LEISURE LETTER (09/25/2015) - 0880.HK, 0027.HK, SGMS, HOT, QUNR, AIRBNB, UBER



  • Hedgeye call on BYD: Sept 25
  • G2E (Sands Expo): Sept 29-Oct 1
  • Hedgeye cruise call: Oct 5


0880.HK - Casino operator SJM Holdings Ltd executive director Angela Leong On Kei expects no big upturn in Macau’s gaming business over the National Day golden week of holidays in the mainland next month.  Ms Leong told reporters in Hong Kong that it was improbable that the number of visitors to the city over the holidays would be 10% or more greater this year than last.  But the F&B business might do well, she said.


Takeaway: Not exactly useful insight. Golden Week will be stronger than recent weeks but likely down from last year.


0027.HK - Macau’s gaming market has “stabilized”, said Lui Che Woo, chairman and founder of casino firm Galaxy Entertainment Group Ltd.  Below are some of his comments from his interview. 

  • “I think the situation there [Macau] has already calmed down. It has stabilized. I am optimistic that in one year or two years, it will improve,” said Mr Lui, in an interview with BBC. 
  • Mr Lui said a slowing in the Chinese economy would allow the nation to move in a “new direction”. China’s Premier, Li Keqiang, this week called for the country’s manufacturers to focus on “innovation.”
  • He added: “At the moment the Chinese economy is turning a corner. It is changing direction. You can’t be accelerating at the same time. They have to figure out a new direction. If they succeed, the future would be incredible.”


Takeaway: On the margin bullish comments from Galaxy's chairman. We think Mass may have stabilized - minimum bets levels have not declined the past 2 months - and October is a much easier comparison. However, there is little evidence of junket stability.


Tiger Resorts - Tiger Resort, Leisure and Entertainment Inc has confirmed it has been given a construction timetable extension for its Manila Bay Resorts casino venue (pictured in a rendering) and that the “projected opening of the property will be December 2016.” It additionally mentioned “expansions and “improvements” to the casino project, including “an additional 97,000 square metres [1.04 million sq feet] of gross floor area, covering two hotel towers.” 



SGMS -  announced that the Company has signed a new two-year contract with four two-year extension options to provide instant games and related services to the Ohio Lottery. The contract, began in July 2015 and includes instant games as well as marketing, licensed brands and interactive services.  Ohioans purchased a record $1.5 billion in instant games in fiscal year 2015, an 8.8% increase YoY.



HOT/QUNR - Qunar, a Chinese OTA platform, announced a partnership with Starwood Hotels & Resorts Worldwide, Inc.  Under the new partnership, Qunar's travel user base, one of the largest in the world, will get instant and direct access to Starwood's global hotel inventory through Qunar's mobile and PC transaction platform.


AIRBNB - An Airbnb representative says the company has experienced a 270% increase in Philadelphia listings since April, and that demand there is eight times the norm. Airbnb also pushed Philadelphians to offer more inventory. The company introduced a charity incentive, promising that for every new host who lists property by December 31, it would donate $250 to charity. Philadelphia is the first city where Airbnb has offered such an incentive.


Takeaway: Airbnb continues to get creative in order to drive listings growth.  


UBER - A Belgian court upheld a ban of the ride-sharing app UberPOP on Thursday, giving it 21 days to cease operations in the country or face substantial penalties. The more expensive UberX service is unaffected, however.  



Overnight Subsidy - Macau Government Tourist Office director Maria Helena de Senna Fernandes has denied a newspaper report that her office means to subsidize tours for overnight visitors.  The Portuguese-language Jornal Tribuna de Macau reported that the government had plans to pay tour operators MOP200 (about $25) per head to accommodate tourists in the city overnight.



Macau Smoking Ban - Macau’s Health Bureau has said in a written reply to a Macau legislator that it expects – if implemented – a full smoking ban in the city’s casinos would result in a 2.7% to 4.6% reduction in casino GGR.  

  • The report quoted the written reply saying the assessment was done in conjunction with Macau’s gaming regulator, the Gaming Inspection and Coordination Bureau. 
  • The government forecast was based on estimates regarding the percentage of Macau gamblers that are smokers and the potential impact of a reduction in the number of their visits to casinos.


Takeaway: Most Street estimates project a bigger hit. We're in the 5-10% range but in terms of the profitability impact, it's much lower. 


Macau Unemployment - Statistics and Census Service (DSEC) indicated that the unemployment rate for June-August 2015 was 1.9%, up slightly by 0.1% from May-July; the underemployment rate remained stable at 0.4%.  


Total labor force was 402,700 and the labor force participation rate stood at 73.3%. Total employment decreased by 2,800 from May-July, at 395,100. Analysed by industry, employment in Construction and Retail Trade registered decrease, while that in Hotels, Restaurants & Similar Activities saw increase.



McCarran August Traffic - Las Vegas visitor traffic continues to rise. August saw 7.2% YoY growth in arriving and departing passengers. Domestic air traffic led the way with a 7.8% YoY growth while international and helicopters posted 3.3% and 0.8% growth respectively. This is the second consecutive month of 4 million or more visitors to Las Vegas. 

LEISURE LETTER (09/25/2015) - 0880.HK, 0027.HK, SGMS, HOT, QUNR, AIRBNB, UBER - mccarran

Takeaway: Air traffic continues to push higher, but are these people gambling? 


