The Macau Metro Monitor, April 27th, 2010


MARINA BAY SANDS OPENS ITS DOORS Channelnewsasia, The Edge Singapore, Bloomberg

Adelson expects the resort to generate $1BN of EBITDA over the next twelve months and that LVS's $5.5 billion investment  in Marina Bay Sands will be recouped over five years. He expects 70,000 to 80,000 people to visit the complex daily when all the facilities are open. Singapore aims to lure 17 million visitors and triple annual tourism revenue to S$30 billion ($22 billion) by 2015, helped by two casino resorts, Marina Bay Sands and Genting's RWS. Marina Bay Sands is designed to cater to the corporate and convention crowd while Resorts World is aimed at families. Today, Marina Bay Sands opened 963 of its 2,560 hotel rooms, the casino, the meeting and convention facilities, parts of its shopping mall and some restaurants. A grand opening party will be held June 23 when the second phase is unveiled, including a sky park, additional shops and more restaurants. Asia is expected to contribute 85% of revenue once the Singapore casino “ramps up.” said Adelson.


Adelson also added that the gaming industry in Las Vegas is past the bottom, with hotel occupancy rates and the conference business rebounding. He said the company’s Las Vegas hotels are running at 96 to 98% occupancy in April, and expects that the average occupancy rate will be back in the 90s this year.


The unemployment rate for January - March 2010 held stable at 2.9% and the underemployment rate also remained unchanged at 1.8% in comparison with the previous period (December 2009 - February 2010). Total labor force was 323,300 in January - March 2010 and the labor force participation rate stood at 71.1%, with the employed population increasing by 600 over the previous period to 313,800.


Visitor arrivals to Singapore registered 17.3% growth to reach 928,000 in March 2010, the highest ever recorded in the month of March. In March,  visitor days were estimated at 3.5 million days, a YoY growth of 16.4%.




Yesterday, the S&P 500 closed down -0.4% on the day as concerns over financial reform  drowned out strong earnings from Caterpillar. On the MACRO front, the U.S. Treasury said it will approve an initial sale of 1.5 billion shares of Citigroup common stock. On the EU front, the possibility of a speedy bailout for Greece was stalled by German Chancellor Angela Merkel. 


Consumer Discretionary (XKY) outperformed yesterday, closing up +0.8%. That was followed by Basic Materials (XLB) at +0.4% and Industrials (XLI), closing up +0.2%. Those were the only sectors to close up on the day. Notable laggards were Healthcare (XLV) and financials (XLF), closing down -1.1.% and -1.6% on the day, respectively.  No doubt the government's plans to begin exiting it's 27% stake in Citigroup weighed on the sector.


The Dollar index closed up +0.2% on the day.  The Hedgeye Risk Management models have levels for the Dollar Index (DXY) at:  buy TRADE (81.09) and sell TRADE (81.89). 


Yesterday, the VIX closed up 5.1%. We currently have no position in the VIX, though we are managing risk around it. The Hedgeye Risk Management models have levels for the VIX at: buy TRADE (16.83) and sell TRADE (19.41). 


 Yesterday, Crude Oil closed down -1.1% on the day. The Hedgeye Risk Management models have levels for the OIL at: buy TRADE (80.35) and sell TRADE (83.87). 


In early trading, Gold is trading down -0.2%.  The Hedgeye Risk Management models have the following levels for GOLD – Buy TRADE (1,147) and Sell TRADE (1,165).


In early trading, Copper is trading down -1.5%. The Hedgeye Risk Management Quant models have the following levels for COPPER – Buy TRADE (3.36) and Sell TRADE (3.52).


In early trading, equity futures are trading below fair market value.  As we look at today’s set up, the range for the S&P 500 is 14 points or 0.4% (1,207) downside and 0.7% (1,221) upside. 


