Tickers: IKGH, PENN, IHG, L, LQ, FCH
- Dec 8: 10:30 MTN Q1 2015 earnings
- Dec 8: Golden Nugget Lake Charles Opening
- Dec 12: Trump Taj Mahal Closing
- Dec 14: City of Dreams Manila Opening
- Dec 17: Upstate NY Casino Decision
TODAY's HEADLINE STORY
China Conducts Immigration Sweep in Macau – through our local contacts in Macau, we understand Mainland Chinese immigration officials recently conducted an immigration sweep through Macau bars, restaurants and casinos and rounded up several thousand Chinese nationals who had overstayed their visas. Chinese officials then returned the nationals back to mainland China.
Takeaway: Combined with yesterday's news of the new Transit Visa scheme, the sweep indicates that Macau/China are serious about the cleaning up Macau before the China President's visit in a few weeks. VIPs are likely to stay away this month which could dampen GGR even more than the 20-25% YoY decline we're forecasting.
GENS.SP – Genting Singapore today repurchased 10 million shares (43.7% of today's trading volume) for S$11.284 million, following Monday and Tuesday's similar repurchase activity of 10 million shares each day. Cumulative shares repurchased year-to-date = 97,665,000. Following today's share repurchase, the total shares outstanding = 12,150,371,480
IKGH – acquiring small junket operators in Macau is one of its main opportunities to grow its business.
Takeaway: While this could be a good growth strategy for IKGH given the likely low valuations, it would be a risky one. The smaller junkets are in difficult financial positions right now. #riskreward
PENN – Hollywood Casino in Lawrenceburg is laying off “a limited number” of employees this week in response to a weak gaming market in Cincinnati. The company has not confirmed how many employees are being let go this week but its total employment after this week's cuts is 450 less than its 1,400-person head count after a big round of layoffs in 2012.
Takeaway: Not surprising given steep revenue declines and suffocating competition e.g. OH, WV, MD
L & IHG – Loews Hotels & Resorts has a new CEO, and it's Kirk Kinsell, who is currently president of the Americas for InterContinental Hotels Group. He is replacing Paul Whetsell, who was held the top job at Loews Hotels since 2012, with the charge to expand the brand's footprint, which he did mostly through acquisitions and conversions.
Takeaway: We knew Kinsell in some of his roles at IHG. Looks like a good hire.
LQ – announced Mit Shah was appointed as Chairman of the Board. Mit Shah has served on the boards of directors of La Quinta and its predecessor entities since 2013 and is currently Chief Executive Officer and Senior Managing Principal of Noble Investment Group, which he founded in 1993 and which specializes in making opportunistic investments in the lodging and hospitality real estate sector.
Silversea– Silversea Cruises designated 31 cruises as part of its 2015 Silver Wave program, which provides a suite upgrade and up to $1,000 in onboard credits as a booking incentive. The offer, which expires Dec. 31, applies to both Silversea’s traditional luxury cruises and its expedition ships. It is capacity controlled and subject to availability, Silversea said.
Takeaway: Rare luxury promotion.
FCH – Tom Corcoran Jr. Chairman of FelCor Lodging Trust sold 75,000 shares in two non-option related sales of 72,100 at an average price of $10.2535/share and 2,900 at an average price of $10.2089/share on December 1 and 2, respectively. Mr. Corcoran now directly owns 417,215 shares as well as 32,847 shares indirectly.
Takeaway: Not a lot of insider buying in hotel stocks these days
Chinese Corruption Worse in 2014 than 2013 – Despite this year's well-publicized campaign to combat graft and crack down on corrupt public officials, China was labeled more corrupt this year than it was in 2013. China posted one of the worst rises in corruption of any country in this year's "Corruption Perceptions Index" by lobbying group Transparency International. The country dropped to 100th out of 175 countries, from 80th in 2013.
Takeaway: This report will not likely sit well with the CPC officials in Beijing given the CPC's efforts to improve transparency and accountability by party officials.
Macau Economic Recession – The gaming slump will deprive the industry of MOP60 billion (US$7.51 billion) in revenue and the government of MOP20 billion in direct gaming taxes in the 12 months ending next June and the shortfalls mean the economy will contract for four quarters in a row, thus causing a recession.
Takeaway: We noted yesterday Macau GDP contracted by 2.1% in Q3 2014. Given Q4 2014's sickening GGR contraction, we'd bet Q4 GDP will also be negative. Two consecutive quarters of negative GDP is a recession.
Pachinko Arrives in Hong Kong – following the successful HKSE listing by Dynam Japan Holding (6889.HK) at least four additional pachinko-hall operators are considering similar HKSE listings.
Atlantic City Casino Tax Relief – Atlantic City's eight surviving casinos would get a break on taxes and the city would get help making up for lost revenue under a rescue plan unveiled by two New Jersey state senators. The plan, introduced in the Legislature late Monday and announced on Tuesday by State Senate President Steve Sweeney and Sen. James Whelan, would let the casinos collectively pay $150 million in lieu of taxes for two years. It would redirect an investment alternative tax, currently used for redevelopment projects, to help pay off $25 million to $30 million of Atlantic City's debt a year.
Takeaway: This would be an important lifeline for the AC casinos and would help stem their losses. $BYD and $CZR
Group Hotel Bookings Uptick in November – According to TravelClick North American Hospitality Review, new group hotel reservations increased 10.5% during November 2014. Additionally, for the first quarter of 2015, group hotel bookings experienced an increase in ADR of 2.6% and increase in occupancy of 4.3%.
Takeaway: Strong Group lodging segment fundamentals provide a positive look through for RHP as well as HLT.
China November PMI data
Official services PMI 53.9 vs 53.8 in October
HSBC services PMI 53.0 vs 52.9 in October
Employment 49.5, fifth consecutive month below 50
New orders rose at quickest pace in 2 1/2 years
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.