In this week’s piece we discuss five topics: 1) poor freight trends as it relates to our coverage; 2) softer U.S. GGR trends in June; 3) VAC’s valuation is near an all-time low versus its prior parent company MAR; 4) recently disclosed buybacks from CCL, and our analysis on why additional buybacks could be limited for at least a couple years; and 5) our thoughts on a possible sale/leaseback transaction at MGM for Bellagio and MGM Grand, and our analysis on what we think this could be worth to the stock. Please click the link above for the full report.
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Vegas Strip fundamentals have been mixed YTD, though we still think better than the sentiment. We see potential for revenue reacceleration in 2020 due to several tailwinds, which we’ll discuss and quantify, and we’ll also discuss some potential risks.
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 10 of 19 last month, though in many cases the y/y data points in the recent month were only marginally worse or marginally less positive than the prior month. We chart all 19 of the indicators, and we show a summary table in Exhibit 2.
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!
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.
May Vegas Strip GGR was released this morning which showed a decline of -11% y/y – entirely driven by continued weak baccarat play – below our expectation of -5% y/y. Had the month played in line with normal hold the result would have been in line with our expectation. Strip RevPAR was released this afternoon which showed an increase of 7.3% y/y, above our expectation of flattish. For the entire 2Q we estimate CZR Vegas revenue to be flat y/y and MGM Vegas revenue to be down slightly y/y. MGM Vegas and total consensus EBITDA for 2Q still seems too high to us, and CZR Vegas and total consensus EBITDAR for 2Q generally seems OK to us.
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 10 of the 19 y/y indicators are better than the prior month versus 7 of 19 last month. We chart all 19 of the indicators, and we show a summary table in Exhibit 2.
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.
Macau May GGR was released overnight (06/01/19) showing growth of 1.8% y/y, we think slightly below a consensus estimate of around ~3% growth. Visitation grew 37% y/y during the first three days of the Labor Day holiday, and two of those days fell in April of last year presumably adding more benefit to May this year. Therefore, earlier in the month we would have expected stronger GGR than today’s result. We think visitation for the entire month may have continued to grow double digits y/y, but that again didn’t translate into GGR growth we think partly because of continued VIP softness. Our gaming summary file with all historical data is updated and included in the model link.
April Vegas GGR was released this morning followed by RevPAR and visitation data this afternoon. April Strip RevPAR rose 2.4% y/y, which was marginally better than we expected, but Strip GGR declined 3.5% y/y, which was marginally worse than we expected. However, April would have been in line with our expectation had April played in line with normal hold. See our summary file with historical data in the link with this email.
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