Today is an important day on the MACRO front. The calendar reads:

  • FMOC Meeting Begins
  • S&P/Case-Shiller Home Price Index
  • April Confidence Board Consumer Confidence

Darius Dale














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Normalizing for taxes, WMS would have reported $0.49 which amounts to a disappointing quarter in light of "great expectations". Our long term thesis hasn't changed


WMS reported an inline quarter as we expected. However, given the "great expectations" going into the call, inline proved not to be good enough. Our long term thesis on WMS's outlook remains unchanged. We will have further thoughts on the quarter out shortly. Below are our notes from the call.



  • Expect only modest increases in customer budgets in 2010
    • Based on IGT's and WMS's replacement units, we estimate replacements will be up nicely y-o-y to roughly 12k units
  • Think that they got higher ship share gains in the quarter
  • Bluebird xD getting launched in the June quarter and should help them to continue gain ship share
  • Repurchased $25MM worth of shares during the quarter (So $5MM post Q filing)
  • 55% product sales margin target
  • Overall environment of constraint and conservative in NA - however, it's the first quarter where units increased y-o-y
  • Expect to deliver higher y-o-y unit increases in the June quarter due to entry into new distribution avenues and launch of xD
  • Expect strong ASP's again in the June quarter, more of their customers are opting to upgrade to their BB2 line when ordering new units
  • Australia will have a drag on ASPs, but will largely be offset by launch of BBxD which will sell at a premium price
  • Increase in their Average Daily Revenue in game ops is largely driven by higher mix shift of WAP units as a % of the overall install base
  • Gross margin decline in their gaming operations was due to mix shift towards WAP games and a benefit of favorable jackpot expense last year. They also had some royalty contracts roll off and are now servicing those customers directly (at a lower margin)
  • Expect their tax rate to be btw 36-37% in the F4Q2010
  • Had a $20MM WC benefit in the quarter partly due to lower demand for extended credit terms - however they are still above historical norms.
  • Expect an increase in capital expenditures to expand gaming operations footprint
  • September 21st analyst day in Chicago
  • 26% ship share in calendar 2009, and believe they had better ship share in the March 2010 quarter
  • Launching BlueBird xD cabinet in the June quarter.  Has a smaller footprint than comparable products.  Performing very well in current trials
  • Launching Price is Right in June Q and Lord of the Rings in July.  Lord of the Rings will have player recognition like Star Wars.
  • Shipped games to New South Wales in the the March quarter. Expect to increase shipments to that market in the June quarter
  • Mexico - shipped Blue Bird 2 units again this quarter and expect to gain further penetration in that market
  • Italy - expect first revenue earning units to be placed this fall
  • IL - expect first units to ship at the end of this calendar year
  • Expect commercial applications of Wage Net and first portal applications to launch at the end of this year (Jackpot Explosion - first commercial application). Working with 9 casinos to trial Jackpot Explosion
  • Revised 4Q Guidance of $213-223MM (lowered the range by $3MM)


  • Ship share in March?
    • Think they gained share in the March quarter vs. Dec Q
  • 50% of profit came from gaming operations
  • Expect to keep disciplined on supply of participation games
  • Thoughts on IGT's discounting - "dynamix package"
    • Continue to believe that as long as their games perform well, pricing will not be an issue
  • Will bring out 105 new titles this year
  • Would they have been able to sell more units if IGT had not bundled or if they had lower prices?
    • No
  • Not concerned about their WAP footprint for Q4 given their product pipeline
  • Got approval for Ruby Slippers at the end of March - so very few of those units are in the March 31st footprint - but they will be accretive to the footprint in June
  • Refresh the stand alone participation footprint each quarter (Monopoly/etc) so they aren't ignoring them at the expense of WAP
  • Why xD vs. BlueBird 2?
    • Same themes run at significant premium on the xD vs the BB2 - pricing is north of $20K at same margins as BB2





