Highlighted financials 

  • Q2 Gaming Revenue -28% YoY
  • Q2 Non Gaming Revenue -3% YoY 
  • Q2 Adjusted EBITDA - S$296.46 million, -6% YoY
  • Q2 Unadjusted EBITDA - S$107.865 million, -60% YoY
    • (Includes the effects of losses on financial derivatives)
  • Resorts World Sentosa contributed revenue of S$577.8 million, a drop of 23% YoY. Poor VIP business to blame. 
  • No dividend declared for Q2. Dividend of 1 cent was declared for Q1 2015. 
  • Q2 2015 eps - S$(0.14)

Q & A 

Rolling VIP volumes? VIP win rate?

  • Rolling VIP volumes -11% QoQ
  • VIP win rate - 2.1% 

VIP share of total volume? Mass share, Mass GGR?

  • 37% VIP, Mass volume 43% this Q, Mass GGR was 41% 

Overall GGR performance YoY

  • GGR -28% YoY
  • VIP GGR -36% YoY
  • Mass GGR +2% YoY

Accounts Receivable down substantially? Why?

  • They are being a lot more cautious in the VIP space. They are quite concerned with their ability to give credit. They have tightened their collection procedure quite significantly as a result of their lack of confidence in the Chinese economy. 

FX reserves are high because they must pay their customers back in the same currency they came there with. 


What drove the drop in value of your financial derivatives? 

  • The prices derive directly from the price of the public listed equities. The value of those equities has fallen off and therefore the derives have fallen off. 
  • Very limited color on how the values are derived. Would not disclose additional information on these derivatives. 

They do not hedge any of their currency exposure. 


Why is the mass market growing for you guys? 

  • They include mass and premium mass together. Very concerned with the volatility of the currencies in the surrounding countries. They get a lot of business from Malaysia and the Malaysian ringgit has continued to depreciate. This could hurt their mass and premium mass business. 

Cost cutting measures? What have you implemented?

  • Mostly reductions in the VIP business headcount through natural labor attrition. Could see further reductions in headcount. 

Ability to pay dividends and increase dividends?

  • Probably able to consider an increase in 2016 depending on how results rebound. 

Buy back to continue?

  • Yes, they have a lot of shares they can buyback, will move forward with the buyback as originally planned. 

Korea, whats the status of getting a gaming license? 

  • Property is well underway and construction is on track. The government is putting together the regulations and they should have the regulations finished by Q12016. Bottom line: They have to wait for the regulations to come out before they can submit their license application. Could be a 6 month wait until the application is processed and approved. 

ADR this Q?

  •  S$275

Market stabilizing?

  • Sentiment is still very negative from their perspective. They still see overall volume and GGR trending downward over the next 12 months. 
  • Currency issues in the surrounding countries remains a major problem and could further hurt visitation and GGR. 

Does the low win rate has to do with the breadth of players, or is it the table mix?

  • Not the table mix. From a statistical standpoint they do not know why their win rate remains so low. They are "praying" for it to get better. 

Slot mkt. share in Q2?

  • 43% for the Q. (for the entire slot business)

What are the derivatives linked to? Which equities? US, AUS, UK?

  • No comment. 









USD, EUR and Commodity Divergences

Client Talking Points


Investors pushed out the dots yesterday as global growth slowing and China’s quasi-acknowledgement of economic reality pushed bets on the probability of a September lift-off back below 50% and pushed the dollar -1.1% lower on the day. With dollar correlations still strong, across durations, ↓ Dollar still  = ↑  (commodity/energy) re-flation and XLE followed the currency correlation playbook gaining +1.86% and leading sector performance  … but the slow-growth rotation remained equally strong with XLU up 1.8% on the session (+2.8% MTD vs SPX -0.85%).  The USD is up modestly this morning and Jackson Hole – the next major currency catalyst – is, on the margin, Euro bearish.  Jackson Hole = Aug 27-29th, September FOMC = Sept 17th.  


We remain the EUR/USD bears. The next days will bring parliamentary votes on Greece’s 3rd bailout.  Make no mistake, the top Eurocrats (Draghi & Merkel) are incentivized to plug Greece’s credit hole. Expect ‘debt relief’ in some form, but no great solution to Greece’s larger structural issues nor the flawed nature of a currency union regulating uneven economies with one monetary policy. We expect slower growth in the region from here, which should put increased pressure on Draghi to issue more QE.  


