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GALAXY ENT. Q3 2015 CONFERENCE CALL NOTES

CC NOTES

  • Group Rev of $12.3 billion, up 5% QoQ but down 29% YoY

  • Adj EBITDA of $2.1 billion, UP 13% QoQ but down 36% YoY

  • Galaxy Macau

    • Adjusted EBITDA of $1.7 billion, down 30% YoY, up 19% QoQ
    • Played unlucky in Q3 which reduced Adjusted EBITDA by approximately $117 million
    • Hotel occupancy across the five hotels was 99%, Non-gaming revenue of $742 million, up 92% YoY and 60% QoQ
    • VIP Win % = 3.6% in Q3 2015 vs 3.2% in Q3 2014
    • Mass Hold % = 43% in Q3 2015 vs 44.9% in Q3 2014
  • StarWorld
    • Adjusted EBITDA of HK$514 million, down 43% YoY, up 1% QoQ
    • Played unlucky in Q3 which reduced Adjusted EBITDA by approximately HK$11 million
    • Hotel occupancy was 99%
    • VIP Win % = 2.7% in Q3 2015 vs 2.9% in Q3 2014
    • Mass Hold % = 40.3% in Q3 2015 vs 41.4% in Q3 2014
  • Broadway
    • Virtually broke even with Adjusted EBITDA of HK$(1) million 
    • Played unlucky in Q3 which reduced Adjusted EBITDA by approximately HK$3 million 
    • Hotel occupancy was 99%
    • Mass Hold % = 25.1% in Q3 2015 vs 20.7% in Q2 2015
  • Development cost savings of HK$400-HK$500 for Phase 2

  • Issuing a special dividend of HK$0.14 per share 

  • Mass and non gaming - growing relative to VIP, despite still being the market leader in VIP

  • Will be realizing a HK$800 million cost savings program, and so far is on pace to deliver this initiative.

  • Cost savings program was previously underway, but are just now quantifying the program. 

  • Hotel OCC continues to grow. Up to 99% from 96% over the same period last year

  • Bad luck hurt virtually all properties, luck on mass side was slightly better than the prior year period

  • Starworld Mass business growing very nicely 

  • Phase 2 Update - Invested a total of $15.7 billion thus far on the project 

  • Finished their strategic investment in Monaco's SBM (casino monopoly in Monte Carlo)

  • They remain cautiously optimistic regarding the future of Macau

  • Cite that a growing consumer in China will aid the growth of Macau

  • Anticipate to re-capture lost players when growth resumes 

  • Flexible balance sheet is a huge positive going forward and will allow Galaxy additional opportunities 

q/a

  • Cost savings? Where will the costs be taking out?
    • HK$800 million in savings and they have done about 35% of that thus far. Should be a 12-18 month program. 
    • Labor, marketing, and procurement will take up the largest share of the savings
    • Shuffling around their human resources more effectively 
    • Looking into strategic marketing initiatives - wouldn't specify 
  • China/Macau Government comments
    • Confident in the government's ability to support the industry and economy. See their willingness to work with the operators.  Recent steps are a real positive
  • Constantly looking to re-allocate their tables to Mass and premium Mass
    • Revenue mix is really beginning to shift from VIP to mass, non gaming and slots. Represents roughly 50% of revenue now 
    • Cited strong Golden Week as a positive sign for the future.
    • Opening of Horizon their premium mass offering has been very successful and will look to continue to use that as a future driver
  • Table allocations. Awarded another 100 tables?
    • They are in further talks with the government, but haven't received confirmation for the additional tables 
  • Tables are reportedly under utilized, how will they help?
    • Would offer flexibility to allocate more tables to effective areas of the casino. 
    • It is also another sign of support from the government
    • Will apply the tables to their highest and best use, (likely to premium mass segment)
  • Couldn't comment on Phase 2's specific contribution to EBITDA but said it was very accretive
  • Non Gaming was so strong due to Phase 2 and they are very pleased with this segment. 
  • Non Gaming Margin = Very high (wouldn't give exact numbers)
  • SSS growth looking strong in their retail segment. 
  • 60k foot traffic per day for phase 2 was the whisper number, is that still holding?
    • Still north of 60k per day, but they are also attracting better customers and Horizon will continue to drive that number higher
  • Phase 3 or 4 changes to CAPEX?
    • Studying diligently, focusing on consumer and forecasting where the consumer will be. 
    • CAPEX allocation is subject to change but for now, they haven't made changes
  • Retail area not open until end of july, should we see more of an uptick since they weren't open for the full Q?
    • Yes, expect to open more stores which will add to the non gaming number. 
    • They are very bullish on the potential of their retail segment

