On Tuesday (10/16/19) we met with senior management at ERI (Outperform), BYD (Outperform), and PENN (Peer Perform) in Las Vegas.
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In this week’s piece we discuss five topics, including 1) valuations for our coverage are trading near historic lows relative to consumer staples in this risk-off and defensive-oriented tape; 2) improved advance hotel booking trends for the third straight month; 3) visitation trends to Macau during Golden Week thus far; 4) thoughts on recent NCLH management changes; and 5) thoughts around price dislocation in CCL’s dual listing with the LSE equity trading at a large discount to the NYSE equity.
In this week’s piece we discuss 1) read-throughs to RCL and NCLH from CCL’s F3Q report; 2) expectations for the upcoming VAC analyst day; 3) new resort fee legislation introduced in the House, and what that means for our coverage; and 4) Vegas RevPAR outperformance versus the rest of the country, and why we believe that will continue well into next year.
August Vegas Strip GGR reported this morning showed an increase of 8.9% y/y versus our estimate of flat to up slightly y/y, driven by hold and better core trends it seems. Had the month played in line with normal hold then the month would have still beaten our estimate by about 4pp, so we think this was a good result. Strip RevPAR data is expected to be released later today at around 2 PM ET. We are looking for Strip RevPAR growth of about 4% y/y. All in, we feel good about 3Q consensus estimates for MGM and CZR with what we know right now, with August RevPAR and September GGR/RevPAR still unknown as of now.
In this week’s piece we discuss four topics: 1) a rotation from growth to value last week, and what that means for our coverage; 2) healthy U.S. GGR trends in August and thoughts on September; 3) timeshare stocks now seem back in favor, which we’ll discuss, including some LBO math on HGV that we think would seem to support a buyout; and 4) the hurricane forecast and measuring the likelihood of another storm as we’re now over halfway through the Atlantic hurricane season.
In May 2018 the Supreme Court overturned PASPA, which gave each state the right to legalize sports betting. Today 18 states have legalized sports betting, and it’s currently operational in 13 of them. In this note we examine the initial impact, project the incremental near-term impact with the start of the NFL season, and project the long-term opportunity for the industry.
The U.S. ISM manufacturing PMI has been in a downtrend for the last year, and this week it fell below the key 50 level for the first time since August 2016. In this week’s piece we examine the implications for our coverage by looking at industry stock returns over the last 25 years in relation to when PMI drops below 50 as well as when PMI eventually bottoms.
July Vegas Strip GGR reported this morning (08/28/19) showed an increase of 1.6% y/y versus our guess of up mid-to-high-single digits y/y growth, but the data is volatile month to month, like last month when June was significantly better than expected. Normalizing for slightly better hold the result was roughly flattish y/y. We will refrain from judging the month until the RevPAR data is released later today at around 2 PM ET. We are looking for Strip RevPAR growth of about mid-single digits y/y. We feel good about 3Q CZR and MGM estimates, as we heard from both companies at 2Q reports when July should have been mostly known.
Las Vegas Strip revenue and EBITDA expectations still seem modest, and expectations seem particularly low for 2020, even though this earnings season seemed to indicate solid trends with both CZR and MGM beating consensus Vegas estimates and speaking positively on demand. We have a positive outlook for the Las Vegas Strip from now through year end 2020 due to a favorable event calendar, still limited rooms growth, easy comparisons, and we think expectations that seem low. We’ll discuss with charts. Please click the link above for the full report.
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