LEISURE LETTER (08/5/2015) - MGM, G13.SI, MPEL, IKGH, 1159.HK, 27.HK, 582.HK, CCL, RCL

08/05/15 08:35AM EDT

TICKERS: MGM, G13.SI, MPEL, 1159.HK, 27.HK, 582.HK, CCL, RCL


August 6: 8:30am: MPEL 2Q CC ; PW: MPEL

August 6: 8:30-1pm: RCL INVESTOR DAY (NYSE)

August 7: 11:00am: Hedgeye Macau Call 

August 11: 4:30pm: STN 2Q CC

August 12: 7:00am: 880.HK 2Q CC 

August 13: 6:00am: G13.SI 2Q CC

August 19: 7:00am: 27.HK 2Q CC 


G13.SI - Genting Singapore has warned investors that it expects to report “a significant decline in net profits after tax” for the quarter ended June 30 when they report earnings next Thursday.  “This is due mainly to fair value loss on derivative financial instruments as a result of unfavorable market conditions and unrealized foreign exchange translation losses,” the firm said in a Tuesday filing to the Singapore Exchange.  Genting Singapore added: “Notwithstanding the foregoing, on a theoretical normalized hold basis, the group expects its adjusted EBITDA [earnings before interest, taxation, depreciation and amortization] for the second quarter of 2015 to be comparable to the preceding quarter.”


Takeaway:  Based on gaming tax data and MBS results, we were projecting for Genting S$241m EBITDA for Q2 2015 (vs $230m for Q1). Street Q2 EBITDA estimates were much higher.

Macau Hotel Occupancy - According the Hotelier's Association, "The city will see continual improvement in the hotel occupancy rate in August, although the rate could still show a YoY drop of 5% to 10% in this peak travel month, Macau Hoteliers and Innkeepers Association forecast."  

  • In August last year, when the city had 27,900 rooms in hotels and guesthouses in operation, the occupancy rate hit a high 90.1%, led by 5-star hotels at 91% and 4-star properties at 92.3%.
  • By the end of June this year, there were a total of 29,900 rooms from the 102 hotels and hotels in operation, representing a 7.2% YoY increase. 
  • The average hotel room rate for summer this year shows a YoY drop of 15% to 20%, as the casino operators here have continued to offer discount packages for attracting guests.


Takeaway: Could REVPAR fall 30% in August?


MGM - MGM Resorts sues Connecticut Governor over Tribal Casino Act.  They are suing to prevent the construction of a tribal casino in Connecticut that would compete with the company’s own resort being built in Springfield, Massachusetts.  

  • The company said the measure, signed by Malloy in June, violates federal law because it discriminates against out-of-state competitors who are barred from trying to develop a casino in Connecticut.  
  • “MGM is ready, willing and able to compete for the opportunity to develop a commercial casino gaming facility in Connecticut, but is excluded by the act from competing for this opportunity,” the company said in its complaint.


MPEL - Studio City will open on Oct 27.  Lawrence Ho Yau Lung, co-chairman and chief executive of Melco Crown, said at the press conference that he hoped Studio City could open with 400 tables.  A Melco Crown spokesman confirmed that the entry fee for the Ferris wheel will be MOP100 (US$12.50) for adults, and MOP80 for children. The property is designed to appeal in particular to mass-market visitors that might wish to see non-gaming attractions as well as play casino games.


Takeaway: MSC is unlikely to receive 400 tables. We're hearing 150 but wouldn't be surprised if it's 250.  The Oct 27 opening date is later than previously forecasted Q3 opening. 


1159.HK - Hong Kong-listed, Jimei International Entertainment Group Ltd on Monday issued a positive profit alert for the first half of 2015.  The casino junket investor said it expects a consolidated profit for the six months ended June 30, as compared to a loss recognized for the corresponding period in 2014.

  • The turnaround is “mainly attributable to the profit contributions from the group’s newly established gaming and entertainment business since February.”
  • On June 30, Jimei International Entertainment announced that one of its units had agreed to operate at least seven VIP gambling tables at NagaWorld casino resort in Cambodia.