Singapore Smog - Singapore has closed its schools after the pollution levels caused by the smoky smog enveloping the city hit dangerously high levels.  On Friday the PSI hovered near the hazardous range again, hitting 255, with the 24-hour figure at 264-321.  Reports suggest, that the El Nino phenomenon, which results in very dry weather, means the haze could continue until the monsoon season begins in November.  


Takeaway: Could impact visitation if the reports prove to be true. 


Singapore Manufacturing Output - Manufacturing output in the Republic fell 7% YoY in August, the Economic Development Board (EDB) said on Friday.




The Hedgeye Gaming, Lodging, and Leisure Team is adding BYD as a best idea LONG, and will be hosting a call today at 11am to discuss our views on the stock. Here is a brief summary of our thesis.



  • Regional Gaming Stability = Earnings Visibility 
    • As predicted, August would look weak and pressure the stocks. However, the states will begin releasing stronger September results beginning next week. 

    • The underlying demand/supply fundamentals in regional gaming are much improved and likely sustainable

  • Operational improvements and favorable market exposure could drive upside

    • Atlantic City and LV Locals could be surprise growth drivers. Supply exodus in AC is mostly to Borgata and the sustained housing recovery is finally translating into gaming revenue growth. These markets generate higher incremental margins for BYD's aggregate portfolio.
    • BYD's management changes are paying dividends  
  • Valuation

    • 15% free cash flow yield and 8x EV/EBITDA. PNK going out ~10x EV/EBITDA and PENN/GLPI split around 10-11x.
    • We believe BYD is undervalued at current prices 

USD, Rates and Stocks

Client Talking Points


The UST 10YR hits 2.08% on slowing Durable Goods; rises to 2.16 on Janet Yellen's forecast – the #1 risk remains her forecast. FX market moves 70 basis points on this (USD vs both Yens and Euros), but looks far from convinced. The USD Index would have to breakout above 97 (Euro below 1.09) for us to believe that the market actually believes she’ll hike into the Q3 GDP slowdown.


This is the 8th time this year that the UST 2YR will test 0.75%, but on what? There’s certainly no inflation or growth data to support a rate hike – but Yellen has clearly been politicized to change her tune at the whim of stock market moves, so good luck with that. The UST 10YR risk range is low-vol and manageable = 2.07-2.21%.


What kind of stocks love the idea of USD up? Japanese and European stocks! Because their FX is down on that trade, but don’t forget the context of today’s Nikkei and DAX “bounce” (the German stock market is in crash mode -22% since APR). We would short more U.S. Financials and Industrials today too.


**Tune into The Macro Show with Hedgeye CEO Keith McCullough at 9:00AM ET - CLICK HERE

Asset Allocation


Top Long Ideas

Company Ticker Sector Duration

McDonald’s remains one of our Restaurant teams Best Ideas on the LONG side.  We continue to believe that 3Q15 will be the inflection point for the company’s turnaround and that we are going to be looking at a much different company 1-3 years from now.


Urgency has been instilled from the top down by new CEO Steve Easterbrook. He wants more speed and is encouraging people to get things done faster. The food and experience provided to the customer will greatly improve over the coming months as “Experience the Future” is implemented across the system. It won’t be instantaneous though, as MCD has a lot of work to do around changing the perception to bring back customers it may have lost.


Penn National Gaming continues to be our favorite Regional Gaming stock.


Regional numbers for August have come in soft, but we predicted the August weakness. September revenues should rebound and serve as a catalyst for the stock going into Q3 earnings. On the research side we have not altered our views of PENN’s long term growth story. We continue to see more upside from current price levels. 


Slower (and Lower) For Longer remains our non-consensus call. It's nice to see that the Fed is finally starting to see what the #GrowthSlowing late-cycle data does.


  1. GROWTH: is #LateCycle and will be slower (again) in Q3 than it was in Q2
  2. INFLATION: misreported, yes – in the area code of the Fed’s 2% “target”, no


Our estimate for Y/Y% GDP for Q3 is a range of 0.1% to 1.5%. Even the Q/Q SAAR # that consensus hangs on will be comping against a 3.7% Q/Q SAAR GDP print (second revision). Good luck positioning for a rate hike. Prepare for the fade…. AGAIN.


Three for the Road


Cliggott: ‘Uncomfortably High Probability of Significant Correction’… via @HedgeyeDJ #markets  



I found out that if you are going to win games, you had better be ready to adapt.

Scotty Bowman


4.6 million people tuned in to watch Donald Trump on The Late Show with Stephen Colbert  on Tuesday, a  46% increase from the previous Tuesday.

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The Macro Show Replay | September 25, 2015



Hedgeye will host a call analyzing the investment prospects in Boyd Gaming (BYD), a regional gaming/hotel operator.


Call Details:

Today, September 25, 2015 at 11am.  Attendance on this call is limited.  Please contact for details. 


Points of discussion include: 

  • Near term catalysts for BYD and regional gaming
  • August vs September – a tale of two months
  • Q3, Q4, and 2016 earnings outlook
  • BYD’s operational performance vs the competition – opportunities for improvement?
  • The emergence of 2 surprising growth markets for BYD
  • Valuation

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