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    MARKET EDGES

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Tickers: SGMS, H, RCL, CCL

EVENTS

  • Nov 6:
    • MPEL Q3 earnings 8:30 am , pw MPEL
    • PNK Q3 earnings 10 am , code 27759617
    • BEL Q3 earnings 10 am , ID 12457691
    • DIS Q3 earnings 5 pm , pin 38177041
  • Nov 10:
    • CZR Q3 earnings 4:30 pm , pin 20797507
    • SNOW FYQ1 earnings 5pm
    • SJM Q3 earnings
  • Nov 11
    • Galaxy Entertainment Q3 earnings: 3:15am
    • Genting Singapore Q3 earnings:  5am
    • Stations Casino Q3 earnings: 4:30pm

COMPANY NEWS

BLOOM:PM – Bloomberry Resorts Corp, the operator of Solaire Resort and Casino in the Philippines, said phase 1A of the casino resort would open by the end of November this year. The expansion is expected to provide an additional 66 VIP gaming tables and 223 slot machines and also include a 312-room all-suite boutique hotel tower and a 1,760-seat Broadway-style theater.

Takeaway: Manila gearing up for the opening of Solaire's phase 1A as well as City of Dream's Manila later in December.

034230:KS – 3Q revs increased by 5.1% YoY to KRW172.6 billion.  Growth was mostly supported by casino revenue, which grew by 7.1% YoY to KRW139.9 billion.  Paradise had a share of 49.6% of the South Korean market based on casino sales in the third quarter, up from 46% a year earlier, but down from a 54.9% share in the previous quarter.

Takeaway: Contrast to Macau, casinos revenues actually grew in 3Q.

SMGS – announced it was awarded the contract by the New Zealand Lotteries Commission to provide instant games for Lotto New Zealand. The seven-year contract began in September 2014 and includes a one-year extension option.

H – filed a Certificate of Retirement with the Secretary of State of the State of Delaware to retire 1,122,000 shares of Class B Common Stock. All 1,122,000 shares of Class B Common Stock were converted into shares of Class A Common Stock in connection with the repurchase by the Company of 1,122,000 shares of Class B Common Stock from selling stockholders. The Company has also retired all 1,122,000 shares of Class A Common Stock into which the Class B
Common Stock converted.  The total number of authorized shares of the Company is now 1,453,399,875 shares, consisting of 1,000,000,000 shares designated Class A Common Stock, 443,399,875 shares designated Class B Common Stock, and 10,000,000 shares designated Preferred Stock, $0.01 par value per share.

Takeaway: Hyatt buying back stock while also modestly simplifying the equity capital structure.

RCL– According to Dondra Ritzenthaler, Senior VP of Sales for Celebrity, Celebrity has launched "1,2,3 Go All-inclusive".  Guests between November 5 and January 4 that book Concierge and above [suites, Aquaclass] will get 1, 2, 3 Go All-inclusive. That includes beverage package, free gratuities, and up to $300 onboard credit for specialty dining."

In other news, Celebrity has launched some 2016/2017 itineraries, the earliest ever released for those far out itineraries.

Takeaway:  Celebrity getting a head start on promotions ahead of Wave

CCL – (Travel Weekly)  The battle for British cruise passengers is heating up, with P&O Cruises introducing a low deposit offer and more onboard spending money. The move to attract early bookings follows RCL putting its wave campaign on sale two months earlier than usual following a trade preview of new ship Quantum of the Seas in Southampton last weekend.  The P&O Cruises £50 deposit offer covers bookings made before November 30 including sailings over Christmas and Easter next year.

 Takeaway:  Price war?

 

RCL – (TTG)  Stuart Leven, UK and Ireland MD for RCL hinted there could soon be changes to shore excursions, including whether agents will start to be paid commission on them.  “Work is in progress. I don’t think it will be too long before we make any changes in that area," said Leven.

MSC Cruises recently announced plans to raise commission on its shore excursions from 5% to 15%. 

Takeaway:  More competition (3rd party providers) in the shore excursion space is leading cruise lines to increase incentives to agents.

Insider Transactions:

CHH - COO Patrick Pacious sold 33,947 shares of CHH stock on Monday, November 3 att an average price of $53.25 and now directly owns 99,211 shares of the company’s stock.

MAR - CEO Arne Sorenson sold 147,600 shares of MAR stock on Friday, October 31, at an average price of $75.72 and he now directly owns 420,618 shares.


LHO - CEO Michael D. Barnello sold 30,000 shares of PEB stock on Friday, October 31 at at an average price of $39.08 and now directly owns 181,331 shares.

INDUSTRY NEWS

Macau Construction Worker Wages Increase(Macau Daily Times) The average daily wage of construction workers increased by 2.3% quarter-to-quarter to MOP672 in the third quarter of this year, and the average daily wage of local construction workers was recorded as MOP883, up by 7%.

Takeaway:  Increasing wages not only in gaming

Hilton Prague Listed For Sale (Czech Happenings) Hilton Prague, the largest Czech hotel with 791 rooms, has been put up for sale, and its managerial contract with the Hilton chain will soon expire. Avid Asset Management, the current owner of the hotel, empowered JLL to mediate the deal whose price was not disclosed. Avid Asset Management has put over EUR50m in the modernization of the hotel since 2004. 

Takeaway: Another big European asset listed for sale.  We wonder if HOT is watching?

Boca Raton Resort & Club Listed For Sale– (Sun Sentinel) Blackstone Funds, the owner of the Boca Raton Resort & Club plans to put the property up for sale. The listing will be handled by JLL Hotels. The Blackstone Group has invested more than $250 million in the resort. JLL has begun to contact potential investors who might be interested in acquiring the resort.

Takeaway: Inside odds indicate Hilton Worldwide is the likely buyer given the Resort & Club's affiliation with the Waldorf Astoria collection.

MACRO

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.