Takeaway: Margin improvement drove FY guidance slightly higher. LV Locals missed expectations.



  • Non-gaming initiatives working out
  • Consumers growing more confident and spending more
  • Locals market solid- non-gaming grew in 7th consecutive quarter.  Orleans and Suncoast did well. 
    • EBITDA fell due to $1m disruption at Suncoast (will continue until road work ends in June). 
    • Sports book win down 80% related to Super Bowl bets
  • Downtown LV:  solid Hawaiian play and increased Fremont Street. Non-gaming up 3%. Lower fuel costs from Hawaiian service.
  • Regionals:  Kansas Star (improved marketing plans).  IP (strong flowthrough). Blue Chip (revenue and EBITDA grew). Treasure Chest (revs up 8% thanks to visitation and slot play). Par-a-Dice:  adapting to new competitive landscape well. Delta Downs (well ahead of expectations, strong visitation from core customers)
  •  Borgata:  $5.5m property tax benefits; solid gaming volumes; more cost efficiencies. Contributed to 14,000 more room nights in 1Q.  
  • AC Same-store gaming revenues grew 5% in 1Q 2015
  • Customer is changing:  younger demographic of customers; need to reposition non-gaming amenities
  • Cash room rates at LV: +14%
  • Orleans/Blue Chip renovation scheduled to be completed by end of 2015
  • 20 new F&B concepts will open in next 12 months
  • Debt reduced by $80m in 1Q
  • 1Q capex: $19m ($7m Peninsula, $5m Borgata); will meet previously issued FY capex ($100m maintenance (Boyd), $15m maintenance (Peninsula) $45m project capex, Borgata around $25m)
  • Guidance raised:  
    • Expect LV road construction to impact 2Q (about ~$1mm)
    • Expect LV Locals and Downtown EBITDA to grow 2-3% : also for Q2
    • Expect Midwest/South EBITDA to grow 3-4%: also for Q2
    • Expect Borgata EBITDA ($160-165m) 
  • Borgata leverage ratio: 4.2x (down from 7.0x leverage in March 2014)

Q & A

  • Margins are sustainable, particularly in payroll/marketing
  • Delta Downs:  through April, continue to be very strong
  • LV Q2: trends from Q1 are continuing into Q2.  April is similar to Q1. May is looking good. June is looking soft. Nothing that gives them concern. 
  • REIT option - continue to evaluate
  • LV Downtown: cost cuts (half of it was due to lower fuel costs)
  • Raised FY guidance all due to stronger Q1 results
  • Pacquiao fight and Rock in Rio:  will take advantage by levering up rates
  • Slot replacement cycle is fairly normal

Casual Dining Shorts?

Casual Dining Shorts? - 6


Today, we find it prudent to reiterate our shorts and remind people why we have zero casual dining names on our current Investment Ideas list.


While seeing BWLD and PNRA whiff on earnings has really dampened the sentiment around restaurants in the early innings of 1Q15 earnings season, we believe signs of trouble have been brewing for quite some time.  This is particularly true in the casual dining industry, which despite being in the midst of a secular decline, currently trades close to a five-year peak multiple. 


Casual Dining Index: EV/EBITDA (NTM)

Casual Dining Shorts? - 11

Source: FactSet


Given the recent increase in gasoline prices, decrease in consumer confidence, labor cost pressures, and softening industry sales, we believe there is more downside on tap for restaurants stocks.


Regular Gas Price

Casual Dining Shorts? - 2



Casual Dining Shorts? - 3


Barring an exception, which we will call out if/when it is appropriate, we would not be comfortable owning any casual dining names.  CHUY and DFRG continue to be two of our favorite shorts, but the majority of names could be due for a continued correction.  See our short bench for more ideas.


Casual Dining Shorts? - 4


Casual Dining Shorts? - 5


Latest Relevant Note: 1Q15 Investment Ideas Earnings Preview

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Takeaway: We reiterate our intermediate-to-long term bullish bias on Japanese equities and view any near-term weakness as a buying opportunity.

Watch the brief 2min summary of our latest thoughts on Japan in light of the disappointing BoJ statement today.


Thesis summary:


  • Today in Japan, the lack of QQE expansion in spite of the BoJ lowering its forecasts for both growth (FY15: down -10bps to +2%) and inflation (FY15: down -20bps to +0.8%) resulted in the Nikkei 225 selling off -2.7%.
  • In conjunction w/ Kuroda’s still-sanguine guidance and our positive outlook for Japanese GDP growth over the next two quarters, marginal easing has now been officially punted well into 2H15.
  • Consensus expects a move in October and we currently have no reason to argue for one month sooner or later than that; we just know two catalysts need to materialize before the BoJ can justify expanding the pace of its asset purchases:
    • The YoY RoC in the USD/JPY cross needs to  converge towards zero.
    • Survey based inflation measures (namely Tankan) need to trend lower  – which they are likely to do if our forecast of continued and material disinflation in Japan proves prescient.
  • All told, we remain bullish on Japanese equities and continue to expect foreign inflows to support the market in light of the “win-win-win” thesis we outlined in a presentation last week (CLICK HERE to access the video replay).


