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Tickers:  IGT, LVS, MPEL, MGM, BEE, NCLH, RCL

EVENTS

  • Dec 2: 11 am ISLE Q2 2015 earnings
  • 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

COMPANY NEWS

959.HK – Macau junket investor Amax Holdings Ltd. posted a loss of HK$18.40 million (US$2.3 million) during the first half of its fiscal year ended September 30. Facing increased losses of revenue, Amax Holdings noted the loss ‘was mainly attributable to the increase in general and administrative expenses and finance costs during the period under review.’

Article HERE

Takeaway: More challenging VIP gaming operations hinder results and performance as Amax looks to diversify into resort operations with its Vanuatu casino resort development.

GENS.SP – Genting Singapore today repurchased 10 million shares for S$11.356 million, following yesterday's repurchase of 10 million shares. Cumulative shares repurchased year-to-date = 87,665,000.  Following today's share repurchase, the total shares outstanding = 12,160,371,480

Article HERE

Takeaway: Genting share repurchases continue. Pristine balance sheet suggests there will be more.

IGT & GTK.IM – GTECH S.p.A. announced that based on the communications received from the custodians, GTECH believes that cash exit rights have been exercised for less than 20% of the Company shares outstanding as of July 15, 2014, when the agreement for the acquisition of International Game Technology was executed.  GTECH and IGT continue to work towards completing transaction final results of the cash exit rights to be announced by December 12, 2014.

Takeaway: GTECH/IGT merger remains on track.

LVS & 1928.HK Sands China announced the 400-room St. Regis Macao, located in Sands Cotai Central, will open in the third quarter of next year.

Article HERE

Takeaway:  We think it will open on August 1, 2015.

MPEL & MCP.PM – According to Lawrence Ho Yau Lung, co-chairman and chief executive of Melco Crown, City of Dreams Manila is to have a soft opening on December 14.

Article HERE

Takeaway:  As expected.

200.HK – Melco International Development Ltd has subscribed to 26,062,294 new shares of common stock in Entertainment Gaming Asia Inc (EGT). Melco International paid more than US$14 million for its subscription to new shares in EGT, via an entity called EGT Entertainment Holding Ltd, which was already EGT’s largest stockholder. Upon completion of the rights issue, Melco International’s subsidiary owns 37,512,294 shares of common stock in EGT, representing 64.81% of the outstanding shares of common stock of EGT’s enlarged capital. EGT operates slot machines on a participation basis and also supplies gaming chips and plaques to casinos in Asia.

Article HERE


MGM – As the company works to obtain all the necessary permits to begin breaking ground in early 2015 for its $800 million Springfield casino, MGM Resorts International is also preparing to shell out nearly $2 million to eight Western Massachusetts communities on Friday, Dec. 5.

Article HERE

Takeaway: MGM ensuring an expeditious approval and permitting process with the payment of the surrounding communities funds to help improve traffic flow.

BEE – announced a 20 million share offering through JP Morgan and intends to use the proceeds from the offering to fund the acquisition of the Four Seasons Resort Scottsdale at Troon North as well as to redeem all of the issued and outstanding shares of its 8.25% Series B Cumulative Redeemable Preferred Stock and general corporate purposes.

Article HERE

Takeaway: Interesting to us is how management conveyed at NAREIT (November 5 and 6) their view that BEE shares were undervalued (stock was $12.60 to $12.90/share) then various C-Level individuals sold stock on November 6 and 7 at $12.64 and $12.59/share...and now we have an equity issuance near $12.50/share.

NCLH – announced that Jason Montague has been named President and Chief Operating Officer of Prestige Cruise Holdings, Inc. following the resignation of Kunal S. Kamlani.

RCL – Royal Caribbean Cruises Ltd. will replace Bemis Company Inc. (BMS) in the S&P 500 effective after the close of trading on Thursday, December 4.

Insider Transactions:

WYN – EVP and General Counsel Scott McLester sold 6,834 shares (not options related) on November 28 at $83/share and now owns 7,675 shares directly and an additional 56,004 via restricted stock units.

INDUSTRY NEWS

Macau Additional Transit Visa Restrictions – Effective as of yesterday December 1st additional transit visa restrictions between Zhuhai to Macau transiting to a third country have been implemented at the China – Macau border crossings and had an immediate effect.

