A small EBITDA miss but not really relevant. Surpisingly, previously stable Downtown disappointed but how quickly the LV Locals market improves will be the main driver going forward.



BYD missed our EBITDA estimate by only $1.4 million but we were below the Street.  The big negative was Downtown Las Vegas which had been holding in nicely, but missed our Q1 estimate badly with EBITDA down 37%.  The positives were cash flow and debt paydown.  Going forward, all eyes are on the LV Locals market which is clearly getting less bad, although down 11% on a -32% comp is not exactly table pounding, but at least it wasn't a miss from expectations. 





"We continue to be encouraged by improving trends in our business, which clearly reflect the signs of an emerging recovery. Our Las Vegas Locals market reported the best year-over-year comparison in nearly two years, and business levels are returning to normal seasonal patterns in this region. Given the positive developments in our business, combined with continued improvement in the national economy, we expect to generate year-over-year growth during the second half of 2010."

- Keith Smith, President and Chief Executive Officer of Boyd Gaming



  • LV Locals: "While conditions remain challenging in the region, the fundamentals of our business are strengthening, and we saw sequential improvement in this region for the second straight quarter."
  • Downtown: "Results reflect lower ticket pricing and higher fuel costs associated with our Hawaiian charter operation, as well as lower Downtown visitor volumes."
  • Midwest & South: "Regional results were impacted by declines at our Louisiana properties as the market continues to normalize, partially offset by Adjusted EBITDA growth in Illinois and Indiana."
  • Borgata: "The decline was principally due to reductions in visitation caused by severe winter weather, which impacted the property repeatedly throughout the first quarter."



  • Visitor volume has increased over the last 5-6 months in the locals Las Vegas markets. They expect that convention business will improve in the second half of the year
  • Will aggressively pursue M&A
    • Stations - continue to be interested in acquiring them
    • Also looking for additional acquisition opportunities that can create shareholder value
  • Expect a similar y-o-y decrease in EBITDA in 2Q2010 and a return to EBITDA growth in the 2H2010 in the Las Vegas locals market
  • Downtown was impacted by a combination of lower ticket prices and higher fuel prices which accounted for 1/3 of the decline.  Rest of it was due to Hawaiian economy and state gaming tax introduced in Hawaii
  • Level of growth they saw in LA during 08 & 09 wasn't sustainable and expect the declining revenues to continue through 3Q2010
  • Excluding weather, they think that Borgata's EBITDA would have been flat y-o-y
  • Believe they will return to overall growth in 2H2010
    • On an aggregate basis, not at every property
    • Apples to apples basis - not including Borgata
    • Yes, they mean EBITDA growth too
  • I don't understand why they are pumping up Borgata if they want to buy it on the cheap? hmmmm
  • Starting next quarter they will fully consolidate all of Borgata's revenues and expenses, and all BS items
    • Minority interest will also increase obviously
  • 6.5x was their leverage ratio at the end of the Q
  • Corporate expense this Q is a good run rate for the rest of the year
  • Interest expense: $125MM for the year plus Borgata's interest expense of $5-6MM per year.  Next year Borgata's interest expense will be impacted by refinancing of that facility
  • Maintenance: 55-60MM and Borgata's is 15-20MM for the year



  • Weather impact was really only at Borgata $5-6MM
  • Florida - now that the tax rate has been lowered they are re-evaluating that market but still watching how it develops
  • Stations assets - at this point they will wait and see what the judges ruling will be before they move forward
  • Would they consider selling their interest in Borgata's along with MGM?
    • Will see what happens. Right now they will just wait and see and don't have any interest currently in selling their stake but will wait and see
  • Las Vegas locals market- what does it mean that they are seeing normalizing trends?
    • Historically the 1Q has been the best quarter for the market and for the first time in a while 1Q was better then 4Q - and hence the seasonality comment
    • Spend is still obviously down but is seeing an uptick in visitation - the first time in 2 years
  • Confident that Borgata will be able to compete going forward in the face of supply in PA
  • Lower visitor volumes Downtown?
    • Number of commercial airline visitors was definitely down y-o-y
    • In addition saw lower levels of traffic from street levels
    • Not driven by less local visitors
  • Business as usual vs. just increasing promotional environment at Borgata to deal with new supply and table games. Borgata reallocated costs across the property when slots came to PA initially.
  • New Jersey doesn't need new capacity to stimulate demand
  • They just have a simple right of first refusal for MGM's stake in Borgata... lol no they can't force a potential buyer to pay the same for BYD's stake
  • Opening City Center is impacting their Downtown properties as well as the historically low rates that are driving people to try to upgrade
    • Cooler crowd

