• It's Here!

    Etf Pro

    Get the big financial market moves right, bullish or bearish with Hedgeye’s ETF Pro.

  • It's Here

    MARKET EDGES

    Identify global risks and opportunities with essential macro intel using Hedgeye’s Market Edges.

Tickers:  SGMS, HLT, MAR, RHP, RCL

EVENTS

  • Dec 14: City of Dreams Manila Opening
  • Dec 17:  Upstate NY Casino Decision
  • Dec 20: Trump Taj Mahal Closing

Today's Headline Story

HLT – is in talks to buy four properties from Blackstone Group LP and other owners to defer tax payments from its $1.95 billion sale of New York’s Waldorf Astoria hotel. The assets include San Francisco’s Parc 55 Wyndham, the city’s fourth-biggest hotel, at more than 1,000 rooms, two Waldorf Astoria resorts in Key West and one in Orlando. Aside from Blackstone, the sellers of the Parc 55 include Rockpoint Group, a Boston-based real estate private-equity firm. New York-based Blackstone owns the two Key West resorts, and the sellers of the Orlando property are Blackstone, Chicago-based Gem Realty Capital and Farallon Capital Management, a San Francisco-based hedge fund firm.

Article HERE

Takeaway:  While the reinvestment is entirely tax motivated, we like the profile of selling New York and buying San Francisco and Florida as well as the EBITDA growth outlook of the new assets.

COMPANY NEWS

LVS – Robert G. Goldstein will be replacing Michael A. Leven as LVS's President and COO, as Leven is retiring at the end of 2014. Goldstein joined LVS in 1995 and has served in several executive positions for the company, including president and chief operating officer of The Venetian and Palazzo and, most recently, as president of global gaming operations. 

Takeaway: Given tough times, it is easier to hire an internal candidate. 

200.HK Melco International Development – Development of Barcelona World could be in jeopardy following the withdrawal of the anchor sponsor Enrique Bañuelos.  Late yesterday, Mr. Bañuelos and his firm, Veremonte, announced neither will not exercise the right to purchase the land of CaixaBank in Salou (Tarragona), where they planned to build BCNWorld. Following this announcement, the Catalonia Government hopes to find another investor who takes the initiative forward. In addition to Melco Int'l Development, other development partners included:  Hard Rock, Ceasars, Value Retail, Melia and Port Aventura.

Article HERE

Takeaway: Following the land purchase delay back in July, we'd been hearing from our local contacts that the project would be delayed or potentially canceled. 

678.HK – Genting Hong Kong is acquiring Exa Ltd, an investment company with interests in luxury yachts and submersibles, for US$37.9 million. Genting Hong Kong, a joint venture partner in the Resorts World Manila casino resort in the Philippines, said the acquisition will “enhance the company’s competitive edge”. The deal will be done via Genting-subsidiary Star Cruises Terminal (China) Ltd, which operates casino cruises in the Asia Pacific region. Exa was previously owned by a private unit trust controlled by Lim Kok Thay and his family.  

Article HERE

Takeaway: Genting continuing to diversify

Konami – Shoshone Rose Casino selects Konami's SYNKORS Gaming enterprise management system.

Takeaway: IGT lost a systems client to Konami

GTK.IM– announced that the statutory cash exit rights in connection with the cross-border merger of GTECH with and into Georgia Worldwide PLC have been validly exercised with respect to 19,796,852 shares, for an aggregate amount of €379.6M at the liquidation amount of €19.174 per share. Such shares represent 11.3% of GTECH’s current fully paid-up share capital and 11.4% of GTECH’s shares outstanding as of 15-Jul-14, when the agreement for the acquisition of International Game Technology (IGT) was executed. 

Following the determination of the number of shares for which cash exit rights have been exercised, the commitment for GTECH’s 364-day senior bridge term loan credit facility for the financing of the acquisition of IGT (the “Bridge Facility”), will be further reduced to ~$6 billion.  

Takeaway:  As long it is under 20%, the merger will go as planned. The reduction in the bridge loan is a positive.

SGMS – Richard M. Haddrill, former CEO of Bally Technologies, Inc. ("Bally"), was elected as Executive Vice Chairman of the Board on December 4, 2014, and Judge Gabrielle K. McDonald was elected as a Director of the Board on October 30, 2014. 

RHP & MAR – Despite being embroiled in legal controversy, the Gaylord Rockies Hotel and Conference Center could bypass a legal quagmire dragging on and break ground by the end of next year with significant financing from Houston-based RIDA Development Corp. On Monday, Aurora City Council, acting as the Aurora Urban Renewal Authority, unanimously and with no comment approved a resolution that supports Houston-based RIDA Development Corp.  financing the construction of a project, which has been estimated to cost upwards of $800 million

Article HERE

Takeaway: Once development commences on the Gaylord Rockies, RHP would recover about $8.5 million in predevelopment costs from RIDA. Additionally, RHP has first right of refusal on acquiring the Gaylord Rockies from RIDA upon property stabilization.  MAR would be the manager of the hotel.

RCL –  Royal Caribbean International president Michael Bayley said the 1st new Celebrity Edge class ship will operate from the UK.  The ship is due for delivery in autumn 2018.  

Article HERE

Takeaway:  No surprise that the new ships would be positioned in the strongest European market in 2014.

INDUSTRY NEWS

Neptune's Cheung Chai Tai Linked to Paul Phua's Illegal World Cup Betting at Caesars – Recall Paul Phua alleged 14K Triad Leader was arrested for spearheading an alleged illegal World Cup betting scheme via IBCBet from a villa at Caesars Palace.  Now one of Cheung Chai Tai's companies was linked to the World Cup betting as Cheung's companies were used to help the alleged group collect and settle with gamblers.

Article HERE

Macau Hotels  – Macau ranks third most expensive overall in the 2014 Accommodation Price Index compiled by GoEuro.com, a Berlin-based travel search website. Macau is among the most expensive overall after New York and St. Moritz in Switzerland. While Macau ranks third in the overall survey, in the category of 5-star Hotel Price Index Macau doesn’t even get into the top 20, at US$353 per night.

Article HERE

Takeaway: While Macau is relatively expensive, many of the rooms are comped for VIP players.

Airfairs & Capacity Growth in 2015 – A new White Paper by ARC and Expedia, “Preparing for Takeoff: Air Travel Trends for 2015,” predicts modest capacity gains next year, but large increases by low-cost carrier while noting airfares should be flat to slightly lower to most U.S. and European cities in 2015. The report notes Frontier expects to increase capacity by 14% in the first half of 2015 and that Spirit’s capacity will be up 26% year over year in the first half of 2015 with new efforts to to penetrate Washington DC, Houston, Dallas, Detroit and Chicago. 

Article HERE

Takeaway: Airline capacity growth is positive for hotels – more seats = support for MICE, business transient and leisure demand.  Lower airfares are a positive for Association groups who tend to be more price sensitive. 

MACRO

China Banking System To Increase Lending – the PBoC increased target bank lending for 2014 to CNY10T from CNY9.5T last year and the PBoC is also allowing banks to lend more than 75% of deposits

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.