October 15, 2015

October 15, 2015 - Slide1

 

BULLISH TRENDS

October 15, 2015 - Slide2

October 15, 2015 - Slide3

October 15, 2015 - Slide4 

BEARISH TRENDS

October 15, 2015 - Slide5

October 15, 2015 - Slide6

October 15, 2015 - Slide7

October 15, 2015 - Slide8

October 15, 2015 - Slide9

October 15, 2015 - Slide10

 


The Macro Show Replay | October 15, 2015

 


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INVITE | THOUGHT LEADER CALL | THE LOOMING CRASH IN RED MEAT

Please join us today, at 1:00pm ET, for our Thought Leader call discussing the current crash in cattle prices and the long-term implications for the industry.  On the call will be James G. Robb, Senior Agricultural Economist and Director, Livestock Marketing Information Center. 

 

In short, the economy is slowing; the ag commodity complex prices are crashing; the herd is fat and growing and consumers are consuming less red meat.  Therefore, the current set up for a crash in red meat is nearly perfect:

  1. Because beef is among the most expensive proteins.
  2. The strong dollar is hurting the export market for beef.
  3. U.S. per-capita beef consumption in 2015 will decline to 53.9 pounds per person, the lowest in government data that goes back to 1970. 
  4. Cattle futures are in a free fall and could crash further and stay low for an extended period of time.  As a result, the bubble in red meat prices is going to burst, and could be in a bear market for years.

 

COMPANIES IMPACTED ― TSN, HRL, CAG

 

The call will focus on the following:

  1. Historical context to the current cattle market supply and demand dynamics
  2. The free fall in cattle prices
  3. The cattle life cycle and why the largest cattle herd expansion in history is now underway
  4. Why the “fat” inventory of cattle will continue to drive prices lower
  5. The ramifications of falling beef prices across the supply chain
  6. A time table for key industry events that could drive price down further

 

JIM ROBB BIO

Jim Robb is the Senior Agricultural Economist at the Livestock Marketing Information Center (LMIC) and for 18 years has served as the Director. He has written several hundred articles and newsletters on a variety of agricultural marketing and cattle industry topics. Jim is a regular speaker at conferences throughout North America and has given expert testimony to the US Senate Agriculture Committee.

 

Prior to joining the LMIC, Jim was an Agricultural Economist at the University of Nebraska. He also has worked in the agricultural banking sector. Jim received degrees in Agricultural Economics from the University of California-Davis and from Michigan State University.

 

The LMIC began in 1955 and is a unique cooperative effort that supports market education, research, and outlook. Currently, the Center includes 28 US Land Grant Universities, Utah State University was a founding partner. The Center also includes six USDA agencies, and several associate organizations.

 

CALL DETAILS

Toll Free:

Toll:

Confirmation Number: 13622214

Materials: CLICK HERE

 

Please call or e-mail with any questions.

 

Howard Penney

Managing Director

 

Shayne Laidlaw

Analyst

 


INVITE | THOUGHT LEADER CALL | THE LOOMING CRASH IN RED MEAT

Please join us today, at 1:00pm ET, for our Thought Leader call discussing the current crash in cattle prices and the long-term implications for the industry.  On the call will be James G. Robb, Senior Agricultural Economist and Director, Livestock Marketing Information Center. 

 

In short, the economy is slowing; the ag commodity complex prices are crashing; the herd is fat and growing and consumers are consuming less red meat.  Therefore, the current set up for a crash in red meat is nearly perfect:

  1. Because beef is among the most expensive proteins.
  2. The strong dollar is hurting the export market for beef.
  3. U.S. per-capita beef consumption in 2015 will decline to 53.9 pounds per person, the lowest in government data that goes back to 1970. 
  4. Cattle futures are in a free fall and could crash further and stay low for an extended period of time.  As a result, the bubble in red meat prices is going to burst, and could be in a bear market for years.

 

HEDGEYE LONG IDEAS - MCD, DFRG, YUM

 

ADDITIONS TO THE HEDGEYE LONG BENCH - RUTH, TXRH

 

OTHER BENEFICIARIES - SHAK, QSR, SONC, JACK, BLMN, HABT, WEN, RRGB 

 

INVITE | THOUGHT LEADER CALL | THE LOOMING CRASH IN RED MEAT - CHART 100

 

The call will focus on the following:

  1. Historical context to the current cattle market supply and demand dynamics
  2. The free fall in cattle prices
  3. The cattle life cycle and why the largest cattle herd expansion in history is now underway
  4. Why the “fat” inventory of cattle will continue to drive prices lower
  5. The ramifications of falling beef prices across the supply chain
  6. A time table for key industry events that could drive price down further

 

Purchasing over $1 billion of red meat, McDonald’s is one of the biggest beneficiaries of the lower beef prices.  We are bullish on the MCD turnaround and now the company will likely be seeing a significant commodity tailwind in 2016-2017.

