Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Melco International Development / Event-Driven

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<p>This week in StubWorld ...</p>
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<p><a href="https://www.smartkarma.com/entities/melco-international-development-ltd" target="_blank" data-smartkarma-citation="entities:809:1" rel="noopener">Melco International Development (200 HK)</a>'s has bounced off its all-time low NAV discount and implied stub back in March, and is now back to +2 STD levels. </p>
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<p>Preceding my comments on Melco are the weekly setup/unwind tables for Asia-Pacific Holdcos.</p>
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<p>These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold - the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent - of at least 20%.</p>
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<p>As always, more below the fold.</p>
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This week in StubWorld ...




Melco International Development (200 HK)'s has bounced off its all-time low NAV discount and implied stub back in March, and is now back to +2 STD levels. 




Preceding my comments on Melco are the weekly setup/unwind tables for Asia-Pacific Holdcos.


These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold - the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent - of at least 20%.


As always, more below the fold.


StubWorld: Lock In Profits As Melco's NAV Discount Narrows

Senior Credit Analyst, Lucror Analytics

Leonard Law, CFA

Senior Credit Analyst

High Yield Experts

Lucror Analytics

Lucror Analytics is a leading credit and ESG research specialist and a provider of technology solutions for differentiated fixed income strategies. Our roots are in bottom-up fundamental credit analysis with a specialization in high yield corporate credits from Europe, Asia and Latin America. We are one of few research specialists integrating ESG considerations with fundamental credit research through a dedicated ESG platform. Our ESG assessment covers five key criteria: Disclosure, E,S, & G Pillars, Controversies, ESG Impact on Credit and ESG Momentum.

Recognizing the importance and value-add of Factor Investing in fixed income, Lucror developed the Smart Quant Navigator (SQN), an intuitive platform that helps clients devise and implement factor-based strategies ranging from pure quant to active fundamental, with integrated ESG.

Our company has been at the forefront of developments in the fixed income markets, identifying opportunities and consistently delivering new products and value-adding solutions to clients. Lucror has close relationships with the largest and most reputable asset managers, family offices, hedge funds, investment and wealth managers globally.

Credit

<p>We initiate coverage of Sands China, with a "Hold" recommendation on the SANLTD Notes. </p>
<p>We view Sands China as “Low Risk” on the LARA scale. Parent Las Vegas Sands Corp​ (LVSC) is a pioneer of the integrated resorts business model, which combines casino gaming with ancillary facilities such as MICE and entertainment. Among the six concession/sub-concession holders in Macau, Sands China has the largest scale and the highest market share in the territory's fast-growing mass-market gaming segment. Our view also considers the company's track record of strong operations and sound financial management, with a robust leverage profile prior to the COVID-19 pandemic. </p>
<p>Our fundamental Credit Bias on Sands China is “Negative”, as the company is still incurring an operating cash burn due to the pandemic. We expect the company’s OCF to turn positive towards FYE 2021, assuming the Macau/Mainland travel visa requirements continue to ease. That said, its FCF should remain negative in FY 2021, owing to planned capex for The Londoner Macao. Hence, we foresee that the company's debt will increase further throughout the year. </p>
<p>We view Sands China's corporate governance as “Effective” on the LAGA scale. We believe the company is now run by professional managers, following the death of founder Sheldon Adelson. This is despite the 57% stake that his wife, Miriam Adelson, and family hold in LVSC. Related party transactions are immaterial. That said, the absence of an independent chairman is a minor negative.</p>

We initiate coverage of Sands China, with a "Hold" recommendation on the SANLTD Notes. 
We view Sands China as “Low Risk” on the LARA scale. Parent Las Vegas Sands Corp​ (LVSC) is a pioneer of the integrated resorts business model, which combines casino gaming with ancillary facilities such as MICE and entertainment. Among the six concession/sub-concession holders in Macau, Sands China has the largest scale and the highest market share in the territory's fast-growing mass-market gaming segment. Our view also considers the company's track record of strong operations and sound financial management, with a robust leverage profile prior to the COVID-19 pandemic. 
Our fundamental Credit Bias on Sands China is “Negative”, as the company is still incurring an operating cash burn due to the pandemic. We expect the company’s OCF to turn positive towards FYE 2021, assuming the Macau/Mainland travel visa requirements continue to ease. That said, its FCF should remain negative in FY 2021, owing to planned capex for The Londoner Macao. Hence, we foresee that the company's debt will increase further throughout the year. 
We view Sands China's corporate governance as “Effective” on the LAGA scale. We believe the company is now run by professional managers, following the death of founder Sheldon Adelson. This is despite the 57% stake that his wife, Miriam Adelson, and family hold in LVSC. Related party transactions are immaterial. That said, the absence of an independent chairman is a minor negative.

