LEISURE LETTER (12/23/2014)

Tickers: MPEL, PENN, H 

Today's Headline Story

MPEL –  MPEL has repurchased about ~1.5% of its ordinary diluted shares outstanding (1.656 billion) in December so far. YTD, MPEL have repurchased ~2.2% of its shares. For all the transactions , see HERE.

Takeaway:  At least the company feels the bottom is near

COMPANY NEWS

577.HK – Louis XIII said in an HKSE regulatory filing the slowdown in Macau's gaming revenue over the six months to September 30 was “primarily” caused by a decline in telephone betting.

Article HERE

Takeaway: Seems like a reach to us, since proxy betting only ceased at Wynn Macau and Sand China and is only a small portion of GGR. 

  

PENN – Hollywood Casino Bangor will be open 24 hours a day between Dec. 26 and Jan. 3 as a trial run to determine whether a round-the-clock operation in Eastern Maine might be viable long-term. Normally, the casino, which has about 400 employees, closes daily at 3 a.m. and reopens at 8 a.m.

Article HERE

Takeaway:  An initiative to compete with Oxford casino

 

H – announced plans to offer free Wi-Fi at all Hyatt hotels worldwide, providing connectivity and convenience regardless of booking method or loyalty program participation. Free Wi-Fi will become available to Hyatt guests around the world in February 2015. Travelers will be able to access free Wi-Fi on an unlimited number of mobile devices or laptops in Hyatt-branded hotel guest rooms and social spaces.

Article HERE

Takeaway: Hyatt ups the WiFi game with free WiFi for all guests, not just loyalty members.

 

RCL - will retrofit 19 of its ships with advanced emissions purification (AEP) systems. Installation will begin on Jan 2015 with 13 RCI ships and 6 Celebrity ships. Most of the installations will take place between 2015 and 2017. Each installation will take ~8 months.

Takeaway:  Expect more dry dock days in 2015 

INDUSTRY NEWS

Corruption/austerity articles:

  • China started to probe into alleged corruption of Ling Jihua, a former senior aide to former president Hu Jintao. Ling is vice chairman of the Chinese People's Political Consultative Conference National Committee and head of the United Front Work Department of the CPC Central Committee. Ling is investigated for "disciplinary violations". Ling was demoted in September 2012 after sources said his son was involved in a deadly crash involving a luxury sports car. Article HERE
  • Hong Kong's Former Chief Secretary Sentenced for Corruption – Hong Kong's former chief secretary Rafael Hui was sentenced by the High Court on Tuesday to seven-and-a-half years for corruption and misconduct convictions. Hui was ordered to pay the government of the Hong Kong Special Administrative Region (SAR) a fine of 11.182 million HK dollars ( about 1.437 million U.S. dollars). Hui was convicted of five counts of misconduct and corruption, making him the highest-ranking official in Hong Kong's history found guilty of taking bribes. Article HERE 
  • China's CPC Reprimands Officials in Austerity Sweep – November saw 7,308 officials reprimanded for violating the central government's austere working practice policies.  The Communist Party of China's (CPC) Central Commission for Discipline Inspection (CCDI) issued its monthly report regarding its fight against extravagance, saying that those punished were involved in 5,699 violations uncovered last month. Violations included dereliction of duty; overseas travel and personal entertainment financed by public funds; negligence and lazy work practices; excessive spending on receptions, buildings and vehicles; extravagant weddings and funerals; and sending or accepting gifts, the CCDI said on its website. Article HERE
  • China Business Leader Investigated – Sun Zhaoxue, former general manager of China's top aluminum producer, is being investigated for allegedly accepting bribes. Sun, also former member of the Communist Party of China (CPC) committee of the state-owned enterprise Aluminum Corporation of China (Chinalco), has been placed under "coercive measures". According to China's criminal procedure law, coercive measures include summons by force, bail, residential surveillance, detention and arrest. The CPC Central Commission for Discipline Inspection (CCDI) announced earlier Tuesday that Sun had been expelled from the CPC and public office following its own investigation. The CCDI investigation found that Sun took advantage of his post to seek profits for others, asked for and accepted "a huge amount in bribes," and committed adultery.Article HERE

 

Macau Outbound Tourism Increase – The president of the Travel Industry Council of Macau, Andy Wu, expects Macau people to take 30 percent more tours abroad this holiday season than a year ago with Japan and South Korea as the most popular destinations among Macau tourists. Because the closely spaced public holidays in Macau between the handover anniversary and New Year fall this year on weekdays, many resident’s took extended holidays to more distant locations. 

Article HERE

 

Deflation in Singapore – The Republic is experiencing deflation for the first time in five years as the consumer price index (CPI) went into negative territory, the first negative reading since December 2009. The CPI fell to -0.3% year-on-year in November, down from 0.1% in October, according to the Department of Statistics. 

Article HERE

Takeaway:  A slight bump up for mass gaming?

 

McCarran Airport Traffic in November – The Clark County Aviation Department on Tuesday reported 3.4 million passengers for the month, a 2.3% increase over November 2013. The number of international passengers increased 12.8% for the month to 279,860. For the year to date, passenger traffic is up 2.5% to 39.5 million and international travelers are up 12.8% to 3.1 million. Based on historical traffic patterns and trends, McCarran should surpass 42 million passengers in 2014 — more than the number recorded in 2013, but short of the 47.7 million reported in record-setting 2007.

Article HERE

Takeaway:  McCarran passenger traffic has now grown for 15 consecutive months.

 

25 to Watch in 2015 – Global Gaming Business Magazine named its list of "25 People to Watch in 2015"

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. 


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