The Hedgeye Gaming, Lodging, and Leisure team will host a conference call this Friday (April 10) at 11AM to discuss the latest Macau data and our overall thoughts on the market and the stocks.  Relevant tickers include:  LVS, WYNN, MGM, MPEL, 0027.HK, 1128.HK, 1928.HK, 2282.HK, 6883.HK, and 0880.HK.


Discussion Points:

  • The company and market details behind March’s 39% GGR decline
  • Summary of our late March Macau trip
  • The true Mass/VIP split is masked by smoking ban related reclassifications of tables – we’ll get you the right numbers
  • In terms of YoY declines, the worst could be behind us – but does that mean sequential trends are improving?
  • Revised 2015 monthly market projections
  • Hedgeye company EBITDA estimates vs the Street (LVS, WYNN, MGM, MPEL, and Galaxy Entertainment) – Still below the Street?
  • Research Topic: Why we’re a little more positive on Direct VIP


Please contact  for dial-in information.

The Only Big Macro Call We’re Staying With Right Now


In this brief excerpt from today’s morning macro call, Senior Macro analyst Darius Dale reviews the latest key developments in global macro and reveals the only big macro call Hedgeye is staying with right now.

European Banking Monitor: Sharp Pullback in Greek Financials Swaps

Takeaway: Greek Financials Swaps tighten ~15% on bailout negotiations.

Below are key European banking risk monitors, which are included as part of Josh Steiner and the Financial team's "Monday Morning Risk Monitor".  If you'd like to receive the work of the Financials team or request a trial please email 




European Financial CDS - Swaps were mostly unchanged in Europe last week while Greek institutions finally tightened in unison given a positive development in bailout negotiations; Greece delivered a more detailed plan for its bailout to the International Monetary Fund on Wednesday.


European Banking Monitor: Sharp Pullback in Greek Financials Swaps - chart1 financials CDS


Sovereign CDS – Sovereign swaps mostly tightened over last week on news of Greece delivering a more detailed bailout plan to the IMF.  Spanish sovereign swaps tightened the most, by -8 bps to 86, while Irish sovereign swaps widened nominally (+1 bp to 49).


European Banking Monitor: Sharp Pullback in Greek Financials Swaps - chart2 sovereign CDS


European Banking Monitor: Sharp Pullback in Greek Financials Swaps - chart3 sovereign CDS


European Banking Monitor: Sharp Pullback in Greek Financials Swaps - chart4 sovereign CDS


Euribor-OIS Spread – The Euribor-OIS spread (the difference between the euro interbank lending rate and overnight indexed swaps) measures bank counterparty risk in the Eurozone. The OIS is analogous to the effective Fed Funds rate in the United States.  Banks lending at the OIS do not swap principal, so counterparty risk in the OIS is minimal.  By contrast, the Euribor rate is the rate offered for unsecured interbank lending.  Thus, the spread between the two isolates counterparty risk. The Euribor-OIS spread was unchanged at 11 bps.


European Banking Monitor: Sharp Pullback in Greek Financials Swaps - chart5 euribor OIS Spread


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Retail Callouts (4/6): KSS, M, JCP, JWN, DDS, SHLD

Takeaway: 1Q15 Real Estate Summary: Strip Center demand lags Regional Malls, minimal real estate optionality for KSS.


Retail Callouts (4/6): KSS, M, JCP, JWN, DDS, SHLD - 4 6 chart2





KSS, Department Stores - Strip Center and Regional Mall 1Q15 Vacancy Rates



Takeaway: Here's a quick summary of what went down on the real estate front in 1Q15. Regional mall vacancies continue to outperform strip/community centers in the US with vacancy rates 220bps below the 7,000+ strip centers which sits at 10.1%. Only marginally off the 11% recession peaks. While rents at regional malls increased 1.8% in 1Q (driven in large part by 'A' properties) while stripe center occupancy rates creeped up by just 0.5%. Those are important data points given the questions we've fielded on KSS over the past few months in regards to the company's real estate optionality. 


