Tickers: WYNN, MGM, SGMS, GTK.IM, RCL
EVENTS
- Aristocrat Leisure FQ4 earnings 9pm: ; pw: 8115282
COMPANY NEWS
WYNN – Gov.-elect Charlie Baker is calling on the state Gaming Commission to take a close look at Wynn Resorts if a reported federal investigation into whether the gaming giant violated money-laundering laws finds any improprieties. Elaine Driscoll, a spokeswoman for the Gaming Commission, said it is monitoring the situation. “Our Investigations and Enforcement Bureau will conduct a comprehensive and careful review of this matter,” she said. “The commission has very broad authority under the statute to take any actions deemed appropriate.”
Article HERE
Takeaway: There could be delays/complications with the Everett project.
Sinogreen – Sinogreen Energy International Group Ltd, a Hong Kong-listed firm controlled since September by Macau junket investor Jack Lam Yin, said in a new filing it plans to use money raised in a corporate funding exercise to develop a junket business in Macau. Friday’s filing said Sinogreen would use Mr Lam’s “expertise and experience” in order to “explore the opportunity of developing the gaming promotion business in Macau”. Mr Lam is chairman of Jimei Group Ltd, on of Macau’s largest consolidators of gaming promoters.
Currently Jimei runs Jimei Casino next door to the Grand Lapa hotel on Macau peninsula under an SJM Holdings Ltd gaming licence.
200.HK – MelcoLot, a subsidiary of Melco International Development Ltd, set up a wholly owned special purpose vehicle subsidiary called Express Wealth Enterprise Ltd, a joint venture with Firich Enterprises Co Ltd, a Taiwan-listed maker of electronic gaming machine, to hold the license for a proposed casino project in Tbilisi, Georgia’s capital. MelcoLot, listed on the Growth Enterprise Market in Hong Kong, sold 5,530 new shares of Express Wealth to Firich, which in turn will allocate them to two other Taiwanese firms – Taiwan-listed Rich Development Co Ltd and Taiwan-incorporated Syncmold Enterprise Corp. MelcoLot will also sell 200 new shares to Oz Gaming Georgia LLC, a food and beverage and entertainment firm in Georgia that has been working with the government to develop gaming regulation. Upon completion of the deal, Express Wealth will be 42.7 percent held by MelcoLot, 31.62 percent by Firich, 15.35 percent by Rich Development, 8.33 percent by Syncmold and 2 percent by Oz Gaming. MelcoLot is also being used as a vehicle to bid for a casino licence in a real estate development called BCN World in Barcelona, Spain
Article HERE
Takeaway: Melco International Development quickly becoming the emerging, frontier market vehicle for Mr. Ho's development while also shielding the strong cash flows of MPEL from potential frontier market regulatory concerns.
BLOOM.PM – Bloomberry Resorts Corp has added 66 VIP gaming tables and 223 slot machines to its Solaire Resort and Casino in Manila. The extra capacity is included in a new hotel tower that opened this past weekend. The facility, known as the Sky Tower, has 312 suites, a Chinese restaurant and a whiskey and cigar bar for VIP customers.
Article HERE
Takeaway: Lower tax rate potentially benefiting Manila - building out additional VIP capacity as an viable destination for Mainland Chinese looking for a Macau alternative
MGM – China's Diaoyutai State Guesthouse and American hospitality giant MGM Resorts International officially opened The Diaoyutai Boutique Chengdu in the capital of Sichuan province in Southwest China. The partners collaborate in China together through Diaoyutai MGM Hospitality, Ltd. and have previously opened the MGM Grand Sanya in Hainan Province.
Article HERE
SGMS– following the merger with Bally, SGMS announced a corporate reorganization including CEO Gavin Isaacs and CFO Scott Schweinfurth who will oversee three operating segments: Gaming, Lottery and Interactive.
1) Gaming - covering the Bally, WMS and SHFL brands and led by Derik Mooberry
2) Lottery - including SGMS’ traditional lottery business and led by James Kennedy
3) Interactive - previously Williams Interactive as well as social gaming operations and led by Jordan Levin.
GTK.IM – GTECH received a seven-year contract extension with the Missouri Lottery. GTECH has been the major lottery technology and services provider to the Missouri Lottery since 1991. Under the terms of the new contract, GTECH will provide the Missouri Lottery with a full set of integrated services, including a new central gaming system and replacement of Lottery Scratcher Validation and back-office systems, based on GTECH’s Enterprise Series platform. It will also replace draw-based lottery terminals with approximately 3,500 full-service Altura GT1200 terminals and 1,500 Altura GT1200 Compact terminals.
RCL – announced a new promotion WOW sale including 50% Off 2nd Guest + $300 Spending Money + 50% Off Deposit Offer for all sailings, excluding Quantum of the Seas, Anthem of the Seas, and all China departures. Buy One, Get One 50% applies to all stateroom categories and excludes third and higher occupancy guests. Cruise must be booked Nov 17-Dec 31, 2014.
