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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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.
Last week was a busy week filled with cruise, gaming, and lodging earnings reports. In this week’s piece we highlight ten key themes with several charts. Please click the link above for the full report.
March Vegas RevPAR and visitation data were just released this afternoon which follows the GGR report from yesterday. March Strip RevPAR declined 1.3% y/y, which is about what we expected. We think investors were braced for something similar after seeing LVS’s 1Q results. That is, LVS reported 1Q Strip RevPAR growth of 1.6% y/y, when Jan/Feb combined for the industry was up 8.0% y/y. March absolute RevPAR increased 8% m/m from February, which is normal seasonality excluding CON/AGG years, so we wouldn’t read into what might look like a bad headline number. Yesterday we learned Strip GGR declined 3.8% y/y, which was similar but slightly below our expectations.
LVS reported 1Q earnings after the close (4/17/19). Adjusted EBITDA was $1,393M, versus our $1,293M estimate and consensus of $1,296M. LVS beat by $30M on hold driven by Macau, but the remainder of the beat was strong revenue, particularly in the higher margin mass segment.
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 12 of the 19 y/y indicators are better than the prior month versus 10 of 19 last month. The average lead time is four months, and the most recent monthly data points show 14 of 19 are higher on a m/4m basis. We chart all 19 of the indicators, and we show a summary table in Exhibit 2.
March GGR was released overnight, showing a decline of 0.4% y/y, versus consensus of we think -4%. Coming into the month we think consensus was flattish to up slightly, but expectations seemed to soften as the month progressed, so the final result was similar to initial expectations but better than the recently lowered expectations. GGR for the entire quarter declined 0.5% y/y and 3.3% q/q, we think driven by VIP softness from the new smoking ban, soft macro data, and tough comps. We’re lowering estimates for our Macau coverage slightly. Macau still seems challenged to us in the near-term, and the comp gets even tougher in April, but the forward-looking macro data offers some hope, including a better China PMI reading last night, which leads GGR by four months at +0.62 correlation.
For our weekly charts this week we provide an update on IMO 2020 given on-going fluctuating fuel prices as well as some recent and potentially overlooked news on scrubber policy, which could become problematic for CCL. We’ll discuss and later in Exhibit 1 and Exhibit 2 we’ll quantify the potential impact to fuel expense. Please click the link above for the full report.
Late last night (03/14/19) the Macau government extended the concessions – that is, the right to operate casino gaming – for SJM (not covered) and MGM from March 2020 to June 2022, which now puts them in line with their four other peers in Macau. The extension required minimal/immaterial payments and labor terms, in our view, with MGM paying the government ~$25M, paying SJM ~$2M, and establishing a labor-related bank guarantee of ~$101M.
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