Super Mario

From: Derek Hillen
Sent: Tuesday, October 25, 2011 12:10 PM

To: Derek Hillen
Subject: Super Mario

“You cannot ride two horses with one ass.”  - Russian proverb

Markets are inching higher on the rhetoric that Europe will fix itself. But Humpty Dumpty has fallen off the euro wall and can’t be made whole again. Probably time for an omelet. If you are wondering what they are going to do, look no further than the future head of the ECBHank Paulson. I mean, Mario Draghi. Former Treasury Secretary Paulson, as we all know, bailed out the banks first, especially the $182 bn he steered toward AIG which immediately passed $13 bn of that to none other than Goldman Sachs, Hank’s previous employer. Hank is now Chairman and CEO of Goldman Sachs International. I find it interesting this is the same subsidiary of GS that Super Mario worked for as Vice Chairman from 2002 – 2005. Not to second guess Mario before he starts on the job next month but GS shareholders will surely sleep better knowing that their European exposure will be “looked after.”

Too Big to Fail


In response to the “Occupy Wall Street” movement, the “We Are Wall Street” letter is making the rounds again. It presents the view of the “1%,” according to some, but really is a funny look of what would happen if you did fire all the bankers. Written by a financial insider, the letter starts out with the line, “We are Wall Street. It’s our job to make money.” Yep. And continues full throttle:

“Go ahead and continue to take us down, but you’re only going to hurt yourselves. What’s going to happen when we can’t find jobs on the Street anymore? Guess what: We’re going to take yours. We get up at 5am & work till 10pm or later. We’re used to not getting up to pee when we have a position. We don’t take an hour or more for a lunch break. We don’t demand a union. We don’t retire at 50 with a pension. We eat what we kill, and when the only thing left to eat is on your dinner plates, we’ll eat that.”

So now that we’re going to be making $85k a year without upside, Joe Mainstreet is going to have his revenge, right? Wrong! Guess what: we’re going to stop buying the new 80k car, we aren’t going to leave the 35 percent tip at our business dinners anymore. No more free rides on our backs. We’re going to landscape our own back yards, wash our cars with a garden hose in our driveways. Our money was your money. You spent it. When our money dries up, so does yours.”



“Pair of Dice”

We are raising our target price 25% today on Paradise (034230 KS, Buy) to KRW 10,000. Q3 earnings will be flat due to a high tax penalty (all cash business, I guess). But their long term strategy of merging five subsidiary casinos into the listco will make them the largest “foreigner-only” casino group in Korea. This should lead to synergies in marketing and operations. We also think the expansion of their casino at the Hyatt Regency at Incheon Int’l Airport will also help growth. The stock has outperformed the Kospi and other casino names in Korea this year by doubling. Trading at 10.5 X PER with 80% EPS growth and a fat dividend yield of 5% makes Paradise attractive still at these levels. Note attached.


You can get our research by typing MASR <Go> on Bloomberg.


Derek Hillen, CAIA


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