 

JIM ROBB BIO

Jim Robb is the Senior Agricultural Economist at the Livestock Marketing Information Center (LMIC) and for 18 years has served as the Director. He has written several hundred articles and newsletters on a variety of agricultural marketing and cattle industry topics. Jim is a regular speaker at conferences throughout North America and has given expert testimony to the US Senate Agriculture Committee.

 

Prior to joining the LMIC, Jim was an Agricultural Economist at the University of Nebraska. He also has worked in the agricultural banking sector. Jim received degrees in Agricultural Economics from the University of California-Davis and from Michigan State University.

 

The LMIC began in 1955 and is a unique cooperative effort that supports market education, research, and outlook. Currently, the Center includes 28 US Land Grant Universities, Utah State University was a founding partner. The Center also includes six USDA agencies, and several associate organizations.

 

CALL DETAILS

Toll Free:

Toll:

Confirmation Number: 13622214

Materials: CLICK HERE

 

Please call or e-mail with any questions.

 

Howard Penney

Managing Director

 

Shayne Laidlaw

Analyst

 


NKE | QUICK TAKE ON ANALYST MEETING

Takeaway: BIG targets = Very Doable. Say what you want, but the model’s changing for the better. Wouldn’t want to be a wholesaler while this occurs.

We’ll be back after the dust settles with more detailed thoughts and analysis on Nike’s Investor Day. But in seeing the presentations, we’re pleased to see that so much of it was spot on with what we outlined in our 86-page Black Book on Monday.  Here’s the LINK. This is what was most notable to us…

  1. Revenue: The $50bn target by 2020 was impressive – especially on a day where Wal-Mart told us that it won’t hit 2015 EPS again until 2020. That represents about a 10% CAGR. We think this is a slam dunk for Nike.
  2. Sounds like bold statement from us that 10% growth annually is a slam dunk. But keep in mind the P&L impact of the shift in mix to DTC/e-comm. This shift in mix alone gives Nike 200-300bps in growth per year. That means Nike needs to grow end-market demand by closer to 7% per year. This category grows globally at 4-6% per year, and Nike is a perpetual net share gainer.
    NKE  |  QUICK TAKE ON ANALYST MEETING - nike chart1 10 14 15
  3. E-comm targets of $7bn by 2020, 42% CAGR, are not just appropriate, but they are flat-out low. We think they’ll hit that level at least a year early. Why be so conservative? What message do you think it sends to Foot Locker, Finish Line, Dick’s, Hibbett, and the other retailers in the US that have a swoosh on 75% of what they sell? A really bad one. Nike set a big aggregate revenue number, but will get there by way of beating the e-comm number.
  4. The Financial Model has changed. It was our contention that Nike had to admit that the Model that has served it well for 15 years is changing. While it did not announce that broadly, the model definitely changed. It took up revenue growth, took up GM expansion to 30-50bp/year (which means it thinks it can do nearly twice that), and lowered expectations for SG&A leverage on a better sales number. Why? Aggressive shift to e-commerce (again – this hurts traditional wholesale accounts) is very sales and GM-accretive, but the cost of growth is going up by way of manufacturing innovation and athletic endorsements.
    NKE  |  QUICK TAKE ON ANALYST MEETING - nike chart2 B 10 14 2015
  5. Manufacturing Innovation? This is something we’ve been talking about for a while now – that Nike will reverse engineer how shoes are made – like what it did with FlyKnit. This will allow the company to accelerate on-site manufacturing (which it still played down today), 3-D printing, and both take capital out of its supply chain while driving ASPs higher to sell through NKE-owned distribution (retail and e-comm). The interesting thing is that Nike announced a partnership with FLEX to accelerate this initiative instead of go solo. What’s funny is that the partnership isn’t really new. Nike has been doing business with FLEX for at least 5 years. But it sounds like they’re doubling down on one another.
    A Slide From FLEX Presentation:
    NKE  |  QUICK TAKE ON ANALYST MEETING - nike chart4 10 14 2015
  6. Management: To its credit, while we’re still not thrilled with each individual member of management, this team sounded amazingly confident – more so than we’ve ever heard or seen them in 20 years. This sounded to us very much like a team that will not miss its goals come hell or high water. #respect

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