ROST: KM Covering

Keeping a trade a trade. While we still believe this is one of the better shorts in the intermediate-to-longer term, Keith is covering ROST on market weakness and ahead of sales day. We’ll revisit at a different time/price.


Headline miss but ASCA actually beat our EBITDA slightly. Below the line was worse. Maybe we were too conservative but East Chicago wasn't the disaster we thought.



Despite the weather, George Bush, low hold, and other excuses, ASCA actually beat our EBITDA estimate slightly.  They missed the Street, of course.  Below the EBITDA line items were worse so EPS looked bad.  While the excuse game gets a little much sometimes, we actually feel a little better about the properties going forward, particularly East Chicago.  However, EPS will likely go down significantly going forward, due to a higher tax rate, corporate expense, and interest expense.   





"In comparison to the extremely strong first quarter of 2009, when we established several all-time financial performance records, the initial quarter of 2010 proved to be more challenging due to a variety of negative factors that impacted our operating results....We continue to see soft consumer discretionary spending in most of our markets, as most significantly evidenced by market contraction on a year-over-year basis in our Vicksburg, Kansas City, Council Bluffs and Jackpot markets"

- Gordon Kanofsky, Ameristar's Chief Executive Officer



  • "Our luxury hotel and the favorable regulatory changes in Colorado spurred year-over-year gross gaming revenue growth of $12.0 million in the Black Hawk market during the first quarter, and we were able to capture more than 100% of that"
  • "Ameristar East Chicago's admission levels and operating results continued to be adversely affected by a permanent bridge closure in the fourth quarter of 2009 that has made access inconvenient for many of the property's guests. The bridge closure contributed significantly to the 47.2% decrease in Adjusted EBITDA as compared to the prior-year first quarter."
  • "The first quarter of 2010 was adversely impacted by low table games hold at several of our properties, including Ameristar East Chicago where a high-limit player affected Adjusted EBITDA by approximately $1.6 million."
  • "Our Midwest properties were negatively impacted by the increased frequency of inclement weather... Additionally, the poor weather conditions were often present during weekends and holidays."
  • "Employee benefits expense increased year over year by $1.9 million."
  • Outlook: "Although we were presented with several challenges during the first quarter, we are fortunate in that some of them are expected to be subject to the law of averages, such as the inclement weather, low table games hold percentages and spikes in health benefits claims"
  • 2Q2010 Guidance:
    • D&A: $27 to $28MM
    • Interest expense, net of capitalized interest: $34 and $35MM (includes non-cash interest expense ~$2.8MM)
    • Tax rate: 42.5% to 43.5%.
    • Capital spending: $15 to $20MM
    • Capitalized interest: $0.2 to $0.3mm
    • Non-cash stock-based compensation expense: $3.0 to $3.5MM


  • Comparison between 1Q09 and 1Q2010 was difficult as everything went right for them last year
  • Implemented almost all of their cost controls by 1Q09, and therefore they are particularly happy with their margin performance given the top line results.
  • Used 42% of Adjusted EBITDA to pay down debt
  • Still playing around with the marketing & promotions at East Chicago to get maximum efficiencies. 
  • The bridge is permanently shut down, but the state will allow the use of the highway to improve access to the property late this year. By 2012 they will complete the second phase of a project to really help the egress to the property
  • Continue to see the consumer being very frugal with their money
  • Few unexpected items in the Q included:
    • increase in benefits to healthcare charges and some particular non-recurring timing issues, weather- especially on peak times like holidays and weekends and low hold
  • Hotel occupancy at Blackhawk has been exceeding 90% since opening. Attracting a lot of visitors from the Denver market. Their gross gaming revenues increased by $14.9MM and market share grew to 26.9%
  • Game plan is to retire debt with their FCF.  Retired an additional $12MM of debt in April
  • High cash balance is related to certain interest payments they need to pay in 2Q2010
  • Expect to retire $70-80MM of net debt for the year and are slightly ahead of that plan.
  • Once the swaps expire on 7/19/2010, they will see a substantial reduction in interest expense in the 2H of the year by roughly $12MM