  • "Looking forward to 2010, the year is looking much stronger than many thought possible only a short time ago. We're expecting good yield growth despite a continued poor economy. Wave season's off to a strong start with good volume and even higher pricing. While we are also not seeing a dramatic run-up in pricing, our numbers demonstrate a slow but steady improvement in our revenue environment, consistent with a slow but steady improvement in the economy. This improving environment combined with continued focus on cost will be meaningfully accretive to earnings this year."
  • "It's encouraging to note that our yield guidance would still be positive for 2010 even if we excluded the Oasis- and Solstice-class ships."
  • 4Q09 "Ticket revenue benefited from stronger-than-expected close-in bookings, and even onboard revenue was slightly stronger than we had forecasted."
  • "Wave season is off to a promising start. Each of the last three weeks have generated record booking volumes for us at pricing that is running ahead of the same time last year. Clearly, we are not back to pre-recession demand level, but we are pleased to see yield recovery underway. As of today, our booked load factor and average net per diem are ahead of the same time last year for all four quarters and the full year."
  • "We currently expect yields to improve around 2% in the first quarter and between 3% and 6% for the full year."
  • "We once again had healthy close-in demand for our cruises in both Europe and the Caribbean. In general, volume was a bit better than what we thought at the time of our previous earnings call. Our onboard revenue also performed better than we had planned driven by shore acts [ph], gaming and onboard communications. And expenses were slightly under where we thought they would be driven by our focus on costs."
  • "In the Caribbean, we've continue to see close-in bookings for the first quarter. Some of this closed-in business is being driven with discounting. But overall, Caribbean pricing remains consistent with our expectations a few months ago."
  • "This summer's European season is looking very strong for Celebrity. Both Equinox, operating 10- and 11-night Med cruises from Rome, and Eclipse, our first ship dedicated to U.K. market operating summer cruises from Southampton, are performing well at very healthy prices. I'm pleased to say bookings are also performing quite well on our non-Solstice-class ships operating in Europe."
  • SG&A? "Cost on a reported basis will be flat to slightly up. And when you factor in base exchange rates, it'll actually be flat to slightly down next year."
  • "I think the Spanish economy continues to be likely the weakest that we are operating in these days. But I think we are feeling that Pullmantur has an opportunity of yield accretion in 2010."





  • “On all fronts, demand is improving on a relative basis, however, we continue to see those improvements at lower room rates compared to the prior year.” 
  •  “The favorable trends we experienced in the third quarter accelerated during the fourth quarter as transient occupancy turned positive for the first time this year driven in part by increased special corporate bookings.” 
  • “Starting with our transient business, volume was very strong with an increase in room rates in the fourth quarter of nearly 7% compared to the fourth quarter of 2008, and perhaps even more noteworthy, up almost 1% compared to 2007.”
    • “The increase in transient occupancy stemmed primarily from additional demand in both with discount … and special corporate segments..Rates continue to be a challenge as the average trends in rates declined by 15% for the quarter which led to an overall transient revenue decline of 9.6%.”
    • “Group business trends have begun to turn the corner as the run rate of declines in group occupancy continues to improve and the outside levels of attrition and cancellation activity are reverting back to historical norms.”
    • Group booking – booking window:
      • “We're not seeing any sign yet that they are beginning to lengthen.”


