LEISURE LETTER (08/11/2014)

Tickers: BYI, IGT, MGM, MPEL, WYNN, RCL

EVENTS

  • Aug 11:
    • HPT 2Q 1pm:
    • CZR 2Q 430pm: 844.231-441, pw: 55917191
    • STN 2Q 430pm
    • HTHT 2Q 9pm: , pw 7103 4558
  •  Aug 12:
    • HMIN 2Q 9pm: , pw HOME INNS
  • Aug 14:
    • GENTING SINGAPORE 2Q earnings
    • Revel Auction Proceedings

COMPANY NEWS

IGT – GTECH S.p.A. announced the U.S. antitrust authorities have granted early termination of the required waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 relating to GTECH’s pending acquisition of International Game Technology (IGT), thereby satisfying one of the conditions required to finalize the transaction.  The transaction, which has been approved by the boards of directors of both companies, is currently expected to be completed in the first or Q2 of 2015.

TAKEAWAY:  A faster than expected clearance of a significant hurdle.

 

MGM / MGM China – (Macau Daily Times) the Company reportedly received the license approval for the full MGM Cotai building plan and now expects the new property to open mid-2016 – albeit potentially in phases.  

TAKEAWAY:  Licensing approval, but does the Company hold the construction permit to erect steel and build the superstructure above ground?

 

880:HK – late on Friday, Forefront of Macau Gaming announced the labor organization would protest and picket against SJM, its latest target. Previously, Forefront of Macau Gaming targeted labor actions against both Sands China and Galaxy.

TAKEAWAY:  Forefront of Macau Gaming is simply moving from operator to operator demanding higher pay for casino floor workers – despite the operators voluntarily increasing worker compensation.

                                  

BYI – launched a new 50 line, 5 line video slot game titled “Aloha Island”.  The slot title features tropical island symbols such as parrots, pearls, boat and more while also playing gentle island music.  The game allows for bets from $0.01 up to $100.

TAKEAWAY:  Another new game but for an industry facing strong demographic headwinds.

 

MPEL - The Taipei District Prosecutors Office charged the Taipei branch of MPEL with deliberate violation of foreign exchange controls and failure to maintain financial oversight when the Company transferred more than $NT5.4 billion ($194 million) between its Taiwan office and City of Dreams and Altira casinos located in Macau.

TAKEAWAY:  Could be an overhang on the stock.

                                  

WYNN – is coming under scrutiny for a $200,000 donation last winter to the Republican Governors Association, an organization that is now supporting Charlie Baker’s run for Massachusetts governor.  Massachusetts gambling law prohibits applicants for casino licenses from donating, directly or indirectly, money or in-kind contributions to “any group, political party, committee, or association organized in support” of a Massachusetts candidate. The association is a major funder of a television ad that is currently airing in the Boston market supporting Baker’s candidacy.

TAKEAWAY: Thus far there is no evidence of any wrongdoing by WYNN.

 

MGM – (Bloomberg) – Renew NJ license

According to CFO Dan D'Arrigo, MGM expects to renew its NJ gaming license soon.  MGM will keep 50% ownership of Borgata.  MGM’s license renewal will be considered by New Jersey regulators next month.

TAKEAWAY: A definite positive, but expected.

 

Melco International Development MelcoLot, controlled by Melco International Development Ltd, said on August 6, it was informed by Spanish authorities that BCN Integrated Resorts 2’s bid had passed to the second phase of the tender process, “which consists of preparation and assessment of detailed development proposals and granting of authorisations for the installation and exploitation of casinos”.  It is expected that BCN World will include casinos, hotels, convention centres, leisure centres and residential areas. Each casino licensee would have to invest a minimum of EUR300 million (US$403 million) in BCN World.

TAKEAWAY:  An interesting opportunity that has received little interest from the investment community. Gaming tax rate needs to be low.

 

RCL (Cruise Critic) – Celebrity Cancels 2015 Round-Japan Sailings Due to Charter  

Two 2015 sailings to Japan on Celebrity Millennium have been canceled and another changed, due to a private charter.  The charter affects passengers who booked on the 14-night Japan cruises for September 27, 2015 and October 11, 2015.  The September 11, 2015 sailing is also affected and will end in Shanghai instead of Tokyo.

TAKEAWAY:  The complications with sailings in Japan continues. 

 

RCL – delayed the float out of Quantum of the Seas until Tuesday, August 12, 2014 at 4 p.m. local time.  According to RCL, the delay was the result of the poor weather forecast at the Meyer Werft dockyard.

TAKEAWAY:  Minor delay

INDUSTRY NEWS

New Jersey gaming (NJ.com) – Christie vetos sports betting bill 

Christie's office announced that he nixed a bill (S2250) that would have allowed New Jersey to circumvent the 1992 federal law that bans sports betting in most states, after New Jersey’s challenges to the law in court failed.  The bill would have repealed the state’s ban on sports betting and made it legal in casinos and at racetracks.

TAKEAWAY:  Atlantic City needs help badly and Christie shot down an opportunity.

 

Maryland Live – On Saturday at 11 p.m., Maryland Live opened a $1 Double Gold million slot machine which requires gamblers to bet $500 per spin for a chance to win the $1 million jackpot.

TAKEAWAY: Maryland Live attempting to generate big media coverage prior to the opening of the Horseshoe casino in two weeks. 

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.



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