LEISURE LETTER (04/08/2015)

TICKERS: MGM, LVS, NCLH, CCL, RCL

headline news  

April - VIP gaming promoters predict that Macau GGR in April will be less than the MOP20 billion the government is hoping for each month, Macao Daily reports.

The Chinese-language newspaper quotes one unidentified junket operator as saying the prospects for the VIP gaming market are opaque. The source said the slowing of growth in the mainland economy and central government policy were reducing gaming revenue in Macau.

The newspaper quotes another unidentified junket operator as saying the value of the VIP gaming market is now one-third of what it was at its peak.

ARTICLE HERE

Takeaway: Less than MOP20 billion suggests a fall of at least 36% YoY for April GGR. Indeed, the weak 1st week in April indicates it may look that way.

COMPANY NEWS  

MGM - MGM China has agreed in principle with its lenders to amend and restate its Hong Kong Dollar denominated senior credit facilities agreement expanding the facility by $1 billion and extending the maturity by 18 months.  The amended and extended facilities will consist of a US$1.55 billion equivalent term loan, an increase from the previous $550 million term loan and US$1.45 billion equivalent revolving credit facility.  The facilities will amend and restate the existing US$2 billion credit facilities of MGM China Holdings Limited, in their entirety, and extend the term of those facilities to April, 2019.

The amended facilities will bear interest at a fluctuating rate per annum based on HIBOR plus a margin, initially set for a six month period at 1.75% per annum, but thereafter the margin (in the range of 1.375% to 2.50% per annum) will be determined by the company's leverage ratio.

Takeaway: MGM China needed this $1bn expansion of credit to fund its Cotai project amid a deteriorating demand environment.

LVS - A sampan that runs on a canal in the Marina Bay Sands shopping mall tipped over with guests in it on Sunday. It is the first time such an incident has happened since the sampan ride came into operation in 2010.

A spokesman for Marina Bay Sands told The Straits Times that the water in the canal is shallow, and that assistance was "immediately rendered" to the affected guests.

ARTICLE HERE

 

Macau Legend - The New Macau Association (ANM) says that the Land, Public Works and Transport Bureau (DSSOPT) plans to raise the height limit and to relax the density restrictions for new buildings to be built at the Fisherman’s Wharf. The association said that the plan runs counter to the government’s desire to protect world heritage sites.

ANM argues that these decisions are in conflict with the Cultural Institute’s suggestion about the area’s height limit of 60 meters, which was made last year. The association urged the government to extend the public notice period and to revise the Chief Executive’s instructions – which were issued in 2008 – to restrict the heights of buildings in the buffer areas surrounding the Guia Lighthouse. According to this regulation, part of the Fisherman’s Wharf is limited in height to 90 meters, while the other part cannot exceed 60 meters 

ARTICLE HERE

China LotSynergy - one of its units has won a bid to supply software to Henan Sports Lottery Administration Centre in mainland China for use in the sale by telephone of lottery tickets. The subsidiary, Beijing Huacai Yingtong Technology Co Ltd, is involved in the research and development of lottery systems and equipment.

The unit will provide “system project planning, software design and development and system testing services” to Henan Sports Lottery. It will also connect the system to the National Sports Lottery Administration Centre.

ARTICLE HERE 

Paradise- South Korean gaming operator Paradise Co Ltd said sales from its casino business division decreased 11.6% in 1Q 2015 to KRW133.3 billion (US$122.2 million). The drop was caused by sales from table games, which were down 12.9% YoY, to KRW124.6 billion. Sales from machine games jumped 12.2% YoY to KRW 8.8 billion. Table drop decreased by 22.7% YoY in 1Q 2015 to KRW 1.1 trillion. 

Takeaway: Is this a hiccup or are Chinese high rollers starting to move elsewhere?

NCLH - Due to a technical issue with the ship’s ABB-manufactured Azipod propulsion system, Norwegian Star’s 15-day Panama Canal cruise, scheduled to depart on April 12 from Los Angeles, has been canceled. Passengers on the canceled cruise will receive a full refund and a 50% future cruise credit. 

ARTICLE HERE

CCL - Costa Cruises is promoting a money-back satisfaction guarantee for passengers who book a cruise by May 31. The concept is novel on the Italian market, though it's been done by sister brand Carnival Cruise Line stateside. 

ARTICLE HERE

RCL - is seeking shareholder approval for a delisting of shares on the Oslo Stock Exchange. The election of eight directors, including a newcomer, will also be considered at the company's annual meeting on May 28 in Miami. In addition, the proxy has a shareholder proposal that would require the company to take steps to increase diverse representation, inclusive of gender, race and ethnicity, on the board and assess the effectiveness of these efforts. Currently Royal Caribbean has one woman director; the race and ethnicity of its directors are not specified.

ARTICLE HERE

INDUSTRY NEWS

Singapore Visitation - For the 1st two months of 2015, overall visitation to Singapore have declined 5.5% YoY.  Indonesian visitors -largest visitor segment- tumbled 16% YoY in Jan-Feb. Malaysian visitors also fell 7%.. Mainland Chinese visitors dropped 3% in Jan-Feb; due to the CNY shift, a sharp drop in January (-25%) was offset by 17% growth in February.

LEISURE LETTER (04/08/2015) - 3


Takeaway: Weak Malaysian/Indonesian currencies may have contributed to the decline, which will pressure Singapore mass gaming volumes. 

Singapore Changi Airport visitation - February visitors was up 0.3% YoY. 

LEISURE LETTER (04/08/2015) - 2

LRT - The Transportation Infrastructure Office (GIT) has slammed the contractor responsible for building the depot superstructure of the Taipa section of the Light Rail Transit (LRT), blaming delays in the construction process on the contractor’s apparent inaction.

Takeaway: No point shifting blame. Get this project done.

Package tours - Travel agents are now arranging package tours for mainlanders that take in Macau and places over the border in Guangdong, Business Daily reports. The newspaper quotes the Macau International Chartered Tourist Guide Association and Macau Travel Industry Council as saying this is meant to make up for a decline last month in demand among mainlanders for package tours that take in Macau and Hong Kong.

It quotes the tour guide association’s president, Wu Wai Fong, as saying: “The negative image mainland visitors have of Hong Kong since the recent protests against mainland shoppers and parallel traders have really impacted the package tour business.”

Takeaway: Package tour visitors to Macau have been robust. This initiative may help even more.

March Regional revenues

Illinois: -6%

Ohio SSS: -4%

Detroit: -1%

Takeaway: Illinois and Ohio are coming in-line with our projections for March

MACRO

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.