LEISURE LETTER (11/28/2014)

Tickers:  BYD, MGM, H, HLT


  • Dec 1:  8:30 am  IKGH Q3 earnings
  • Dec 2: 11 am ISLE Q2 2015 earnings
  • Dec 8: 10:30 MTN Q1 2015 earnings
  • Dec 12: Trump Taj Mahal Closing
  • Dec 17:  Upstate NY casino decision


BYD, MGM – will redesign Borgata buffet, renovate its spa and more as part of $13 million in renovations. Additional renovations will be made to the casino floor, front desk, suites and its back-of-the-house talent areas, said casino President and Chief Operating Officer Tom Balance.

Article HERE

Takeaway: The $13m is likely part of the $25m capex guidance for Borgata’s FY 2014.


Crown Racing and Gaming Minister Terry Waldron told State Parliament that the tax Crown pays on VIP gaming profits will be cut from 11% to 8%.  In return, Crown will guarantee it will pay at least $45.25 million to the State Government over the next five years - well above the $37.4 million it paid over the past five years. Crown believes the lower rate of 8%, which, with the Burswood Park Board levy of 1%, brings the rate to 9%, will allow it to match the incentives offered by casinos in Macau, Singapore and Las Vegas.

Article HERE

Takeaway: Crown will give out more incentives to attract China mainland VIPs in the coming days.


H – filed a mixed securities shelf of indeterminate size

Article HERE


MSC Cruises - is offering agents full commission on cruise and flight packages as part of its turn of year sales campaign. The line is also offering savings of £600 per cabin as part of the promotion, which runs from December 1 until March 5 next year. The campaign entitled “The Sale” is focused on promoting MSC’s fly-cruise programme and is valid on selected Mediterranean summer sailings in 2015 and winter 2015-16 destinations.

Article HERE

Takeaway: MSC has been aggressive with agent promotions lately, even in Europe.  


HLT Insider Transactions:

Executive Vice President and Chief Financial Officer, Kevin Jacobs sold 26,000 shares (non-options related) over two days, November 24 and 25 in two 13,000 tranches at an average price of $27.80 and $25.95, via scheduled 10b5-1 plan and now owns 681,123 shares.


Executive Vice President and President, Development, Architecture and Construction, Carter Ian Russell sold 200,000 shares (non-options related) at $26/share on November 25 via scheduled 10b5-1 plan and now owns 1,632,224 shares.


Executive Vice President, Hilton Worldwide and President, Hilton Grand Vacations, Mark Wang sold 25,000 shares (non-options related) at $26/share on November 25 via scheduled 10b5-1 plan and now owns 700,433 shares.

Takeaway: Regular scheduled insider selling at Hilton begins.  


Macau package tourists– The number of package tourists visiting Macau rose to 1.12 million last month in October, +56% YoY. The Statistics and Census Service says the number of package tourists from the mainland rose by 75% to 919,000. More came from Taiwan and South Korea but fewer from Hong Kong. Some 863,000 people stayed in the city’s hotels and guesthouses last month, 4% more than a year earlier. Each stayed, on average, 1.4 nights.

Article HERE

Takeaway:  These are usually lower-income tourists who do not make a dent in GGR - partially explains the growing disconnect between visitation (strong) and Mass revenue growth (weak to negative).


China Lottery Sales Increase 20% in October – Lottery sales in mainland China increased 20.3% YoY to RMB32.7 billion (US$5.3 billion) in October.  Welfare lottery sales in October reached RMB17.7 billion, up by 14.5% YoY. Sports lottery sales increased by 27.9% YoY to RMB15 billion

Article HERE

Takeaway: Chinese lottery sales growth have been strong.


Ho Tram to Offer VIP Phone Proxy Betting – The Grand Ho Tram casino resort in Vietnam is to start offering – to high-roller gamblers – live telephone betting on some of its tables from next month. 

Article HERE

Takeaway: Vietnam and the Philippines both offering viable alternatives for the shutting of phone proxy betting by Sands China and Wynn Macau.


China Corruption Crackdown – A top official at iconic Chinese state-owned liquor maker Moutai has been snared in the country’s ongoing anti-corruption campaign. Kweichow Moutai Group deputy general manager Fang Guoxing is under investigation for serious violations of discipline, the ruling Communist Party’s Central Committee for Discipline Inspection said.

