TICKERS: SGMS, CCL
- March 26: Macau Legend 4Q conf call 8:30-9:30pm (EST)
- March 27: CCL F1Q, 10am -
SGMS - currently holds the West Virginia contract to provide the central monitoring system. That six-year, $6.2 million was originally awarded in 2006 and was extended when the six-year term expired. The current contract is set to expire in 2017.
WV Lottery director John Musgrave said the Lottery would like to have the bidding process complete a year before the current contract expires to allow for any transition period that might be needed should a different vendor win the contract.
Meanwhile, the state’s various lottery games generated nearly $94.7 million in revenue in February, about $2.2 million better than the $92.5 million forecast for the month. However, it was about $4.2 million less than the $98.9 million generated in February 2014. Better than expected revenue from video lottery games at the state’s four racetrack casinos, along with a boost in online games thanks to the $564.1 million Powerball jackpot during the month, helped offset a sluggish performance in limited video lottery revenue during the month.
Musgrave said the casinos are seeing a slight increase in consumer spending. He hoped that the improving spring weather combined with improvements in the regional economy will have positive effect on casino revenue in the next few months. “We would like to think we’re seeing an increase in disposable income,” he said.
Takeaway: Can SGMS hold on to the WV contract? In addition, WV casino revenues haven't seen a growth month since June 2012 due to stifling new competition. The decline will continue in March.
CCL - Carnival is ready to order 10 new ships and to sign a construction contract with the two biggest shipyards in Europe, Fincantieri in Italy and the German giant Meyer Werft.
The announcement with the details of the ships, the shipyards involved and the total figure for the agreement are expected by the end of this week, perhaps by Friday. The commission from the American company will be divided equally between Fincantieri and Meyer Werft.
The market price for these units would be between $700 and $800 million each, a figure that would bring the total value of the commission for Fincantieri to $4 billion. Other sources confirm that the order, when announced, should include a new class of ship for the Costa Cruise fleet: a 170,000-tonne prototype that could be ordered with a twin ship.
The other ships should be divided between the American giant’s various brands, Carnival in particular urgently needing a renewal of its fleet. New ships for Aida are also at stake: the group’s German brand, after the complicated construction of its latest ship in Japan, the “AidaPrima”, Aida decided to build its next ships in Europe.
Takeaway: Build it and they will come.... CCL hopes that is the case.
CY Foundation - CY Foundation Group Ltd, the parent of Macau-based casino services provider CY Management Ltd, said its plans to expand slot machine operations have to be extended beyond the original deadlines.
“Given the recent changes in market environment in Macau, the group has not been able to achieve its target to expand the number of gaming machines in operation to 1,000 by the end of this financial year [on March 31, 2015],” the company said in a filing this week.
CY Foundation identified the market changes affecting Macau’s gaming industry as “the enforcement of non-smoking policy in casinos, mainland China’s policies on restricting frequency of visitation to Macau and the anti-corruption drive within mainland China”.
The company had said in its interim report in December that its goal was to expand the number of gaming machines in operation to 1,000 by the end of the current financial year, and to 3,000 by the end of the financial year ending March 31, 2017.
CY Foundation said it would continue to explore potential sites in Macau and Southeast Asia.
Japanese pachinko operator Niraku Holdings is IPOing in Hong Kong to raise US$49.5 million.
Niraku is selling 30 million shares at HK$1 to HK$1.28 each in the IPO, which closes Friday, Macau Business reported.
The money will be used to build five pachinko halls in northeastern Japan.
The $49.5 million is significantly less than the $100 million to $200 million Niraku originally expected to raise.
Niraku is one of four pachinko operators expected to go public this year.
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.