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Takeaway: CZR, MGM, RCL, MTN

Tickers: CZR, MGM, RCL, MTN


  • Aug 19:  Galaxy Entertainment Group 2Q results 5 am
  • Aug 21:  Hedgeye Cruise Pricing Update
  • Aug 26:  Horseshoe Baltimore Opening
  • Aug 27:  BYI 2Q earnings
  • Aug 28:  Hollywood Dayton Raceway Opening
  • Sept 1/2:  Revel closes


BEL:PM (GGRAsia) Belle announced on Monday the company has hired Hong Kong-based brokerage firm CLSA Ltd to “study the feasibility” of the company selling “a portion” of its current equity ownership in Sinophil Corp (soon to be called Premium Leisure Corp) “at some future date, subject to market conditions”.  Recently, Belle disclosed it was looking to increase the public float in Sinophil/Premium Leisure Corp, the unit that will hold its gaming investments. The firm controls close to 90% of Sinophil’s shares and is looking to reduce its ownership to 67% to 70%.

Takeaway:  Time is money, Belle appears anxious to monetize its investment in Sinophil/Premium Leisure Corp. 

880:HK SJM (Macau Business) SJM Holdings Ltd’s chief executive, Ambrose So Shu Fai, has said he is unworried by the possibility of the government limiting the size of the gaming industry. “Slowing down the growth will not affect us,” but Mr. So also said he was against the granting of more gaming licenses because more casino operators would increase demand for the limited supply of labor and “make the problem of human resources worse”.

Separately, in reaction to Chief Executive Fernando Chui Sai On’s proposal that casino operators would be made responsible for housing migrant workers they employed, Ambrose So Shu Fai “Well, this is something I’ve heard for the first time; of course, we’ll keep dialogue open with the government to know exactly what their policy is and whether we can cope with the situation,” said So, adding that “at the present moment, we do offer housing allowances to non-resident workers.” However, So thinks that if the government requires the gaming operators to build homes for its imported workers, then the government should provide land to the operators. 

Takeaway:  Looks like there will be more non-gaming issues to consider this year. 

3918:HK(GGRAsia) disclosed the Company signed two junket operators from Macau and will formally launch the marketing agreements in September.  Naga disclosed during Q2 2014, it purchased 3 previously used, Airbus A320s for $44.423 million during the quarter. To increase visitation to NagaWorld, the Company purchased two Airbus A320 which will be leased to an independently operated airline. The airline will, through collaboration with key Chinese travel agents, increase flights to Phnom Penh targeting the Mass Market players with packaged accommodation in NagaWorld. The Company also intends to use these aircraft, in addition to the private jets, to fly VIP players from various parts of Asia targeting destinations which do not have direct flights to Phnom Penh.

Takeaway:  Naga attempting to maximize the production of its casino via the use of junkets and private aircraft, while also raises the maximum wager limit.

CZR – The High Roller, which became the world's tallest observation wheel when it opened in late March, will end its summer pricing on Monday, Sept. 1.  As such, a daytime ride will be $24.95 for adults, up from a $19.95 summer special announced in June. Nighttime rides were not reduced for the summer and will remain $34.95. Tickets for children ages 13-17 will remain at $14.95 during the day and $24.95 at night. Younger children are free. The best deal for families of four is a $49.95 family pack during the day or $79.95 at night. Finally, the High Roller has also been running other promotions, including a $69 Groupon promotion that includes two rides (day or night), two-for-one drinks and two-for-one souvenir photos.

Takeaway: Raising the price of admission while trying to generate incrementally more free cash flow.

CZR – Caesars New York will hold a ceremony today to mark the opening of its office in the town of Woodbury located in the Orange County, New York. Caesars wants to build a casino near the Woodbury Commons shopping center about 50 miles from New York City.

Takeaway: The local media and public relations blitz intensifies over the battle for the Upstate New York gaming licenses. 

MGM (Las Vegas Review Journal) ran a story touting MGM Resorts International turnaround story since the recession and the Company's equity trading in single digits.

Takeaway: When the news becomes the topic of Main Street discussions, this usually "marks a top" in stock prices.

DIS – Disney changed the structure of its non-commissionable fare (NCF), thus raising the amount of fare excluded from commission on most cruises. The new NCF structure creates a sliding based on cruise length. Currently, the NCF is a flat $20 per person, per day. Starting next week, the line will deduct $25 per person, per day on voyages of six days or less, and $30 per person, per day on trips between seven and 10 days. However, Disney is leaving the amount at $20 for cruises of 11 days or more.  Also beginning today, tour operator Adventures by Disney will no longer pay commission on the air portion of packages. It will continue to book air arrangements.

Takeaway:  Raising NCF may not be consumer friendly but helps margins

RCL – announced a five-day WOW Sale taking place from Aug. 16 through 20, 2014, designed to help consumers plan for their next vacation. During the WOW sale, vacationers can receive up to $200 onboard credit per stateroom when making a new booking on itineraries through spring 2016 aboard Royal Caribbean’s currently sailing fleet.  For all new individual U.S. and Canadian bookings made from Aug. 16 through 20, 2014, vacationers will receive $50 onboard credit per stateroom for five-night or shorter itineraries; $100 onboard credit per stateroom for six- to nine-night itineraries; and $200 onboard credit per stateroom on 10-night and longer itineraries. As part of the WOW Sale, vacationers also can make a reservation with only a 50 percent reduced deposit, starting as low as $50 per guest, based on double occupancy. The offer is applicable to staterooms that are part of group space booked by U.S. and Canadian travel agents, provided those staterooms become named berths during the offer window, and excludes Quantum of the Seas and Anthem of the Seas.

