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Takeaway: Disappointing all around. Even on a hold-adjusted basis, Q4 missed expectations. Lower market share and cautious VIP commentary.


  • Jeju:  will be 1st major integrated resort in Korea
  • Market share #s:
    • GGR: 42%
    • RC volume: 54%
    • mass drop: 43%
    • Slot/ETGs: 43%
  • 4Q VIP hold rate: 2.2%; hold-adjusted win is 2.85%
  • Genting: has become more prudent, not accepting as much VIP players as before; VIP has become more risky and players getting more cash-strapped. 
  • VIP 2015 outlook: challenging. 
  • Will look closely at their provision for bad debt. It will not be pretty for one or two quarters
    • Bad debt increased 42% YoY in Q4.
  • Q4 Mass revs as a % of GGR: 56%
    • 75% revenue contribution in slots/ETGs? You could say that.
    • Slots have gone up slightly while ETGs have been flat. 
    • Mass table revenues slightly down
    • Very focused on promos
  • Japan: lot of activity to try to push the casino bill through. Still hopeful the bill gets through some time in May.
  • Scaling back VIP business.  Will focus on mass and premium mass business. Expect no growth in VIP for rest of year.
  • Jeju:  has received construction approvals for IR. Waiting for bill to be presented to Jeju govt. Once that is done, govt will gazette the regulations. Expect casino license in 6-12 months.
  • Jurjong:  soft opening in April 2015. Fully open by June 2015. Expect 80-85% occupancy in initial stages. Expect 1,500/1,600 people to visit the attractions. Should boost casino attendance. 
  • Korea:  no information on junket operations.  
  • Share repurchases: stopped in January because of quiet period (blackout period).  No comment on further share repurchases.
  • Large gains in Q4 balance sheet:  exiting most of the portfolio investments in preparations for Jeju/Japan.  Needed cash.
  • More optimistic on Japan than other people.  Diet Parliament ends in June. 
  • Why not raise dividend of 1 cent?  Still need to consider where they stand on cash flow.  May raise in future.
  • Q4 VIP RC Volume decreased 12% YoY
  • 2014 VIP RC volume unchanged YoY
  • Provision for bad debt:  jump in longer-term debt. In Q4, number of customers either they negotiate for longer-term payment or that they have no money.  Going forward, provisions may be higher.
  • Jurong hotel vs RWS pricing: Jurong pricing will be much lower than Sentosa. Room rates of S$200 (RWS had S$422 in Q4). Room sizes are smaller.
  • Jeju # of tables:  unsure until casino bill is enacted
  • RW Jeju:  casino license will be issued by Governor of Jeju
    • Genting HK Korea license is different but gaming tax will be the same
  • VIP volume:  softness throughout but impact from Mainland China particularly strong 
  • Japan:  hasn't been less enthusiastic on gaming legislation
  • 2015 Capex:  nothing major. Opening Puss/Boots at USS and Battlestar in April
  • 20k visitors (12k USS, 8k in MLP).   USS $80 spend/visitor; MLP $30 spend/visitor
  • Jurong construction costs not major: $50-60m
  • Jeju capex for rest of year: do not need to put in any more money
  • Mass initiatives: coming up with few more programs along with Jurong hotel

McCullough: Plan for Uncertainty

The remarks below were delivered by Hedgeye CEO Keith McCullough as part of an update to our macro team's #GlobalDeflation theme at Asset Allocation 2015: Liquidity, a conference hosted by The Boston Security Analysts Society. He was asked how he expects the Fed to dance its way through the next 6-12 months.


McCullough: Plan for Uncertainty - 34

In the past, six or seven years ago, I would mistakenly start with what the Fed should do, versus what the Fed could do. Of course, these are two very different things.


I’m not Janet Yellen, I never want to be Janet Yellen. And she doesn’t want to be me. What she could do here is raise rates, with the deflationary force and global growth slowing at the same time. That would be a huge policy mistake.


What the Fed is effectively trying to do—and this is the core of central planning—is promise you, my mom, my dad, and the whole world, certainty. That’s not possible. So whatever their plan is, I’m not buying it. I don’t think you can plan certainty with respect to things like economic gravity.


So, what would I plan for? I’d plan for uncertainty.

