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SANDS CHINA VALUATION

Could be attractive at the lower end of the range.  Risky but attractive long-term growth profile and we love the tax efficiency.

 

 

Sands China will price Thursday on the Hong Kong Stock exchange.  Here are the offering details:

 

SANDS CHINA VALUATION - sands china offering details

 

The valuation range looks reasonable, although only attractive at the $1.34 low end of the range in our opinion.  Based on our numbers, the range on 2010 EV/EBITDA is 13.5-16.0x.  That may look expensive but there are two major considerations.  First, the net debt includes about $2 billion of capitalized costs for Lots 5&6 development without any real EBITDA contribution until 2012.  We believe the initial ROI on this development will struggle to reach 10% but it does have some incremental value.  Second, as we discussed in our notes on the Wynn Macau IPO, Macau does not impose a corporate income tax on gaming profits.  Thus, a 16x taxed equivalent multiple is close to 10x.

 

To address the first point, we think it is appropriate to look out to 2012 when the first and major phase of the Lots 5&6 development will be open for a full year.  The EV/EBITDA valuation on 2012 is a much more reasonable 9.5-11.0x.  Relative to Wynn Macau (1128.HK), there is very little discount on 2010 and 2011.  However, after giving credit for Lots 5&6 (2012 EBITDA), the Sands China discount is almost 15% from the midpoint of the offering range to Wynn Macau’s 2012 valuation.  We believe that this discount is appropriate. 

 

Here are the valuation metrics for Sands China:

 

SANDS CHINA VALUATION - Sands China valuation summary

 

The following table outlines our view of the value of Sands China.  We think 2012 EBITDA deserves a 14x multiple which would take the taxed-equivalent multiple below 10x.  Fair in our opinion.  Discounting that back three years gives Sands China a current value of $1.51, right in the middle of the offering range of $1.34-1.79 and 13% higher than the low end of the range.

 

SANDS CHINA VALUATION - Sands China IPO Value


MPEL: SLOPPY Q3 BUT SOME ENCOURAGING SIGNS

MPEL missed our EBITDA estimate but there were some encouraging signs.  Mass drop was better than we thought in Q3 and November volumes look better than October. 

 


MPEL put up a sloppy quarter, generating only $56 million in adjusted EBITDA versus the Street at $60 million and our estimate of $66 million.  The shortfall was driven in part by by low hold percentage, primarily in the Mass and slot segments, and lower Rolling Chip and direct VIP play.  Encouragingly, Mass drop was strong, beating our estimate at City of Dreams (CoD) by almost $40 million, or 11%.  See the chart below.

 

 

MPEL: SLOPPY Q3 BUT SOME ENCOURAGING SIGNS - MPEL MASS DROP 2

 

 

The VIP segment was confusing, obscured by the lack of data.  Direct VIP play is always the wild card.  On the conference call, the company indicated that direct VIP play was 17% of total VIP and the VIP hold percentage was slightly above 3% at CoD.  Total VIP volume at CoD was $9.0 billion, below our projection of $9.8 billion.  We were anticipating a strong hold percentage of 3.3%.  On the surface it appears that volume and lower hold dinged the results pretty significantly.  However, by our calculations direct VIP play was actually closer to 10% of the total and the hold percentage was more in-line with our 3.3% estimate.  We need to get more color but suffice it to say that VIP, in the aggregate, was disappointing.

 

 

MPEL: SLOPPY Q3 BUT SOME ENCOURAGING SIGNS - MPEL Q3 RC TURNOVER  2

 

 

Going forward, the news is better.  Volumes remain strong and MPEL actually did better in November than October.  While market share took a hit in October, it was partly a function of October being a strong Mass month for Macau and MPEL being positioned as more of a VIP operator.  Grand Hyatt should boost Mass volumes and likely expand normalized hold percentages.  CoD is holding around 16% versus the more mature Mass properties over 20%.

 

MPEL has a long way to go at CoD, particularly with the increasingly important Mass business.  At least the signs are somewhat encouraging.  The stock remains cheaply valued when compared to the Wynn Macau and the expected range for Sands China with a discount of 30-40%.


RETAIL FIRST LOOK: LET THE COMPARISONS BEGIN

RETAIL FIRST LOOK

 November 17, 2009

 

 


TODAY’S CALL OUT

 

With the reporting of HD and TGT this morning (both on the surface better than expected), the inevitable comparisons will now begin between their results and those of their biggest competitors. The SIGMA overlay charts below speak for themselves, highlighting the differences and similarities between how each of these companies has performed over the past several quarters. The consistency in margins is eye-opening for WMT, which has barely budged from a profitability standpoint since the “recession” began.

 

RETAIL FIRST LOOK: LET THE COMPARISONS BEGIN - TGT   WMT

 

RETAIL FIRST LOOK: LET THE COMPARISONS BEGIN - HD   LOW SIGMA

 

 

LEVINE’S LOW DOWN

 

  • It’s not often that I draw attention to advancements in textile technology, but this caught my eye. A textile “treatment” has been developed that reduces heat build-up and provides UV protection in dark colored textiles. In lab tests, Coldblack finished black garments displayed a 9 degree cooler temperature than a comparable shirt constructed of conventional fabric. The material has been used in some higher-end brands so far, but the potential is widespread for anyone or any product that prefers black over white in the blazing sun!