  • Weather likely impacted them by several million
  • Overall impact of low hold was a couple million
  • Also getting impacted by road construction / access issues in St. Louis which will be completed over the next few months
  • Didn't seem to be particularly interested in acquiring any Stations assets
  • Any signs from the consumer that things are improving?
    • No
  • Are East Chicago costs normalized this quarter?
    • Yes but they are still tweaking the promotional campaigns
  • Benefit charges had to do with changing providers and a large claim settlement that was outstanding. There has also been some accelerating trends on healthcare costs. However, those costs will be more balanced going forward
  • There were also increases in SG&A as well. Corporate run rate excluding stock comp should still be $47MM for the year
  • Capital spending for 2Q 2010: $15-20MM
  • Still have over $4MM of construction payables outstanding pending the outcome of their lawsuit with Walton in St. Charles
  • The stock comp guidance doesn't include the deferred comp plan.
  • The point of their hotels is largely for promotional purposes
  • Gas prices did have a negative impact on them last time they were over $3.50/ gallon
  • Found that the consumer was very happy to spend ASCA's money in 2008 when things were weak but that wasn't efficient for them - as soon as their promotions dried up, so did spending.

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Calendar Catalysts in Europe

Greek Strike:


Today begins a 48-hour strike in Greece to protest against the government’s new austerity measures in exchange for a €110 Billion financial aid package. The measures include:

  • Halting increases in public sector salaries and pensions for at least three years, and eliminating bonus pay
  • Increasing Value Added Tax from 21% to 23%
  • Raising tax on fuel, alcohol, and tobacco by 10%
  • Liberalizing labor laws to make it easier for companies to fire workers
  • Taxing illegal construction
  • Increasing retirement age to 67 from 65 (being proposed)

Around half a million public sector workers in the union ADEDY are expected to take to the street today, with pensioners holding separate demonstrations. Tomorrow, the private sector, including teachers, is set to strike. Expectations are for the country of 11 million to nearly shut down: Government ministries and shops are expected to be closed, airports have cancelled flights and transportation should be severely delayed; hospitals may be understaffed.



UK Election:


Thursday is the General Election in the UK. Candidates include: Gordon Brown (Labour), David Cameron (Conservatives), and Nick Clegg (Liberal Democrats). Polls suggest a high likelihood of a hung parliament, ie a lack of a majority government, meaning the inability of a party to obtain the 326 seats needed (of the 650 seats in the House of Commons) to gain an overall majority. While there is historical precedence for a hung parliament (most recently in 1974), a lack of majority, especially before we get the exact number of seats that each party attains, could yield at least three possible outcomes:

  1. Gordon Brown’s government may continue to rule despite a minority in Parliament, perhaps with a hand-shake agreement with another party for support like the Liberal Democrats.
  2. Brown may offer his resignation to the Queen and suggest a new government, likely to David Cameron.
  3. The Queen could overthrow Brown’s minority government in her "Queen’s Speech” on May 25th in favor of another party


German Vote on Bailout and State Election:


Friday marks the vote in Parliament on Greece’s bailout; Germans are on hook for nearly $30 Billion and sentiment suggests an unwillingness to fund the mismanagement of the Greek economy.


On Sunday, Germany’s largest state by population and the country’s industrial heartland, North Rhine-Westphalia (NRW), holds a state election.  For Merkel’s Christian Democratic Party (CDU) along with her coalition partners the Free Democrats (FDP) a win is needed to retain its majority in the Bundesrat (upper house of parliament).  With government spending a hot topic in the election, Merkel must show that she’s not writing a blank check to the Greeks (even if she will) to gain the popular vote on this very unpopular bailout.  



