LEISURE LETTER (03/17/2015

TICKERS: MGM, RCL, CCL, NCLH

EVENTS

  • March 16-19: Cruise Shipping Miami Conference
  • March 17: 4pm Land and Buildings MGM conf call: 
  • March 18: 9am IGT Investor Day: (1877) ; pw: 1325073
  • March 19: 5am Galaxy FY 2014 results
    • (), Passcode: 712943

COMPANY NEWS  

MGM- Registered investment manager, Land and Buildings, issues investor presentation proposing REIT conversion, which it believes offers MGM the opportunity to monetize real estate and reduce leverage in a cost- and tax-efficient manner.  Land and Buildings believes the net asset value of MGM is $33 per share and sees a path towards $55 per share value. They intend to nominate four highly-qualified candidates for Board. 

ARTICLE HERE

Takeaway: The REIT frenzy continues, however, hurdles exist. MGM carries a lot of financial leverage.  Moreover, MGM’s EV/EBITDA multiple (ex Macau) is pretty high and not too far off from the current weighted average GLPI/PENN multiple.  We will have more color on this.

 

Bloomberry - said its subsidiary Solaire Korea Co Ltd has signed an agreement to acquire up to 92% of Golden and Luxury Co Ltd, which owns and operates T.H.E. Hotel and Vegas Casino on South Korea’s southern holiday destination Jeju Island. Solaire Korea has also signed a deal to buy the 20.96-hectare (51.79-acre) Silmi Island near Incheon in the north of the country

 

The casino operator gave no value for the deals announced on Tuesday. Both transactions are still subject to South Korean government approvals.

ARTICLE HERE

Takeaway: South Korea has been getting a lot of attention lately. Everybody wants a piece of the action.

 

Cruise shipping Miami pre-conference tidbits and other news -

  • John Tercek, VP of new business development at Royal Caribbean Cruises Ltd., rattled off dozens of cruise markets that will be developed around the world and the challenges they face. Most markets, he said, are not as saturated as Australia and New Zealand, where 1 million people out of 20 million travel on cruise ships. However, Royal Caribbean is still seeking new international customers in Australia, in addition to Germany, France, Mexico, Brazil, China, Colombia and Hong Kong. 
  •  Big ships won't be able to go everywhere.
    • "A lot of [destinations] in Asia are on rivers, it's different than a deep water port," Tercek said. He noted that a destination like Myanmar will only be able to handle small ships because of its geography.
  • Just because you build it, doesn't mean they will come.
    • Cruisers don't want to travel to a destination and find a water park similar to the ones they left back home, said Marc Melville, director of Chukka Caribbean Adventure Tours. He stressed that travelers will pay more for experiences that are unique to their destinations.

      "People want multiple experiences on one site for less money and usually for less time," Melville said. "Stay local, stay local, stay local." 

  • China Cruise Shipping Conference and Show Confirmed for Shanghai in October

  • MSC South America: While many cruise lines are decreasing the number of ships in South America, MSC's bookings there are up, said Gianluca Suprani, MSC's head of global port development and shore activities. Santos, Rio de Janeiro, Buzios and Buenos Aires are some of the hot ports of call.

  • Shore excursions: Cruisers are searching for “authentic” and “exclusive” shore excursions and tours - and they're willing to pay more for the experience.

  • Azamara has committed to Australasia for a third season in 2018, with Azamara Journey coming for the first time in 2017 and Azamara Quest returning the next year.

  • Rumors: 
    • MSC Cruises USA has promised a “big announcement” during a Tuesday afternoon press conference. The rumors won’t stop that one of the MSC newbuilds is heading to homeport on the East Coast, could this be the confirmation? It would be coming more than two years out.

INDUSTRY NEWS

Singapore floating casino - A spokesman for New Century Tours, the ship's Singapore-based tour operator said, "Our business dropped drastically after the casinos opened. We had fewer than 500 passengers on some days. But as the (Singapore) casinos lost their novelty, the crowds started to come back in 2013." Now, the spokesman said, it gets between 600 and 700 passengers daily, four in five of whom are Singaporeans, and the rest, Malaysians.

 

There used to be three such floating casinos in recent years, but Leisure World is the only one known to be operating close to Singapore now.

ARTICLE HERE

Takeaway: Minor impact on the Singapore mass business - mainly targeting the lower end.

MACRO

Macau in recession:  4Q GDP fell 17.2% YoY, following a 2.3% drop in Q3.

Takeaway: You can thank gaming for that. Will Mainland China be more proactive in supporting Macau's mass gaming business? 

 

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.


Cartoon of the Day: Hard-Headed Bears

How's this for "hard data"? So far, 107 of 497 S&P 500 companies have reported aggregate sales and earnings growth of 4.4% and 13.2% respectively.

read more

Premium insight

McCullough [Uncensored]: When People Say ‘Everyone is Bullish, That’s Bulls@#t’

“You wonder why the performance of the hedge fund indices is so horrendous,” says Hedgeye CEO Keith McCullough, “they’re all doing the same thing, after the market moves. You shouldn’t be paid for that.”

read more

SECTOR SPOTLIGHT Replay | Healthcare Analyst Tom Tobin Today at 2:30PM ET

Tune in to this edition of Sector Spotlight with Healthcare analyst Tom Tobin and Healthcare Policy analyst Emily Evans.

read more

Ouchy!! Wall Street Consensus Hit By Epic Short Squeeze

In the latest example of what not to do with your portfolio, we have Wall Street consensus positioning...

read more

Cartoon of the Day: Bulls Leading the People

Investors rejoiced as centrist Emmanuel Macron edged out far-right Marine Le Pen in France's election day voting. European equities were up as much as 4.7% on the news.

read more

McCullough: ‘This Crazy Stat Drives Stock Market Bears Nuts’

If you’re short the stock market today, and your boss asks why is the Nasdaq at an all-time high, here’s the only honest answer: So far, Nasdaq company earnings are up 46% year-over-year.

read more

Who's Right? The Stock Market or the Bond Market?

"As I see it, bonds look like they have further to fall, while stocks look tenuous at these levels," writes Peter Atwater, founder of Financial Insyghts.

read more

Poll of the Day: If You Could Have Lunch with One Fed Chair...

What do you think? Cast your vote. Let us know.

read more

Are Millennials Actually Lazy, Narcissists? An Interview with Neil Howe (Part 2)

An interview with Neil Howe on why Boomers and Xers get it all wrong.

read more

6 Charts: The French Election, Nasdaq All-Time Highs & An Earnings Scorecard

We've been telling investors for some time that global growth is picking up, get long stocks.

read more

Another French Revolution?

"Don't be complacent," writes Hedgeye Managing Director Neil Howe. "Tectonic shifts are underway in France. Is there the prospect of the new Sixth Republic? C'est vraiment possible."

read more

Cartoon of the Day: The Trend is Your Friend

"All of the key trending macro data suggests the U.S. economy is accelerating," Hedgeye CEO Keith McCullough says.

read more