Sands China - Tear Sheet - Lucror Analytics

<p>One step forward ...</p>
<p>The travel bubble - or perhaps travel corridor has a nicer ring to it - between Hong Kong and China remains very much a work in progress. </p>
<p>There were earlier reports that cross-border travel between the two SARs would resume on July 11, under certain conditions.</p>
<p>Yet Hong Kong's tourism sector lawmaker Yiu Si-wing said cross-border travel between Hong Kong and Macau is unlikely to resume next week as the two administrations have yet to put forward any concrete plans regarding the travel arrangement.</p>
<p>As it stands,  the Macau government raised the threshold for resumption of travel, with Hong Kong required to reach 14 days without either local coronavirus infections or community ones linked to imported cases. Previously, the requirement was for no untraceable cases for 28 days.</p>
<p>The Macau Tourism <a href="https://www.macaotourism.gov.mo/en/" target="_blank" rel="noopener">website</a> mentions if departing from Hong Kong, you need a clear Covid test within the last 24 hours, and you will still need to go to designated places for a 14-day medical observation. Visitors from China face similar restrictions - although the Covid test must be within a 7-day window.</p>
<p>This brings us to the Macau gaming sector.</p>
<p>Despite meaningfully reduced visitation (~16% of 2019 levels in the 1Q21), positive EBITDA in Macau is occurring. 1Q21 mass gaming has recovered to approximately 38% of 1Q19 levels.</p>
<p>In this insight, I look at how <a href="https://www.smartkarma.com/entities/sands-china-ltd" target="_blank" data-smartkarma-citation="entities:182:1" rel="noopener">Sands China Ltd (1928 HK)</a> has weathered the pandemic and how it is placed for a recovery.</p>

One step forward ...
The travel bubble - or perhaps travel corridor has a nicer ring to it - between Hong Kong and China remains very much a work in progress. 
There were earlier reports that cross-border travel between the two SARs would resume on July 11, under certain conditions.
Yet Hong Kong's tourism sector lawmaker Yiu Si-wing said cross-border travel between Hong Kong and Macau is unlikely to resume next week as the two administrations have yet to put forward any concrete plans regarding the travel arrangement.
As it stands,  the Macau government raised the threshold for resumption of travel, with Hong Kong required to reach 14 days without either local coronavirus infections or community ones linked to imported cases. Previously, the requirement was for no untraceable cases for 28 days.
The Macau Tourism website mentions if departing from Hong Kong, you need a clear Covid test within the last 24 hours, and you will still need to go to designated places for a 14-day medical observation. Visitors from China face similar restrictions - although the Covid test must be within a 7-day window.
This brings us to the Macau gaming sector.
Despite meaningfully reduced visitation (~16% of 2019 levels in the 1Q21), positive EBITDA in Macau is occurring. 1Q21 mass gaming has recovered to approximately 38% of 1Q19 levels.
In this insight, I look at how Sands China Ltd (1928 HK) has weathered the pandemic and how it is placed for a recovery.

Sands China (1928 HK): Gambling On The Future

Managing Director

Elan Gore

TMI Data Science

TMI Data Science utilizes Natural Language Processing to build custom leading indicators using unstructured data sourced from the global financial, trade & traditional media.  Our proprietary software, TMI Machine, is a text-mining platform designed with the buy-side & capital markets professional in mind, text-mining the global media to discern and quantify nuanced qualitative shifts in press coverage as they apply to macroeconomics, equity indexes/ETFs, commodities, currencies, fixed income & individual equities.  TMI provides custom leading indicators and systematic trading strategies, operating at the nexus of linguistics & statistics drawing on vast experience in investment banking and hedge fund settings in senior quantitative and fundamental roles.  

