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Tickers:  IGT, MGM, HLT, HST, CCL

EVENTS

  • Dec 4: Normua Investment Forum - MPEL, WYNN & Genting Singapore
  • 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 soft opening
  • Dec 17: Upstate NY Casino Decision

Today's Headline Story

Mainland China Official: Macau Too Reliant on Gambling– Li Fei, deputy secretary general of the National People’s Congress Standing Committee, on Wednesday said the Macau SAR government should address its over reliance on the gaming industry and to put more effort into economic diversification and take into account the interests of mainland China. Mr Li, who is also chairman of the Basic Law Committee, was in Macau on Wednesday to take part in a seminar on Macau’s Basic Law, which came into effect following the city’s handover from Portuguese administration in 1999. 

Article HERE

Takeaway:  We have heard similar comments from the Chinese government in the past but we expect more discussion on this particularly in the face of declining GGR.

COMPANY NEWS

GENS.SP – Genting Singapore today repurchased 12 million shares (35.3% of today's trading volume) for S$13.338 million. Cumulative shares repurchased year-to-date = 109,665,000.  Following today's share repurchase, the total shares outstanding = 12,123,371,480.

Article HERE

Takeaway:  Thus far, Genting has completed 8.9% of the total authorized shares.  They are authorized to purchase up to 10% of ordinary shares.

IGT & GTK.IM – The merger of the two companies could increase NewCo's EBITDA by as much as $280 million. In an IGT filing on behalf of GTech to Nasdaq in New York, management said “industrial efficiencies” could have a positive EBITDA impact of US$85 million; with “overlapping corporate activities” accounting for a US$125 million positive impact; and a further US$20 million improvement from “optimized” research and development spending. GTech added that what it called “natural revenue enhancements” from sales in Italy – GTech’s home base – plus benefits from cross selling and “mobile exploitation” could produce a further US$50 million positive impact on EBITDA.

Article HERE

Takeaway: It's good to be optimistic on revenue and cost synergies. 

MGM – MGM Resorts International asks Obama Administration to proceed with caution before granting federal recognition to Pamunkey Native American tribe of Virginia.

Article HERE

Takeaway: MGM seeking to prevent potential competition from a Native American casino at its MGM National Harbor project under development.

HLT – welcomed The Franklin Hotel Chapel Hill to its growing global brand, Curio – A Collection by Hilton. Selected for its strong connection to the community and tradition of excellence among guests, The Franklin Hotel Chapel Hill offers travelers the local discovery and authentic travel experiences at the core of the Curio brand.

HST - authorized a regular quarterly cash dividend of $0.20 per share and a special dividend of $0.06 per share on the Company's common stock.  The total dividend of $0.26 per common share is payable on January 15, 2015 to stockholders of record on December 31, 2014.

Takeaway: HST had mentioned on its 3Q call that a special dividend was possible in 4Q.


CCL – Princess Cruises is celebrating 50 years of cruising and kicking off its Wave season with the cruise line's biggest sale ever featuring savings on vacation destinations around the globe. Guests can save up to $500 per person on all cruise vacations seven days and longer, sailing between May and December 2015. In addition to these special savings, guests will enjoy free dining for two at one of the line's specialty restaurants and receive up to $200 per stateroom of free onboard credit to be spent as they wish, including on commemorative 50th anniversary keepsakes, a rejuvenating massage at the Lotus Spa, or an in-depth cultural experience on a Princess shore excursion.

Guests can also bring along friends and family and save up to 50% on third and fourth guests in a stateroom. They can additionally reserve their cruise with a reduced, refundable deposit of only $100 per person.

Takeaway:  Wave Season promotions are generally early this year.

 

Virgin Cruises – the Branson family- owned branded investment group, today announced the formation of Virgin Cruises, its new cruise line business, as well as the appointment of a CEO and its lead investment partner, Bain Capital.  
 
Proven industry leader Tom McAlpin will join Virgin Cruises as CEO and will head the management team. Most recently, Tom has been President and CEO of The World, Residences at Sea. Tom also served as President of Disney Cruise Line having joined as part of the founding management team. 
 
Virgin Cruises will be headquartered in the Miami/Fort Lauderdale area and plans to design and construct two new world class cruise ships.

Article HERE

INDUSTRY NEWS

Jeju - Jeju's casinos have opened offices in China to tout for gamblers there. One agent has organized 53 gambling trips to Jeju for Chinese gamblers over the last 2 years. In some instances, Chinese tourists have turned to loan sharks on the resort island, have their passports confiscated and commit suicide when their luck refuses to turn.

Article HERE

Takeaway:  The gaming world is becoming more sensitive to negative media articles. This time, it's South Korea.


Macau International Airport Traffic +9.5% in November – During November, passenger volume was recorded at over 450,000, +9.5% YoY. Aircraft movements posted over 4,600, an increase of 11.5% YoY from 4,400.

Article HERE

Takeaway: Strong airport traffic not translating into casino revenues. Some of the increased airport traffic could be MICE attendance. 

Macau Residential Real Estate Prices Drop 10% – A slump in gaming revenue, the mainland crackdown on corruption and competition from nearby Hengqin Island in Zhuhai have combined to drive home prices in Macau down 10%, and the fall is expected to extend into the new year, according to property agents. 

Article HERE

 

Hong Kong-Macau Organized Crime Crackdown – A joint crackdown organized by police in Guangdong Province, Hong Kong and Macau has busted 38 cross-border criminal gangs, Guangdong police said. The crackdown focused on guns, drugs, prostitution, money laundering and illegal border crossings, said Lin Weixiong, director of the criminal investigation bureau of Guangdong Pubic Security Department. Over 470 suspects have been arrested in the joint operation, Guangdong police said. More than 180 guns and one ton of drugs were found.

Article HERE

Takeaway: Mainland China cleaning up both Hong Kong and Macau.

Blackstone Group Closer to Closing The Cosmopolitan Acquisition – Yesterday the Nevada Gaming Control Board recommended that Blackstone Group be licensed to acquire the 4-year-old Strip hotel-casino. The Nevada Gaming Commission will take up the matter on Dec. 18. Blackstone representatives told the Control Board it planned to make changes at The Cosmopolitan, including adding another restaurant and renovating areas of the casino to improve revenue. The Cosmopolitan’s Strip frontage may get a new look.

Article HERE

Clark County Nevada Class A Slot Machine License Amended – Clark County commissioners on Wednesday approved regulations affecting slot machine operations in taverns. The new ordinance requires taverns to operate a full-service kitchen and embed more than half of the location’s slot machines into a bar top. If that requirement isn’t accomplished, the taverns must show that slot machine revenue is 50% or less than other revenue. If a tavern is unable to accomplish at least one of those requirements, it must reduce the number of slot machines from 15 to seven. The ordinance is effective immediately for future tavern applicants.

Article HERE

  

European Low Cost Airline Results Strong But Outlook Uncertain – Ryanair raised its profit forecast for the second time in a month on Thursday after passenger numbers jumped 22% in November. Ryanair said that despite increasing its seat capacity by 13% during November, as a result of opening new routes designed to appeal to business customers, it also increased its load factor by 7% to 88%.  However, the company also indicate its final full-year profit would still be heavily reliant on bookings and fare yields in the January-March quarter over which it said it "presently has very little visibility".

Article HERE

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.