 

  • Lowe’s 3Q results were in part driven by a sequential same store sales improvement in 45 out of 50 states. The biggest improvements were noted in states that have been hit the hardest by the housing downturn. Additionally, after 5 quarters “indoor” related products are now out-comping “outdoor” related categories (by a margin of 300bps). Management also noted that while inventory commitments to the trim-a-tree category are planned down this year, sales are off to a “solid” start this season.

 

  • A few weeks ago it was widely expected that the $99 Blu-ray DVD player would be one of the key items for Black Friday. Now with the recent leaking of Wal-Mart’s Black Friday circular, it appears that they are setting the bar even lower, with a $78 unit. Now granted that price is only available during door-buster hours, but the price is still aggressive especially when considering a similar unit was promoted at $129 over the same event.

 


MORNING NEWS 

 

PPR Starts African Unit IPO to Raise $1.5 Billion - PPR SA, the owner of Gucci Group, started selling shares in its African unit CFAO today to raise as much as 1 billion euros ($1.5 billion) in France’s first initial public offering for two years. Paris-based PPR is offering 31 million existing shares and may add 4.65 million additional shares for a total of 35.65 million at a price range of 24.80 euros to 29 euros apiece, the Paris-based company said today in a statement. If the over- allotment is exercised, PPR will sell almost 58 percent of CFAO. PPR said it plans to give up majority control of CFAO, which sells cars, pharmaceuticals and consumer drinks in Africa and France’s overseas territories. The retailer said two weeks ago the sale is part of a “reconfiguration” of its businesses, which include Gucci, the Conforama furniture chain, bookseller Fnac, mail-order unit Redcats and a controlling stake in the German sporting-goods company Puma AG. Investors and analysts have speculated that the company may target luxury makers such as Italian jeweler Bulgari SpA.  <bloomberg.com>

 

Yoox Kicks Off IPO - Internet fashion retailer Yoox Group launched an initial public offering on Monday that could raise as much as 126 million euros, or $187.9 million at current exchange. Shareholders in the Bologna, Italy-based company, which include venture capital firms Balderton Capital, Kiwi and Nestor 2000, are selling 24.3 million shares at an indicative price per share of between 3.60 euros, or $5.37, and 4.50 euros, or $6.71, through the end of November. If demand is high enough, a further 3.65 million shares will go on sale via an overallotment option, known as a greenshoe. Goldman, Sachs & Co. and Mediobanca are managing the placement, which values Yoox at as much as 226.8 million euros, or $338.2 million. Shares will start trading Dec. 3 on the Milan Stock Exchange STAR segment for small companies.  <wwd.com>

 

Bernanke Signals ‘Extended’ Low-Rate Period May Become Longer - Federal Reserve Chairman Ben S. Bernanke’s diagnosis of a weak U.S. economy and labor market signaled that the central bank’s extended period of low borrowing costs may get even longer. Bernanke said “significant economic challenges remain,” with lending constrained and the jobless rate above 10 percent. Speaking in New York yesterday, he said U.S. asset prices aren’t out of line with underlying values, and central bank policy will ensure that the “dollar is strong.” Treasury two-year notes rose and the dollar weakened as investors reduced bets the Fed will raise interest rates by August. In his most extensive comments on the economy since July, Bernanke repeated the Fed’s Nov. 4 pledge to keep rates low for an “extended period,” and he said forecasters anticipate “moderate” growth this quarter after the 3.5 percent pace of expansion in the prior three months.  <bloomberg.com>

 

Obama Urges China to Heed Commitment on Currency Appreciation - President Barack Obama called on Chinese counterpart Hu Jintao to make good on a commitment to allow the yuan to appreciate to help prevent trade imbalances that exacerbated the global economic crisis. “I was pleased to note the Chinese commitment, made in past statements, to move toward a more market-oriented exchange rate over time,” Obama said during a joint appearance with Hu after a meeting in Beijing today. America’s trade deficit with China widened to a 10-month high in September, raising concern that the combination of a recovering U.S. economy and a fixed yuan exchange rate against the dollar will worsen global imbalances. China’s dollar purchases to prevent appreciation swelled its foreign-exchange reserves to $2.3 trillion in the third quarter, more than twice as much as any other country.  <bloomberg.com>

 

Buffett Raises Berkshire’s Wal-Mart Stake, Adds Exxon, Nestle -  Warren Buffett’s Berkshire Hathaway Inc. took stakes in Exxon Mobil Corp. and Nestle SA, betting on the world’s biggest oil and food companies. Berkshire held about 1.28 million Exxon shares and 3.4 million American depositary receipts of Nestle at the end of the third quarter, the Omaha, Nebraska-based company said in a regulatory filing yesterday. The stake in Irving, Texas-based Exxon would be worth about $95 million, based on yesterday’s stock price, while the Nestle holding would be valued at $161.5 million. Berkshire also raised its stake in Wal-Mart Stores Inc., the largest retailer. “Berkshire is increasingly looking for companies that are world-leading brands,” said Tom Russo, partner at Gardner Russo & Gardner, which holds shares in Berkshire and Vevey, Switzerland-based Nestle.  <bloomberg.com>

