All six of the Macau gaming operators have now reported earnings following Galaxy’s report on Thursday (27-HK – Not Covered). In this week’s piece we look at 1) potential pressure on VIP junket commissions, as it appears Galaxy may have been more promotional in 1Q, 2) who gained share, and in what areas, 3) mass versus VIP performance and why mass is materially outperforming VIP, and 4) implied GGR in 2Q-4Q assuming normal seasonality versus our actual estimates. We discuss with six charts. Please click the link above for the full report.
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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
This is a recurring piece we write monthly where we track several key monthly indicators, which have historically led Macau GGR growth. The data points for the most recent month show only 7 of the 19 y/y indicators are better than the prior month versus 12 of 19 last month, as our data points took a meaningful step backwards this month. We chart all 19 of the indicators, and we show a summary table in Exhibit 2.
In this week’s piece we discuss five ideas with five charts, including probably way-too-early hurricane forecasts for the upcoming Atlantic hurricane season as it relates to cruise lines; NCLH’s recent consistent beat and raise execution, and what that hasn’t meant for the equity multiple; why VAC’s planned analyst day later this Fall seems positive; RevPAR index gains for brands, who seemingly took RevPAR share from independents in 1Q, which we believe is positive for the long-term model; and softer Chinese credit data in April, and what that might mean for Macau GGR. Please click the link above for the full report.
This morning (5/10/19) MAR reported adjusted EBITDA of $821M, versus our $829M, consensus of $836M, and the prior guide of $820M-$845M. EBITDA came in at the low end of the range due to cost items, while EPS was better partly because of a lower tax rate. MAR reiterated FY RevPAR guidance (+1%-3%), prior FY EBITDA guidance ($3,615M-$3,715M), and prior capital returns guidance (at least $3B), but the stock closed down 3% we think because of a headline miss and softer 2Q guidance implying a bigger back half ramp.
CHH reported 1Q earnings this morning (5/9/19). The quarter beat estimates slightly on fee revenue and tax timing, but RevPAR was disappointing. CHH lowered FY RevPAR guidance, but it just doesn’t move the needle much on the P&L given the business model, and ultimately EBITDA guidance was unchanged. The stock closed down 2% on the news we think because the result wasn’t great, numbers aren’t going up, and the stock has already had a decent run YTD to an all-time high.
WYNN reported 1Q earnings after the close and then hosted their call. 1Q property EBITDA was $495M ($465M hold-adjusted) vs. FactSet consensus of $499M and our $485M estimate. We thought results in both Vegas and Macau were soft, and WYNN described the current operating environment specifically for VIP and premium mass as “choppy.”
NCLH reported 1Q earnings this morning. Our initial take is here. NCLH beat the quarter and raised the full year on the beat and better 2Q yields, and the demand commentary on the call was robust. NCLH’s execution in the last couple years has been exceptional, in our view, after mishaps and previously over-aggressive targets back in 2016. NCLH beat and raised yields/EPS each quarter in 2018 and started 2019 the same.
This morning (5/9/2019) NCLH reported 1Q EPS ex-items of $0.83 vs. the prior guide of $0.70, and consensus and our $0.71 estimate. NCLH beat its constant currency net yield guide by 160bp, versus an average beat of ~90bp throughout last year, and it also follows a strong beat from RCL, too, we think implying strong close-in demand and onboard trends. NCLH cited strong growth in organic pricing across all core markets and robust onboard spending in 1Q. NCLH also raised FY guidance from the 1Q beat and from now higher 2Q-4Q expectations. NCLH also repurchased $200M of stock. This was a very strong report, in our view.
We downgrade shares of MLCO for four key reasons: 1) the stock has rallied meaningfully off its lows and the multiple has recovered to near historical levels, 2) prior consensus estimates seem aggressive to us, 3) the macro looks increasingly dicey with re-emerging trade war rhetoric and recent stimulus from China may be short lived per reports, 4) the Morpheus ramp is taking longer than we expected and today’s call didn’t have enough answers to give us confidence.
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