LVS: SINGAPORE THE PLACE TO BEAT

MBS was the standout which bodes well for the stock. High hold across the properties helped but volumes at MBS were outstanding.

We felt going into this quarter that MBS was the lynchpin.  If we were right, then it should be a good day for the stock.  MBS beat us by $68MM on EBITDA – and it wasn’t just hold.  Macau was just in-line with our estimate – hold adjusted was in-line with the Street – while Las Vegas beat us mainly due to luck.  Relative to the market, Macau remains disappointing for the company but with the kind of growth we’re seeing, who cares?  Right now it is, and should be, all about Singapore.

Overall, we estimate that higher than normal hold across LVS’s portfolio benefited net revenue and EBITDA by $91MM and $64MM, respectively, although to be clear, high hold was factored into our Macau estimates.  Here are the results by region.

MACAU

Macau property EBITDA was in-line with our estimate ($2MM lower) and 5% above consensus. However, as mostly factored into our projections, hold benefited Macau net revenues by an estimated $60MM and EBITDA by $37MM.  Despite efforts to grow their junket business, it was apparent that LVS was not making much traction.

Sands Macau

Sands Macau’s net revenues were 2% below our estimate and EBITDA was 9% lower than we estimated.

• $7MM revenue miss versus our estimate was due to lower gross gaming revenues, and higher fixed expenses led to the $10MM EBITDA vs our estimate
• VIP net table win was $9MM lower than our estimate due to lower hold
  • We estimate that direct play was 12% in the quarter vs. our estimate of 10%
  • Drop was 3% better than we estimated which resulted in hold that was 20bps lower
  • The rebate rate was 99bps or 33.3% of hold (consistent with 1Q11)
  • While hold was on the high end of the theoretical range, it was in-line with Sand’s hold over the last 2 years. If we use theoretical hold of 2.85%, net revenues and EBITDA would have been $7MM and $4MM lower, respectively
  • Slot win was $2MM below our estimate – handle grew 14% YoY vs our estimate of 18% and the win % was 20bps lower
  • We estimate that fixed expenses were $47MM, up 6% YoY

Venetian

Revenue and EBITDA results for Venetian Macau were within 1% of our estimate

• Non-gaming revenue was $6MM better than we estimated due to better retail revenues
• VIP net revenues were $12MM better than we estimated due to higher drop and higher direct play
  • Direct play jumped up as a % of total drop after decreasing for 3 quarters.  We estimate that direct play was 22% in 2Q compared to 19% last quarter
  • The rebate rate was 1% or 29% of hold
  • Assuming theoretical hold of 2.85%, net revenues and EBITDA would have been $58MM and $35MM lower, respectively.  If we use the 9 quarter average hold of 2.92%, then the high hold impact on net revenue and EBITDA would be $51MM and $31MM, respectively
  • Mass table revenues were $17MM below our estimate mostly due to lower hold
  • Slot revenues were $6MM above our estimate due to 22% growth in handle vs our estimate of 5%. Slot handle increased 15.5% QoQ.
  • We estimate that fixed expenses increased 3% YoY to $104MM

Four Seasons

Net revenue and EBITDA results for Four Seasons were $5MM and $10.5MM above our estimates, respectively

• Casino revenues were $3MM better than we estimated, non-gaming revenues were $1MM better while promotional expenses were $1MM lower
• VIP net revenues were $5MM better than we estimated due to 2% higher drop and slightly better hold than we estimated (8bps)
  • Direct play was 41% in 2Q compared to 40% last quarter
  • The rebate rate was 73bps or 32.4% of hold
  • Assuming theoretical hold of 2.85%, net revenues and EBITDA would have been $14MM and $8MM better, respectively.  If we use the 9 quarter average hold of 2.8%, then the low hold impact on net revenue and EBITDA would be $12MM and $7MM, respectively
  • Mass table revenues were $1MM below our estimate despite 38% hold
    • We estimate that high Mass hold benefited the quarter’s net revenue and EBITDA by $9MM and $6MM, respectively, if we use the 9 quarter preceding hold of 28% to normalize results
    • Slot revenues were $1MM below our estimate due to lower win %
    • We estimate that fixed expenses decreased 8% sequentially to $18MM

Marina Bay Sands

Marina Bay Sands results were the crown jewel of LVS’s second quarter results, with EBITDA coming in 23% ahead of consensus and 20% ahead of our estimate.  

• Net gaming revenues were $94MM, 19% above our estimate
• Slot revenues were $13M higher
  • Sequential handle growth accelerated to 17% from 11% last quarter
• Mass table revenue was $27MM higher
  • Sequential drop growth accelerated to 13% from 5% last quarter
• Net VIP revenue was $54MM higher
  • Drop increased 21% sequentially
  • Hold was 19bps above our estimate of 2.8% and accounted for 30% of the EBITDA outperformance ($20MM) vs our estimate. The prior 4 quarter hold rate for MBS was 2.63%. If we include this current quarter, the property’s average hold since opening has been 2.7%. 
  • If hold had been 2.85% net revenue and EBITDA, would have been $17MM and $15MM lower, respectively.
  • The rebate rate was 1.23%
  • Non-gaming revenues, net of promotions, were $13MM better than we estimated
  • We estimate that fixed expenses were $201MM up from $182MM in 1Q

US

Las Vegas

Revenues for Venetian and Palazzo came in 6% ahead of our estimate while EBITDA was 21% better than we estimated

• Better revenues were primarily driven by better F&B, retail and other revenues and lower promotional expenses as well as better casino results which were slightly offset by lower rooms revenues. 
• Non-gaming revenues (ex-rooms) grew an impressive 38% YoY, however, that growth should taper off in the 2H11 as the two properties had non-gaming growth of 50% in the 2H10 vs a 6% decline in 1H10.
• We estimate that better than favorable luck across tables and slots helped the quarter by $14MM on revenues and $12MM on EBITDA
  • Slot handle plummeted 39% YoY due to less promotional activity. However, a continued rise in win percentage to 8.8% helped offset weakness in handle. Slot win decreased 28%. 
    • Had hold been 8% - which is still on the high side for most slot operators, revenues would have been $3MM lower
• Table win benefited from better than average hold.   If we use a 9 quarter average of 17.4%, revenues would have been $11MM lower.
• Operating expenses (excluding taxes) grew 14% YoY to $232MM vs our estimate of $229MM. Expense growth should moderate in the back half of 2011 as comps get easier.

Pennsylvania

Sands Bethlehem revenues and EBITDA were $5MM and $7MM lower than we estimated due to lower net non-gaming revenues and higher operating expenses in the quarter