With normal hold, MBS would’ve missed the Street. Relative to estimates, Singapore is no longer the positive outlier and that is the crux of our thesis.
LVS posted a strong Q4, at least relative to consensus. The problem is that whisper numbers were higher. With an 18x EV/EBITDA multiple, estimates need to go significantly higher to grow into the multiple. That is the issue we have with this stock. For the first time in 5 or 6 quarters, our estimates are not 20% or so higher than consensus. In fact, if hold was normal across its Asian properties, LVS would’ve missed the consensus EBITDA projection.
Absent from the conference call discussion was the high hold, although management did volunteer a lot of commentary regarding the low hold at Four Seasons. In terms of our expectations, the high Mass and VIP hold at MBS was not anticipated. We estimate it contributed almost $20 million of incremental EBITDA. Even with the high hold, the upside to our estimate was only 1% at the property which leads credence to our view that EBITDA upside may be restricted to Macau and there are better ways to play Macau.
Las Vegas
Vegas revenues of $310.6MM were 2% below our estimate while EBITDA of $80.6MM was$3MM better than our estimate. As mentioned on their conference call, Sands has implemented a shift in strategy in Las Vegas by cutting promotional spending and comps. While this negatively impacted RevPAR stats, this strategy seems to be paying off on the bottom line.
- Promotional spending as a % of GGR declined to 18.4% this quarter from a 32% average YTD run rate. We’re guessing that the lower occupancies and GGR were negatively impacted by this decline.
- Total operating expenses increased 11% YoY to $230MM (compared to $232MM in 3Q10) and $207MM in 4Q09
Macau
On an aggregate basis, higher than normal hold across Mass and VIP revenues benefitted Macau revenues and EBITDA by $16MM and $18MM, respectively.
Sands revenues of $319MM were $2MM above our estimate while EBITDA of $93.4MM was $13MM better than our estimate.
- While net gaming revenues were spot in-line with our estimate, non-gaming less promotional spending was $2MM better. Promotional spending declined to 3.4% of net casino revenues from a YTD average of 4.2%
- Normalizing for slightly high hold, revenues would have been $14MM lower and EBITDA would have been $2MM lower
- Direct play was 15%, up from 14% the last 2 quarters
- While we won’t know until the Sands China quarterly release is out, we suspect junket commissions were lower this quarter
- Fixed costs were also $5MM below our estimate
Venetian revenues of $661.5MM were 0.6% above our estimate while EBITDA of $235.6MM was 10% better than our estimate.
- Direct play decreased to 19% of total VIP RC from a range of 21-24% YTD. We assumed that the direct play would be in 23% - in-line with the last 2 quarters, which is why our hold rate assumption was 8bps lower.
- If we were to use the mid-point of LVS’s normal VIP hold of 2.85%, revenues and EBITDA would have been $17MM and $3MM lower, respectively
- Mass drop only grew 6% YoY, lagging Macau mass market table revenue growth of 31%. Mass hold of 28.2% almost 4% above the prior 7 quarter average. Using the prior 7 quarter average, gaming revenues would have been $36.5MM lower and EBITDA would have been impacted by about $22MM
- Net gaming revenues were $12MM below our estimate but were more than offset by higher non-gaming and lower promotional expenses
- Same with Sands, we suspect junket commissions were lower this quarter at the Venetian
- Fixed costs were also $5MM below our estimate
Four Seasons revenues of $92MM were 13% below our estimate while EBITDA of $12.2MM was $9.6MM lower than our estimate.
- Direct play was 54% - higher than the 43% we had estimated. As a result, hold was a lot lower than our 2.17% estimate – which accounts for the majority of the EBITDA miss vs. our estimate
- Low VIP hold negatively impacted revenues by $60MM and EBITDA by roughly $14MM.
- Mass drop appears to have plateaued at $99MM since 1Q2010. Mass hold of 33% was 8% above the 11 quarter trailing average of 25%. Using the 11 quarter average, revenues would have been $8MM lower and EBITDA would have been $5MM lower.
- Net net hold issues negatively impacted revenues by $52MM and EBITDA by $9MM
Singapore
MBS revenues of $558MM were in-line with our estimate, while EBITDA of $306MM was 1% better.
- While slot handle was better than we estimated, mass drop and VIP RC were weaker
- RC volume actually decreased by 21% QoQ
- “Normal” VIP hold of 2.85% would have negatively impacted revenues by $21MM and EBITDA by $10MM
- “Normal” Mass hold would’ve negatively impacted Mass EBITDA by $8-10MM
- Non-gaming revenues were $3MM higher than our estimate while promotional was $3MM lower
- Rebates were 1.31% ( flat to 3Q)
- Fixed expenses were $153MM (vs. $148MM in 3Q)