LEISURE LETTER (08/12/2014)

Tickers: 8198.HK

EVENTS

  •  Aug 12:
    • Stations Casino 430pm:  
    • HMIN 2Q 9pm: , pw HOME INNS
  • Aug 14:
    • GENTING SINGAPORE 2Q earnings
    • Revel Auction Proceedings

COMPANY NEWS

8198:HK – MelcoLot Ltd awarded Lawrence Ho and seven directors share options in the firm.  Ho was awarded 4,384,000 MelcoLot shares at the exercise price of HKD1.14 per share, which was also the closing price of the shares on Monday.  Seven directors shared options on a further 67,744,000 shares. MelcoLot closed at HKD1.14 per share today.  MelcoLot Ltd is a 50/50 investor in a joint venture (BCN Integrated Resorts 2 SA) with Veremonte Espana SL to operate a casino at BCN World.

Takeaway: Laurence Ho's new growth vehicle emerges.  

INDUSTRY NEWS

Japan Gaming Expansion(Bloomberg) USJ Co, the operators of Osaka's Universal Studios Japan is holding partnership discussions with MGM Resorts International, Caesars Entertainment and Genting Bhd for a possible joing bid to operate a casino resort. 

Takeaway: As a Gaijin, if you can't beat 'em, join 'em. 

 

South Korea Gaming Expansion – South Korea's Ministry of Culture, Sports and Tourism South Korea will reduce regulatory barriers for the development of integrated resorts that contain gambling facilities. The country is hoping to defend against potential competition from Japan, which may open to casino gambling by 2020, coinciding with the Summer Olympics in Tokyo.  South Korea may has processes in place by the first half of 2015, including a bidding system for awarding casino licenses. 

Takeaway:  South Korea is trying to capture its fair share of foreigners gaming revenue.

 

Revel Auction Likely – According to Philadelphia's NBC 10, no "qualified bids" were received ahead of Revel's scheduled auction.  As a result, Revel's Board of Directors will meet to determine the next steps and whether or not the property will close.  CZR CEO Gary Loveman also indicated Revel has not received any qualified bidders - even at the minimum price.

Takeaway: Once hailed as the savior and turnaround for Atlantic City, Revel is quickly becoming a white elephant.

 

New Jersey Casino Closures – The New Jersey Casino Control Commission said it cannot force owners (Showboat, Trump Plaza and potentially Revel) to require the casinos to remain open past their expected closing dates. 

Takeaway: Capitalism and Laissez-faire economics at their best.

 

Upstate New York Casinos (NY Times) Criticism is mounting over Governor Cuomo's plan to award up to four additional casino licenses in upstate New York. Despite hopes to increase employment and taxes, critics argue the Governor's plan is 15 years too late as the Northeastern States are already suffering the effects of fierce competition as well as potentially saturation.

Takeaway: Built it and the gamblers may not come.

MACRO

Singapore Economy - during Q2 2014, Singapore GDP unexpectedly increased at a meager 0.1% annualized rate versus -0.8% forecast and +1.8% for Q1 2014. Manufacturing contracted 15.2% in Q2 2014 versus the prior quarter. Services rose 4.5% while construction increased 0.3% also during Q2 2014. 

Takeaway:  Flat growth in 2Q

 

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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