LEISURE LETTER (04/09/2015)

TICKERS: HLT, MGM, ZNGA, FCH, WYNN, AYA

COMPANY NEWS  

HLT - Blackstone has reportedly been approached by a Chinese consortium including Shanghai-based JinJiang International.  Whispers have suggested Blackstone has been offered $45/share for its controlling stake but Blackstone wants more.

ARTICLE HERE

Takeaway: HLT has done well on solid lodging fundamentals. This rumor would further support its share price.

 

MGM - The Bellagio has just completed a resort-wide remodel of the guest rooms and 403 suites in its main tower.  The Mandalay Bay Convention Center is on schedule to open the first phase of its expansion in August.

 

ZNGA - has announced the resignation of CEO Don Mattrick after just short of two years in the CEO hot seat. Former CEO and founder/chairman Mark Pincus will return to CEO, effective April 8. Pincus tells the WSJ that the company is preparing a new set of mobile games.

 

FCH - announced prelim Q1 REVPAR growth of +13.1% on same-store basis.  “We are extremely pleased with our strong year-to-date results, which are significantly ahead of our expectations. Lodging fundamentals continue to be robust and our same-store RevPAR growth continues to outperform the industry," said Richard A. Smith, President and Chief Executive Officer of FelCor. “We are also making great progress on completing the sales of our remaining non-strategic hotels. We have sold three hotels during 2015, including one in March, and three of the five remaining hotels are under contract to be sold.”

 

Melco International - $700 million casino in the Russian gambling zone of Primorye at Vladivostok will open its first phase in July.  This will include a casino and a 140-room hotel. 

Takeaway: This project has been long delayed.  

 

WYNN -  “The corporate governance committee will name one or more diverse directors to the board by the end of 2015,” said WYNN in a filing. Wynn Resorts would “prioritise women and diverse candidates in its search,” the filing added.

 

AYA.CN - 

  • People familiar with an investigation by regulator the Autorité des marchés financiers tell the Globe and Mail that the AMF has seized documents of and communications records between CEO David Baazov and CFO Daniel Sebag.
  • The Globe and Mail reports that the AMF and the company's board are looking into trading in Amaya stock before the $4.9B purchase of Rational Group (PokerStars) last summer, and that the regulator has executed search warrants on Amaya, its financial adviser Canaccord Genuity (CF.CN), and Manulife Securities (MFC.CN).
  • In other news, NYX has agreed to purchase from Amaya all of the issued and outstanding shares of Amaya's subsidiaries, Amaya (Alberta) Inc. (formerly Chartwell Technology Inc.) and Cryptologic Limited on a cash-free and debt-free basis.
    • The total cash consideration for the transaction is C$150,000,000, subject to working capital adjustments.
    • As part of the transaction, a subsidiary of Amaya and NYX anticipate entering into a supplier licensing agreement for a term of six years, under which NYX will provide certain casino gaming content to Amaya's real-money casino offering which Amaya intends to integrate into the PokerStars and Full Tilt branded casino websites.
    • Pursuant to the Licensing agreement, a subsidiary of Amaya will provide NYX with a minimum license commitment in the amount of C$12,000,000 per year for each of the first three years of the Licensing agreement. 

ARTICLE HERE

 

Pollard Banknote - its $5 instant lottery game Frogger is already the Vermont Lottery’s highest-selling instant game despite being on the market less than three months. The game, licensed from Konami, is outperforming all other instant games introduced in Vermont since 2010.

INDUSTRY NEWS

Less Mainland visitors - Macau received fewer visitors from the mainland but more from both Hong Kong and Taiwan over the Easter and Ching Ming holidays between Good Friday and Monday, Macau Government Tourist Office (MGTO) Director Helena de Senna Fernandes said.

Senna Fernandes said that the city received 641,000 visitors during the four days, up 2.7% YoY. While the number of mainland visitors dropped 3.5%, the number of visitors from Hong Kong and Taiwan rose 20% and 42% respectively, the city’s tourism chief said. 

Meanwhile, the Government Information Bureau (GCS) said in a statement on Wednesday that the number of “tourist arrivals” rose 1.67% to 775,086 between Good Friday and Tuesday.

ARTICLE HERE

Takeaway: Weak Mainland visitation could partly explain the lower revenues in the 1st week of April.

 

Singapore - Singapore is trying to use judicial means to compel dozens of Chinese gamblers to pay up. Last year its two casinos filed 49 lawsuits against individuals in Singapore’s High Court for gaming-related debts, up from just two a year earlier. The resorts brought 12 more cases in the first quarter of 2015. 

ARTICLE HERE

Takeaway: Without junkets, Singapore casinos are more exposed to the VIP downturn and collecting debts.

 

South Korea - According to news agency Yonhap, national officials supported a measure that would ease some foreign investment conditions relating to Saemangeum, an area of reclaimed land (pictured) in North Jeolla, in the southwest of the country. The government-backed bill is said to simplify the registration process for foreigners-only casinos in that area. Under the current rules, only casinos that are attached to luxury hotels and have at least US$500 million of investment are qualified to register, reported Yonhap. 

ARTICLE HERE

 

Romania - The Romanian government has triggered an investigation into the affairs of national lottery Loteria Romania, accusing the company of entering the gambling proper business without licence or authority by introducing 6,263 slot machines over the period 2006 to 2014 in collaboration with an Intralot subsidiary, Lotrom SA. Prosecutors claimed Wednesday that this illegal activity has impacted state budgets to the tune of over Euro 100 million (a preliminary estimate). The officials declined at this stage to provide further details, and Loteria Romania declined to comment on the issue in view of the ongoing investigation.  Sources close to the investigation told Reuters that the enquiry was criminal in nature, and that bank accounts belonging to the two companies involved had been frozen.

ARTICLE HERE

 

Indiana GGR declined 7.3% YoY in March

Takeaway: A couple of % points below our expectations.

 

Thoroughbred races -  Handle on thoroughbred races grew 9.46% YoY to $984.365 million in March. Race dates rose 1.81% to 394.

Takeaway:  Horse racing betting did well in March.

 

Four-river cruise in China -  Asia's first four-country river cruise from the Mekong to China has been introduced by locally based operator Pandaw. The new seven-night itinerary will sail from Chiang Saen, in Thailand, to Myanmar, then on to Laos before crossing the Chinese border for the first time to reach the city of Jinghong in Yunnan Province.

ARTICLE HERE

MACRO

Chinese Ministry of Finance to ease restrictions on NPL write-offs 

  • China Securities Journal cited banking officials who said that China's MoF will further ease restrictions on banks writing off bad loans. The officials said that the government will allow some banks to write off some bad loans before tax to encourage banks to increase lending.

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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