For our Weekly Sho we've recorded a 20-minute video with 36 slides highlighting our current views as we head into another earnings season. The cruise line section begins at 4:03, the lodging section begins at 9:00, and the gaming section begins at 15:40. Enjoy the rest of your weekend!
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Our coverage is up 24% YTD, on average, which is modestly outperforming the market. However, our coverage remains 21% below 2018 highs, on average, and also 10% below 2019 highs, on average, all while the market is near an all-time high. Our coverage mostly remains out-of-favor, in our opinion, but we see some opportunities. Within lodging our best idea is VAC. Within gaming our best idea is ERI. And within cruise our best ideas are RCL/NCLH.
In this week’s piece we discuss cruise line capacity growth into 2020. The growth rate of gross supply (i.e. total cruise ship deliveries) is accelerating modestly into 2020 and we’ll discuss with a couple charts.
In this week’s piece we discuss 1) our observations of investor sentiment and feedback following our regional gaming initiation, 2) our thoughts on insider selling activity in the cruise line space, 3) our thoughts on insider purchase activity at MGM, and 4) China total social financing for May, and the implications for Macau GGR. Please click the link above for the full report.
This was an eventful week for our coverage and for us as we were out meeting with investors most of the week. For this week’s piece we discuss 1) the Cuba travel ban, 2) more news flow on a potential CZR acquisition, 3) our VAC thesis with an interesting chart following our roadshow with management, and 4) our gauge of investor sentiment from our conversations. We’re also rebranding this weekly piece from our “Charts of the Week” to now “The Weekly Sho.”
On Tuesday evening (6/4/19) we lowered estimates for our best guess of the Cuba impact. Yesterday RCL quantified the impact and this morning NCLH quantified the impact. The RCL impact was slightly worse than we previously forecasted, and the NCLH impact was more extreme.
Tuesday morning (06/04/19) the Trump Administration announced the elimination of all non-family travel to Cuba after 6/4. Recall news first circulated in April of this possible restriction, but no official update had been provided until now, which we think provided hope that nothing would happen. Cuba accounts for a small percent of sailings at ~4% for NCLH, ~3% for RCL, and ~1% for CCL, but Cuba is a high yielding market with a double-digit premium that we think could be 25%+ when compared to Caribbean itineraries without Cuba. Therefore, there is a mix headwind from losing Cuba, and then to a lesser extent eliminating Cuba also adds more ex-Cuba Caribbean capacity.
Cruise line stocks de-rated in 2016 and have since traded at a larger-than-normal discount to the S&P 500. In this week’s piece we discuss our thoughts and five things we think it may take for the stocks to re-rate toward historical levels. Please click the link above for the full report.
WH trades at a discount to peers and we often hear some investors tell us the discount should close over time. Admittedly, the level of WH’s relative valuation seems more compelling to us – specifically versus CHH – as WH has underperformed CHH and its relative valuation to CHH has contracted further since WH’s spinoff last year. However, we continue to rate the stock Peer Perform because we believe there are reasons for a discount to peers – especially relative to MAR and HLT – and there are reasons why we don’t believe the valuation gap will meaningfully close in the near term. In this week’s piece we explore this idea by analyzing ten themes that factor into WH’s relative valuation. Please click the link above for the full report.
Each year around this time we dig through annual proxy statements to learn about changes in corporate governance and shareholder alignment, and we publish the results. Specifically, we study three broad categories: 1) CEO compensation, including how much and how it’s derived, 2) CEO equity ownership, and 3) board composition. We gave each company a qualitative score for each category and aggregated the results in Exhibit 1. Every company has areas of improvement, in our view, but HLT and WYND scored best based on our qualitative aggregation, followed by VAC, NCLH, and WH. All five are companies we think to be commercially aggressive and shareholder focused
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