KSS operates just 7% of its stores in regional malls, the rest are split between strip centers (67%) and freestanding locations (26%). Besides the fact that the company owns just 36% of its properties outright, it has practically no exposure to the space's beach front property -- the 300 or so 'A' malls in the country. Strip center space is a dime a dozen, though construction has stalled out following the recession there is little demand to fill the vacant space. Plus negative sq. ft. events like the Office Depot/Max/Staples will continue to weigh on this space. Add on the fact that we are massively overstored in the US today, we average 46. sq. ft./capita, compared to #2 on the list the UK at 9 sq. ft./capita. That leaves KSS with very little ability to monetize its real estate assets.


Retail Callouts (4/6): KSS, M, JCP, JWN, DDS, SHLD - 4 6 chart1





Party City files to raise up to $427.7 million in an IPO



BLKIA - Belk confirms it is exploring strategic alternatives, hires Goldman Sachs



Changing of the guard at RadioShack; former Dell exec to head chain



Saks chief steps down after 15 months



AMZN - expands Prime Now to Atlanta



TGT - Target, Lilly Pulitzer Collaboration Gets App



Everything to Know About Primark



Alibaba eyeing acquisition of Indian e-commerce firms 



Keith's Macro Notebook 4/6: UST 10YR | USD | Commodities

Hedgeye Macro Analyst Darius Dale shares the top three things in CEO Keith McCullough's macro notebook this morning.


LEISURE LETTER (04/06/2015)



WYNN -  Institutional Shareholder Services, a leading proxy-advisory firm, recommended that shareholders protest governance issues by withholding support for the company’s nominees to the board as well as dissident nominee Elaine Wynn amid a contentious board battle. 



WYNN - is promising a swift response to concerns from the MA's environmental secretary, who raised legal questions about the acquisition of MBTA-owned land critical to the casino's traffic plans. Wynn Everett President Robert DeSalvio says Secretary of Energy and Environmental Affairs Matthew Beaton found the gambling company's plan "suitable on substantially all of the 59 conditions" for the project identified by Beaton's predecessor. But Beaton said, "The requirement for the environmental approval will delay, but not derail, the project."


The Boston Herald reports that Beaton also said the state Department of Transportation, working with Wynn to upgrade to state-owned roads to the casino site, must integrate the plans with those of Boston, which has had a long-term federally financed $100 million fix for Sullivan Square and Rutherford Avenue that did not take into account casino trips.


Takeaway:  Not surprsingly, a delay in the Everett project. Capex may be inched higher.


GTECH/IGT - announced that 17 of the 20 lenders under its senior revolving credit facilities have proportionally increased their aggregate commitments with respect to the U.S. Dollar revolving credit facility from $1,500M to $1,800M and their aggregate commitments with respect to the EURO revolving credit facility from €850M to €1,050M. To prepare for the transition, GTK has finalized its price paid for IGT: $14.3396 in cash and .1819 shares in the new IGT for every current IGT share.


Crystal Cruises - is offering savings for family travel during than a dozen of its luxury cruises in fall and winter, with free berths for kids and other group perks.






Easter/Ching Ming visitation - Travelers to or from Macau made over 1.28 million border crossings during the Easter and Ching Ming festival holidays from Friday to Sunday. Between Friday and 9pm yesterday, about 570,700 mainlanders and 191,800 Hong Kong people entered Macau, the police say.
The authorities at the Gongbei border post say about 330,000 travelers crossed the border there on Sunday alone, some 160,000 of them Macau people or Hong Kong people.


Takeaway: Border travelers was higher than last year's 1.25m.  Tourists were also higher than last year's 412,630. Visitation growth, while slower, is not the problem.


F&B/Luxury -“Many friends and members have said that [in March] the food and beverage business dropped by 20% and the retail sales of luxury [items] also saw a cut of 40%. On the other hand, mass-oriented businesses remain unaffected for the moment. What we are seeing is, a general economic downturn,” said director of the Industry and Commerce Association of Macau, Ho King Lun, adding that rent-related expenses and other living costs in the city seem to be remaining intact in spite of the ongoing economic adjustment.


Takeaway:  F&B/retail revenues should also be lower in Q1 2015.


