• GGR -37.9% YoY in Q3, -39.6% for the first nine months 
  • Adj EBITDA, -49.5% YoY in Q3 - HK$884M
  • Adj EBITDA margin = 7.8% in Q3, down from 9.6% in Q3 2014
  • GGR Share 22%
  • Grand Lisboa
    • GGR = -48.5% YoY, HK$3,450
    • Adj EBITDA -49.2% YoY, HK$507M
  • Challenging factors still persist, hurting opportunity for profitability 
  • Market may be stabilizing but they are not forecasting an upturn just yet
  • Still remain optimistic on the long term prospects of Macau 
  • EBIITDA margin squeezed due to labor costs and lower volumes
  • Corporate overhead hurt their satelite casinos EBITDA margins, and additionally cash rebates hurt EBITDA margins  
  • VIP remains unstable, currently have 454 VIP tables vs. 557 at beginning of the year 
  • VIP Tables at Grand Lisboa - 152 currently vs 177 at beginning of the year 
  • First Q in SJM's history where Mass revenue exceeded VIP revenue 
  • Occ up to 85% in the Q, visitation slightly up at most properties. 
  • Visitation at Grand Lisboa +7% in the Q, trends in October have been promising  
  • Cost savings associated with labor remains very difficult to attain in Macau 
  • Lisboa Palace on schedule for 2017 and in line with budget expectations 
  • CapEX HK$1.8 billion YTD, big CapEx year will be 2016 at roughly HK$17 billion 


  • Grand Lisboa VIP revenue -58% YoY 
  • Grand Lisboa Mass QoQ = -8%, YoY -21%
  • Cost cutting efforts slowly begin to show some positive signs, but they have just been implemented so it will take time. Expect more cost savings to kick in the future. 
  • On the revenue side, it is difficult to guide because of the new supply that is coming on line
  • Premium mass is growing, targeting a mid tier premium customer and opening a new premium mass pit in early 2016 
  • Total VIP Hold rate = 3.4% for the Q, normalized roughly 2.9% 
  • Financing for Lisboa Palace, expect to have more details in the future on bank financing
  • Reasons for EBITDA decline despite stable revenues - mostly due to older properties and satelite casinos. Older properties cost of revenue is higher 
  • Junket color - difficult environment and tough to predict 
  • Do satelite casinos have chance to survive? Yes, customers are sticky at those properties, they will survive 
  • MSC - no comments on cannibilization but consider it a nice property
  • Not aware of any changes in transit visa policies
  • Comp room ratio, roughly 70% of the rooms go to casino players
  • No update on Macau Theme Park land 
  • VIP Hold Rate at Grand Lisboa Q3 2014 2.88%, Q3 2015 3.24%
  • Hold rates at all casinos were not the reason for weaker EBITDA margins, cash rebates were likely the driver of that. 
  • Confident in their abilities to remain competitive despite the new supply that has come online in Macau

November 3, 2015

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Cartoon of the Day: Hail Mary Bubble!

Cartoon of the Day: Hail Mary Bubble! - bubble cartoon 11.02.2015

It's going to be very interesting to witness how this bubble will ultimately end. In many ways, what's going on today is actually worse than at the prior two U.S. stock market bubble tops of 2000 and 2007.

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What Gold and Bond Prices Say About a December Rate Hike


During this brief excerpt from The Macro Show this morning, Hedgeye commodities analyst Ben Ryan and CEO Keith McCullough weigh in with their thoughts on current market signals and what they portend from the Fed.


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Recession Coming? McCullough and Hilsenrath Square Off

In a spirited economic debate on Fox Business' Mornings With Maria today, Hedgeye CEO Keith McCullough and Wall Street Journal Chief Economics Correspondent Jon Hilsenrath discuss whether the U.S. is headed toward recession.


Click HERE to watch.

Recession Coming? McCullough and Hilsenrath Square Off - 11 2 2015 keith fox

Retail Callouts (11/2): Retail Idea List, Labor Market Tightening, COLM, M, TGT, WMT, KSS

Takeaway: COLM Added to Short Bench. Holiday hiring runs into tight labor market.

Hedgeye Retail Idea List

Retail Callouts (11/2): Retail Idea List, Labor Market Tightening, COLM, M, TGT, WMT, KSS - 11 2 2015 chart1


This Week's Changes

Columbia Sportswear: Added to Short Bench. It's admittedly early to short COLM, especially in light of such healthy sales, inventory and margin trends that COLM reported last week. But...the company benefitted from two extreme winters, and the likelihood of a third is slim. Management says it does not need one. But with inventories already elevated in the channel, and with the likelihood of so many consumers already having stocked up on boots and puffy jackets in the past two years, we think order trends are more likely than not to slow (or margins weaken -- or both). As a kicker, the company has seen notable success with its boot/wedge business. We actually did not know that this was a 'thing', but by the sound of management on the conference call, they did not either. This will be a tough business for COLM to anniversary in another nine months. So all-in, it's early to short this one. But at 21x earnings and near 10-year trough short interest, we think this one is definitely bench-worthy.

Retail Callouts (11/2): Retail Idea List, Labor Market Tightening, COLM, M, TGT, WMT, KSS - 10 30 15 Chart3


M, TGT, WMT, KSS - Several retailers including Macy's, Target, and Toys R Us noting labor market tightness.  The companies are taking steps such as increasing hours of current employees, and offering higher pay to attract seasonal employees.


A 5.2% unemployment rate and the largest retailer in the space taking up the ante chip on wages for entry level employees to the tune of $5400 = a difficult labor market anyway you slice it. So many retailers seem to have blown this off thinking that it’s really not a big deal, but rather a WMT PR stunt that won’t affect them. It may be a stunt, but when the biggest retailer in the world raises the minimum wage to $10.00, it is a big deal for everybody. We’ve heard half a dozen CEO’s say “We already pay above minimum wage, so it’s not a big deal.”  Or in Kohls’ case, “Our employees love to work, so we don’t have to pay them more.”  We understand that the companies can’t negotiate wage increases with employees through Wall-Street conference calls. But there will be an impact to almost everyone who sells to the low/mid-level consumer. That's kicked into high gear in October as retailers prepare for Holiday.


AMZN - Amazon announces Black Friday deals from now until Dec 22nd.  Prime members to have exclusive early access to more than 30,000 lightning deals.



AMZN - Amazon ending Amazon local and Amazon Payments card reader services.



ETH - Ethan Allen reports record orders for month of October 2015, notes impact of shift in sale calendar.



WBA, RAD - Walgreens to divest upwards of 1000 stores as part of Rite Aid acquisition.  Walgreens operates 8173 stores while Rite Aid has 4561 stores.



CVS - Omnicare was served with an administrative subpoena by the DEA. The subpoena seeks documents related to controlled substance policies, procedures, and practices at eight pharmacy locations from May 2012 to present.



Fendi Unveils New Store Concept in Miami



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