GC 3Q09 PREVIEW

The positive momentum should continue

 

 

Great Canadian is reporting Thursday after the close.  Barring abnormal hold issues, we think they should beat consensus.  The Street projects a sequential uptick in revenues to $97.8MM but margins down 100bps, and therefore flat EBITDA at $30.4MM.  We have 3Q09 revenues at $99.5MM and EBITDA at just over $33MM.

 

Local Government Share of GC's BC property revenues increased 6% sequentially for the three month period ended Sept 30, 2009.  The local share of government revenue is usually a good directional indicator for GC's results.  The completion of two projects and the opening of the Canada Line should have a positive impact on the next few quarters.  Unlike other expansion projects, View Royal and Georgian Downs were truly "capacity constrained" properties and therefore we believe that the additional slots should produce healthy ROI's.

 

We expect GC to continue to have positive momentum going into the 2010 Olympics, although, like everything else, GC isn't quite as cheap as when we initially turned positive on it back on 4/5/09 in our "GC: GOOD CANADIAN GAMING" post. 

 

 

2Q09 YOU TUBE

 

Construction/renovation commentary:

  • The completion of River Rock’s redevelopment project and the associated opening of the Canada Line will obviously assist that property.  However, in an effort to combat the slot play pressure, we are also making modifications to the gaming experience at not only these facilities but all our British Columbia casinos.
  • A more significant refresh of our gaming option is currently taking place at every one of our BC casinos.  I anticipate that this refresh, which will involve both machine replacements and conversion, will be immediately appreciated by our more frequent patrons.
  • We expect that View Royal on Vancouver Island will add 120 new slot machines on August 18th
  • We expect Georgian Downs in Ontario will add 400 machines on August 26th.  Despite that province being especially hard hit by a weakened economy, Georgian Downs’ gaming volumes have remained resilient, underscoring our belief that its market is crucially underserved.
  • Canada Line will commence operation on Monday of next week, August 17th.  By the end of September, we expect to finish construction on the associated parkade.  And in November, we expect River Rock’s own renovations, as well as the walkway connecting the facility to the station, to reach completion.
  • We’re not going to make decisions to bring things [deferred projects] back until we see very definitively that people are coming and that the existing expenditures are utilized to their maximum. And only when we’re busting at the seams and it’s absolutely clear that additional CAPEX needs to be spent, that’s when we’ll bring them back.

 

Guidance:

  • Go-forward ...you would expect a [EBITDA] margin of around 32 percent? 
    • Yes, that’s what we’re thinking.  We do believe the vast majority of these cost reductions are sustainable going forward and, you know, barring that things don’t get worse
  • Can just comment quickly on...what the [3Q] quarter so far looks like in terms of traffic and gaming dollars, if there’s been any improvement?  
    • It has not gotten worse, that’s for sure
  • On View Royal can you give us an idea of what the incremental costs might be for that additional gaming capacity?
    • Minimal

 

Operations:

  • Average spend is, again, the most significant thing that’s affected us, the first thing that we noticed and that continued on.  Visitation levels have softened a little bit but not significantly.  The biggest part is average spend.

Did the US Economy Just “Collapse”? "Worst Personal Spending Since 2009"?

This is a brief note written by Hedgeye U.S. Macro analyst Christian Drake on 4/28 dispelling media reporting that “US GDP collapses to 0.7%, the lowest number in three years with the worst personal spending since 2009.”

read more

7 Tweets Summing Up What You Need to Know About Today's GDP Report

"There's a tremendous opportunity to educate people in our profession on how GDP is stated and projected," Hedgeye CEO Keith McCullough wrote today. Here's everything you need to know about today's GDP report.

read more

Cartoon of the Day: Crash Test Bear

In the past six months, U.S. stock indices are up between +12% and +18%.

read more

GOLD: A Deep Dive on What’s Next with a Top Commodities Strategist

“If you saved in gold over the past 20 to 25 years rather than any currency anywhere in the world, gold has outperformed all these currencies,” says Stefan Wieler, Vice President of Goldmoney in this edition of Real Conversations.

read more

Exact Sciences Up +24% This Week... What's Next? | $EXAS

We remain long Exact Sciences in the Hedgeye Healthcare Position Monitor.

read more

Inside the Atlanta Fed's Flawed GDP Tracker

"The Atlanta Fed’s GDPNowcast model, while useful at amalgamating investor consensus on one singular GDP estimate for any given quarter, is certainly not the end-all-be-all of forecasting U.S. GDP," writes Hedgeye Senior Macro analyst Darius Dale.

read more

Cartoon of the Day: Acrophobia

"Most people who are making a ton of money right now are focused on growth companies seeing accelerations," Hedgeye CEO Keith McCullough wrote in today's Early Look. "That’s what happens in Quad 1."

read more

People's Bank of China Spins China’s Bad-Loan Data

PBoC Deputy Governor Yi says China's non-performing loan problem has “pretty much stabilized." "Yi is spinning. China’s bad-debt problem remains serious," write Benn Steil and Emma Smith, Council on Foreign Relations.

read more

UnderArmour: 'I Am Much More Bearish Than I Was 3 Hours Ago'

“The consumer has a short memory.” Yes, Plank actually said this," writes Hedgeye Retail analyst Brian McGough. "Last time I heard such arrogance was Ron Johnson."

read more

Buffalo Wild Wings: Complacency & Lack of Leadership (by Howard Penney)

"Buffalo Wild Wings has been plagued by complacency and a continued lack of adequate leadership," writes Hedgeye Restaurants analyst Howard Penney.

read more

Todd Jordan on Las Vegas Sands Earnings

"The quarter actually beat lowered expectations. Overall, the mass segment performed well although base mass lagging is a concern," writes Hedgeye Gaming, Lodging & Leisure analyst Todd Jordan on Las Vegas Sands.

read more

An Update on Defense Spending by Lt. Gen Emo Gardner

"Congress' FY17 omnibus appropriation will fully fund the Pentagon's original budget request plus $15B of its $30B supplemental request," writes Hedgeye Potomac Defense Policy analyst Lt. Gen Emerson "Emo" Gardner USMC Ret.

read more