Spain’s Debt Due:


In June, Spain has roughly €16 Billion in debt redemptions due of the some €225 Billion due this year. Like Greece, we could see the government unable to meet its obligations at maturity.  For more on our analysis on Spain see Daryl Jones’ note out today titled "Bearish Enough On Spain?"



Matthew Hedrick

Spanish Spoo: SP500 Risk Management Levels, Refreshed

You just know I am smiling today. My Hedgeyes like winning.


In the face of plenty a perpetual bull pleading their valuation case, the Spanish Spoo crew is crying the SPY’s a river out there today. Global Risk Management doesn’t occur in a vacuum. From a crash in sovereign debtor nations to a TREND line breakout in both volume and volatility, the risks are clear and present in the rear-view.


Critically, the SP500 has broken its immediate term TRADE line again today (1193). We have an immediate term lifeline of support down at 1173, and the intermediate term TREND line of support is -2.6% lower from there.


Just to antagonize the bulls, we might cover, get long, and get more bullish than they were at 1217.


Maybe not. May’s Showers are in motion.



Keith R. McCullough
Chief Executive Officer


Spanish Spoo: SP500 Risk Management Levels, Refreshed - S P


The Macau Metro Monitor, May 4th, 2010


ICONIC CLASS Global Gaming Business Magazine


Las Vegas Sands is counting on the convention business but it has been slow to ramp up, according to LVS COO Michael Leven. "Honestly, I would have liked to see more business on the books than we have right now," he says. "I think the nature of the facility being built over three to four years has caused meeting planners to delay making any commitments. But over the past few months, bookings have really picked up. Eventually, we'll own the MICE business in this town." "Based on the numbers we're seeing at Resorts World and what we expect to see at Marina Bay Sands, I think it's going to take a couple of years to reach the 65-45 mix that we have anticipated," Leven explains. "The casino business in the early going is going to dramatically exceed the MICE business and the room business. First of all, they're all not going to be ready immediately, and then there's a booking cycle that takes a while to kick in. So I think it's going to be well into 2012 before that starts to level off. You can't sustain these kinds of buildings without the gaming revenue. I've been in the hotel business long enough to know something about that income. The casino business is likely to be 75 percent to 80 percent of EBITDA, certainly for the first seven months, and likely for the first full year as well."


Leven doesn't believe there is opportunity for the company in the Bay State. "Massachusetts has some problems," he says. "You need to be in a location that is favorable and there are weather problems nine months of the year. We've had those conversations. If you're not contiguous to Boston and that infrastructure, you can't expect to drive enormous midweek convention business."


Maybe the most significant-but little known-initiative instituted by Jacobs is a leveling of the VIP commission rate with Melco Crown, which owns City of Dreams, across the street from the Venetian. The move allows the two integrated resorts to compete on a level playing field. Steve Jacobs, President of Sands China, said, "We lost a couple of junkets, but in about 60 to 90 days, they came back. What we found and what we proved through this experiment is if the brand is strong enough-if there's enough adhesion between the products and the services-the guests and the high-rolling VIPs like to play where they feel lucky and where they call home. It certainly benefited us and City of Dreams. The rates downtown now are at 1.4, 1.45, 1.5-which makes no sense to me at all. None. That being said, I think as long as we continue to develop product and experience ahead of just pure commission, we'll be fine."


According to Lusa, gross gambling revenues reached 14.1 billion patacas ($1.76 billion) in April.  SJM Holdings continues to lead in market share at 33%; Sands China had slightly more than 21%; Wynn Macau had 14%; and Melco Crown Entertainment controlled 13%.


Stanley Ho's Macau sports betting monopoly, Macau Slot, has won another one-year extension, just in time for the World Cup. Macau Slot is 48% owned by Ho's private Sociedade de Turismo e Diversoes de Macau (STDM).


Daily Trading Ranges

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