3-factor price signaling in the commodities complex is sending mixed signals. Relative USD correlations (near-term vs. historical norms) are tracking more positively (less negatively correlated) and price volume signals vs. USD movements are diverging across the space. Nat. Gas and RBOB Gas finished +~3-4% vs. Corn and Soybeans -5-6%, all on heavy volumes. We continue to like base metals, materials, and crude on the short side, but time and price is key. Most look oversold on a near-term duration on our screens. We would look to short on strength.  

Asset Allocation


Top Long Ideas

Company Ticker Sector Duration

In an analysis of the demographics of the newly insured, Pap testing, HPV, and mammography were at the top of the list of products that would be positively impacted by the ACA.  As we reach the #ACATaper stage, will HOLX take a hit to their Diagnostic segment? It is possible, in our view, but so far a minor risk. As we learned last week from a lab operator, Qiagen is likely to continue to cede their 14% HPV testing share to HOLX. So while the #ACATaper appears to be finally here, there are offsets. On a disappointing note, our 3D Tomo Tracker update for July came in at 24 facilities. Down sequentially from June, and down from a peak of 54 in May. Our forecast algorithm, which is based on these updates, remains unchanged. While 20 is low, it is probably a blip in the longer term adoption cycle.


PENN has emerged as the first domestic gaming growth story in 10 years with a new casino in Massachusetts this year and one in San Diego next year. Meanwhile, regional gaming trends have stabilized, providing near term earnings visibility and upside. Upcoming catalysts include the monthly release of State gaming revenues for July, including Massachusetts, and positive earnings revisions.


Sometimes the macro rotation and allocation playbook is relatively straightforward. As growth slows and "reflation" deflates, you want to be buying A) Long-term Bonds and B) stocks that look like bonds. Bond proxies and defensive yield consistently outperform alongside the dual deceleration in demand and prices and Utilities and REITS remain the go-to sectors for growth slowing, defensive yield exposure.

Three for the Road


$SHAK announces 4M share offering priced at $60 - someone thinks its a good buy here



One person with passion is better than forty people merely interested.

E. M. Forster


Only 1.9% of Facebook users continue to use the popular 1990s-era acronym LOL to signify their laughter in a post.

CHART OF THE DAY: Draghi's "Whatever It Takes" Willingness

Editor's Note: The excerpt and chart below are from this morning's Early Look which was written by Hedgeye analyst Matthew Hedrick. For more info on how you can become a subscriber click here.


...Draghi’s “whatever it takes” continues to spell a willingness to increase his QE purchasing program (currently structured at ~ €60 billion/month – see Chart of the Day below). Look to Jackson Hole at the end of the month (Aug. 27-29) as an opportunity for Draghi to talk down the Euro. An increase in his QE target would send the Euro falling. 


CHART OF THE DAY: Draghi's "Whatever It Takes" Willingness - z. chart2

Hedgeye Statistics

The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.

  • LONG SIGNALS 80.52%
  • SHORT SIGNALS 78.70%

Broken Euro!

“The magician and the politician have much in common: they both have to draw our attention away from what they are really doing.”

-Ben Okri


But what could the Eurocrats really be doing beyond perpetuating a political ‘crisis’ in the Eurozone?


Interestingly, according to a new Opinium poll, only 14% of Brits, 17% of Dutch and 24% of French believe that the EU countries “should continue to progress towards ever closer union” and transfer more powers to Brussels. 


What does this poll suggest?


It’s another confirming signal that the Eurozone project has failed.  Like it or not, the union of uneven countries (today composed of 19 member states) guided under one monetary policy is deeply flawed; and the economic, political, and cultural divides across countries is not abating. The United States of America, therefore is not an apt analogy for the Eurozone.


Back to the Global Macro Grind


But would any Eurocrat come out and say this?  Not if they want to keep their job.


A great expose on Greece’s ex finance minister, Janis Varoufakis, in The New Yorker titled in jest “The Greek Warrior” reveals from the man himself the great political chicanery between the Greek government and those of the Eurozone member states around the most recent (3rd) bailout.