  • “Economic indicators present a very mixed picture with GDP improving, business investment expected to be relatively flat while unemployment remains high and job growth is not expected to accelerate until next year. Even with the recession ending in 2009, we believe that the pace of recovery in 2010 will be somewhat moderate as concerns over unemployment and consumer spending linger.”
  • “The bigger challenge is on the rate side as we begin this year with average rate running around 10% below last year’s level. While comparisons will become easier as we move into the second quarter, we see pricing power returning only slowly on a market-by-market basis as demand begins to improve. Unless we experience a far more robust recovery that is currently anticipated, we would expect to endure a third consecutive year of decline in RevPAR and EBITDA.”
  • “2010, we are expecting a solid increase in transient occupancy, although this may be offset by a decline in transient rate.”
  • “Looking at 2010, at this point our forward bookings represent more than 70% of the group room nights we achieved in 2009… Our group room night bookings for this year are approximately 5% to 6% behind 2009’s pace.  Based on the strength of our short-term bookings, we would expect to close much but not all of that gap by year end.”
  • “However, we believe that rate crisis will persist on the group side in 2010, and that the decline in average rate will be higher for groups than on the transient side of our business. This will likely lead to a reduction in group revenues for the year. Of course the final results for both of our group and transient business will depend on the ultimate strength of the recovery and the economy in 2010.”
  • “In a more favorably scenario, where there is significant business investment in job growth, which result in flat RevPAR for the full year, we would anticipate the comparable adjusted margin will decline a 175 basis points, leading to adjusted EBITDA of $750 million and FFO per share of $0.57.”
  • Markets with a position outlook for 2010:
    • “We expect the Miami/Fort Lauderdale market to perform very well [in 2010]. The outperformance will be driven by the late 2009 Ballroom addition at the Harbor Beach Marriott and demand generated by the Super Bowl and Pro Bowl.  
    • Boston will also be a top performer, benefiting from the 2009 renovation at the Sheraton Boston, Boston Marriott Copley Place and the Hyatt Cambridge.  In addition, leisure and in-house group demand to help to offset weak citywide activities.
    • We also expect New York City to outperform in 2010. We believe that occupancy will continue to strengthen across all transient segments, and may allow us to stabilize and eventually increase rates.
    • San Francisco will also perform well, the Ballroom renovation at the San Francisco Marriott Marquis will negatively affect the first quarter but improve fourth quarter comparisons. While the citywide pace is down, transient demand is recovering well.”
  • Markets that will continue to struggle in 2010...
    • Phoenix, where substantial decline in group room nights is expected along with the 2.5% increase in supply. The ballrooms at the Ritz-Carlton and Phoenix in the Westin Kierland will be renovated and we are adding a ballroom in Kierland which will be disrupted and further reduce group room nights.
    • The Hawaiian market will continue to be challenged by the lack of airline capacity and airline price increases. Although we have started to see a recent increase in flights, they are still well below 2007 level. In addition, both of our hotels will undergo room renovations.
    • The San Diego market will struggle due to a substantial decline in citywide demand and the absorption of the new Hilton that opened in 2009, and room renovation at the San Diego Marina Marriott will also negatively effect our performance.”
  • We expect the European joint venture portfolio to have RevPAR of +2% to -2% for 2010."
  • “Looking forward to 2010, we expect occupancy to increase, which will lead to growth in wage and benefit costs, slightly less than inflation…  we expect unallocated costs to increase less than inflation except for utilities, where we expect higher growth to an increase in rates in volume due to 2010’s cold winter compared to the mild winter of 2009. We expect property insurance to increase because of inflation, and property taxes to rise in excess of inflation.”
  • Real estate taxes going higher: 
    • “I think the problem we are running into is that we know that single family values are down throughout a lot of markets. There is a reluctance on the part of most local governments to increase tax rates, especially as it relates to residential customers. And so, even though our value should be lower, at the end of the day we are assuming that we're going to pay a bit more.”


  • “Given the current operating environment, tight capital markets for potential buyers and our strong capital position, we have not included any additional dispositions in our guidance for the remainder of the year, although, we still expect to market a few assets this year.” 
  • “While we are fairly confident we’ll acquire assets including debt instruments this year, we have not built any acquisition assumption into our guidance at this point.” 
  • “For all of 2009, attrition and cancellation fees were approximately $40 million higher than a typical year.”
  • “I think you are seeing the conservatism of an owner who is basically paid and focused on the bottom line as the somewhat normal optimism of the operator to the little bit more top line focus. The truth is that I don’t think there is a huge difference in the way we are looking at next 2010 compared to Marriott and Starwood. They represent together probably 75% to 80% of our portfolio. So, to the extent that the way the years plays out is closer to the midpoint of their guidance and necessarily the midpoint of ours, you will see that benefit in our performance. I don’t expect that we would really ultimately perform much differently from them.”
    • “I suspect that if we do underperform at all it would probably be because we have a slightly larger group presence, and it may take a bit longer for that to come back."

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