The new regulations now require:

1.  Must hold valid passport

2. Must have valid destination country visa

3. Airplane ticket to the destination country

All three documents must be presented at the dedicated customs check point in order to clear immigration into Macau from Zhuhai.  GongBei border customs officials have dedicated two channels (lanes 21 & 22) to exclusively process this type of visa application and to demonstrate their intent have an exit lane to return to China immediately adjacent for those applicants deemed unsuccessful. News reports suggests this exit lane was well used yesterday immediately the new requirements were enforced. Multiple outlets in and around the GongBei border shopping district that provided this service of selling airline tickets and visas were apparently vacated with shutters down within hours of the new regulations coming into force.

Article HERE

Takeaway: Another blow to the Mass business that generated it's 2nd consecutive YoY decline in November (even after adjusting for the table reclassifications). December continues to look worse and worse.

Macau's New Secretary for Economy & Finance – Lionel Leong Vai Tac, Macau’s new Secretary for Economy and Finance, the official in charge of the city’s casino industry, said  – on Monday said the government would “pay special attention” to the current decline in gaming revenue. He added he would carefully assess the development of the city’s gaming industry ahead of the renewal of the gaming licenses. The current rights of the city’s six Macau gaming concessionaires expire on various dates between 2020 and 2022.

Article HERE and HERE

CPC New Anti-Graft Investigations – Disciplinary inspectors have arrived at all target state organizations in a new round of campaign initiated by the Communist Party of China (CPC) to put a check on officials' misconduct. The third round of inspection for 2014 targets 13 state organizations: the Ministry of Culture, the Ministry of Environmental Protection, China Association for Science and Technology, All-China Federation of Industry & Commerce, China Radio International, China Southern Airlines, China State Shipbuilding Corporation, China Unicom, China Shipping Company, China Huadian Corporation, Dongfeng Motor Corporation, Shenhua Group and Sinopec.  These inspectors will be stationed in their respective target unit for about one month, aiming to uncover officials' misconduct, especially that concerning corruption, undesirable work styles and personnel selection and appointment.

Article HERE

Takeaway: No end in sight for CPC crackdowns and in fact the investigations appear to be more "in plain sight".

Hong Kong Occupy Central Movement Shutdown – Three founders of Hong Kong pro-democracy movement Occupy Central with Love and Peace said they would surrender to the police today, hoping the student protesters who have been leading the street occupations will retreat.

Article HERE

 

Vietnam Drawing Renewed Gaming Interest – Chow Tai Fook Enterprises Ltd, a privately held firm founded by Hong Kong businessman Cheng Yu Tung, is interested in investing in a US$4 billion casino in Vietnam. The company is already a partner in a bid for a casino in Australia and has recently committed to build an integrated resort in South Korea. VinaCapital Group, Vietnam’s largest fund manager, is developing the Quang Nam project and said it has almost completed negotiations with an unnamed foreign partner, according to an October report by the Vietnam Investment Review. Chow Tai Fook Enterprises would replace Malaysia’s Genting Malaysia Bhd as investors in the project. Vietnam’s government is currently considering a draft decree allowing local citizens to enter casinos and plans also to reduce regulatory barriers for casino operators to do business in the country in a bid to attract more foreign investors.

Article HERE

 

Maine Gaming Expansion – At the Maine State House, a legislative committee agreed to draft a report for incoming lawmakers to guide their discussion on future gambling venues. The report, which was authorized by the Legislature, could set the stage for a new discussion around creation of two more casinos, one in southern Maine and another that would benefit the state's Indian tribes. However, State Sen. Linda Valentino, plans to submit a request for a bill later this month that would lay the foundation for three more gaming facilities. Valentino says she'd make the case for a facility in southern Maine and for smaller operations in Aroostook and Washington counties. And she says the state could still meet its cap for 3,500 slot machines by distributing them proportionately

Article HERE

 

Taj Mahal Closes Hotel Tower & Stops Issuing Gaming Credit – Yesterday, Trump Entertainment Resorts announced it closed the Chairman Tower, the newer of its two hotel towers, and halted the issuance of gaming credit.  In its filing with the New Jersey Division of Gaming Enforcement, Trump Entertainment outlined Taj Mahal will close at 5:59 a.m. on Dec. 12, and the final hotel guests have until noon that day to check out. Cars have to be out of the garage by 5 that evening.

Article HERE

 Takeaway:  Taj Mahal on track to close. 

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:  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.