Article HERE


Officials in north China's Shanxi Province have been expelled from the Communist Party of China and dismissed from public office, Zhang Xiuping, former deputy secretary of the CPC Jinzhong City Committee, because she took advantage of her post to seek profits for others in exchange for a large amount of money and property, and committed adultery, said a statement. Another official Wang Min, former head of the discipline authority in Yangquan City, took advantage of his post to seek profits for others, and accepted a huge amount of money and property. Another two officials expelled from CPC and dismissed from public posts were Yang Xiaobo, former mayor of Gaoping, a county-level city, and Qin Jianxiao, former secretary of the CPC Zezhou County Committee of Jincheng City, according to the statement.

Article HERE

Takeaway: Given the "hide out" story we featured on Wednesday, there appears to be no slowdown in the corruption crackdown by Mainland Chinese officials.


China SAR System & Taiwan Implications – Taiwanese vote this weekend in local elections that are being watched by China for signs the ruling party it prefers to deal with is losing its political grip.

Article HERE


Resell Your Nonrefundable Hotel Reservation on Roomer – Canceling your vacation at the last minute can be painful — mostly because of the money you lose on your nonrefundable accommodations. But Roomer, a three-year old startup, has created a marketplace where travelers can buy and sell these hotel reservations, and today it announced that it has raised $5 million in new funding. As described on Roomer’s website, booking a room through the service is just the same as booking through any other travel service, and it usually costs less. To sell your non-refundable reservation, simply submit a listing to the site and wait for someone to purchase it. When a buyer does so, Roomer contacts the hotel to transfer the booking to their name and then sends you the money through PayPal, Western Union, or wire transfer. Roomer takes a 15% cut of each transaction.

Article HERE

Takeaway: We wonder how hotels will crackdown on the reselling of rooms, especially since identification is required at time of check-in.  It sounds interesting but we are skeptical of Roomer's business plan.


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.

7 Tweets Summing Up What You Need to Know About Today's GDP Report

"There's a tremendous opportunity to educate people in our profession on how GDP is stated and projected," Hedgeye CEO Keith McCullough wrote today. Here's everything you need to know about today's GDP report.

read more

Cartoon of the Day: Crash Test Bear

In the past six months, U.S. stock indices are up between +12% and +18%.

read more

GOLD: A Deep Dive on What’s Next with a Top Commodities Strategist

“If you saved in gold over the past 20 to 25 years rather than any currency anywhere in the world, gold has outperformed all these currencies,” says Stefan Wieler, Vice President of Goldmoney in this edition of Real Conversations.

read more

Exact Sciences Up +24% This Week... What's Next? | $EXAS

We remain long Exact Sciences in the Hedgeye Healthcare Position Monitor.

read more

Inside the Atlanta Fed's Flawed GDP Tracker

"The Atlanta Fed’s GDPNowcast model, while useful at amalgamating investor consensus on one singular GDP estimate for any given quarter, is certainly not the end-all-be-all of forecasting U.S. GDP," writes Hedgeye Senior Macro analyst Darius Dale.

read more

Cartoon of the Day: Acrophobia

"Most people who are making a ton of money right now are focused on growth companies seeing accelerations," Hedgeye CEO Keith McCullough wrote in today's Early Look. "That’s what happens in Quad 1."

read more

People's Bank of China Spins China’s Bad-Loan Data

PBoC Deputy Governor Yi says China's non-performing loan problem has “pretty much stabilized." "Yi is spinning. China’s bad-debt problem remains serious," write Benn Steil and Emma Smith, Council on Foreign Relations.

read more

UnderArmour: 'I Am Much More Bearish Than I Was 3 Hours Ago'

“The consumer has a short memory.” Yes, Plank actually said this," writes Hedgeye Retail analyst Brian McGough. "Last time I heard such arrogance was Ron Johnson."

read more

Buffalo Wild Wings: Complacency & Lack of Leadership (by Howard Penney)

"Buffalo Wild Wings has been plagued by complacency and a continued lack of adequate leadership," writes Hedgeye Restaurants analyst Howard Penney.

read more

Todd Jordan on Las Vegas Sands Earnings

"The quarter actually beat lowered expectations. Overall, the mass segment performed well although base mass lagging is a concern," writes Hedgeye Gaming, Lodging & Leisure analyst Todd Jordan on Las Vegas Sands.

read more

An Update on Defense Spending by Lt. Gen Emo Gardner

"Congress' FY17 omnibus appropriation will fully fund the Pentagon's original budget request plus $15B of its $30B supplemental request," writes Hedgeye Potomac Defense Policy analyst Lt. Gen Emerson "Emo" Gardner USMC Ret.

read more

Got Process? Zero Hedge Sells Fear, Not Truth

Fear sells. Always has. Look no further than Zero Hedge.

read more