Varoufakis says the 19 governments could be divided into 3 groups:


  1. “There is a very small minority that believes in austerity, and in this program. Germany leads this minority.
  2. A second group – Ireland, Spain, Portugal, the Baltic states — has pursued austerity programs, and now fears that Syriza, if successful, would leave those countries exposed to radical domestic opposition.
  3. Then there’s another group, of substantial countries like Italy and France—especially France—who don’t believe in austerity. But they fear that if they side with us they will be punished. Their punishment would be austerity.”


Sound conflicted?  While we won’t take Varoufakis’s word as the final one, the point we’re trying to make is getting 19 states to agree on anything is a fool’s errand. There exists so many different agenda points – the problem is Eurozone countries are often more divided than united.


You don’t have to look further than the money trail to understand who is incentivized to play in this conflicted system. One great winner is Germany.  Two recent data points clearly demonstrate this reality:


  • A new report by the Halle Institute of Economic Research shows during the debt ‘crisis’ Germany (more than any other country) benefitted by the reduction in interest rates, namely in German bund rates declining by about 300 bps, yielding interest savings of more than €100 billion (or more than 3% of GDP) during 2010-15.  A significant proportion of this debt ‘crisis’ relief is attributable specifically to the Greek ‘crisis’. In short, Germany benefitted not only greatly from the flight to safety trade during the ‘crisis’ but also the debt savings helped it maintain its “fiscally conservative” budget balance.
  • Germany is expected to achieve a record trade surplus of 8.1% this year (vs 7.6% in 2014), according to recent report from the German Finance Ministry. A weaker EUR and strong USD (perpetuated by the Greek ‘crisis’) has supported lower energy prices and propelled Germany’s export growth (47% of Germany’s GDP is comprised of exports!)


Stay Short the EUR/USD!


On Tuesday we recommended another short signal in the EUR/USD via the etf FXE in our Real Time Alerts.


We think there are a few guiding principles to maintain this #EuroWeakness position:


  1. The political crisis in the Eurozone isn’t going away. Extend & Pretend policy from the Eurocrats isn’t a viable solution to fix deep sovereign ails and the flawed structure of the single monetary union. ‘Real’ solutions and compromise to Greece’s debt ‘crisis’ cannot be reached in mere days with band-aid bailout packages.  Greek bailout #3 isn’t going to work, just like #2 didn’t work. 
  2. Draghi and Merkel remain poised and incentivized by a weak Euro.  So follow the money!  Draghi’s agenda is to will growth and inflation across the region. Germany is his best horse. A weak Euro is in Merkel’s best interest to support her country’s export powerhouse.
  3. Draghi’s “whatever it takes” continues to spell a willingness to increase his QE purchasing program (currently structured at ~ €60 billion/month – see Chart of the Day below). Look to Jackson Hole at the end of the month (Aug. 27-29) as an opportunity for Draghi to talk down the Euro. An increase in his QE target would send the Euro falling.
  4. Janet Yellen’s Fed is increasing looking de-facto hawkish on policy. In the last week the BOE talked down inflation (and the Pound Sterling); the BOJ remains mired in economic maladies pressuring the Yen lower; China devalued the Yuan to support its exports; and Draghi’s QE bazooka for the Eurozone remains fully loaded, with no prospect for a rate hike before the Fed. His goal of achieving a 2% inflation rate is a far out pipe dream, increasing the likelihood of more QE.

Broken Euro! - Euro cartoon 05.18.2015


While we see growth and inflation globally continuing to slow into year end, on a relative basis the currency wars will promote winners and losers.  As we originally outlined as one of our Top 3 Global Macro Themes for Q3 2015, #EuropeSlowing, we continue to like the EUR/USD as a relative loser.


Our immediate-term Global Macro Risk Ranges are now:


UST 10yr Yield 2.10% - 2.28%

SPX 2073 - 2115
USD 96.20 - 98.47
EUR/USD 1.08 - 1.13
Oil (WTI) 42.10 - 47.18

Gold 1075 - 1128


Keep your head down and eye on the ball,

Matthew Hedrick


Broken Euro! - z. chart2

The Macro Show Replay | August 13, 2015


August 13, 2015

August 13, 2015 - HE DTR 8 13 15

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