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Tickers: IGT, MGM, LVS, PENN, GLPI, HLT, MAR, NCLH, RCL

EVENTS

  • Wed Oct 8 & Thurs Oct 9:  Todd Jordan in Macau
  • Wed Oct 8    HT Investor Day

COMPANY NEWS

GTK:IM & IGT – announced an extraordinary GTECH shareholders’ meeting has been called for November 4, 2014, to approve the common cross-border merger of GTECH and Georgia Worldwide - which will then set the stage for Georgia Worldwide to acquire IGT. 

Takeaway: Merger appears to be moving toward closing faster than the anticipated Q1 2015 closing.

GENS:SP – (Singapore Business Review) Genting Singapore is struggling to stay afloat as its ultra-rich gamblers vanish, with the article noting the casino's VIP volumes are driven mainly by mainland Chinese. However, these players are disappearing due to the lack of junkets in the island, who extend credit and collect debt from VIPs.

Takeaway: Recently touted as a relatively safe haven investment opportunity by some sell-side analysts, Singapore looks risky to us with macro economic pressure on Mass and shrinking VIP volumes. 

MGM, 2282:HK, 27:HK and 880:HK (Macau Business Daily) Some 800 gaming SJM Holdings Ltd., MGM China Holdings Ltd. and Galaxy Entertainment Group workers participated in industrial action on Friday and Saturday. Following a series of protests and movements demanding a lift in their wages yet not met, these workers, primarily dealers and supervisors, decided to walk off the job by taking collective sick leave and working to rule during National Day Golden Week, according to Cloee Chao, secretary general of the gaming labor union Forefront of Macau Gaming. Ms. Chao told Business Daily that half of the workers are from SJM’s Grand Lisboa, while some 200 are from MGM, with the remaining from the StarWorld Hotel of the Galaxy Group.

Takeaway: We understand that despite the industrial action, casino floor activities continued without interruption.

LVS – Sands Bethlehem is embarking on a two-year expansion plan that looks to double its hotel to 600 rooms, add a convention center that can handle 500 people and bring in a Bass Pro Shops that will draw up to 3 million visitors a year. More immediate, the restaurants will be reprogrammed with a new celebrity chef offering to compliment the current Emeril Lagasse programming. Additionally, new policies will be implemented to reduce the loitering by bus riders from the Asian neighborhoods of New York.

Takeaway:  Mr. Juliano reprogramming Sands Bethlehem in an effort to make Bethworks more appealing as new casinos threaten to cannibalize patrons and revenues.

PENN & GLPI – The former Argosy Sioux City casino has been sold to an Illinois company that plans to move the riverboat down the Missouri River next week to Wood River, Illinois.  Financial terms were not disclosed. 

Takeaway: The final end to this embroiled riverboat.

HLT – announced it has entered into an agreement with Anbang Insurance Group Co. Ltd. (“Anbang”), under which Anbang has agreed to purchase the Waldorf Astoria New York for $1.95 billion. As part of this long-term strategic partnership, Anbang will grant Hilton Worldwide a management agreement to continue to operate the property for the next 100 years, and the hotel will undergo a major renovation to restore the property to its historic grandeur. Hilton Worldwide intends to use the proceeds from the sale to acquire additional hotel assets in the U.S. in one or more transactions as part of a like-kind exchange under Internal Revenue Code Section 1031. These acquisitions will be finalized and announced at a later date. Hilton disclosed LTM EBITDA of $59 million and Adjusted EBITDA of $61 million as of June 30, 2014.

Takeaway: In an unexpected move, Hilton management sells the Waldorf New York for >30x EBITDA.  While removing a growthy development opportunity, the sale appears to be the right financial decision - a huge multiple while retaining a management contract.  

MAR – while protesting the ruling, MAR announced it was fined $600,000 for violating the FCC's open airwaves rules when it protected its Wi-Fi network at Gaylord Opryland, while using FCC-authorized equipment to protect the property's network from external, cyber-attacks and identity thefts.

Takeaway: Not material to MAR nor RHP as the equipment was previously removed, the fine was fully reserved, an no other legal actions are pending.

NCLH – Crystal Cruises, one of the world's top-rated cruise lines, has announced that one of its ships, the Crystal Serenity, will traverse the fabled Northwest Passage on this Pacific-to-Atlantic voyage, beginning from Seward, Alaska, through the north part of mainland Canada and the Arctic Ocean to New York City. The cruise sails from Aug. 16 to Sept. 17, 2016, will cover 900-miles during the 32-day luxury cruise and fares start at $19,975 double occupancy.