 

Strickler Details Obama's Trade Stance at WWD CEO Summit - The Obama administration understands the importance of trade as an engine for economic growth and is committed to brokering sound trade agreements, said Gail Strickler, assistant U.S. Trade Representative for the office of textiles. USTR Ron Kirk “has given me an opportunity to serve the industry I know and love, and this opportunity is something I plan to take full advantage of,” said Strickler, a 30-year textile and apparel industry veteran who has been in her post just eight weeks. Strickler, who is in the position formerly called the special textile negotiator, is the lead negotiator for textile and apparel products and advises Kirk on industry trade matters. Although many in the apparel industry feel there’s a lack of clarity on the Obama administration’s approach to trade, Strickler said the administration is “committed to getting the science of trade right.” <wwd.com>

 

European Exports Rose Most in 20 Months in September - European exports increased the most in more than a year and a half in September as reviving global demand helped the region’s economy emerge from its deepest recession since World War II. Exports from the 16-nation euro area rose a seasonally adjusted 5.5 percent from August, when they fell 4.1 percent, the European Union’s statistics office in Luxembourg said today. The September increase was the biggest since January 2008 and pushed the trade surplus to 6.8 billion euros ($10.2 billion), the largest in more than five years. Imports advanced 1.1 percent after a 1 percent drop in August. The euro-area economy returned to growth in the third quarter after global governments stepped up stimulus measures and central banks injected billions into markets to revive lending. While Europe’s services and manufacturing industries expanded for a third month in October, the euro’s ascent is threatening to undermine exports by making them more expensive.  <bloomberg.com>

 

U.K. Inflation Rate Increases More Than Forecast - The U.K. inflation rate rose more than economists forecast in October, climbing for the first time in eight months as fuel costs and air fares climbed.

Consumer prices gained 1.5 percent from a year earlier, compared with 1.1 percent the previous month, the Office for National Statistics said today in London. The median forecast in a Bloomberg News survey of 30 economists was 1.4 percent. On the month, prices rose 0.2 percent.  <bloomberg.com>

 

Japan Deflation Concern Rises Even as Growth Quickens - The acceleration of Japan’s economy to the fastest growth pace in more than two years masked a slide in prices of goods and services that threatens to temper the nation’s recovery. The domestic demand deflator, a measure of price levels that excludes the cost of imports, fell 2.6 percent in the third quarter from a year earlier, the most since 1958, Cabinet Office figures showed yesterday in Tokyo. At the same time, gross domestic product jumped 4.8 percent, the most since early 2007. Sustained price declines threaten to curtail a corporate- profit rebound that’s already been insufficient to spur a rally in Japan’s shares this quarter. <bloomberg.com>

 

Money-losing GM to repay aid early, sees 2010 IPO - General Motors said Monday an improving global auto market will allow the struggling auto giant to repay government loans early and move forward toward a 2010 share offering. But the automaker that needed massive aid to avert collapse earlier this year also reported a net loss of 1.15 billion dollars in the period since emerging from bankruptcy in July.

The number one US automaker said it is making progress toward reviving its fortunes, although predicted more losses in the coming months. "The business has performed better than we had expected going into bankruptcy," chief executive Fritz Henderson told a conference call. <google.com>

 

Fossil's New Retail Concept Focuses on Apparel - Fossil has introduced a new retail design that plays up the brand’s Americana image and puts more focus on clothing. The watchmaker, which has been opening stores rapidly and now counts 360 worldwide, cited strength in direct sales for the quarter ended Oct. 3, when comp store sales rose 6.4 percent, but net sales fell 6.9 percent to $381.4 million. Of Fossil’s 124 U.S. stores, 91 are accessory stores and 33 have both accessories and clothing. Next year, clothing will be added to Fossil’s unit at Covent Garden in London after a renovation and to a new store in Stuttgart, Germany, she added.  <wwd.com>

 

SG Footwear Acquires Rugged Shark - SG Footwear has acquired all the assets, trademarks, and registrations of the Rugged Shark brand from Gordon Brothers LLC. Rugged Shark, a marine and fishing footwear brand, was founded in 2001. Terms were not disclosed. The footwear is best known for its technical and comfort features targeting a core demographic group of men 25-55. "The acquisition of the Rugged Shark brand adds tremendous equity to our stable of brands with expansion into new channels of distribution," commented Bernard Leifer, President & CEO, SG Footwear. "In addition to immediate growth potential to the boating and fishing enthusiasts, Rugged Shark will be positioned as a lifestyle brand offering significant brand expansion opportunities." <sportsonesource.com>

 

