Tickers: ISLE, LVS, MGM, MAR
EVENTS
- Oct 28:
- HEDGEYE EBOLA CALL 1 pm , code 651216#
- GLPI Q3 earnings 10 am
- HOT Q3 earnings 11:30 am , code 10325720
- WYNN Q3 earnings 4:30 pm , pw 16870074
- MAR Q3 earnings 5 pm , ID 59390131
- Oct 29: H Q3 earnings 11:30 am code 95150754
- Oct 30:
- HST Q3 earnings 10 am
- NCLH Q3 earnings 10 am
- MGM Q3 earnings 11 am , pw 6307991
- BYD Q3 earnings 5 pm , pw 8021592
- Oct 31: HLT Q3 earnings 10 am , ID 11936190
- Nov 3:
- BEE Q3 earnings 11 am , pw 37266467
- SHO Q3 earnings 12n , ID 75906336
- Nov 4: RHP Q3 earnings 10 am
- Nov 6:
- PNK Q3 earnings 10 am , code 27759617
- BEL Q3 earnings 10 am , ID 12457691
COMPANY NEWS
Trump – Trump Entertainment has dropped its November 13 deadline to close the Taj, its last remaining casino, but CEO Bob Griffin says it still might close this year.
Takeaway: The posturing continues. Our bet is that the Taj will not permanently close
ISLE – (Waterloo Cedar Falls Courier) The Isle Casino Hotel Waterloo has settled a long-running dispute over the value used to set its property tax bills. The settlement covers the 2011, 2012, 2013 and 2014 assessment years and slashes the assessed value on the city's second largest taxpayer from $64.8 million to $54.4 million retroactively to 2011. The Isle's current $2.5 million annual property tax bill will drop to $2.1 million. The city of Waterloo alone stands to see this year's tax revenue from the casino fall more than $178,000 on top of the estimated $551,700 it may be responsible to cover for the past three years of over payments.
Takeaway: One time gain for ISLE during Q4 2014 as well as a small reduction in overhead going forward.
LVS & 1928:HK – announced David Fleming, the firm’s secretary and general counsel, will retire with effect from April 1, 2015. Mr Fleming, 67, has served in these roles since January 2011. Mr. Fleming is also the authorized representative of Sands China and the alternate director to Michael Leven since 2011. Sands China said it would engage Mr Fleming as a consultant from July 1, 2015.
MGM – The Harmon Hotel defects trial is set to begin in Nevada District court and the trial is expected to last nearly one year. The case stems from the construction of CityCenter, MGM Resorts International’s 67-acre development on the southwest corner of the Strip and West Harmon Avenue. The Harmon Hotel is the only portion of the $9 billion project that was never completed. Work stopped on the Harmon after construction defects were found in 2008. A structural engineer hired by MGM Resorts determined the building was unsafe and could topple if an earthquake of a magnitude of 7.7 were to hit Las Vegas. Construction on the planned 47-story tower was stopped at 26 floors.
NagaCorp 3918:HK– Mark Brown, who was appointed chief operating officer of NagaWorld in December 2013, has tendered his resignation as chief operating officer of NagaWorld Ltd with effect from October 26. Naga indicated Mr Brown “has confirmed that he has resigned to pursue other opportunities”, but gave no further details. Prior to his move to NagaWorld, Mr. Brown was senior vice president for strategic development at Wynn Resorts Ltd’s Encore Las Vegas facility. From April 2006 to April 2009, Mr Brown, headed Las Vegas Sands Corp’s operations in Macau, Mr. Brown's recent responsibilities at NagaCorp included overseeing the initial stages of NagaCorp's casino project near Vladivostok, in Russia.
Takeaway: Could there be a delay in the opening of Naga's Vladivostok casino?
MOHEGAN – (The Columbian) In a pivotal development in a years long fight to build a casino in Clark County, the Cowlitz Tribe was notified Wednesday they’ll receive 152 acres west of La Center in January or within 30 days of a federal court ruling in their favor, whichever comes first.
In April, a tentative tribal-state compact was released by the state gambling commission. The compact allows for two gaming facilities. One could have as many as 75 gaming tables, and a second could have up to 50 tables. Initially, the wager limit would be set at $250, but after a year the limit could increase to $500. The tribe could also have as many as 3,000 “tribal lottery player stations,” with as many as 2,500 in one facility. Any terminals beyond the tribe’s allotted 975 terminals would have to be leased from other tribes, however.
Takeaway: A 2017 event for the slot suppliers if the hurdles are crossed.
MAR – plans to expand its footprint in India with an additional 49 hotels, which will take the total operational properties to around 70 by 2018.
Takeaway: Building it's global footprint.
INDUSTRY NEWS
China's Corruption Crackdown to Never End – (Xinhuanet) Senior leader of the Communist Party of China (CPC) Wang Qishan said the CPC's anti-graft campaign and its efforts to build a clean government will never be concluded.
Takeaway: We expected full enforcement efforts to continue - which is a headwind for Macau GGR.
Macau Smoking Ban Enforcement – (GGRAsia) At least 41 people in Macau had been fined for smoking on casino main floors by October 24. The Health Bureau’s statement added that among those fined, 30 were tourists. The bureau said that since the new rules were enacted, it conducted over 61 site inspections to a total of 40 gaming venues, including casinos and slot-machine parlors.
Takeaway: The Department of Health steps up enforcement efforts.
