The Street tends to be way off on its Macau estimates for a variety of reasons. Direct play is an important missing variable in their models.



Direct play is better than junket play.  That is a fact for the Macau operator.  If Wynn Macau/Encore could convert the 85% of its VIP business that is junket-related to direct play, it would result in an incremental $280-325 million in EBITDA.  Obviously, if it was that easy, a smart guy like Steve Wynn would’ve already done that.  The point is there is a lot of margin out there to capture given the 0.4% to 0.5% spread between the junket commission rate and the direct player rebate.


With the opening of the predominately direct play Encore, Wynn is poised to grow its direct play business from 10% to 13%.  That number should grow over time as should Wynn’s margins.  Wynn still falls behind LVS in terms of direct play market share but directionally, Wynn (thanks to Encore) and MPEL are moving higher while LVS’s share is declining.  LVS share should ramp back up when Lots 5 and 6 finally open.  The following chart details direct play market share by company.




To look from a different perspective, we also track the amount of direct play volume as a percentage of total Rolling Chips (VIP volume).  LVS remains the market leader here but MPEL and Wynn look like they have the most to grow.




Direct play is an important factor in determining margins in Macau which is why the Street seems to be consistently off in projecting EBITDA.  Other important details that some on the Street fail to model separately are Mass vs VIP, both volume and hold, and junket commission rates.

Cartoon of the Day: 'Biggest Tax Cut Ever'

President Donald Trump's economic team unveiled what he called last week, "the biggest tax cut we’ve ever had.” Before you get too excited about that hang on a sec. "Trump Tax Reform ain’t gettin’ done anytime soon," Hedgeye CEO Keith McCullough wrote in today's Early Look.

read more

Neurofinance: The Psychology Behind When To Sell A Bull Market

"Most momentum investors stay invested too long, under-reacting and holding tight after truly bad news finally arrives to break the trend," writes MarketPsych's Richard Peterson.

read more

Energy Stocks: Time to Buy the Dip? | $XLE

What the heck is happening in the Energy sector (XLE)? Energy stocks have trailed the S&P 500 by a whopping 15% in 2017. Before you buy the dip, here's what you need to know.

read more

Cartoon of the Day: Hard-Headed Bears

How's this for "hard data"? So far, 107 of 497 S&P 500 companies have reported aggregate sales and earnings growth of 4.4% and 13.2% respectively.

read more

Premium insight

McCullough [Uncensored]: When People Say ‘Everyone is Bullish, That’s Bulls@#t’

“You wonder why the performance of the hedge fund indices is so horrendous,” says Hedgeye CEO Keith McCullough, “they’re all doing the same thing, after the market moves. You shouldn’t be paid for that.”

read more

SECTOR SPOTLIGHT Replay | Healthcare Analyst Tom Tobin Today at 2:30PM ET

Tune in to this edition of Sector Spotlight with Healthcare analyst Tom Tobin and Healthcare Policy analyst Emily Evans.

read more

Ouchy!! Wall Street Consensus Hit By Epic Short Squeeze

In the latest example of what not to do with your portfolio, we have Wall Street consensus positioning...

read more

Cartoon of the Day: Bulls Leading the People

Investors rejoiced as centrist Emmanuel Macron edged out far-right Marine Le Pen in France's election day voting. European equities were up as much as 4.7% on the news.

read more

McCullough: ‘This Crazy Stat Drives Stock Market Bears Nuts’

If you’re short the stock market today, and your boss asks why is the Nasdaq at an all-time high, here’s the only honest answer: So far, Nasdaq company earnings are up 46% year-over-year.

read more

Who's Right? The Stock Market or the Bond Market?

"As I see it, bonds look like they have further to fall, while stocks look tenuous at these levels," writes Peter Atwater, founder of Financial Insyghts.

read more

Poll of the Day: If You Could Have Lunch with One Fed Chair...

What do you think? Cast your vote. Let us know.

read more

Are Millennials Actually Lazy, Narcissists? An Interview with Neil Howe (Part 2)

An interview with Neil Howe on why Boomers and Xers get it all wrong.

read more