Cambodia -  Ros Phearun, deputy director of finance industry for the Ministry of Economy and Finance, said the ministry is close to finalizing the long-delayed draft bill, after which it will proceed to the Council of Ministers, with approval from the National Assembly not expected to take long after that. “We believe that when we have the law in place, we can increase our revenue by two times compared to our current revenue [of $25 million],” he said,


Son Chhay, deputy chairman of the National Assembly’s banking and finance commission, welcomed the draft law, but said the government should issue new gaming licenses only after the law was passed. He said that the law should be strict and reinforce the existing ban on locals gambling. He said once the bill passed the Council of Ministers, it should take the National Assembly no longer than three months to pass it. “I think it won’t take long because the government will try to push it as they need more money to fill up their recent increase of civil servants salary,” he added.


Cambodia currently has 59 licensed casinos as of last year, generating around $25 million, a rise of 15 from 2013. Phearun told the Post in March that three new casinos in Takeo province were awaiting their operating licenses and should be operational in time for Khmer New Year.


Takeaway: With Macau's slump, doubling gaming revenues in Cambodia is a feasible goal.  


NY VLTs - The 2015 New York state budget approved the week of March 29 codifies state law with case law in a move to try to thwart potential legal challenges. By doing so, officials said they have opened the door to requests by racetrack gaming facilities to offer new kinds of video lottery games at their facilities, such as electronic three-card poker and blackjack.


Supporters of the measure believe it will give bettors an opportunity to incorporate some skill into their wagers. However, the new devices will still be considered VLTs.


The New York State Gaming Commission estimates about 500 new machines will go to New York's racetrack gaming facilities, of which about 175 will replace existing machines that don't offer the games. Resorts World will add the most new machines. The NYSGC will have to approve any requests to add to the number of existing VLT devices.



Takeaway: Positive for SGMS and a way to existing casinos to better compete with upcoming full-scale casinos in NY. 


2014 Global lottery results - In 2014, global lottery sales grew 9.9% YoY. The growth in worldwide lottery sales was once again built on the foundations of strong performances from the Asia Pacific and Latin American regions, with both these locales having recorded unbroken double-digit growth in sales over the past six quarters. The robust performance of the Asia Pacific and Latin American markets was tempered, however, by the performance of the North American region, which saw sales tread water in 2014.

  • Latin America sales up 23.2% 
    • Argentina: +26.8%
    • Brazil: +18.5%
    • Chile: flat
    • Mexico: down slightly
  • Asia-Pacific sales up 15.6%
    • China Sports Lottery: +32.8%
    • China Welfare Lottery (world's largest lottery by sales volume at US$32.2 bn): +16.7%
    • Australia: +1.8%
    • Japan: dip slightly
  • Europe sales up 5.1%
    • Hungary: +24.8%
    • Czech Republic: +15.2%
    • Greece: +14.8%
    • Poland: +6.7%
    • Finland/Italy/France: ~+5%
    • Spain: fell slightly
  • Africa sales up 3.8%
  • North American sales up 0.4%
    • California Lottery: +6%
    • Powerball: -19%
  • Global growth in lottery sales has ranged from an annual high of 13.1% (2011) to an annual low of 4.9% (2013).


Takeaway: Worldwide lottery sales did well in 2014, although the mature North America market continues to lag, posting flattish results. 


TN lottery - The Tennessee Education Lottery Corporation announced today that it had sold more than $10 billion in instant tickets since the Lottery’s inception, reaching that mark in March, or  just over 11 years, a faster pace than all but one other U.S. lottery (Texas). Instant ticket sales for March of this year hit $115.8 million, the highest for any month since inception, eclipsing by one million dollars the previous record set in March 2014.



Iowa lottery - Iowa Lottery sales have been "spectacular," with gross sales totaling $217.5 million for the eight months between July and February, Lottery President Terry Rich said. That's 12.5% above the five-year average.

"Our latest monthly results for February show it was a really good month for both scratch and Powerball. March also should be an above-average month, based on current projections," Rich said.



Turks & Caicos - A $224 million Ritz-Carlton hotel planned for Turks and Caicos will include a casino. Construction is expected to begin in November and last three years.


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.


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