Macau Health Bureau Weighs in on Premium Mass Smoking – (Macau Business) The Health Bureau says it is worried by reports that some casinos are allowing smoking in areas reserved for premium mass-market table gaming. The bureau issued a written statement saying it is “very concerned”.
Takeaway: We understand the DICJ recently approved smoking in one City of Dream's previously designated premium mass rooms (Grand Hyatt) with the condition that premium mass tables were "converted" to direct VIP. A turf battle could be in the works between the DICJ and the Department of Health. When we were in Macau we heard the Bureau was responsible for the last minute smoking ban in premium mass.
Macau Secretary for Economy & Finance to Retire –Francis Tam Pak Yuen announced he will step down as the Secretary for Economy and Finance once Chief Executive Chui Sai On’s first term in office ends in December. Lionel Leong Vai Tac, a well-known businessman here and an Executive Council member, is rumored to be one of the likely candidates to take over the post. One of the biggest challenges Mr. Chui and his administration face during his second term in office is the renewal of casino concession licenses, which are up for discussion next year.
Takeaway: Tam was a "friend" of the gaming industry. With a new Secretary for Economy & Finance, could the Macau government make greater demands on the gaming operators to give back to their employees?
Changi – Singapore's Changi airport passenger movement fell 0.6% YoY in September to 4.256m.
Takeaway: Singapore's mass visitation continues to be flat this year.
Pacquiao To Fight in Macau – (theboxingvoice.com) Boxing promoter Bob Arum said Manny Pacquiao will fight at the Cotai Arena because boxer likes the Arena as well as the the significantly lower tax rates.
Mainland China Lottery Sales – (GGRAsia) Lottery sales in mainland China rose 25.2% in year-on-year terms to RMB32.25 billion (US$5.3 billion) in September. During September, sales of welfare lottery tickets stood at RMB17.47 billion, up by 19.6%, while sports lottery sales rose by 32.5%, to RMB14.78 billion.
Takeaway: As the corruption crackdowns continue, it would seem Chinese punters are challenging luck more with the lottery than at casinos.
Vietnam Graft Crackdown – Police in Vietnam have arrested a prominent businessman and one of the country’s richest men on suspicion of lending fraud, as authorities step up their crackdown on financial crimes in a bid to clean up the debt-ridden banking sector. Ha Van Tham, former chairman of the board of the private Ocean Bank, was taken into police custody in Hanoi on Friday for “violating lending regulations,” the Ministry of Public Security said on Friday.
Sri Lanka Casino – (GGRAsia) Sri Lankan President Mahinda Rajapaksa has proposed to impose a US$100 entrance fee for the country’s casinos and raise the gaming levy to 10% (up from 5%) of turnover. The proposals were set out in the 2015 budget announced on Friday. The budget document did not give any further details on the casino entry levy, including whether it would apply only to Sri Lankan residents or also to foreigners. Crown Resorts Ltd, chaired by Australian gambling tycoon James Packer, plans to build a casino resort in Sri Lanka.
Takeaway: Sri Lanka with a 5% tax on GGR seemed too good to be true.
Las Vegas McCarran Airport Traffic – passenger traffic increased 2.7% in September versus +3.4% during August.
Takeaway: McCarran passenger growth has risen for 13 straight months.
Montage Hotels Lifestyle Brand – announced the launch of Pendry Hotels, the company's new lifestyle brand that will marry the culture of service for which Montage is renowned with an inspired, fashion-forward and design-driven approach to hospitality. Pendry Hotels will sit at the crossroads of lifestyle and luxury hospitality. Pendry San Diego, which broke ground on October 8, is scheduled to open in 2016 and will feature 317 guest rooms, including 36 suites, a rooftop pool, two uniquely designed restaurants, an ultra-lounge, a beer hall, a spa and energizing fitness facility, and over 22,000 square feet of meeting space. In launching Pendry Hotels, the company intends to significantly expand its portfolio of hotels and resorts which today includes five distinctive Montage-branded properties in Laguna Beach and Beverly Hills, California; Deer Valley, Utah; Kapalua Bay, Maui, Hawaii; and Palmetto Bluff, South Carolina.
Takeaway: Feels to us like the lifestyle brand could ultimately push supply up similar to what happened in the late 1990s with the limited service/extended stay construction boom.
MACRO
Macau (Un)Employment Rate & Earnings - According to Macau's Statistics and Census Service indicated that both the unemployment rate (1.7%) and the underemployment rate (0.3%) for July-September 2014 held stable as the previous period (June-August). Total labor force increased to 398,700 and the labor force participation rate reached 74.0%. Median earnings of those engaging in Gaming and the Construction sector amounted to MOP17,000 and MOP13,000 respectively.
Hedgeye Macro Team remains negative Europe, their bottom-up, qualitative analysis (Growth/Inflation/Policy framework) indicates that the Eurozone is setting up to enter the ugly Quad4 in Q4 (equating to growth decelerates and inflation decelerates) = Europe Slowing.
Takeaway: We're seeing bottoms up slowing in Europe cruise pricing in our monthly survey. Europe has been a tailwind for CCL and RCL but a negative pivot here looks increasingly likely. Following CCL's earnings release, we recently turned negative on those stocks based on the negative European thesis.
Hedgeye Macro Team remains negative on consumer spending and believes in muted inflation, a Quad4 set-up. Following a great call on rising housing prices, the Hedgeye Macro/Financials team is 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.