One-On-One with UA CEO Kevin Plank - “Protect this house." That’s the marketing motto made famous by Under Armour in a series of commercials, which has been adopted by athletes on fields across the U.S. as a spirited rallying cry at their home games. The ads were overseen by Kevin Plank, founder, chairman and chief executive officer of the performance apparel and footwear maker — and a big fan of aggressive dictums, which he inscribes on an oversize whiteboard in his office at the firm’s Baltimore headquarters. “The Under Armour brand is very much like a team brand, and that is the way we run our company,” said Plank, a former University of Maryland football player who founded the company in 1996. “Sales and marketing are like offense; manufacturing and distribution are like defense; finance and I.T. are like special teams. But what you learn in this business is that not just one team is on the field alone, but we’re all on the field at the same time. The companies that will win are the ones that communicate the best.” <wwd.com>

 

A mixed message on sales—but possibly not so mixed for online retailers - Online retailers looking for clarity as to what to expect for the holiday sales period got a little glimmer of hope today as the U.S. Department of Commerce reported that while total October retail sales were down 1.7% from October 2008, general merchandise sales—the goods that consumers are most likely to buy online—were up 1.5% from a year ago. A big part of the overall decline in sales was the result of lower gasoline prices; sales at gasoline stations were down 15% year over year. The average nationwide price of gasoline was about 90 cents a gallon less this October than a year ago, according to the U.S. government’s Energy Information Administration. Another contributor to the drop was the result of a downturn in home-related purchases—housewares, home furnishings, building equipment and garden materials. Sales of building material and garden equipment fell 16.6% year over year.  <internetretailer.com>

 

Burberry Raises Dividend as Profit Meets Estimates - Burberry Group Plc, the U.K.’s largest luxury-goods company, raised its dividend for the first time in 18 months after reporting a drop in first-half profit that was no worse than analysts estimated. Shareholders will receive 3.5 pence a share, up 4 percent on the prior year’s 3.35 pence, according to the London-based company, which left the dividend unchanged last year. Net income declined to 56.8 million pounds ($95.7 million) in the six months ended Sept. 30, from 74.8 million pounds a year earlier, the retailer also said today in a statement, matching the average estimate of six analysts surveyed by Bloomberg. <bloomberg.com>

 

Rossignol Taps IMG Worldwide to Expand Brand - Snow, ski and mountain brand Rossignol has teamed up with IMG Worldwide to extend its licensing into a number of categories. Rossignol is newly independent from previous owner Quiksilver. IMG Worldwide is currently seeking partnerships for the brand in footwear, eyewear, sports bags and other related accessories. "It is a privilege to be handling an important part of the new strategy of this iconic 100-year-old winter sports brand," says Bruno Maglione, IMG Worldwide's executive vice president and co-managing director. < licensemag.com>

 

Birkhold Joins Lacoste Licensee as CEO - Devanlay U.S. Inc., the licensee for Lacoste apparel, has tapped Steve Birkhold as chief executive officer, effective Jan. 4, succeeding Robert Siegel, who will retire from the company at the end of the year. Birkhold is joining Devanlay from Diesel USA, where he has been ceo since November 2007. This is the second time in the past year Siegel has exited the top job at Devanlay. He originally left the company in December 2008, but rejoined in February when his replacement, Robert Skinner Jr., the former ceo of Kellwood Co., departed after less than two months on the job, citing “differences with the board.” <wwd.com>

 

Oxxford President Departs - After 11 years at Oxxford Clothes, president Mike Cohen has left the company, reportedly to join competitor Hickey Freeman. Cohen could not be reached for comment at press time Monday and a spokeswoman for Hickey had no comment. Individualized Apparel Group, which owns Oxxford, a brand best known for its American-made customer clothing, has elevated Oxxford veteran Scott Ruerup to executive vice president, effective immediately. There are no plans to name another president. Cohen, who had worked at Polo Ralph Lauren Corp. before joining Oxxford 11 years ago, is said to be taking a job helming the Hickey Freeman brand, the other remaining American high-end suit maker. <wwd.com>

 

Brazil: Amazon rainforest destruction shows decline - Brazil's National Institute for Space Research (INPE) has reported that the country's Amazon rainforest resources shrank by 7,000 square kilometres from August 2008 to July 2009, the smallest amount of territory lost in the area since 1988. The figure is also better than the Brazilian government's prediction of 9,000 square-kilometres. INPE director, Gilberto Câmara, said: "This is a substantial drop in the rate of decline. It's by far the smallest amount of destruction since Inpe began observing. It gives us great happiness to be able to confirm that the efforts of Brazilian society to contain the destruction of the Amazon has reached such as satisfactory level." <fashionnetasia.com>


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Retail First Look: Let the Comparisons Begin

 RETAIL FIRST LOOK

 November 17, 2009

 

 

TODAY’S CALL OUT

 

With the reporting of HD and TGT this morning (both on the surface better than expected), the inevitable comparisons will now begin between their results and those of their biggest competitors. The SIGMA overlay charts below speak for themselves, highlighting the differences and similarities between how each of these companies has performed over the past several quarters. The consistency in margins is eye-opening for WMT, which has barely budged from a profitability standpoint since the “recession” began.

