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SJM 4Q 2014 CONF CALL NOTES

Takeaway: 4Q EBITDA missed expectations due to higher costs and revenue mix. Jan/Feb performing better than market.

CONF CALL

  • Visitation from Mainland has continued to grow
    • High end players have either less gaming budget or visiting less often
  • Do not expect V-shaped recovery in near-term
  • 2015 Wage increase: 5% across the board and some loyalty benefits
  • 5% of rooms will be out of service in the next couple of years
  • On schedule to open Lisboa Palace in 2017. Currently 600 workers there
  • 2015 capex:  $7.1bn ($5.8bn -construction for Lisboa Palace); will be funded from cash
  • Will consider financial options after completion of Lisboa Palace

 

Q & A

  • Staff retention:  3,600 subscribe to bonus accumulation program.  Will be $45m/ year
  • Dividend payout: 70% in-line with what they have said before
  • New Mainland China visitation restriction possibility: both HK and Macau concerned. May address it in upcoming CPCC meeting.  Impact may be minimal.
  • Grand Lisboa margins:  low because of revenue mix and statutory holiday payments
  • Why satellite RC volume up?  Solid junket operators 
  • Casino Lisboa:  hold rate - 3.26% in 4Q, up from 2.77% in 3Q
  • Jan market share: improvement in both vip and mass
  • Promotional $ as a % of revenue:  5.9%...want to keep in the 4-5%; have to reinvest in mass business
  • February CNY:  market fundamentals remain weak but SJM doing better than market

Hedgeye's Morning Macro Call with CEO Keith McCullough

On today's Morning Macro Call, Hedgeye CEO Keith McCullough shares his Top Three Things, welcomes Financials Sector Head Josh Steiner via phone to discuss the current housing setup, and takes questions from viewers. 

 

 

 

 


SINGAPORE Q4 REVIEW: A TALE OF TWO SENTIMENTS

Takeaway: MBS was lucky, which resulted in share gains but VIP volumes remain the key risk.

CALL TO ACTION

LVS and Genting struck different chords when describing the Singapore market performance and outlook.  Luck was definitely on the side of LVS’s MBS in Q4, but overall, Genting’s assessment is probably more accurate.

 

While Singapore generated GGR growth in 4Q 2014, it was mainly due to easy YoY comps and a high hold percentage (good luck for the house).  On a hold-adjusted basis, Singapore 4Q GGR declined for a 5th straight quarter.

 

Mass volume growth is stable at best.  But most disconcerting is the accelerating decline in VIP volumes, indicative of systemic risks in the market, particularly those stemming from the high-end Mainland Chinese. 

 

Please see our detailed note: http://docs.hedgeye.com/HE_SING_4Q_2014.pdf


the macro show

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XLU: Removing Utilities from Investing Ideas

Takeaway: We are removing Utilities from Investing Ideas.

Interest rates are falling today post dovish Fed comments, so we’re selling Utilities (XLU) today on the bounce. We think there are better opportunities (like Penn Gaming) to be buying on weakness. 

XLU: Removing Utilities from Investing Ideas - 356


PENN: Adding Penn Gaming to Investing Ideas

Takeaway: We are adding Penn Gaming to Investing Ideas.

NoteThe excerpt below was written earlier today by Hedgeye CEO Keith McCullough. Stay tuned for further updates from our Gaming, Lodging & Leisure sector head Todd Jordan.

 

PENN: Adding Penn Gaming to Investing Ideas - rrr

 

Janet Yellen's testimony today was, on the margin, dovish. I think this keeps the lower-rates-for-longer Macro Theme in play and also augments our bullish Q1 (Quad1) view of US domestic consumption. 

 

One of the best ways to play that Macro Theme is via regional gaming stocks (where both gas prices and accelerating housing trends are bullish for their core consumer).

 

As I pointed out in a previous note, Todd Jordan has already added Penn Gaming to our Institutional Research Best Ideas list. So that's not new today - the stock testing the low-end of its risk range on no volume is...

 

To review Jordan's bull case, while he's not ready to call a V-shaped regional gaming recovery, due to a variety of factors the numbers are looking a lot better. PENN had a solid Q4. January was one of the best months in regional gaming since well before the “Great Recession” began in 2008. 

 

Buy Best Ideas (on red) when testing the low-end of the risk range.

KM



Macro Minute: The 3 Things You Need to Know From Yellen’s Testimony Today

 

Hedgeye CEO Keith McCullough distills the three things that really matter from Fed Chair Janet Yellen’s testimony before Congress today. 


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