BUY THE DIP IN JAPAN - DM Idea Flow Monitor


Feel free to ping us with any follow-up questions.




Darius Dale


Video | Process: How to Weigh Probability


During this week’s Fed Day Live show, Hedgeye CEO Keith McCullough offered real-time analysis on the FOMC statement and answered subscriber questions. In this segment, Keith discusses the value of considering Frequentist factors as well as Bayesian inference and highlights the importance of flexibility and being willing to change the game plan. 

Hesham Shaaban: The Prescient Hedgeye Bear Who's Been On a Tear | $YELP $TWTR

Editor's Note: Our Internet & Media analyst Hesham Shaaban has been a bear on a tear. His contrarian calls on Twitter and Yelp are just two of many non-consensus calls he's made which have served investors very well. Here's a quick recap of why it pays to listen to what he's saying.


Related tickers: YELP, TWTR, BABA, P, WTW, EHTH


Hesham Shaaban: The Prescient Hedgeye Bear Who's Been On a Tear | $YELP $TWTR - z bear

*  *  *  *  *  *  *

Just over a year ago, Hesham explained on HedgeyeTV why he's bearish on YELP for the long term. Shares are down over -30% since.

he echoed his concerns again to Charlie Gasparino on Fox business last month. the stock is down -10% since his appearance.

Here's a cartoon. We like cartoons (and our cartoonist). A lot.

Hesham Shaaban: The Prescient Hedgeye Bear Who's Been On a Tear | $YELP $TWTR - Yelp cartoon 02.06.2015 normal

Here's a bonus piece of unlocked research Hesham wrote on YELP articulating his BEARISH CASE. He's written a lot more. We just wanted to give you a little taste. CLICK THE WAD OF CASH TO READ IT.

Hesham Shaaban: The Prescient Hedgeye Bear Who's Been On a Tear | $YELP $TWTR - Z CASH


On a related note...

here's a screen grab of a report he sent to our customers earlier this week ... ahead of Twitter's bomb. You can click the image to enlarge. (We'd show you the whole thing, but our customers wouldn't like that and we have families to feed.)

Hesham Shaaban: The Prescient Hedgeye Bear Who's Been On a Tear | $YELP $TWTR - z twtr


Here's another cartoon. Did we mention we really like cartoons?

Hesham Shaaban: The Prescient Hedgeye Bear Who's Been On a Tear | $YELP $TWTR - twitter cartoon 04.29.2015


And last (but certainly not least)

Here's an abridged excerpt from yesterday’s Morning Newsletter written by CEO Keith McCullough discussing Hesham's myriad non-consensus calls. It's definitely worth the read. (While we're at it, it probably makes sense to shell out the dollar a day it takes to subscribe to our Morning Newsletter too.)


Excerpt from Keith McCullough's Morning Newsletter:


During yesterday’s meeting, circa 3:15PM, one of our analysts slammed his laptop and left the room in a frenzy…one of our Hesham Shaaban’s Best Short Ideas, Twitter (TWTR) was blowing up!


Fat finger on the pre-market close release. Stock down 18% in a New York minute. Halted. #Boom!


And the Hedgeyes smiled.


There’s something about building an independent think tank that prides itself in SELL ideas that gets me up in the morning. As most of you know, building a repeatable #process on the short side is not an easy thing to do. That’s why we’re doing it…


…While you can criticize Shaaban for literally never having presented a Best Long Idea (yet), he’s nailed the following names to the proverbial NHL playoff boards in the last 18 months (i.e. since we let him start publishing on his own names):


  1. Weight Watchers (WTW)
  2. eHealth (EHTH)
  3. Pandora (P)
  4. Yelp! (YELP)
  5. Alibaba (BABA)


In other words, what he really needs next is to get run-over in one of these things. Because no analyst I have ever worked with stays this good (on the short side) for this long, in an up market!


I obviously don’t want the man to get crushed. But reality is that everyone gets tagged in this business, eventually – and that’s how we all learn. But if you listen to Shaaban talk through his ideas, he’s constantly talking about not only what he doesn’t know… but what the management teams he follows don’t know either.


*****To learn more about how you can access Hesham's research ping

investing ideas

Risk Managed Long Term Investing for Pros

Hedgeye CEO Keith McCullough handpicks the “best of the best” long and short ideas delivered to him by our team of over 30 research analysts across myriad sectors.