 

Retail First Look: Let the Comparisons Begin - TGT   WMT

 

Retail First Look: Let the Comparisons Begin - HD   LOW SIGMA

 

 

LEVINE’S LOW DOWN

 

  • It’s not often that I draw attention to advancements in textile technology, but this caught my eye. A textile “treatment” has been developed that reduces heat build-up and provides UV protection in dark colored textiles. In lab tests, Coldblack finished black garments displayed a 9 degree cooler temperature than a comparable shirt constructed of conventional fabric. The material has been used in some higher-end brands so far, but the potential is widespread for anyone or any product that prefers black over white in the blazing sun!

 

  • Lowe’s 3Q results were in part driven by a sequential same store sales improvement in 45 out of 50 states. The biggest improvements were noted in states that have been hit the hardest by the housing downturn. Additionally, after 5 quarters “indoor” related products are now out-comping “outdoor” related categories (by a margin of 300bps). Management also noted that while inventory commitments to the trim-a-tree category are planned down this year, sales are off to a “solid” start this season.

 

  • A few weeks ago it was widely expected that the $99 Blu-ray DVD player would be one of the key items for Black Friday. Now with the recent leaking of Wal-Mart’s Black Friday circular, it appears that they are setting the bar even lower, with a $78 unit. Now granted that price is only available during door-buster hours, but the price is still aggressive especially when considering a similar unit was promoted at $129 over the same event.

 

MORNING NEWS 

 

PPR Starts African Unit IPO to Raise $1.5 Billion - PPR SA, the owner of Gucci Group, started selling shares in its African unit CFAO today to raise as much as 1 billion euros ($1.5 billion) in France’s first initial public offering for two years. Paris-based PPR is offering 31 million existing shares and may add 4.65 million additional shares for a total of 35.65 million at a price range of 24.80 euros to 29 euros apiece, the Paris-based company said today in a statement. If the over- allotment is exercised, PPR will sell almost 58 percent of CFAO. PPR said it plans to give up majority control of CFAO, which sells cars, pharmaceuticals and consumer drinks in Africa and France’s overseas territories. The retailer said two weeks ago the sale is part of a “reconfiguration” of its businesses, which include Gucci, the Conforama furniture chain, bookseller Fnac, mail-order unit Redcats and a controlling stake in the German sporting-goods company Puma AG. Investors and analysts have speculated that the company may target luxury makers such as Italian jeweler Bulgari SpA.  <bloomberg.com>

 

Yoox Kicks Off IPO - Internet fashion retailer Yoox Group launched an initial public offering on Monday that could raise as much as 126 million euros, or $187.9 million at current exchange. Shareholders in the Bologna, Italy-based company, which include venture capital firms Balderton Capital, Kiwi and Nestor 2000, are selling 24.3 million shares at an indicative price per share of between 3.60 euros, or $5.37, and 4.50 euros, or $6.71, through the end of November. If demand is high enough, a further 3.65 million shares will go on sale via an overallotment option, known as a greenshoe. Goldman, Sachs & Co. and Mediobanca are managing the placement, which values Yoox at as much as 226.8 million euros, or $338.2 million. Shares will start trading Dec. 3 on the Milan Stock Exchange STAR segment for small companies.  <wwd.com>

 

Bernanke Signals ‘Extended’ Low-Rate Period May Become Longer - Federal Reserve Chairman Ben S. Bernanke’s diagnosis of a weak U.S. economy and labor market signaled that the central bank’s extended period of low borrowing costs may get even longer. Bernanke said “significant economic challenges remain,” with lending constrained and the jobless rate above 10 percent. Speaking in New York yesterday, he said U.S. asset prices aren’t out of line with underlying values, and central bank policy will ensure that the “dollar is strong.” Treasury two-year notes rose and the dollar weakened as investors reduced bets the Fed will raise interest rates by August. In his most extensive comments on the economy since July, Bernanke repeated the Fed’s Nov. 4 pledge to keep rates low for an “extended period,” and he said forecasters anticipate “moderate” growth this quarter after the 3.5 percent pace of expansion in the prior three months.  <bloomberg.com>

 

Obama Urges China to Heed Commitment on Currency Appreciation - President Barack Obama called on Chinese counterpart Hu Jintao to make good on a commitment to allow the yuan to appreciate to help prevent trade imbalances that exacerbated the global economic crisis. “I was pleased to note the Chinese commitment, made in past statements, to move toward a more market-oriented exchange rate over time,” Obama said during a joint appearance with Hu after a meeting in Beijing today. America’s trade deficit with China widened to a 10-month high in September, raising concern that the combination of a recovering U.S. economy and a fixed yuan exchange rate against the dollar will worsen global imbalances. China’s dollar purchases to prevent appreciation swelled its foreign-exchange reserves to $2.3 trillion in the third quarter, more than twice as much as any other country.  <bloomberg.com>

 