Takeaway: Any one interested in sailing over the North Pole?

 

RCL – asked permission to keep the casinos, souvenir shops and other services open after the cruise ships dock at Vietnamese ports. Royal Caribbean is planning to increase its business in Vietnamese ports.  They are aiming to bring 25,000 cruisers a year with bigger cruise ships visiting Chan May Port in Thua Thien – Hue province. After cruise ships dock at Vietnamese ports, many passengers opt to stay on the ship and the cruise line would like to offer more entertainment onboard.

Takeaway: RCL attempting to capitalize on Asian's wanting to challenge their luck rather than disembarking for a land tour.

INDUSTRY NEWS

Macau Gross Gaming Revenue for September 2014  – according to the DICJ total GGR was HKD24.819bn, down by 11.74% year-over-year and and down 11.47% versus August 2014. On a year-to-date basis, total accumulated Gross Gaming Revenue was HKD267.904bn, an increase of 5.87% year-over-year.

Takeaway: Modestly better than last week's indicated down 13% year-over-year

Macau Golden Week Visitation – total visitation through October 5th was 775,913, an increase of 14.4% year-over-year while total visitors from Mainland China were 632,646 an increase of 13.9% year-over-year. 

Takeaway: Decent increase in visitation but far short of prior year's 20%+ year-over-year increase in Mainland visitation. 

Macau Smoking Ban (GGRAsia) Only 12 of Macau’s casinos and slot-machine parlors are offering smoking lounges on their mass floors to gamblers, the government confirmed in a statement over the weekend. That means 16 gaming venues have had to adopt a default position - to go completely smoke-free on their mass floors, including the so-called premium mass areas, at 12.01 am on Monday.

Takeaway: The start of a new day in Macau gaming.

Europe Slowing – on September 16th, Thomas Cook Group commented that despite strong late summer 2014 booking, the firm was seeing recent weakness in consumer confidence across Germany.  Today, Disney commented that 2014 results for the company will be negatively impacted by lower attendance at Euro Disney.

Takeaway: Another warning salvo that Europe is/could be slowing. Not good for CCL and RCL.

Massachusetts Gaming Referendum – (Boston Globe) a recent poll by the newspaper indicated widespread gaming support and opposition to repeal gaming legislation by 53% oppose repeal and 38% support repeal.

Takeaway: Would appear voters are siding with WYNN, MGM, and PENN - most positive for PENN since their new casino is scheduled to open early next year in Plainville.

Mohegan Sun at Pocono Downs Expansion – in an effort to attract more visitors and make the property more of a family destination, the company is planning an expansion to include The Ultimate Sports complex that will have two large indoor sports domes with seven artificial turf fields and a  snow park will feature snow-flex skiing and snowboarding mountain. A timetable for the project has not yet been established, the expansion is expected to be completed within the next three to five years.

Takeaway: Competition to become more family friendly as well as programming to drive non-gaming visitation.


Ski Resort Consolidation – Deer Valley Resort near Park City announced Friday in a news release that it has agreed to buy Solitude Mountain Resort in Big Cottonwood Canyon. Deer Valley will take over the resort in 2015. Terms of the sale were not disclosed. Deer Valley officials said they will continue to allow snowboarding at Solitude. Deer Valley is one of only three U.S. ski resorts that bans snowboarding.

Takeaway: No bid from the publicly traded operators.

 

Slowing Mergers & Acquisitions Graton Resort & Casino has decided not to pursue its opportunistic refinancing, citing market conditions. Bank of America, Wells Fargo, and U.S. Bank had shopped a $950 million loan package for Graton Resort, including a $500 million, six-year TLB that was talked at L+425-450, with 1% LIBOR floor, offered at 99. The debt package also included a $100 million revolver and $350 million A term loan that was talked at L+350, offered at 99.5. Graton wasn’t facing any near-term maturities. The issuer in 2012 placed a $375 million, six-year term loan that cleared at L+750, with a 1.5% LIBOR floor, along with $450 million of 9.625% secured notes due 2019. Graton Resort & Casino, which opened in November 2013 outside of Rohnert Park, Calif., is owned by the Federated Indians of Graton Rancheria and is operated by Station Casinos. It is an upscale Las Vegas-style casino and entertainment destination catering to the San Francisco-area market. A 200-room hotel is being added to the site.

Takeaway: The large SGMS loan may have flooded the market and doused demand. 

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.