27.HK - A Galaxy Entertainment Group Ltd executive has called for Macau to develop more tourist attractions other than gaming, the Hong Kong Economic Times reports.  “Do the customers already find Macau boring? We think that the city needs an adjustment period,” the Chinese-language newspaper quotes the company’s director of business development, John Au, as saying in an interview.


582.HK - Landing International has agreed to acquire a half stake in a South Korean casino from its partner Genting Hong Kong for 130 trillion won (HK$864 million), as it bet on the opportunities brought about by the influx of Chinese tourists.

  • “[The Jeju casino] will provide a good platform for the group to build up its own brand name and goodwill in the gaming industry, and to develop its own professional team in casino operation and management,” Landing said in a statement to the Hong Kong stock exchange. 
  • Jeju is one of South Korea’s visa-free entry points for mainland Chinese tourists, whose visits to the country surged 58 per cent to 2.9 million last year, the statement shows.


CCL - AIDA Cruises has made adjustments to its winter deployment as the voyages of the AIDAprima from October 2015 can not take place as originally planned, said the German cruise line. The Mitsubishi Heavy Industries Ltd. (MHI) shipyard in Nagasaki, Japan, announced that it is not able to maintain the schedule for completing the vessel.  The actual delivery date will be announced at a later date and the ship will debut in Hamburg next spring.  The AIDAstella will assume some of the winter routes, as she will be moved out of Europe this coming winter.


 Takeaway: Delay in AIDAprima delivery

RCL -  Insider Transactions:

  • Adam M Goldstein , Pres., Chief Operating Officer of Royal Caribbean Cruises Ltd sold 4,184 shares on Aug 3, 2015. The Insider selling transaction was disclosed on Aug 3, 2015 to the Securities and Exchange Commission. The shares were sold at $91.08 per share for a total value of $381,094.19.
  • Chairman & CEO Richard Fain sold 151,032 shares on August 03, 2015. The reported shares were unloaded at an avg market stock price per share of $90.4, for a total trade of $13,650,151. Richard Fain holds around 0.64% of RCL's market cap or 1.42 million shares.




Macau Suspect Gaming - Macau’s Financial Intelligence Office says there was a 14% YoY increase in suspicious transaction reports – also known as STRs – in the city during 2014.  There were 1,812 STRs in 2014, compared to 1,595 such reports in 2013. The lodging of such reports does not in itself indicate criminal activity has occurred, but does indicate that a transaction had been earmarked for closer scrutiny.


Macau Airport Passenger Volume - The city’s local airport posted a year-on-year increase of 3.6% last month for passenger volume, while aircraft movements jumped 10.7% compared to the same period last year, the airport operator Macau International Airport Company Ltd (CAM) announced yesterday.  Last month, the local airport welcomed more than 510,000 passengers and managed over 4,800 aircraft movements, according to CAM.


Hengqin - Zhuhai Hengqin Chimelong Ocean Kingdom theme park received 30% more visitors from January to July compared to the same period last year, according to a press statement by the Guangdong Chimelong Group Co., Ltd.  The statement doesn’t specify the number of visitors received during the period but says in 2014 Ocean Kingdom welcomed more than 8 million visitors.



Chinese Tourism - 4 Million Chinese tourists are expected to head to Japan this year for vacation, with Shanghai residents comprising the bulk of those travelers.

  • More than 40% were from the greater Shanghai area last year, according the local Japanese consulate, while Beijing accounted for about a quarter of Japanese visas granted.
  • Japan saw 2.7 million Chinese arrivals last year, rising 47% from a year earlier and boosting a trade relationship battered by the island dispute
  • The Chinese tourists spend between 200k-400 yen (~US$1,600-~US$3,200) per trip, according to a March survey by advertising firm Hakuhodo DY Holdings.


Takeaway:  With MERS concerns in Korea, Quantum has diverted sailings to Japan for the summer season. The avg Chinese tourist spend of $1600-$3,200 is quite bullish. 


Hedgeye Macro Team is incrementally bearish on U.S. consumption growth, based on the consumer's continued efforts to deleverage their household balance sheet combined with the peaking of consumer confidence and stagnating labor productivity.   

Takeaway:  For now, US regional gaming slowed in June but North American cruise pricing still doing well.

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