Takeaway:  This is a special WoW Sale ahead of Labor Day holiday. RCL continues to give out onboard credits.

MTN – In its filing with the Utah Superior Court overseeing the litigation with Vail Resorts, Park City Mountain Resort indicated it shouldn’t have to pay more than $1 million a year for the 3,000 acres that constitute most of the skiable acreage on the mountain.  However, Vail Resorts counter filing is not immediately available.

Takeaway: We wait for Vail Resorts' counter filing.

Insider Transactions:

MGM – Director Rose Mckinney-James sold 10,000 shares of the stock on Monday, August 11th at an average price of $24.83 and now owns 100 shares. The shares were Stock Appreciation Awards granted 5,000 shares on June 15, 2011 and June 14, 2012 with expiration dates of June 15, 2017 and June 14, 2018. 

RHP – Directors Edward Gaylord, Ralph Horn and Michael Rose acquired 361, 581 and 361 shares of stock respectively on August 15th at $48.35/share.  Each director has elected to receive cash compensation for service on the Company's Board of Directors and Committees in the form of restricted stock units, which are convertible on a one-to-one basis, into shares of common stock. The director has elected to defer receipt of this award until either (1) a specified date or (2) until termination of his service as a director.

VAC J. W. Marriott, Jr. sold 22,780 shares of Marriott Vacations Worldwide Corp on Thursday, August 14th at an average price of $59.61. The shares were stock options acquired for $9.52/share with an expiration date of November 12, 2014. Following this transaction, Mr. Marriott has options on an additional 12,000 similar termed options. Mr Marriott owns an additional 313,463 shares as well as more than 2.5 million shares held in other family trusts.


Macau Chief Executive's Agenda – Chief Executive Fernando Chui Sai On’s agenda for his re-election campaign includes efforts to curb the growth of the gaming industry with a view to making the economy more diverse. Additionally, he suggested the government would stick to its policy of allowing only Macau residents to work as croupiers and he put forth a proposal that casino operators would be made responsible for housing and transportation for the migrant workers they employed.

Takeaway:  A more divisive tone from the Chief Executive.

Macau Hotel Construction (Macau Daily Times) Statistics released by the Land, Public Works and Transport Bureau (DSSPOT) revealed that there were 18 hotel projects under construction in the second quarter of this year. Among the 18 projects, nine of them were in the Macau Peninsula, five in Cotai, three in Taipa and one in Coloane. The DSSPOT estimated that the projects will provide around 9,800 hotel rooms after completion. 7,500 of them will be in Cotai and 1,000 in Macau.  Additionally, the DSSPOT authorities are evaluating 28 projects that were estimated to provide almost 15,800 rooms, with 12,000 of them in Cotai.

Takeaway:  The growth of new hotel rooms is well understood by the investment community.

Manny Pacquiao Promotion Tour – The eight-time weight division world champion will be fighting for the second time at the CotaiArena on November 23 and is scheduled to take on American Chris Algieri in Clash in Cotai II.  Pacquiao and Top Rank CEO Bob Arum will attend a press conference in Macau on August 25.  Macau is the first leg of a six-city promotional tour that includes Shanghai, San Francisco, Las Vegas, Los Angeles and New York

Takeaway: LVS and Sands China beginning their marketing campaign in support of the Champ.  His opponent is relatively new to the boxing world.

Japan Gaming(GGRAsia)  “Under the bill, step one will be for the Japanese government to select the appropriate IR area from the municipal bodies that put themselves forward as candidates. Step two will see the selected municipal body publicly tender and select a private IR/casino operator,” said Mr Fukuda (a partner at Nagashima Ohno and Tsunematsu, one of the ‘Big Four’ law firms in Japan) wrote in a paper submitted to the specialist publication International Financial Law Review.

Takeaway: More clarity on the process. 

Revel Atlantic City – The New Jersey Division of Gaming Enforcement approved an earlier closing of the property.  Revel will close the hotel at 11:00 a.m. on Monday, Sept. 1 and the casino at 5:00 a.m. on Tuesday, Sept. 2.

Separately, it was disclosed Revel asked the New Jersey Division of Gaming Enforcement for permission to close today - Aug 18.  However, the Division of Gaming Enforcement denied that request.  Revel and lender Wells Fargo, which has provided financing to the company to get it through bankruptcy court, had asked for permission to shut down on Aug 18 because the weeklong delay of a bankruptcy court sale for Revel triggered a default under its financing agreement for missing a key deadline. 

Takeaway:  Dashed hopes for a 23rd hour bid and buy-out.

Dania Casino & Jai-Alai – a mere six months after its opening, Dania Casino & Jai-Alai plans to close on October 15, 2014, for at least one year. Dania Casino officials say they'll reopen in a year, after spending $50 million on bars, restaurants, and an expanded slot floor to make their venue competitive with four other casinos in south Broward County.  Dania Casino is averaging $65 per day on each of the machines, Gulfstream $150 and Mardi Gras $139. The average at Florida's eight racinos for the fiscal year ending June 30 was $176 per machine. As a side note,  the four Argentine businessmen who own Dania Casino also own 27 casinos in their home country.

Takeaway:  The revamp process is known but the closure is a surprise. 


China New Home Prices decreased 1.1% during July on a MoM comparison but increased 2.9% YoY.  The YoY growth rate slowed from +4.9% in June. During July new home prices fell in 64 cities as compared to 55 cities in June.

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.