Shares of RCL are down 23% since the peak back in January, and its forward P/E multiple has contracted by 28% from 15.2x to 10.9x mostly due to rising oil/USD and concerns about future supply growth. RCL has undeservedly been hit the hardest in the group, in our view, which we attribute to more exposure to the Caribbean. We think RCL’s valuation has created a very attractive risk/reward and we have three charts to illustrate our view.
Search Coverage List, Models & Reports
Search Results1-10 out of 52
CZR filed an S-4 today after the market closed disclosing its intention to take back the $1.1B convertible note. The convertible note does not mandatorily convert until October 2020, so CZR will have to provide some incentive for holders to convert. Interest payments from now until October 2020 total $140M and the convert could seemingly be sold in the open market for $175M more than CZR’s offer, so we suspect CZR will have to offer value equivalent to at least $175M. It’s possible CZR could use its buyback authorization to acquire some shares (we hope), but the more likely outcome is CZR uses cash to offer an incentive to convert, we think.
We looked at stock ownership for CEOs in our coverage and compared the results to other CEOs in the S&P 500. We also looked at prior periods of open market purchases by C-Level executives, and both charts are shown below. We believe stock ownership is the single best form of shareholder alignment. When executives take this a step further and use their own capital to buy stock in the open market – rather than just accumulating stock options – it’s even more bullish, as executives at that point are also confident enough in the direction of the business based on forward data that only they can see.
Lodging fundamentals have been strong and the stocks have been outperformers YTD despite broad macro concerns that the cycle feels toppy and despite weakness from other cyclical industries like cruise lines, for example. We think there are four key reasons why lodging stocks continue to work: 1) supply growth is likely peaking this year and the pipeline has stopped increasing; 2) demand trends have been modestly improving led by corporate travel; 3) inflation and rising oil prices are generally positive for RevPAR; and 4) lodging REIT M&A has sparked incremental interest.
MGM’s stock was down 5% after its analyst day on 05/10/18 and then it mostly traded sideways last week even after PASPA repeal. In terms of PASPA, regional U.S. represents about a quarter of MGM’s adjusted EBITDA and MGM is in states that are likely to legalize sports betting. We thought the analyst day was fine, but the stock also had a little bit of a bounce in the week leading up to the event. There also seems to be continued frustration from the investment community and a lack of management credibility still seems to be weighing on the stock. And specifically we’ve heard mixed views on MGM’s long-term targets.
This morning (05/14/18) the Supreme Court ruled that PASPA is unconstitutional, and it is now legal for states to authorize sports betting. Quick background: The Professional and Amateur Sports Protection Act of 1992 (PASPA) prohibited sports betting in the U.S., with the exception of a few states such as Nevada. In 2016 New Jersey’s case was brought to the Supreme Court (Christie v. NCAA) with an ultimate goal to overturn PASPA. Overturning PASPA now gives each state the sovereign right to decide whether or not to legalize sports betting.
This morning (05/09/18) CZR announced a sale and leaseback transaction with VICI for two of its properties – Octavius Tower at Caesars Palace and Harrah’s Philadelphia – and lease terms were modified.
After the close today (05/02/18) CZR reported earnings and hosted its earnings call. 1Q adjusted EBITDAR was $518M, above our $515M estimate and a messy consensus number of $513M. The results were down y/y because of previously understood hold and weather-related issues.
In our note earlier today (04/30/18), we said March Strip gaming revenue implied the remaining industry (ex-MGM, WYNN, LVS) was down ~1.5%, when it’s actually down ~0.4%. We did not account for a 1Q17 restatement. Note also that there are differences in how revenue is reported to the NGCB versus to investors, so it’s not entirely comparable, but we use it as an approximation. We’ve also updated the short interest %s, which were based on the outstanding shares rather than the float. This version is correct and we are sorry for the error and filling up your inbox during earnings.
March Strip gaming revenue was just reported mid-day which showed Strip revenue up 3.3% y/y for the entire 1Q. We already knew 1Q results from MGM, LVS, and WYNN, and therefore we can back into the rest of the market (which is largely CZR) at down ~1.5% y/y. That’s not great, but keep in mind CZR had already told us hold was impacting EBITDAR by $10M (or we think about 4pp to CZR’s Vegas revenue growth rate), and CZR also reported 4Q earnings on 3/7 when the quarter was almost over.
- 1 of 6
- next →