McCullough: Plan for Uncertainty - dollar cartoon 07.02.2014

And I think the most uncertain thing you could have right now is not only how the Fed reacts to their inability to forecast accurately, but also, how they act in the moment.


Again, I think if Janet Yellen is sitting there, raising rates into what I think is going to be a sub-1% CPI and deflation rolling out like it did between September and January, that could be a very nasty thing that she will have to address in Jackson Hole later this year.


Don’t forget, we have only had one Jackson Hole in the last four, where we didn’t have to get a big central plan from the Fed.


It’s going to be an interesting dance to watch. 


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Cartoon of the Day: Batty Fed

Cartoon of the Day: Batty Fed - Fed cartoon 02.23.2015

Investors will be all ears when Janet Yellen testifies this week, hoping for a hint about when the Fed will finally raise rates from their crisis-era lows.

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It’s All About the Dollar…

It’s All About the Dollar… - 88


Editor's note: This is a brief excerpt from Hedgeye morning research. For more information on how you can become a subscriber click here.

*  *  *  *  *  *  *

Good #StrongDollar morning to you!


The +0.6% USD Index move to +5% year-to-date is good for plenty of commodity-based inverse correlation moves (see #deflation); WTI Oil -1.2% (after a -5.3% week), Gold -0.7% (after a -1.8% week) – Copper still looks like death. 

Click image to enlarge.

It’s All About the Dollar… - brye


On a related note, Japanese “Weimar Nikkei” is all sorts of jacked up on weak Yen (vs USD) to 15-year highs at +5.8% year-to-date – and this is after plenty of headline news that Japanese Corporates (70% of them) see “no need for more easing.”


We can’t imagine why… it’s only been 18 years.

Keith's Macro Notebook 2/23: USD | Japan | Europe


Hedgeye CEO Keith McCullough shares the top three things in his macro notebook this morning.

LEISURE LETTER (02/23/2015)





  • Feb 24: GENTING 4Q CC 4:30am
  • Feb 25: 
    • SJM 4Q CC 6:00am
    • Prestige analyst day (9:00am-12pm)
    • ISLE F3Q 2015:
  • Feb 26: RHP 4Q CC 10:00am  pw: 73087325


Macau government wants to impose a limit to the number of mainland tourists that visit the city, Secretary for Social Affairs and Culture Alexis Tam Chon Weng announced. Mr Tam said tourists already swamp some areas of the city, which has a negative impact on the population’s daily life.


Mr Tam told reporters that the Macau government plans to soon discuss the issue with mainland’s central government. He said no cap had yet been decided and that limits could vary for different seasons of the year. Mr Tam added he hoped the cap could be introduced still this year.


The call to introduce a cap to the number of mainland tourists is not new in Macau. But previously the government had argued that the city still had capacity to welcome more tourists – authorities just needed to better manage the inflow of tourists by directing visitors to less-visited parts of the city.


Takeaway: This doesn't sound good. The profitable grind mass business would certainly be impacted.  What kind of signal does this send regarding the government's desire to see the gaming industry succeed?


MGM - Pacman will fight Mayweather in a super fight at the MGM Grand on May 2.

Takeaway:  It's on. Big win for MGM Grand albeit short term.  Bigger win for boxing fans.


MPEL - Belle CFO Manuel Gana said from Q1-Q3 2014, the company booked P1.2 billion in revenue from the lease to Melco for CoD Manila.  In 2013, Belle realized revenues of P1.3 billion from the lease.  For this year, lease revenues from CoD Manila is expected to hit P1.4 billion.


Gana added that CoD Manila is now mainly catering to the Filipino and needs at least six months to attract high rollers from abroad.  "Since soft opening, it's been primarily mass and premium mass [market]," he said.  


The casino and hotel operations are now in full swing, but the retail business is likely to come on board by April. Asked if China's crackdown on gamers will impact its operations, Gana said "... it's an old story" and the development is spared since City of Dreams Manila is an integrated resort. "From what I understand, it does not affect VIPs. VIP junket operators do not use these offices. These offices are like tourists agencies. They try to attract new mass and premium mass customers. Some integrated resorts have tried to side step the issue by not using the word casino or promoting casino operations," he said. "They promote hotels, restaurants, theatrical productions and other entertainment productions."


