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EBITDA would’ve been 8% lower with normal hold.  In this note, we focus on two forward issues for LVS.

We don’t want to bore you with the details of LVS’s Q4 – there’s plenty of sell-side research that can do the trick better than we can (I mean, the boring part).  The quarter was not as good as we were projecting.  Moreover, the quarter benefited from high hold, the net impact of which boosted company EBITDA by $69 million (8% of total).  Worse, the property we are most concerned about vis-à-vis expectations, MBS, was the beneficiary of most of it.

LVS is in great shape over the long-term.  No question.  We would be buyers of the stock at this price for the long haul.  However, it is the near and intermediate term that concerns us.  Our near-term focus is on two issues:  2012 growth in the Singapore market and the cannibalization at Venetian from Sands Cotai Central.

So what did we learn from this quarter related to these two issues:

  1. MBS Singapore – Q4 YoY EBITDA growth was 40%. Fantastic. However, it was 71% in Q3. EBITDA only grew 3% QoQ. Worse, on a hold adjusted basis for both quarters, EBITDA would have fallen 13% QoQ. So is seasonality to blame? Certainly, that is a factor.  But that isn’t all of it.  Singapore growth is likely slowing. Of course, Q1 has a very easy comparison due to low hold and the newness of the market in Q1 of last year.  Q1 2011 EBITDA was only $285 million. However, on a hold adjusted go forward basis, we think top line growth of 5-10% for the market is more likely than the 15-20% expected by the Street.  Beyond Q1, we see EBITDA growing only 5-10% YoY. This could be a disappointment.
  2. Sands Cotai Central will open in March or April.  Given the overlap with Venetian, we are expecting cannibalization. With its new focus on the VIP, Four Seasons should be fine.  So what can we learn from Q4? Well, Venetian and Sands are badly trailing the market in revenue and EPS growth.  Given past cannibalization (Venetian on Sands, Grand Lisboa on Lisboa, and CoD on Altira), we have little reason to believe that these numbers are going to improve upon the opening of a sister property.  Four Seasons is on a different path because of its new focus on VIP.

The following table outlines the property performance for the quarter.