We like both in part because of the asset-light unit growth that will allow them to grow market share over the longer-term. In the near-term they benefit from corporate tax reform, improving forward lodging data, a better relative position with more international exposure, and a continued rotation trade from poor performing consumer sectors, in our view. The stocks might seem expensive, but MAR’s current P/E premium to the market is in line with its 20+ year average. Assuming tax reform happens MAR would be trading in line with its own 10-year historical average and at a discount to its 20+ year average. Historical comparisons for HLT are irrelevant because of the change in the business model following the spinoffs that occurred in January.
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After the market closed CZR announced it will acquire Centaur Gaming for $1.7B, which confirms yesterday’s (11/15/2017) media reports of a planned $1B+ acquisition. There was no mention of VICI in the press release, which implies to us that CZR may acquire Centaur with its own capital (financing undisclosed), and likely later attempt to sell to VICI.
At around 3 PM ET today (11/15/2017) Bloomberg reported that CZR is near a deal to buy Centaur Gaming for over $1B. Details were limited and the company wouldn’t offer any comments to us, but this has been widely speculated among investors for months, especially after news broke last May that Centaur was exploring a sale. The stock immediately rallied 4% as CZR apparently appears to be doing what they said they would do. Once again CZR’s stock seems to be showing that nothing is priced in until it happens (i.e. refinancing back in September and now this).
We looked at the recently reported 3Q17 advance ticket sales (ATS) as a percentage of LTM passenger ticket revenue for each of the three major cruise lines and compared the progression since 2007. ATS is effectively the unearned revenue recorded on the balance sheet. Note these are the total dollars on the books, and most people are not paying their entire cruise fare up front (i.e. the remaining ~75% of the deposit is required 90 days prior to sailing), meaning a large chunk of the ATS is for the upcoming quarter.
Cruise stocks are selling off again today as the Senate’s tax plan includes a proposal to tax cruise lines. Recall last week there were rumors the House plan would also include a proposal, but it did not.
It was a good quarter in spite of the hurricanes and commentary was good, too. See our initial thoughts here for details. The stock opened up 2%, traded down to flattish before the call, and then rallied throughout the call and is now up 3%, as NCLH sounded positive on demand trends.
This morning (11/9/2017) pre-market NCLH reported 3Q EPS ex-items of $1.86, vs. the prior guide of $1.83, and vs. consensus and our $1.82 estimate. NCLH beat constant currency net yields by 125bp offset some by higher costs likely mostly related to the hurricanes.
MGM beat consensus EBITDA on a better-than-anticipated Vegas performance. See our initial thoughts note here, published earlier this morning (11/8/2017). Guidance for 4Q was a little worse than we expected but management sounded very constructive on the call about trends stabilizing and the stock closed up 5% today.
We attended RCL’s investor event in Brooklyn, which was not webcasted. The focus of the day was on new technological initiatives underway – specifically RCL’s new Excalibur product – but also a business and industry update in addition to some interesting new data.
MGM beat consensus EBITDA nicely, which we knew was likely given the Vegas industry monthly data came in better than MGM’s prior guidance, but the EBITDA result was still even better than our higher-end expectations partly due to MGM playing lucky ($28M EBITDA impact) but also just core strength. However, MGM missed slightly on non-GAAP EPS of $0.34 vs. consensus of $0.35 and our $0.42 estimate, as MGM missed us on non-op and the tax rate. We calculate adjusted EBITDA of $781M vs. the Street of $729M and our $756M estimate. MGM beat in Vegas, where 3Q Strip RevPAR grew 4.2% vs. the prior guide of 2%-3%, and 3Q Strip revenue grew 4.4% vs. the prior guide of “up slightly.” Strip EBITDA margins also increased 270bp vs. the prior guide of “up modestly.” In Macau revenue was in line with us but EBITDA missed us slightly. To summarize the quarter: core trends in 3Q in Vegas were really strong, but less relevant below the line items were slightly worse. We’d call this positive.
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