LEISURE LETTER (08/06/2014)

Tickers: CZR, WYNN, H, CCL, NCLH

EVENTS

  • Aug 6:
    • RLJ 2Q 10am:
  • Aug 7:
    • Revel Auction Proceedings
    • MPEL 2Q 8:30am: , pw: MPEL
  • Aug 8:
    • CHH 2Q 10am: , pw: 30848466
    • DRH 2Q 10am: , pw: 153358818
    • AHT 2Q 11am:
    • SHO 2Q 12n:
  • Aug 11:
    • HPT 2Q 1pm:
    • CZR 2Q 4:30pm: 844.231-441, pw: 55917191
    • STN 2Q 430pm
    • HTHT 2Q 9pm: , pw 7103 4558
  •  Aug 12:
    • HMIN 2Q 9pm: , pw HOME INNS

COMPANY NEWS 

8156:HK – China Vanguard Group Ltd  is paying RMB17.5 million (US$2.8 million) for an electronic marketing and administrative platform, Trans Pacific Associates Ltd. Trans Pacific, a British Virgin Islands holding company, provides interactive electronic marketing and administrative services to the lottery industry in mainland China – including the China Welfare Lottery Center and the China Sports Lottery Administration Center. 

Separately, China Vanguard announced that an indirect non-wholly owned subsidiary had entered into a cooperative agreement with the Shandong Province Sports Lottery Administration Center. The deal covers provision of “lottery solution, sales distribution and other related services”. The company will be paid a percentage of total sales generated. Shandong province recorded RMB12.24 billion of Sports Lottery sales in 2013, ranking second amongst all provinces in mainland china, with a year-on-year growth rate of 15.5%.

Takeaway: A lot of growth in China lottery play.

CZR – The Horseshoe Casino on Russell Street in Baltimore is readying for its opening on August 26. The casino is located a few blocks from M&T Bank Stadium, and will have an outdoor tailgating area that will be used before Ravens games. The casino is expected to be ready for a pair of controlled demonstrations, on Monday, August 18, and Thursday, August 21, where invited guests will be permitted to gamble in the casino, with the proceeds going to charity. The benefiting charities have yet to be announced.

Takeaway: On schedule

  

WYNN – There’s a state bond bill sitting on Gov. Deval Patrick’s desk that will provide $50 million to clean up the old Monsanto site in Everett if Wynn can’t build a resort-style casino on the property. Revere residents will get the change to argue their points before the last public commission meeting on Monday, the day prior to Everett's final open meeting. The Massachusetts Gaming Commission will make its final decision on the license by September 12. 

Takeaway: Stay tuned.

H – a wholly owned Hyatt subsidiary has completed its acquisition of the 100% of the 210-room Park Hyatt New York for approximately $390 million, inclusive of pre-opening and related costs.  Park Hyatt New York is expected to open later this month.

Takeaway: As discussed during the company's recent earnings call.

CCL/NCLH (kiroTV) – two cruise ships return to Seattle with different issues

The Norwegian Pearl was turned around because of a passenger’s medical emergency.  The Grand Princess experienced a problem with an engine and returned to sit at Pier 91 for almost four hours.

INDUSTRY NEWS

Delays, delays, delays –

  • River Spirit Casino's Margaritaville in South Tulsa won't open until Fall 2016 because of a permit hold up
  • Baha Mar, the $3.5 billion resort, will delay its grand opening until late spring 2015, and will open in stages starting in December. The entire resort was originally to have opened in December.  Darron Cash, chairman of the Free National Movement, blamed the government for failing to implement new gaming laws as a reason for the delay. 
  • Construction on Dan Kehl’s Davenport casino has been delayed because of questionable wording on the project’s development agreement, the Quad City Times reported.

Takeaway:  It's not just Macau/Philippines encountering new project delays. 

South Korea Gaming Expansion (Reuters) Paradise City, a Paradise Co Ltd and Sega Sammy Holdings, joint project near South Korea's main Incheon airport should open in Q1 2017.  Groundbreaking is planned for October.  The joint venture plans to open the first phase of the resort with casino, hotel, shopping, entertainment and convention facilities, at a cost of about 1 trillion won. The phase will include 120 tables, 400 slot machines and 300 electronic gaming tables, small by the standards of mega-resorts elsewhere.  Paradise City will also rely on junket operators to bring in 20-30 percent of its business. 

Takeaway:  Little impact overall as long as S Korea does not ease the local play ban

Atlantic City New Casino Development – Discussions begin today on plans to build an 850-room casino-hotel and 3,000-space parking garage in the city’s Chelsea District.  A.C. Gateway Owner LLC, which is a joint project of Goldman Sachs Mortgage Co. and the real estate investment fund Arefin US Investment LLC, has revived a waterfront-development permit (called a CAFRA permit, for the Coastal Area Facility Review Act) which was originally opened when Hard Rock International attempted a development on the same parcel. The plan at issue calls for phased construction of a casino on land bounded by Pacific Avenue, Hartford Avenue, the Boardwalk and Roosevelt Avenue. A garage would be built on an adjacent tract, near O’Donnell Memorial Park.

Takeaway: We doubt such a new development will see the light of day.

Revel Proceedings – The bankruptcy court overseeing the Chapter 11 proceeding of Revel AC Inc. laid out the following timeline:

July 19: Letters of intent to bid were due

August 4: qualified bids submitted

August 7: an auction, if require

August 8: sale hearing according to a court order.

The auction would take place at the New York offices of the company’s counsel, White & Case, and the sale hearing at bankruptcy court in Camden, N.J.

Takeaway: Expect news very soon.

Trump Atlantic City – Donald Trump filed a lawsuit on Tuesday demanding that his name be stripped from the two Atlantic City casinos, the Trump Plaza and the Trump Taj Maha as Mr. Trump has not been involved in their operations for more than five years. Trump's lawsuit, filed in state Superior Court in Atlantic County, seeks a court order directing Trump Entertainment Resorts to immediately cure what it terms a breach of Trump's licensing agreement with the company or remove his name from the casinos and the company itself. Trump Plaza is set to close on September 16, 2014. 

Takeaway: Mr. Trump attempting to disassociate from the demise of Atlantic City and the properties which bear the Trump name.

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.