 

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.