Buffett Raises Berkshire’s Wal-Mart Stake, Adds Exxon, Nestle -  Warren Buffett’s Berkshire Hathaway Inc. took stakes in Exxon Mobil Corp. and Nestle SA, betting on the world’s biggest oil and food companies. Berkshire held about 1.28 million Exxon shares and 3.4 million American depositary receipts of Nestle at the end of the third quarter, the Omaha, Nebraska-based company said in a regulatory filing yesterday. The stake in Irving, Texas-based Exxon would be worth about $95 million, based on yesterday’s stock price, while the Nestle holding would be valued at $161.5 million. Berkshire also raised its stake in Wal-Mart Stores Inc., the largest retailer. “Berkshire is increasingly looking for companies that are world-leading brands,” said Tom Russo, partner at Gardner Russo & Gardner, which holds shares in Berkshire and Vevey, Switzerland-based Nestle.  <bloomberg.com>

 

Strickler Details Obama's Trade Stance at WWD CEO Summit - The Obama administration understands the importance of trade as an engine for economic growth and is committed to brokering sound trade agreements, said Gail Strickler, assistant U.S. Trade Representative for the office of textiles. USTR Ron Kirk “has given me an opportunity to serve the industry I know and love, and this opportunity is something I plan to take full advantage of,” said Strickler, a 30-year textile and apparel industry veteran who has been in her post just eight weeks. Strickler, who is in the position formerly called the special textile negotiator, is the lead negotiator for textile and apparel products and advises Kirk on industry trade matters. Although many in the apparel industry feel there’s a lack of clarity on the Obama administration’s approach to trade, Strickler said the administration is “committed to getting the science of trade right.” <wwd.com>

 

European Exports Rose Most in 20 Months in September - European exports increased the most in more than a year and a half in September as reviving global demand helped the region’s economy emerge from its deepest recession since World War II. Exports from the 16-nation euro area rose a seasonally adjusted 5.5 percent from August, when they fell 4.1 percent, the European Union’s statistics office in Luxembourg said today. The September increase was the biggest since January 2008 and pushed the trade surplus to 6.8 billion euros ($10.2 billion), the largest in more than five years. Imports advanced 1.1 percent after a 1 percent drop in August. The euro-area economy returned to growth in the third quarter after global governments stepped up stimulus measures and central banks injected billions into markets to revive lending. While Europe’s services and manufacturing industries expanded for a third month in October, the euro’s ascent is threatening to undermine exports by making them more expensive.  <bloomberg.com>

 

U.K. Inflation Rate Increases More Than Forecast - The U.K. inflation rate rose more than economists forecast in October, climbing for the first time in eight months as fuel costs and air fares climbed.

Consumer prices gained 1.5 percent from a year earlier, compared with 1.1 percent the previous month, the Office for National Statistics said today in London. The median forecast in a Bloomberg News survey of 30 economists was 1.4 percent. On the month, prices rose 0.2 percent.  <bloomberg.com>

 

Japan Deflation Concern Rises Even as Growth Quickens - The acceleration of Japan’s economy to the fastest growth pace in more than two years masked a slide in prices of goods and services that threatens to temper the nation’s recovery. The domestic demand deflator, a measure of price levels that excludes the cost of imports, fell 2.6 percent in the third quarter from a year earlier, the most since 1958, Cabinet Office figures showed yesterday in Tokyo. At the same time, gross domestic product jumped 4.8 percent, the most since early 2007. Sustained price declines threaten to curtail a corporate- profit rebound that’s already been insufficient to spur a rally in Japan’s shares this quarter. <bloomberg.com>

 

Money-losing GM to repay aid early, sees 2010 IPO - General Motors said Monday an improving global auto market will allow the struggling auto giant to repay government loans early and move forward toward a 2010 share offering. But the automaker that needed massive aid to avert collapse earlier this year also reported a net loss of 1.15 billion dollars in the period since emerging from bankruptcy in July.

The number one US automaker said it is making progress toward reviving its fortunes, although predicted more losses in the coming months. "The business has performed better than we had expected going into bankruptcy," chief executive Fritz Henderson told a conference call. <google.com>

 

Fossil's New Retail Concept Focuses on Apparel - Fossil has introduced a new retail design that plays up the brand’s Americana image and puts more focus on clothing. The watchmaker, which has been opening stores rapidly and now counts 360 worldwide, cited strength in direct sales for the quarter ended Oct. 3, when comp store sales rose 6.4 percent, but net sales fell 6.9 percent to $381.4 million. Of Fossil’s 124 U.S. stores, 91 are accessory stores and 33 have both accessories and clothing. Next year, clothing will be added to Fossil’s unit at Covent Garden in London after a renovation and to a new store in Stuttgart, Germany, she added.  <wwd.com>

 

SG Footwear Acquires Rugged Shark - SG Footwear has acquired all the assets, trademarks, and registrations of the Rugged Shark brand from Gordon Brothers LLC. Rugged Shark, a marine and fishing footwear brand, was founded in 2001. Terms were not disclosed. The footwear is best known for its technical and comfort features targeting a core demographic group of men 25-55. "The acquisition of the Rugged Shark brand adds tremendous equity to our stable of brands with expansion into new channels of distribution," commented Bernard Leifer, President & CEO, SG Footwear. "In addition to immediate growth potential to the boating and fishing enthusiasts, Rugged Shark will be positioned as a lifestyle brand offering significant brand expansion opportunities." <sportsonesource.com>