TMI Data Science was founded by Elan Gore, an award-winning Senior Global Basic Materials Equity Analyst & China Economist with 15 years of experience in North American hedge funds & institutional managers; and Alessandro Porrino, Ph.D., an Algorithmic Trading Analyst and Programmer with 10 years of front-office experience ranging from complex FX option pricing to auto-hedging strategies at Bank of America Merrill Lynch and Standard Chartered.  Mr. Gore holds an MBA in Finance from New York University Stern School of Business, and Mr. Porrino holds a Ph.D. in Systems Engineering from Brunel University London.

Cross Asset Strategy

<ul>
<li>Our indicators have seen a surge in coverage of Macau in the context of the Digital RMB, starting with Macau Chief Executive Ho Lat Seng's mid-April plan to amend legislation in order to accommodate the e-RMB rollout; sentiment on the Macau gaming sector appears to be pulling back as a result</li>
<li>While the long-standing crackdown on VIP junkets has been a factor for Macau's casino operators throughout the previous cycle, rollout of the Digital RMB may also suppress growth in the important premium mass segment</li>
<li>Defensives vs. cyclicals relative sentiment recovered from a multi-year low of -3.5x STDEVs in mid-March to near-neutral readings last week, as the bond rally and flattening yield curve led a few high-profile strategists to call for more defensive positioning; but this phenomenon has now decisively peaked out without any significant thematic reversal, on refreshed expectations of rising yields and action in the commodity complex</li>
<li>European recovery indicators have made new post-pandemic highs, aided by improvement in sentiment on the pace of vaccinations, with implications for EUR/USD</li>
</ul><div class="content-highlight"><p>TMI Data Science utilizes Natural Language Processing to build custom leading indicators using unstructured data sourced from the global financial, trade &amp; traditional media. Our proprietary tools text-mine the global media to discern and quantify nuanced qualitative shifts in press coverage as they apply to macroeconomics, equity indexes/ETFs, commodities, currencies, fixed income &amp; individual equities. </p></div>


Our indicators have seen a surge in coverage of Macau in the context of the Digital RMB, starting with Macau Chief Executive Ho Lat Seng's mid-April plan to amend legislation in order to accommodate the e-RMB rollout; sentiment on the Macau gaming sector appears to be pulling back as a result
While the long-standing crackdown on VIP junkets has been a factor for Macau's casino operators throughout the previous cycle, rollout of the Digital RMB may also suppress growth in the important premium mass segment
Defensives vs. cyclicals relative sentiment recovered from a multi-year low of -3.5x STDEVs in mid-March to near-neutral readings last week, as the bond rally and flattening yield curve led a few high-profile strategists to call for more defensive positioning; but this phenomenon has now decisively peaked out without any significant thematic reversal, on refreshed expectations of rising yields and action in the commodity complex
European recovery indicators have made new post-pandemic highs, aided by improvement in sentiment on the pace of vaccinations, with implications for EUR/USD
TMI Data Science utilizes Natural Language Processing to build custom leading indicators using unstructured data sourced from the global financial, trade &amp; traditional media. Our proprietary tools text-mine the global media to discern and quantify nuanced qualitative shifts in press coverage as they apply to macroeconomics, equity indexes/ETFs, commodities, currencies, fixed income &amp; individual equities. 

TMI Snapshots:  Macau, Defensives Vs. Cyclicals, Europe's Recovery

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

EURO STOXX 50 Price EUR / Technical Analysis

<p>Our intermediate-term outlook remains constructive with major support levels holding on the broad global indexes (MSCI ACWI, ACWI ex-US, EM, and EAFE). Still, we continue to see some reason for caution as various market dynamics have deteriorated, leading us to a more neutral outlook in the near-term.</p>

Our intermediate-term outlook remains constructive with major support levels holding on the broad global indexes (MSCI ACWI, ACWI ex-US, EM, and EAFE). Still, we continue to see some reason for caution as various market dynamics have deteriorated, leading us to a more neutral outlook in the near-term.

Hong Kong

Sands China Ltd. develops, owns, and operates integrated resorts, retail malls, and casinos. The Company also manages convention and exhibition halls in Macau.

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Sands China (1928 HK)

StubWorld: Lock In Profits As Melco's NAV Discount Narrows

If you had set-up Melco - Long Melco and Short MLCO - I'd unwind that trade. I'd be inclined to reverse the stub here - Short Melco and Long MLCO.

David Blennerhassett

Sands China - Tear Sheet - Lucror Analytics

We initiate coverage of Sands China, with a "Hold" recommendation on the SANLTD Notes. We view Sands China as “Low Risk” on the LARA scale....

Lucror Analytics