LEISURE LETTER (02/05/2015)

TICKERS: LVS, CZR, GTECH, IGT, CCL

EVENTS

  • Feb 10: 
    • IGT extraordinary shareholder meeting vote
    • HOT 4Q CC 10:30am
      • (1866) ; pw: 67514695
  • Feb 12: 
    • MPEL 4Q CC 8:30am
      • (1866) ; pw: MPEL
    • PNK 4Q CC 10:00am
      • ; pw: 68847867
    • BYD 4Q CC 5:00pm
      • ; pw: 5378350
  • Feb 17: MGM 4Q CC 11:00am
    • ; pw: 8870181
  • Feb 18: 
    • HYATT 4Q CC 11:30am
      • ; PW: 62845475
    • MAR 4Q release 5pm
  • Feb 19:
    • HST 4Q CC 9:00am
  • Feb 25: Prestige analyst day (9:00am-12pm)

HEADLINE STORY 

LVS - Sheldon Adelson says he expects rich mainlanders to avoid gambling in Macau until the mainland’s campaign against corruption has run its course. “They will stay low and will not be conspicuous in their spending habits until the witch-hunt or whatever it is called – the crackdown on corruption levels – goes down.” “They want to stay below the visibility radar because nobody, whether they are legitimate business people making millions or billions of dollars, wants to come in and be ostentatious.”

Adelson also recalled that visitation to Macau has not declined over the past months. But it doesn’t mean “every person that came in is what we call here a VIP player that could spend a large amount of money in each visit.” Premium mass players – who Mr Adelson says can usually bet between USD5,000 to USD100,000 – have not been spending as much as they did before. 

Nevertheless, Mr Adelson is confident that Macau’s gaming revenue will see brighter days in the near future: “Everything in life is cyclical. Night follows day, day follows night; and recession follows expansion, expansion follows recession…this too will pass, and this too is cyclical.”

Article HERE

Takeaway:  We think the junket business is permanently impaired.

COMPANY NEWS 

LVS - Macau casino operator Sands China Ltd says it is paying a bonus on February 16 – three days before Chinese New Year – to all eligible full-time employees. A total of 27,000 full-timers that have already completed at least one year of full service will receive a bonus of at least one month’s salary, said the company.

Article HERE

Takeaway:  13 month bonus is the norm for 2015

CZR - Caesars Entertainment announced that Gary Loveman, Chairman and CEO, has decided to begin transitioning management of the company at the end of Q1. Loveman will continue to serve as Chairman of Caesars Entertainment and of Caesars Entertainment Operating Company. As Chairman, Loveman will continue to oversee the restructuring of CEOC. Mark Frissora joins Caesars Entertainment as CEO designee and will become CEO on 1-Jul. He joins the board immediately, and will report to the board. Frissora is the former CEO of Hertz and Tenneco.

Article HERE

 

GTECH – The Georgia Lottery has launched a full complement of online lottery games through a partnership with supplier GTECH, with a mobile offering to follow later this year. GTECH claims that Georgia is now the first lottery in the US to offer a full line of iLottery products, which includes traditional draw based games, iKeno, and eInstant games at various price points.

Article HERE

 

IGT - IGT achieved another international win with its agreement to install the Company's systems solutions at the prestigious Palazzo Club, which is located within the Sheraton Saigon Hotel & Towers, Vietnam.

Article HERE

 

Konami- Konami Corp’s gaming and systems division on Thursday reported net revenue of JPY23.2 billion (US$197.8 million) for the nine months ended December 31, 2014, up 4.2% YoY. 

“Sales of the Podium video slot machine continued to be favorable, mainly in the U.S. market. Full-scale marketing is also in progress in Asia, Central and South America and Europe, where we are working on building distribution networks," the company said.

Konami also expanded its line-up of premium products in the North American market, by introducing Podium Goliath, “a larger size version of Podium" under a participation agreement with casino operators.

Article HERE

Takeaway:  We will have more details on KNM's ship share but it wouldn't be surprising to see gains there.

Stations - Station Casinos is extending its reach northward through an agreement to operate a sports book inside the Baldini’s Casino in Sparks. The location is the company’s second sports book operation outside its large and small casinos in the Las Vegas area. Station Casinos has 15 sports wagering facilities at its own properties and also operates the race and sports book at the El Cortez in downtown Las Vegas.

Article HERE

CCL - Cruise prices will never go back up to what they once were as cruise holidays become increasingly mainstream, according to David Noyes, the new CEO of Carnival UK. “We’ve always got to put a good-value proposition in front of them. A lot of what we’re seeing [with price] in cruising – and not just in the UK – as it becomes more mature and more mainstream is inevitable as people look for better value.”

Asked if discounting had been eradicated by the commission cuts instigated by his predecessor David Dingle, and if fares had started to edge up, Noyes said: “We can still charge a premium with brands like P&O Cruises and Cunard, but there’s a lot of competition, not just in cruise but in the holiday market generally.

“Overall, prices are on a par 
with last year, but you never know until the end of the season how it will end up.”

Noyes added that trading so far in 2015 had been strong and this year’s wave period had been designed to be the biggest yet.  “We’ve seen a significant increase in traffic to our website and callers into our contact centers, and our travel partners are reporting lots of people coming into their shops and ringing them,” said Noyes.  “This is all converting into bookings.”

Article HERE

Takeaway:  We agree UK bookings are doing well, partially attributed to an earlier Wave but Noyes's commentary on flat pricing is worse than what many analysts are expecting.  

Paradise Co South Korean casino operator Paradise Co Ltd reported a decline in profit attributable to shareholders, even as casino sales saw a double-digit growth last year. The firm on Thursday reported net profit attributable to controlling interests of KRW96.4 billion (US$88.3 million) for the whole of 2014, down 4.2 percent from a year earlier.

Chinese VIP players accounted for 66.7 percent of table drop at Paradise Co casinos last year, the firm said in Thursday’s filing. Japanese high-rollers came a distant second, accounting for 17.1 percent of total table drop.

Article HERE

 Takeaway: Korea's GGR has benefited from Macau's slump.

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.