 

One-On-One with UA CEO Kevin Plank - “Protect this house." That’s the marketing motto made famous by Under Armour in a series of commercials, which has been adopted by athletes on fields across the U.S. as a spirited rallying cry at their home games. The ads were overseen by Kevin Plank, founder, chairman and chief executive officer of the performance apparel and footwear maker — and a big fan of aggressive dictums, which he inscribes on an oversize whiteboard in his office at the firm’s Baltimore headquarters. “The Under Armour brand is very much like a team brand, and that is the way we run our company,” said Plank, a former University of Maryland football player who founded the company in 1996. “Sales and marketing are like offense; manufacturing and distribution are like defense; finance and I.T. are like special teams. But what you learn in this business is that not just one team is on the field alone, but we’re all on the field at the same time. The companies that will win are the ones that communicate the best.” <wwd.com>

 

A mixed message on sales—but possibly not so mixed for online retailers - Online retailers looking for clarity as to what to expect for the holiday sales period got a little glimmer of hope today as the U.S. Department of Commerce reported that while total October retail sales were down 1.7% from October 2008, general merchandise sales—the goods that consumers are most likely to buy online—were up 1.5% from a year ago. A big part of the overall decline in sales was the result of lower gasoline prices; sales at gasoline stations were down 15% year over year. The average nationwide price of gasoline was about 90 cents a gallon less this October than a year ago, according to the U.S. government’s Energy Information Administration. Another contributor to the drop was the result of a downturn in home-related purchases—housewares, home furnishings, building equipment and garden materials. Sales of building material and garden equipment fell 16.6% year over year.  <internetretailer.com>

 

Burberry Raises Dividend as Profit Meets Estimates - Burberry Group Plc, the U.K.’s largest luxury-goods company, raised its dividend for the first time in 18 months after reporting a drop in first-half profit that was no worse than analysts estimated. Shareholders will receive 3.5 pence a share, up 4 percent on the prior year’s 3.35 pence, according to the London-based company, which left the dividend unchanged last year. Net income declined to 56.8 million pounds ($95.7 million) in the six months ended Sept. 30, from 74.8 million pounds a year earlier, the retailer also said today in a statement, matching the average estimate of six analysts surveyed by Bloomberg. <bloomberg.com>

 

Rossignol Taps IMG Worldwide to Expand Brand - Snow, ski and mountain brand Rossignol has teamed up with IMG Worldwide to extend its licensing into a number of categories. Rossignol is newly independent from previous owner Quiksilver. IMG Worldwide is currently seeking partnerships for the brand in footwear, eyewear, sports bags and other related accessories. "It is a privilege to be handling an important part of the new strategy of this iconic 100-year-old winter sports brand," says Bruno Maglione, IMG Worldwide's executive vice president and co-managing director. < licensemag.com>

 

Birkhold Joins Lacoste Licensee as CEO - Devanlay U.S. Inc., the licensee for Lacoste apparel, has tapped Steve Birkhold as chief executive officer, effective Jan. 4, succeeding Robert Siegel, who will retire from the company at the end of the year. Birkhold is joining Devanlay from Diesel USA, where he has been ceo since November 2007. This is the second time in the past year Siegel has exited the top job at Devanlay. He originally left the company in December 2008, but rejoined in February when his replacement, Robert Skinner Jr., the former ceo of Kellwood Co., departed after less than two months on the job, citing “differences with the board.” <wwd.com>

 

Oxxford President Departs - After 11 years at Oxxford Clothes, president Mike Cohen has left the company, reportedly to join competitor Hickey Freeman. Cohen could not be reached for comment at press time Monday and a spokeswoman for Hickey had no comment. Individualized Apparel Group, which owns Oxxford, a brand best known for its American-made customer clothing, has elevated Oxxford veteran Scott Ruerup to executive vice president, effective immediately. There are no plans to name another president. Cohen, who had worked at Polo Ralph Lauren Corp. before joining Oxxford 11 years ago, is said to be taking a job helming the Hickey Freeman brand, the other remaining American high-end suit maker. <wwd.com>

 

Brazil: Amazon rainforest destruction shows decline - Brazil's National Institute for Space Research (INPE) has reported that the country's Amazon rainforest resources shrank by 7,000 square kilometres from August 2008 to July 2009, the smallest amount of territory lost in the area since 1988. The figure is also better than the Brazilian government's prediction of 9,000 square-kilometres. INPE director, Gilberto Câmara, said: "This is a substantial drop in the rate of decline. It's by far the smallest amount of destruction since Inpe began observing. It gives us great happiness to be able to confirm that the efforts of Brazilian society to contain the destruction of the Amazon has reached such as satisfactory level." <fashionnetasia.com>


Don’t Ignore TGT Credit

People focus on TGT’s credit stats relative to its history. But let’s also not forget to do so relative to bank card issuers. TGT’s charge-offs are getting better, but at a slightly lower rate than these peers. Delinquencies (better indicator of future charge-offs) are still rising, and at a slightly higher rate than peers.  Is this any reason to derail any thesis a bull might have on Target? We don’t think so. But it can’t be ignored either.

