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We’re not expecting a LVS sell-off as better relative volume growth and tame expectations could combine for a positive stock market reaction to earnings.

LVS dropped 9% the day after earnings were released.  The two issues we had with the quarter were that whisper expectations were way too high and MBS volumes dropped 20% sequentially.  On the other hand, the analysts seem to have little concern about the MBS performance despite the fact the property would’ve missed expectations with normal hold.  Less than a week after LVS reported its 4Q2010 results, one Asian analyst cut their target for Genting on fears that it too experienced a similar sequential drop.   While we have no illusions that Genting’s VIP volumes were up a whole lot, our belief is that they were at least in-line and possibly marginally better than 3Q volumes.

Our 4Q2010 projection of S$399MM EBITDA for RWS is marginally ahead of consensus, but given the sell-off in the stock, in-line should be good enough.  We believe Genting gained volume share from LVS.  Genting should also provide an update on their junket licensing progress.  Our understanding is that they are expecting approval in the first quarter and if they do, this could be a nice catalyst for Genting to grow their VIP business. 

October was the strongest month of the quarter by far.  November was slow, as seasonally expected. While December enjoyed huge foot traffic, high 90’s occupancies in the hotel and Universal ran at capacity, we don’t think that strong retail traffic translated to huge gaming volumes which is why this quarter is softer than many had initially hoped for and forecasted.  

Below are the details behind our projections for RWS:

  • Total net revenue of S$806.7MM
  • Non-gaming revenue of S$129MM
    • Room revenues of S$27MM (S$260 ADR & 85% occupancy); F&B and other revenue of S$29MM
    • S$59MM of park revenues (7,750 visitors per day)
  • Net gaming revenue of S$678MM
  • S$9.5MM/day in gross casino revenues
    • S$136.6MM of slot revenues (S$800/win per day)
    • Gross VIP revenues of S$470MM and net VIP revenues of S$272MM
      • RC Volume of S$16.5BN, 2.85% hold
    • Mass table revenue of $269MM
  • Variable expenses of S$243MM and fixed expenses of S$165MM essentially flat with S$163MM in Q3, which we think is a good reference for fixed expenses until RWS opens the west zone and marine park