Takeaway: For any new property, it will take time to ramp up. For the Philippines market, the locals is the most important consumer segment (70% of customers are locals/ 30% international (mostly big VIP, with Koreans the biggest segment). 


SGMS - announced today that a patent infringement lawsuit against Bally Technologies, Inc.(formerly known as SHFL entertainment, Inc.) has been dismissed with prejudice by the United States District Court for the District of Nevada. The lawsuit was brought by TableMax IP Holdings, Inc., Table Max Gaming, Inc., and Vegas Amusement, Inc. (collectively "TableMax") in August 2009. 


H - Hyatt Place Tijuana opens in Mexico. 

  • 145 roomy rooms, all of which feature a swiveling 42-inch TV, the plush Hyatt Grand Bed and a Cozy Corner sectional sofa with sectional sofa-sleeper

Takeaway:  Select service brands will drive Hyatt's unit growth in 2015


RCL -  A suspected norovirus outbreak has left 95 passengers and seven crew members suffering from vomiting and diarrhea on Celebrity EquinoxThe Celebrity Cruises’ vessel has 2,896 passengers on board and is returning to Fort Lauderdale, Florida, for sanitization after a 10 day cruise.

Takeaway: It's not official but February is Norovirus Month! This year, the headlines have been mostly RCL.


CCL-  While Australia is currently the third largest source market for Seabourn, Tony Archbold, director of sales Australia, said it is closing the gap with the UK to become No. 2 after North America.




Visitation - The Public Security Police (PSP) has revealed that more than 1.72 million people crossed the Macau border checkpoints between February 18 and 22.  Compared with CNY 2014, overall visitation is up 3.2% while Mainland Visitation is up 6.7% so far.


LEISURE LETTER (02/23/2015) - CNY


Takeaway:  While a new record, CNY visitation growth is nothing spectacular.




Las Vegas – The Las Vegas Convention and Visitors Authority (LVCVA) Board of Directors has approved a contract for the purchase of the historic Riviera Hotel & Casino's 26-acre site as the cornerstone for its planned Las Vegas Global Business District (LVGBD). Under the agreement, the LVCVA will purchase the site for a total of $182.5 million.  LVGBD is projected to bring 6,000 construction-period jobs to Southern Nevada, and the construction portion alone is projected to generate $3.6 billion in economic activity.  


The $2.3 billion project is the largest economic development initiative the LVCVA has undertaken since the Las Vegas Convention Center was originally built in the late 1950s.  The expansion project is expected to lead to an additional 480,000 new attendees as current conventions grow and through attracting an estimated 20 new trade shows and conventions.


Envisioned to be completed in two phases, the first phase focuses on the Riviera site and includes 750,000 square feet of new exhibit space and 187,500 square feet of supporting meeting space as part of the new 1.8-million-square-foot expansion.


Phase two focuses on renovating the existing convention center and includes a 100,000-square-foot general session space and another 100,000 square feet of meeting space. Including public areas and service areas, the expansion and renovation increase the facility from its current total footprint of 3.2 million square feet to nearly 5.7 million square feet.  Once construction begins, the entire project is expected to take five to eight years to complete.

Article HERE

Takeaway:  Biggest development for LV in years. 


British Columbia Lottery Corp - expects to improve its bottom line this year thanks to an influx of high-rolling gamblers from mainland China. With lottery sales softening, the Crown corporation and its partner casinos on the Lower Mainland have focused on attracting wealthy “industrialists and businessmen” keen to play baccarat for up to $100,000 a hand.


Jim Lightbody, the corporation’s CEO, said the strategy has paid off in spades.

Total revenue from table games — including high-limit tables — is up nearly 20%, or $80 million, from last year, he said.


Takeaway:  Big Chinese VIP gamblers also moving money to Canada.



S'pore CPI - Core inflation – which excludes changes in the price of private road transport and accommodation since these are influenced more by government policies – rose 1.0% YoY in January, down from the previous month's 1.5%. Looking ahead, the Monetary Authority of Singapore (MAS) said inflation is expected to ease further, before rising in the second half of 2015.


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.

Daily Trading Ranges

20 Proprietary Risk Ranges

Daily Trading Ranges is designed to help you understand where you’re buying and selling within the risk range and help you make better sales at the top end of the range and purchases at the low end.