 

Target reported October Monthly Master Trust data this morning. Net charge-offs declined 88 bps vs. September to 13.49%. This compares with a 70 bps decline for the top six credit card bank-issuers. On an apples to apples basis, the magnitude of the improvement as a percentage was slightly smaller at Target: 6.1% vs. 7.0% for the bank card issuers.

 

Don’t Ignore TGT Credit - TGT NCO Oct 09

 

On the delinquency front, a more forward looking indicator, Target reported a rise in delinquencies of 36 bps vs. September to 9.34%. This compares with a 17 bps increase for the top six credit card bank-issuers. Again, looking at it on an apples to apples basis, the magnitude of the deterioration as a percentage was slightly larger at Target: 4.0% vs. 3.1% for the bank card issuers.

 

Don’t Ignore TGT Credit - TGT DQ Oct 09


MPEL 3Q09 CONF CALL TRANSCRIPT

MPEL missed our EBITDA estimate but there were some encouraging signs. Mass drop was better than we thought in Q3 and November volumes look better than October.

 

 

"Our grind mass market business has demonstrated sequential volume improvements across the reporting quarter and this growth trend has continued into the fourth quarter of this year. We have not yet reached our full potential in this segment and the recent opening of the Grand Hyatt Macau is now having a positive impact on performance. We remain on target to complete and open a number of major new entertainment attractions at City of Dreams in the coming months as part of the second phase of development, which will culminate in the launch of the Dragone-inspired show at the Theater of Dreams in approximately six months' time. We remain confident in our outlook for Macau and believe our assets are strategically positioned to capitalize on the expected growth in the market."

 

 

3Q09 CONF CALL

  • Have held commission levels at proposed levels since opening
  • Doing great in the RC segment
  • Premium direct VIP business has been strong and they estimate that their share is as high as anyone else in Macau
  • They have some heavy lifting to do on the grind side of the Mass business
  • Remain confident that their Mass business will continue to build over the next 6 months and the expansion of the amenities yet to open (night club, 50% of their retail, Dragone show)
    • LVS does say that the Cirque show is a big money loser and hasn't driven traffic
  • Grand Hyatt was a "phased delivery" - have about 400 rooms available as of today and expect all rooms to be ready by year end
  • Too early to determine impact of Grand Hyatt on their Mass business but expect it to be benefcial
  • Expect that 2H09 will be a lot better than 1H09 and expect 2010 to grow 20% for the market as a whole (assuming no financial crisis)
  • Expect to spend 115MM on completing construction
  • 4Q09 guidance:
    • D&A $75MM
    • Net Interest expense $20MM
    • Pre-opening negligible
  • Will accelerate timing of quarterly results going forward
    • I bet they got a lot of complaints from the G2E contingent... myself included!

Q&A

  • MPEL market share in Oct down due to lower hold on RC.  Oct is distorted to Mass typically, which makes their share look weak
  • They are seeing better volume in Nov than Oct
  • Any expected changes from new CE in 1 month?  Lots more talk about infrastructure resumed.  Remain very encouraged
  • Covenant on Macau credit facility?
    • Kicks in 4Q2010, needs to be under 4.5x.  Have $1.4BN net drawn now, and then will use cash from ops to lower leverage
  • If hold was normalized on CoD Mass?
    • Hold is just below 16% through the 3rd quarter.  Low hold is a function of lower length of play.  Would expect that hold will move up over time as the property matures.  Mature Mass properties have holds as high as 21%
  • Where do they think Mass drop gets to? NO COMMENT, but they have seen a 35-40% increase in drop over last 4-5 months.  Believe that they will continue to see solid growth in drop and hold there
  • New Capex at CoD?
    • End of 3Q09 - have $150MM capex liabilities which they will cash settle $115MM in the 4Q09.  The remaining are retention payments and won't get settled until the 1H2010. Then there is another $40MM of capex associated with Dragone Theatre fit out which will occur in early 2010.  Then have another $40-50MM of capex maintenance to "spruce up amenity development"
  • Have 135 VIP tables, remaining Mass at CoD. 
  • CoD hold percentage was slightly above 3% and at Altira it was just below 2.7%
    • I don't understand why they are so coy with this number
  • Grand Hyatt full range of inventory handed over the next 4-6 weeks
    • Heard that is was as low as 50 available rooms in early Nov
  • Based on their commentary on Mass Drop in July - it doesn't look like August and September grew sequentially
    • Over the last 8-10 weeks they have seen some positive volume growth and some improvement in hold as a result of better marketing and Hyatt opening. They had a very good Oct which continued into Nov
    • We did see a pickup in Mass in Oct for CoD
  • What happened with AMA agreement?
    • They are neutral on hold under the AMA agreement so there is no make whole payment due to them
  • Cost structure is roughly $1.3MM per day for both properties including corporate and centralized costs.  Hyatt pushed that number to just shy of $1.4MM per day
  • Direct VIP business at CoD is about 17% right now
  • View on 5 & 6 - would be "delighted to see them finish the building"

 


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