LEISURE LETTER (10/02/2014)

Tickers: BYI, ISEL, LVS, H

EVENTS

  • Oct 2: G2E Las Vegas
  • Oct 8: HT Investor Day

COMPANY NEWS

BYI/GTK:IM – GTECH’s board has approved the merger of GTECH into Georgia Worldwide, or what GTK is calling the NewCo, which is part of its deal to buy IGT. The board also approved the repurchase of 16.676 million GTK shares, which is part of the transaction.

 Takeaway: The merger progressing seemingly faster than projected.

ISLE – The Davenport Planning and Zoning Commission approved a plan to alter a comprehensive plan for a 108-acre site at the southwest corner of Interstates 74 and 80 to accommodate a casino and seven-story hotel. The property rezoning will allow Dan Kehl and his casino company to migrate the Rhythm City Casino from a riverboat to a land based casino.  The proposed the casino will encompass a $110 million, seven-story, a 143-room hotel, a 1,500-seat event center and 33,800 square feet of gaming space. 

Takeaway: The development a land based casino in Davenport will likely cannibalize ISLE's Bettendorf riverboat.

LVS (Bloomberg) Mr. Adelson suggested the VIP gambling business in Macau could see a recovery in two months following a Chinese government crackdown on corruption sapped demand. 

Takeaway: What constitutes "recovery"?

LVS (Bloomberg) During a discussion at G2E, Mr. Adelson said Las Vegas Sands would be interested in building a casino at the Meadowlands racetrack in New Jersey, if proposals to expand casino gambling beyond Atlantic City were approved by state legislators.

Takeaway: Low tax rate needed to move the needle.

H – announced Interval Leisure Group has completed the previously announced acquisition of Hyatt Residential Group from affiliates of Hyatt Hotels Corporation. The purchase price of approximately $220 million includes Hyatt's interest in a joint venture that owns and is developing Hyatt Kanapali Beach, a 131-unit shared ownership property in Maui. In connection with the acquisition, a subsidiary of ILG has entered into a global Master License Agreement with respect to the exclusive use of the Hyatt brand in shared ownership.

 

INDUSTRY NEWS

Macau Golden Week Visitation – October 1st visitation was 136,908, +10% year-over-year while visitors from mainland China was 104,569, an increase of 2.3% year-over-year

Takeaway: Overall strong visitation growth, but visitation from mainland China trailing expectations.

Communist Party China Add'l Reform – the Political Bureau of the CPC Central Committee released a statement announcing that the fourth plenary session of the CPC 18th Central Committee, which is set to discuss rule of law, will be held from Oct. 20 to 23. This will be the first time a plenary session of the CPC Central Committee has taken rule of law as its central theme. And rule of law is a must if the country wants to build a prosperous society and comprehensively deepen reform. All in all, the 65th anniversary of the PRC's founding seems a new start for further reform and exploration of socialism with Chinese characteristics.

Takeaway: Stay tuned for additional reforms.

Occupy Central spills into Macau – In Macau, organizers say about 500 activists are gathering at the Praca Da Amizade to show solidarity with Hong Kong protests. The gathering had been approved by the territory's government. The meeting was first planned to take place in front of Macau's Legislative Assembly, but later moved

Takeaway: Growing discord moves from Hong Kong to Macau but very unlikely to be sustained there.

New Jersey Sports Betting (mycentralnewjersey.com) Two New Jersey state senators, Democrat Raymond Lesniak and Republican Joseph Kyrillos announced that they intend to introduce the legislation when the Senate meets Oct. 9. They say the bill would reinforce the state attorney general’s position that the state can legally lift the ban on sports betting, so long as it does not specifically authorize the wagering.

 

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.