LEISURE LETTER (08/05/2014)



  • Aug 6:
    • HT 2Q 9 am:
    • Credit Suisse Gaming, Lodging, Leisure & Restaurant Conference
  • Aug 7:
    • MPEL 2Q 8:30am: , pw: MPEL
    • Credit Suisse Gaming, Lodging, Leisure & Restaurant Conference
  • Aug 8:
    • DRH 2Q 10am: , pw: 153358818
    • SHO 2Q 12n:


27:HK – Galaxy Entertainment Group Ltd announced a pay bonus and share award to encourage staff at senior manager grade and below to stay with the company until the end of 2017. Galaxy said its new pay increase and share award announcement was timed to coincide with the tenth anniversary of operations in Macau and would be effective from August 1. Terms of the new compensation arrangement include: all full-time team members at senior manager grade and below will be awarded company shares equal to three times their salary in August 2014, known as a ‘Special Share Award’. A cash bonus equivalent to one month’s salary will be issued on July 2015 and 2016 as a ‘Special Bonus Award’.

The share award becomes active, or is ‘vested’, on December 31, 2017.

Takeaway: Making good with labor.


880:HK – Mr. Ambrose So, CEO of SJM Holdings commented that the casino operator is not joining the recent trend to compensate worker via a cash or share scheme in an attempt to retain workers as rivals in the industry announce pay bonuses and share award programs to retain and attract staff.  However, Mr. So indicated this position may change near the completion time off the Lisboa Palace. The Lisboa Palace will provide up to 700 gaming tables and over 1,200 slot machines. The total construction cost is approximately HKD30 billion (US$3.9 billion) and is scheduled to open in 2017. 

Takeaway: An interesting counter point to Galaxy and Sand China Limited.


CWN:AU – paid $280 million for the nearly 35 acre, former Frontier Casino property to El Ad Properties - a fraction of El Ad's $1.4 billion purchase price.

Takeaway: Mark to market - Las Vegas strip land is fairly valued at $8 million an acre, higher than the roughly $4 million Genting Group paid Boyd for the Echelon site and a fraction of the $34 million per acre paid by El Ad to Phil Ruffin at time of purchase.  The Klondike Casino at the south end of the strip traded for $1.5 million per acre during Q1 2013.


9766:JP – Konami Corp’s gaming and systems division reported an increase in net revenue of 11.9% for the three months ended June 30. The Japanese conglomerate announced net revenue from that division reached JPY6.8 billion (US$66.3 million) for the period. Operating income from gaming and systems reached JPY1.3 billion, an increase of 4.8% compared with a year ago.  For the second quarter, Konami’s net revenue was JPY48.6 billion, up 6.6% year-over-year while net income rose by 45.6% to JPY1.4 billion.

Takeaway: Konami taking share.


CZR – Despite recent news commentary to the contrary, Caesar's Entertainment said Monday that the company does NOT expect any news regarding a potential sale of the Showboat Casino Hotel and the company is continuing with its plans to shutter the property on August 31.

Takeaway: Could this be a straight faced poker bluff?





MAR – Director Lawrence Kellner disposed of 14,599 shares of Class A on Friday at a weighted average price of $64.53 per share and now owns a total of 2,000 company shares. 

Takeaway: More insider selling of shares.


Cotai Construction Update (Macau Daily TImes) According to the Land, Public Works and Transport Bureau, some of the gaming operators face challenges in developing their new casinos and hotels.  Reportedly, Wynn Macau was granted a superstructure construction license while SJM holds a foundation construction license while SCL's Parisian holds a flatwork construction license.


(Hoje Macau) In a separate story, the news agency reports Macau Studio City is preparing to suspend work and MGM will likely suspend construction activity. MGM indicated it has completed work on the property basement and would soon begin construction of the tower.  While Wynn indicated no interruption of any kinds in the construction of Wynn Palace.

Takeaway: We only have confidence in the Galaxy and Wynn opening targets.


Macau International Airport – During July, passenger volume recorded an 11% increase year-over-year, surpassing 490,000, while the aircraft movement in July was more than 4,300, an increase of 3% over the same period last year. On a year-to-date basis through July 31, passenger volume exceeded 3.1 million and aircraft movements over 29,000, increasing 11% and 8% percent respectively year-on-year. In September, new flight service between Macau and Tianjin will begin with four weekly flights. 

Takeaway: Airlift growth a positive and MIA traffic represents about 20% of monthly Macau visitation.


Macau Punter Exclusions – According to the DICJ, 77 people applied for voluntary casino self-exclusion between April and June, up from 50 people in the first quarter. A total of 252 people applied for self-exclusion from Macau’s casinos in 2013. The maximum exclusion period is two years but it can be extended. The applicant can apply for exclusion from all or just some casinos. Those who fail to comply with the exclusion order risk up to one year in jail or a fine

Takeaway: The potential exist for this list to grow significantly.


Northeast Regional Gaming – Maryland Live! Casino’s two-story 14,800 square-foot poker room, one of the biggest in the Mid-Atlantic, is set to open Wednesday, August 28 just in time for Labor Day weekend. The room will house 52 tables, raising the casino’s total table game count to 174. The Las Vegas style poker room will feature a variety of limits, high-profile tournaments and games.

Takeaway: More competition for both PENN and Caesars.

Cyprus Gaming Expansion – the government plans to fast-track a bill that will offer a casino license be valid for 30 years, together with a 15-year exclusivity agreement for the successful bidder. The operator awarded with the casino license will also be requested to pay a 15 percent tax on gross revenues.  In the eyes of the government, the operator will offer no less than 100 gaming tables and 1,000 electronic gaming machines and that will be classed as a top-tiered casino resort in Europe, and one of the finest in the world. 

Takeaway: More slots sales.


New Chinese Yuan Loans(Shanghai Securities News) big four Chinese banks CNY210B in July vs CNY290B in Jun. Additionally, the big four Chinese banks experienced a net deposit outflow of CNY1.5T last month vs inflows of CNY2.2T in June.

Takeaway: Credit growth abating.


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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