As we expected, the detail behind what was already a very strong month, was even better. As you know, Macau gross gaming revenues (GGR) grew 21% YoY in November to HK$29.3 billion. What you may not know is that VIP hold percentage was approximately 34bps below the year to date average. We estimate that GGR would have grown 30% YoY with normal hold % in November 2013 and 28% with equal hold % in both periods. This truly was another outstanding month in Macau.
Two company themes we’ve been focused on clearly played out during November and should continue: LVS is crushing it across the board and WYNN’s aggressive Mass push is beginning to pay off. These are our favorite Macau names.
Here are our initial takeaways:
- Mass revenues increased 39%
- VIP revenues climbed 15% despite the low hold percentage
- Estimated VIP hold percentage was only 2.66%, below the normal of 3.00% and last year of 2.88%
- VIP hold percentage was the lowest since March of 2011
- Rolling Chip (junket) volume increased 24%, the highest growth rate in almost 2 years
- Slots were the only disappointment, growing only 2% YoY
- While 160bps better than October, market share was just in line with its 3 month average
- However, VIP hold percentage was almost 60bps below normal – market share would’ve increased sequentially with normal hold
- GGR outgrew the market (27% vs 21%) but assuming normal hold, LVS’s GGR would’ve grown 40% (vs the market at 30%)
- WYNN’s market share grew 30bps over its 3 month trailing average
- Hold percentage was 10bps below normal but significantly below last November’s high hold
- Wynn Macau grew its Mass share 130bps above its trailing average
- Most importantly, Mass revenue grew over 53% YoY, the highest growth rate since June of 2011, and led the market
- This was a great month for Wynn Macau
- MPEL was one of the few operators to hold above normal
- VIP volume and Mass share both fell below recent trend
- Total revenue growth was in-line with the market despite the relatively high hold
- We think MPEL could be a share loser over the next year
- MGM held well above normal and higher than last November’s low hold
- High hold contributed to 39% YoY GGR growth, 2nd highest in the market
- Mass market share was only 6.4%, the 3rd lowest of its history
- We think MGM has the most to lose by WYNN’s recent Mass push and that indeed played out in November
- Galaxy led the market in GGR growth for the 2nd straight month
- Hold was well below normal
- Mass and Rolling Chip volume share was above recent trend
- Solid month from Galaxy
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Client Talking Points
Alas, GDP is a lagging indicator. So... as the 10-year yield makes a lower-high versus the Q313 top, look at what Mr. Market is telling you via the leading indicator in our model: The US Dollar. The greenback is down for four consecutive weeks now after being down -0.41% yesterday. #broken
UST 10YR YIELD
Levels matter versus the prior high. If the 10-year yield can’t make a higher high versus the pre-Fed-no-taper September closing high (and we get anything average in an employment report), no-taper can knock 20-30 basis points out of this rate rally. Fast.
Just awesome. Both home prices (+7.7% year-over-year in November versus 6.9% in October) and autos (+7% November versus +4% October) are loving what Americans loved in Q2-Q3 of 2013. What's that? Strengthening purchasing power via a #StrongCurrency. Go Pound.
|FIXED INCOME||8%||INTL CURRENCIES||24%|
Top Long Ideas
Our bullish call on the British Pound was borne out of our Q4 Macro themes call. We believe the health of a nation’s economy is reflected in its currency. We remain bullish on the regime change at the BOE, replacing Governor Mervyn King with Mark Carney. In its October meeting, the Bank of England voted unanimously (9-0) to keep rates on hold and the asset purchase program unchanged. If we look at the GBP/USD cross, we believe the UK’s hawkish monetary and fiscal policy should appreciate the GBP, as Bernanke/Yellen continue to burn the USD via delaying the call to taper.
WWW is one of the best managed and most consistent companies in retail. We’re rarely fans of acquisitions, but the recent addition of Sperry, Saucony, Keds and Stride Rite (known as PLG) gives WWW a multi-year platform from which to grow. We think that the prevailing bearish view is very backward looking and leaves out a big piece of the WWW story, which is that integration of these brands into the WWW portfolio will allow the former PLG group to achieve what it could not under its former owner (most notably – international growth, and leverage a more diverse selling infrastructure in the US). Furthermore it will grow without needing to add the capital we’d otherwise expect as a stand-alone company – especially given WWW’s consolidation from four divisions into three -- which improves asset turns and financial returns.
Financials sector senior analyst Jonathan Casteleyn continues to carry T. Rowe Price as his highest-conviction long call, based on the long-range reallocation out of bonds with investors continuing to move into stocks. T Rowe is one of the fastest growing equity asset managers and has consistently had the best performing stock funds over the past ten years.
Three for the Road
TWEET OF THE DAY
3.6% GDP and +200k handles on jobs and these morons are going to try no-taper again @federalreserve
QUOTE OF THE DAY
"I knew if I didn't leave my bitterness and hatred behind, I'd still be in prison." - Nelson Mandela
STAT OF THE DAY
Most British workers under 50 will have to work longer than expected after the government unveiled plans to introduce the highest retirement age in the developed world. Under the reforms, the pension age will be linked to rising life expectancy and reflect the U.K. government's belief that workers should spend no more than a third of their adult life in retirement. The state pension age of 68 will now be enforced in the mid 2030s, about 10 years earlier than planned. And by the late 2040s it will rise to 69.
THE MACAU METRO MONITOR, DECEMBER 6, 2013
CASINO LEGISLATION REVIEW PUT ON HOLD Taipei Times
The review of a proposed casino act was placed on hold yesterday as lawmakers opposed to the legislation demanded more time to study all the relevant information. Legislators from the transportation, economic and judiciary committees were yesterday scheduled to review the act governing the management of casino resorts bill proposed by the Executive Yuan. They were also to consider two similar drafts proposed by Independent Legislator Chen Hsuen-sheng and Chinese Nationalist Party (KMT) Legislator Alex Tsai. They were also supposed to review an amendment to the International Airport Park Development Act proposed by several legislators including KMT Legislator Chen Ken-te, which would allow casinos to be built within the boundaries of the Taoyuan Aerotropolis project. According to the proposed amendment, casinos would be located in the airport’s free trade zone, and people entering them must hold passports and may be exempt from paying customs tax.