Takeaway: Caribbean struggles continue for the Royal Caribbean brand. Our cruise pricing survey for mid-Nov will be published shortly.
RCL – RCL and Ctrip.com announced a strategic partnership through SkySea Cruises, a joint venture which is designed to serve the Chinese cruise market. Royal Caribbean and Ctrip will each own 35% of the new company, with the balance being owned by SkySea management and a private equity fund. The transaction is expected to close before the end of November. The new cruise line will begin service in the middle of 2015 and will operate with one ship. The venture anticipates the potential for additional vessels to be added over time.
Takeaway: A potential small boost to the JV/mgmt contract line item for 2015. RCL and CCL believe China is the future.
SNOW – announced the resignation of CEO Bill Jensen for personal reason as well as the hiring of Thomas F. Marano as the Company’s new CEO. Previously, Mr. Marano was Chairman and Chief Executive Officer at ResCap from 2008 to 2013, Managing Director at Cerberus Capital Management from April 2008 to April 2009 and prior roles as Chief Capital Markets Officer at GMAC/ResCap and 25 years with Bear Stearns including the Head of Global Mortgage and Asset Backed Trading and Originations from 2006 to 2008.
Article HERE
Takeaway: With Fortress still the 60% majority shareholder, the Board hires a CEO with a fixed income and asset backed trading background versus mountain operations or some other consumer, travel-related business.
INDUSTRY NEWS
Macau Visitation – Macau visitor arrivals 2.65 million in October arrivals +11% YoY including Mainland China arrivals of 1.82 million +20% YoY
Takeaway: Highest overall visitation growth since Feb 2013. Mainland visitation highest since March 2014
Communist Party of China Calls for Stricter Rules – Liu Yunshan, a member of the Standing Committee of the Political Bureau of the CPC Central Committee and a senior official, presided over two seminars held in Beijing in recent days. Experts and officials from various departments and regions said a series of strict rules for Party's discipline after the 18th National Congress of CPC have created a new situation in the Party's work style. They vowed to implement the central authority's decisions, governing the Party with both ideologies and systems, and making strict rules for the Party a new normal for Party construction.
Article HERE
Takeaway: The crackdown on corruption and abuse continues unabated.
New Jersey Sports Betting Injunction – A U.S. District Judge Michael Shipp ruled that New Jersey's latest sports betting effort, the 2014 Sports Wagering Law, violates the Professional and Amateur Sports Protection Act of 1992. As such, Judge Shipp ruled in favor of the NCAA and four major professional sports leagues Friday and issued a permanent injunction to prevent New Jersey casinos and racetracks from offering sports betting. According to State Senator Raymond Lesniak, New Jersey will file an appeal. The state believes it has a much better chance in the Third Circuit Court of Appeals, which ruled against New Jersey by a 2-1 majority decision in September 2013. During that appeal, as New Jersey attorneys argued that the federal prohibition on sports betting unconstitutionally commandeered states, Third Circuit Court judges said states are free to repeal sports betting laws and decide "the contours of the prohibition."
Article HERE
Free Play Case Heard before South Dakota Supreme Court – Should Deadwood casinos have to pay taxes on free play on slot machines? The First Gold, Mineral Palace and Four Aces are the plaintiffs and argued that casinos pay taxes on adjusted gross proceeds and there has to be some revenue to meet that definition as well as the lower circuit court was wrong when it ruled that the value of free play should be included in adjusted gross proceeds. The state countered by saying that state regulations say promotional items cannot be deducted from revenue and says the legislature hasn't created an exemption for coupons. The Supreme Court will issue a ruling at a later date.
Article HERE
Chinese families a prime target for cruising: Hong Kong Tourism Board (HKTB) study
“Our findings indicated out of the three consumer segments (family, young and achievers), the achiever, or those between ages 47 to 60, showed the least intention to take cruise (11%) compared to families with children (44%)…because they view cruising as a hassle-free, ideal occasion to spend quality time with the family,” HKTB executive director Anthony Lau said, adding that Chinese travelers perceived cruises as a luxury product.
Respondents also indicated a preference for French and Italian fine dining on cruises, deemed free Wi-Fi a necessity, and said the ideal length for a cruise is six to seven days. Over 80% wanted to cruise to Hong Kong.
Takeaway: This demographic study shows the differences between Chinese and North American cruisers. Chinese cruisers are more family-oriented, younger, a preference for longer voyages (6-7 days) and view cruising as a luxury entertainment option.
MACRO
Singapore inflation slowed to 0.1% in October, down from 0.6% in September.
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: European pricing has been a tailwind for CCL and RCL but a negative pivot here looks increasingly likely in 2015. Following CCL's F3Q 2014 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.
