In this week’s piece we highlight a few charts from events in the week. Specifically, we’ll discuss 1) how our group has traded since the coronavirus outbreak; 2) our thoughts on PENN’s recent stock performance, and what the market seems to be implying with its new Barstool relationship – we show a DCF of the contribution; 3) WYNN’s cash burn during the Macau casino closure, and math with the EBITDA impact; and 4) the impact of possible RRR land monetization, as well as a bridge to EBITDA in 2020.
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RCL reported 4Q this AM (2/4/20). EPS was $1.42 vs. consensus of $1.42 and our $1.43. The quarter was fine to us. Investor focus was on the 2020 outlook.
In this week’s piece we lower estimates on coronavirus for those with relevant exposure to China, and we also update estimates for other reasons, which we’ll discuss. We also discuss January Macau GGR in relation to Chinese New Year visitation, as well as recent U.S. hotel forward booking data, unit growth, and pipeline data.
In this week’s piece we discuss some topics from the week, including 1) poor stock performance driven by coronavirus, including many stocks who have limited exposure to China; 2) a new CFO at PENN; and 3) an update on the timing of Japan gaming and how investors don’t seem very focused on the Japan opportunity, currently.
As we begin a new decade, we look forward with ten predictions for our coverage over the next ten years. We also look back at the top ten themes that characterized the last decade for our coverage, which resulted in meaningful change.
We last published about the rapid spread of coronavirus on Monday (1/20/20) after the first scare. The issue has escalated, and overnight China ordered travel agencies to suspend travel tours. Again, the timing is unfortunate because the Chinese New Year week-long period just began. China has seemingly been aggressive in its efforts to combat the coronavirus with travel suspensions, as they were blamed for a lack of transparency during SARS in 2003, but it also now appears that there could be a meaningful impact to 1Q earnings for those exposed to China.
In this week’s piece we discuss several topics from the week with charts, including 1) our near-term view on MGM following recent monetization, which we think will allow them to return 17% of the market cap to shareholders in 2020; 2) PENN’s rumored acquisition of Barstool Sports; 3) updates on the ERI/CZR merger; 4) read-throughs from airline earnings; and 5) leading indicators for Macau GGR.
The coronavirus in China has been spreading, and has been confirmed to be transferable between humans, which has caused new concerns. In the most recent update on Monday (1/20/20) the number of coronavirus cases had risen above 200, up from 41 since early January, and it appears to have spread to some other Asian countries. It’s also resulted in at least three deaths currently. This scare seems to have caused Hong Kong listed Macau gaming stocks to decline ~6% overnight. The timing is unfortunate because the Chinese New Year week-long holiday period begins January 24, which is a key travel period. This could be nothing, or it could be something, but at the least there could be an impact to Chinese New Year travel.
In this 35-page note we discuss our views on our coverage after the 2019 rally and how we see 2020 playing out; we discuss key themes and update our thesis with new charts; we preview each company into earnings; and we also change ratings for WYNN, BYD, and CHH.
Our coverage has had a great 2019, with the stocks in our group up an average of 42% YTD (S&P 500 up 29%), recovering losses from 2018 when our group was down an average of 26%. The stock market seems to be suggesting that we’re shifting back to early cycle and that the U.S. ISM manufacturing PMI is set to increase off the September low of 47.8. The question is how much is already priced into the stocks and can the rally continue in 2020? In this week’s piece we try to answer this question by looking at when our stocks peaked during prior cycles in relation to peak PMI. We also show where current valuations stand relative to the peak valuations in the last couple years for some context of the recent rally.
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