LEISURE LETTER (06/19/2015)



  • June 23 - CCL Q2 2015 10am  

Headline News

Macau forecasts - Secretary of the Economy and Finance Lionel Leong expects MOP16 billion in gaming revenue for the month of June, down 41% YoY.  Separately, Ambrose So, SJM Chairman, offered a full year 2015 GGR forecast of down 40% for the market.


Takeaway: Hedgeye is currently forecasting -34% for June and -32% for 2015 but we have little confidence in either projection. The Street remains more optimistic.


Paradise Entertainment - The supplier of electronic gaming systems Paradise Entertainment is confident that Macau can provide many opportunities to sell products during the coming months as the new projects in Cotai come on line. "New casinos will open in Macau and lots of products will be refreshed” said Jay Chun, the chairman of the company. 



BYD - Boyd is pledging $2.5 million to to support the expansion of the William F. Harrah College of Hotel Administration at the University of Nevada, Las Vegas.



Frasers Hospitality UK Holdings Limited - A wholly-owned subsidiary of Frasers Centrepoint Limited (FCL), successfully completed the acquisition of Malmaison Hotel du Vin group (MHDV) of boutique lifestyle hotels for a consideration of GBP363.4 million (approximately $576.32 million) from an affiliate of KSL Capital Partners, LLC. The Malmaison portfolio consists of 2,082 keys across 25 cities in the UK or ($276,881 per key).


This sale comes two years after KSL purchased Malmaison Group for £200 million ($313 million). Based on those numbers, this recent sale represents approximately an 82% increase over the 2013 purchase price.  



Viking Cruises - Added Mediterranean and Holy Land itineraries for its upcoming vessels Viking Sea and Viking Sky in 2016 and 2017.



Macau - The Gaming Enterprise Staff Association is arguing that workers who recently filled out surveys regarding the proposed "smoking lounges" at casinos, were pressured to answer the surveys in favor of the lounges.The independent study initially showed that 66% of workers would be in favor of the lounges, but the association is arguing these results are skewed.    



Cash handouts - The government will begin making its annual cash handouts to the public on July 6, Executive Council spokesman Leong Heng Teng has said.

Leong said the government would distribute this year MOP5.84 billion (about US$730 million) among 675,696 residents of Macau.


It will give 607,465 permanent residents MOP9,000 each and each temporary resident MOP5,400. Whether they will get more next year will depend on how big the government’s surplus is this year, Mr Leong said.


Takeaway: Even in tough times, citizens get money back. Felix has already applied for citizenship.


Puerto Rico - Facing a cash crisis, Puerto Rico is turning to desperate measures to pay the bills: it may legalize the black-market slot machines in grocery stores.



New Jersey - Lottery ticket sales fall short of budget projections. 

  • Total ticket sales for 2014 were $2.9 billion, according to the lottery’s annual report. But after prize payouts, retailer commissions, fees and administrative costs, that meant $965 million went to the state budget.
  • Northstar, had projected income of $1.047 billion for the 2015 fiscal year, but revised that figure down twice – first to $955 million and then, last month, to $930 million
  • Northstar’s failure to meet projections have bolstered criticism from Democratic lawmakers that privatizing the essential function of the state’s fourth-largest revenue source was a bad deal for New Jersey. 



Hedgeye Macro Team remains negative on 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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