LEISURE LETTER (09/25/2014)

Tickers: IGT, MPEL, WYNN, TVPT

EVENTS

  • Sept 25:  Nevada August revenues
  • Sept 29 - Oct 2: G2E Las Vegas
  • Tuesday: Sept 30
    • JPM Securities: FCH, AHT
    • DB Leveraged Finance: WYNN, MGM, CHH, FCH, RHP
    • TAG Fall Consumer Conf: LVS, WYN, MTN
  • Wednesday: Oct 1
    • DB Leveraged Finance: PENN, BYD, SGMS
    • TAG Fall Consumer Conf: LVS, WYN

COMPANY NEWS

IGT – announced an agreement to provide state-of-the-industry systems solutions encompassing IGT Advantage systems, sbX Floor Manager and Service Window, that will provide a comprehensive patron interaction and floor optimization suite of solutions and applications to City of Dreams Manila

Takeaway:  Good to see IGT gaining traction in Asia. 

 

MPEL – announced an a salary increase for its co-chairman, chief executive and executive director, Lawrence Ho Yau Lung, to US$2.5 million from US$2 million.

Takeaway: A challenging time to justify higher executive compensation, when revenues and earnings are revising lower. 

 

WYNN (Macau Daily Times) Despite comments from Chairman Steve Wynn indicating he believed the Wynn Cotai land purchase investigation was complete, the Commission Against Corruption (CCAC) issued a statement to the contrary saying "The relevant investigation is still underway. To observe the principle of judicial confidentiality, the CCAC will neither make any comments nor provide any supplementary information on the case.”

Takeaway: As we indicated yesterday, nothing in Macau is ever concluded until the appropriate governing agency indicates matters are concluded.

 

IHG:LN – announced the signing of a new 900-room InterContinental Hotels & Resorts property in downtown Los Angeles that will be the largest InterContinetnal hotel in the Americas region. The hotel, which is scheduled to open in 2017, will be part of Korean Air and Hanjin Group’s 73-story, US$1.1 billion-plus new-build Wilshire Grand project. Offices and retail space will occupy the building’s lower floors while guestrooms will be on floors 31 through 69 with a sky-lobby on the 70th floor and an F&B outlet on one of the top floors.

Takeaway: Development of Luxury and Upper-Upscale lodging in central business districts is finally restarting.

 

TVPT – raised $480 million, the high end of its forecasted range, in its initial public offering when the company priced 30 million shares at $16 a share as compared to a filing range of $14 and $16. Underwriters have the option to buy another 4.5 million shares. With 25% of the company being sold, the public offering values Travelport at $1.92 billion.

Takeaway: Another on-line travel, global distribution system goes public.

INDUSTRY NEWS 

Revel Auction Update (philly.com) The auction of Atlantic City's shuttered Revel Casinos Hotel never got started Wednesday in New York before it was adjourned until Tuesday, an attorney for Florida bidder Glenn Straub said. "They spent six hours privately negotiating with whoever the bidder is that they want to be the winning bid," Stuart J. Moskovitz, the attorney for Straub, said of Revel's legal team. "They wouldn't even tell anybody who it was, and because the negotiations apparently weren't sufficiently fruitful, they ended at 3 p.m.," he said.

Takeaway: New Jersey - where everything happens behind closed doors.

 

Saipain Casino Development (GGRAsia) Macau junket investor Imperial Pacific International Holdings Ltd said via filing with the Hong Kong Stock Exchange that the total development cost for a casino project on the Pacific island of Saipan is estimated at US$7.1 billion. The company announced a more than twofold increase in investment for the project and said it plans to build and operate “a town hotel and an integrated resort with gaming facilities in five phases”. The full plan includes 1,600 gaming tables and 3,500 slot machines, as well as 4,250 rooms and 300 villas. The company said it plans to finance the development costs by equity and/or debt financings, however it “has not yet formulated any concrete fund raising plan”.

Takeaway: That's more than 1.66 million annual room nights as compared to current annual inbound visitation of a mere 400,000. Visitors origins include: Japan 30%, Korea 35% and China 25%.

 

Delta Bridge Update (Macau Daily TImes) The Transportation Infrastructure Office (GIT) revealed the design of the new Hong Kong-Zhuhai-Macau Bridge (Delta Bridge) and confirmed the project is slated for completion by the end of 2016. GIT officials revealed that they plan to start building the customs area on the Macau side early next year.  Engineer Lam Wai Hou from GIT said that the passenger capacity of the Zhuhai-Macau checkpoint will be 150,000 per day while that of the Hong Kong-Macau checkpoint will be 100,000 per day. The port of entry will have 18 lanes for vehicles to both arrive and depart Macau respectively.

Takeaway: The opening of the Delta Bridge is widely expected to be a catalysts for stronger revenue results from the mass gaming segment.

 

Warhol Paintings To Be Auctioned – German casino company WestSpiel will sell two Andy Warhol paintings at a Christie's auction in November. The two paintings include "Triple Elvis (Ferus Type)” and “Four Marlons” which rate among Warhol’s most famous portraits. The monumental paintings, each nearly 2.1 meters high, have never appeared at auction before and could bring a combined total of $130 million when they go up for bid on Nov. 12

Takeaway: Might Mr. Wynn be a bidder?

 

Los Cabos International Airport – heavily damaged by Hurricane Odile on Sept. 14, is expected to be open for commercial operations by Nov. 25, according to airport operator Grupo Aerportario Pacifico.  Some commercial operations could begin on a limited basis by Oct. 9, although that date is subject to the pace of repair work, which includes the three terminal buildings, control tower and equipment and debris removal.  The facility will continue to operate only relief and humanitarian flights through Oct. 8.

Takeaway: A near term headwind for the lodging companies but could prove to be a catalysts for other Mexico beach destinations such as Puerto Vallarta.

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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