As if badly missing sharply (and recently) reduced estimates wasn’t bad enough, Wynn Resorts also cut its dividend.  WYNN traded down 10% after hours last night in response.  Contrast this stock action with LVS last week which held up (down only 2%) despite a quarter that revealed much more troubling trends (base mass) than anything in the WYNN release. The difference? LVS maintained the dividend. 


So where do we go from here? Beyond the initial reaction to the respective dividend policy decisions, let’s get back to earnings drivers. We wouldn’t be buyers of either stock but with WYNN down 10%, LVS looks like it has more downside. The biggest risk going forward, on the margin, is not VIP, it’s base mass. Yes, LVS has decided to do what it can to protect the dividend and that’s great.  WYNN, in typical fashion, is being more conservative. However, dividend cuts typically follow cash flow trends, albeit in a lumpy fashion. With with each passing day, the probability of an LVS dividend cut increases.  


Please see our detailed note:

April 29, 2015

April 29, 2015 - Slide1



April 29, 2015 - Slide2

April 29, 2015 - Slide3

April 29, 2015 - Slide4

April 29, 2015 - Slide5

April 29, 2015 - Slide6 



April 29, 2015 - Slide7

April 29, 2015 - Slide8

April 29, 2015 - Slide9

April 29, 2015 - Slide10

April 29, 2015 - Slide11


Takeaway: WYNN missed lowered estimates badly and cut the dividend. Negative implications for LVS and MGM.




  • Hope for improvement from CNY turned out to be incorrect 
  • Degradation in VIP volumes have continued even into April
  • Q1 trends have continued into April
  • Las Vegas softness: Asian impact on baccarat
  • Dividend lowered based on soft results.  Board of Directors would not hesitate to change dividend policy again going forward.
  • Wynn Palace on track to open on March 2016
  • Allocation of new tables depend on non-casino/casino % (Wynn Palace has most attractive non-gaming option).
  • Wynn Everett:  Start construction in the fall; almost completely financed with non-recourse debt 
  • "Don't want to div out borrowed money"
  • New junket rooms did well.  Other junket operators 'weren't as powerful'.
  • LV Occupancy/room night fell YoY: because of ConAgg comps in March.  Lot of convention business but not much room inventory in January.  
  • LV:  May convention strong mix; 
  • LV: Summer trends in 2015 not pick up as in previous years due to stronger $ and weak Chinese play
  • LV: EBITDA decline continued in April
  • LV: Non-casino rev was flat in 1Q and will be flat in 2Q
  • Macau Labor allocation: got less than what they wanted and appealed the process
  • Macau:  smaller inventory of rooms than their competitors so less of an occupancy drop
  • Grew mid-segment of their mass segment quite nicely
  • 2014 employee turnover was 11% (less than market average of 20-25%) but will not protect them in the new changes in the marketplace
  • Uncertainty is the word of the day in Macau
  • Social harmony affected by Cotai expansions
  • Beijing policies have been unpredictable
  • Dividend policy:  quarterly reviewed. Want to avoid another deduction. 
  • Reallocated rooms from VIP to mid-tier mass.  Over half of rooms are now allocated to mass.
  • Slow down project in Cotai and/or Boston?  Can't slow it down. 
  • Chinese President Xi Jinping unequivocally supports Macau
  • Japan Diet: study bill appeared today. Good news.
  • Macau:  decline in VIP has opened a window to attract more premium mass customers. 
  • Wynn Palace: primarily a non-casino attraction
  • Wynn has smoking lounges in the terraces, some competitors don't have some advantage
  • Macau LRT bridge:  should be done in 2017 or as late as 2020.  Need to take care of reclaimed land issue from HK.
  • Boston: making forward with permit progress. Have performed drilling on site.  Hopefully get it open at end of 2017. Have spent $200m to date. Still need to spend $100m more on remediation and other fees before groundbreaking this year.


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REPLAY: The Macro Show with Keith McCullough

In case you missed it. Here's the replay from today's edition of The Macro Show.



The Macro Show is Hedgeye's dynamic pre-market rundown highlighting the most important global macro developments where CEO Keith McCullough shares 15 minutes or less of prepared market analysis and commentary and then answers your questions in a live Q&A session.

Cartoon of the Day: Just Imagine...

Cartoon of the Day: Just Imagine... - Japan QE cartoon 04.28.2015

"Last night Japan reported a bomb of a Retail Sales report at -9.7% year-over-year for the month of March," Hedgeye CEO Keith McCullough wrote in today's Morning Newsletter. "That compared to a paltry -1.7% in the month prior. And the Japanese stock market went up on that…"



Being long stocks/commodities ahead of an easier Fed and bombed out Q1 earnings expectations is one thing – holding all long positions related to the consumer as gas prices rise and consumer confidence makes lower-highs is entirely another.


As you can see in the data/chart below, “confidence” is both pro-cyclical (Late-Cycle) and mean reverting. If March was the high for this cycle, that’s is going to be a new problem. In rate of change terms, confidence has been bullish for 6 years.

Click image to enlarge.

#Confidence? - z 1


#Confidence? - z 2

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