LEISURE LETTER (5/18/2015)

Tickers:  27.HK

headline news 

Macau government only approves 150 of the 400 casino tables requested by Galaxy. Galaxy will have to move tables from other casinos under the group’s umbrella to the new casino grounds of Galaxy Phase 2.

ARTICLE HERE

Takeaway: While there hasn't been an official announcement, this media source has been credible in the past.  150 is exactly in line with our expectations. 

COMPANY NEWS  

Bid for BWIN - 

  • 888 Holdings has submitted a proposal regarding the acquisition of bwin.party, comprising of cash and 888 shares.
    • The proposed transaction will require the approval of 888 shareholders
    • 888 shareholders representing ~59% of 888's share capital have irrevocably committed, subject to customary conditions, to vote in favour of the proposed transaction
  • Earlier reports indicated that a merged 888-Bwin Party business could be worth over GBP 1 billion

  • Bwin Party has been on the sales block since last November 

ARTICLE HERE

Takeaway: A bidding war among 888, GVC, and Amaya

 

Viking - Newly launched Viking Ocean Cruises is the first cruise line in several years to not include noncommissionable fees (NCFs) as part of the cruise commission structure. The line made its official debut on May 17 with the naming of its first ship, the Viking Star, in Bergen, Norway.

 

From the start, Viking Chairman Torstein Hagen has made “no nickel and diming” one of the cornerstones of the new line. For passengers, that translates into benefits like unlimited free Internet access and complimentary wine and beer with lunch and dinner.

 

For agents, it means the line items that other cruise lines designate as “noncommissionable,” such as port charges and taxes, are included in the amount on which commissions are calculated. Viking is hoping that this will help distinguish it from other lines in the small-ship, upper-premium category. Several agents said that the policy is welcome, and that if their clients are otherwise qualified for Viking, they would recommend it as a good business move.

ARTICLE HERE

Takeaway: A move by Viking to lure agents as they enter the ocean cruising industry.

INDUSTRY NEWS

Macau hotel promotions - Galaxy is introducing hotel promotions to mark the new property openings, while Sands China offers discounts of up to 50%. 

ARTICLE HERE

Takeaway: Pressure on ADR

 

Macau hotel pipeline -  As of March 31, 2015, Macau saw 18 hotel projects under construction and 25 hotel projects undergoing government approval, which could provide about 25,600 new hotel rooms in total, the latest data released by the Bureau of Land, Public Works and Transport (DSSOPT) shows.

 

The January to March period saw seven fewer hotel projects under construction than the previous quarter. For the 18 projects under construction, most of the over 9,800 hotel room inventory is earmarked for Cotai: five hotel projects were being built in Cotai during the period, which could release over 7,500 rooms.

 

On the Macau Peninsula 10 hotel projects were being built in the first quarter that could potentially provide over 1,000 rooms; in Taipa, the official data stated that two hotel projects were being built in the period, which could put over another 1,000 rooms in the pipeline. The ongoing construction of a hotel project in Coloane could supply about 200 rooms.

 

Meanwhile, some 25 hotel projects are in the planning stage and are undergoing government approvals, which could release more than 15,700 rooms to the market, according to DSSOPT data.

 

While the number of operating hotel rooms by March is almost level that of the same period last year, the occupancy rate declined by 8% points to 79.3% in 1Q 2015 – a time when the number of hotel guests has also declined by 11.6% to about 2.3 million. The last time that the hotel occupancy rate here was below 80% was the first quarter of 2013.

 

A separate set of data provided by the Macau Hotel Association  shows the occupancy rate in the 5-star hotels was 82.72%, almost 9% points lower than the same period last year; the occupancy rate of 4-star hotels was 80.76%, representing an 8.5% points YoY drop.

ARTICLE HERE

Takeaway: Lots of hotel supply coming, not just on Cotai in the face of rapidly declining occupancy rates. 

 

Manila Bay Resorts - Tiger Resort, Leisure and Entertainment Inc – a firm controlled by Kazuo Okada that is developing the Manila Bay Resorts casino property in the Philippines  said via email to GGRAsia, "Given that we have submitted a request for extension of our provisional licence for the first quarter for 2017, we are actively targeting to open the property by 2016. Our Phase 1 spans across our hotel, casino, nightclub and the iconic fountain with a variety of…restaurants...”  “Tiger Resort is currently in review with Pagcor regarding extension of our project implementation plan. Having already committed approximately US$750 million into the project, with a further US$1 billion pending, and having completed more than 50 percent of the construction we believe we are in compliance with the terms of the provisional licence," the company added.

 

But Tiger Resort has not yet announced a local real estate partner for the scheme. Local media have reported that the need for a local development partner relates to a requirement under the country’s constitution and public land laws that only Filipinos, or entities owned at least 60% by Filipino citizens, are allowed to own land. That restricts Mr Okada and his majority-owned companies to just 40% ownership of the land on which the resort is located.

ARTICLE HERE

 

 

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.



Another French Revolution?

"Don't be complacent," writes Hedgeye Managing Director Neil Howe. "Tectonic shifts are underway in France. Is there the prospect of the new Sixth Republic? C'est vraiment possible."

read more

Cartoon of the Day: The Trend is Your Friend

"All of the key trending macro data suggests the U.S. economy is accelerating," Hedgeye CEO Keith McCullough says.

read more

A Sneak Peek At Hedgeye's 2017 GDP Estimates

Here's an inside look at our GDP estimates versus Wall Street consensus.

read more

Cartoon of the Day: Green Thumb

So far, 64 of 498 companies in the S&P 500 have reported aggregate sales and earnings growth of 6.1% and 16.8% respectively.

read more

Europe's Battles Against Apple, Google, Innovation & Jobs

"“I am very concerned the E.U. maintains a battle against the American giants while doing everything possible to sustain so-called national champions," writes economist Daniel Lacalle. "Attacking innovation doesn’t create jobs.”

read more

An Open Letter to Pandora Management...

"Please stop leaking information to the press," writes Hedgeye Internet & Media analyst Hesham Shaaban. "You are getting in your own way, and blowing up your shareholders in the process."

read more

A 'Toxic Cocktail' Brewing for A Best Idea Short

The first quarter earnings pre-announcement today is not the end of the story for Mednax (MD). Rising labor costs and slowing volume is a toxic cocktail...

read more

Energy Stocks: Time to Buy? Here's What You Need to Know

If you're heavily-invested in Energy stocks it's been a heck of a year. Energy is the worst-performing sector in the S&P 500 year-to-date and value investors are now hunting for bargains in the oil patch. Before you buy, here's what you need to know.

read more

McCullough: ‘My 1-Minute Summary of My Institutional Meetings in NYC Yesterday’

What are even some of the smartest investors in the world missing right now?

read more

Cartoon of the Day: Political Portfolio Positioning

Leave your politics out of your portfolio.

read more

Jim Rickards Answers the Hedgeye 21

Bestselling author Jim Rickards says if he could be any animal he’d be a T-Rex. He also loves bonds and hates equities. Check out all of his answers to the Hedgeye 21.

read more