Hedgeye - LVS: BIG QUARTER MAY NOT BE THE FOCUS

All ears will be on the commentary of SCC and the performance of MBS. Fade the sentiment?

We think Q1 upside is expected by the buy side and with the opening of Sands Cotai Central on April 11th, the focus will be on the commentary surrounding the performance of the new property and the related impact on LVS’s existing Macau portfolio. No doubt the spin will be positive but the reality is that it is way too early to determine the ultimate success of the property and level of cannibalization on existing operations. In fact, if sentiment moves significantly one way or another following the release and conference call, a prudent strategy may be to fade that sentiment.

Sands is reporting Q1 results next Wednesday night and we are projecting $2.7BN of net revenue and $943MM of EBITDA. Our estimates are 6% and 5% ahead of the Street on net revenue and EBITDA, respectively. Half of the upside comes from our higher gaming market forecast for Singapore while the other 50% is concentrated in Macau. Other 2012 stock drivers will be growth in Singapore – or lack thereof, approval of Lot 3, and new market opportunities (Japan, S Korea, MA, FL) – including the gargantuan Spain project.

MACAU

Our estimate for Macau property-level EBITDA and net revenues is 7% and 5% above the street at $459MM and $1.433BN, respectively. More specifically, we’re ahead of the Street on Sands and Four Seasons, and in-line on Venetian’s performance. Sands played very lucky while FS and Venetian experienced normal hold rate on their baccarat play. We estimate that EBITDA would have been $17MM lower if Sands held at its historical rate of 2.89%.

Venetian

Venetian is projected to report net revenue of $763MM and EBITDA of $276MM, +2% and in line with consensus, respectively.

Net gaming revenue of $676MM
- $269MM of net VIP revenue
  - RC volume of $13.6BN (up 10% YoY) assuming 25% direct play and a hold rate of 2.86% (just slightly below Venetian’s historical hold rate of 2.92%)
  - Rebate rate of 89bps of 31% of hold

Mass table revenue of $343MM, up 25% YoY

Drop of $1.2BN and 28% hold

Slot win of $64MM

$87MM of net non-gaming revenue
- $58MM of room revenue ($243 ADR/92% Occ/$223 RevPAR)
- $19MMof F&B revenue
- $40MM of retail, entertainment and other revenue
- $29MM of promotional expenses
Variable expenses of $375MM
- $311MM of taxes
- $45MM of junket expenses assuming a commission rate of 1.21% (rebate + promoter expense )
- $22MM of recorded non-gaming expense
$90MM of fixed costs, up 6% YoY but down from an estimated $96MM last quarter

Sands

We expect Sands to report net revenue of $358MM and EBITDA of $107MM, 8% and 17% above the Street, respectively.

Net gaming revenue of $350MM
- $152MM of net VIP revenue
  - RC volume of $6.7BN (down 19% YoY) assuming 14% direct play and a hold rate of 3.59%
  - Rebate rate of 108bps or 30% of hold
  - Assuming historical hold of 2.89%, net revenues and EBITDA would have been $32MM and $17MM , respectively

Mass table revenue of $152MM, up 12% YoY

Drop of $708MM and 21.5% hold

Slot win of $30.5MM

$7MM of net non-gaming revenue
$196MM of variable expenses
- $165MM of taxes
- $21MM of junket expenses assuming a commission rate of 1.39% (rebate + promoter expense ) or 39%
- $4MM of recorded non-gaming expense
$50MM of fixed costs, up 19% YoY and flat QoQ

Four Seasons

We estimate $312MM of net revenue and $76MM of EBITDA, 23% and 6% above the Street, respectively. On the surface one would assume that there would be more of the revenue growth dropping to the bottom line, however, almost all the growth is from low margin VIP business which has a ‘teens’ margin.

Net gaming revenue of $302MM
- $248MM of net VIP revenue
  - RC volume of $12.8BN (up 225% YoY) assuming 16% direct play and a hold rate of 2.89%
  - Rebate rate of 95bps or 33% of hold
  - The historical hold rate at FS has been 2.69%

Mass table revenue of $42MM, up 26% YoY

$107MM drop and 39% hold

Slot win of $12MM

$10MM of net non-gaming revenue
- $9MM of room revenue
- $7MM of F&B
- $6MM of retail, entertainment and other
- Promotional expenses of $12MM
$210MM of variable expenses
- $166MM of taxes
- $35MM of junket expenses assuming a commission rate of 1.22% (rebate + promoter expense )
- $6MM of recorded non-gaming expense
$20MM of fixed costs, up 3% YoY and flat QoQ

SINGAPORE

We project $819MM of net revenue and EBITDA of $429MM, 4% and 7% above consensus, respectively.

Net gaming revenue of $678MM
- $240MM of net VIP revenue
  - RC volume of $14.5BN, up 43% YoY
  - Hold rate of 2.9%
  - Rebate rate of 1.25%

Mass table revenue of $289MM

Drop of $1.3BN, up 30% YoY and 22.5% hold

$150MM of slot & EGT win

$140MM of net non-gaming revenue
- $78MM of room revenue ($340 ADR/99% Occ/$337 RevPAR)
$82MM of gaming taxes and $44MM of GST
$255MM of fixed costs, compared to an estimated $253MM in 4Q

LAS VEGAS

We estimate that Venetian and Palazzo’s net revenues will be $351MM with EBITDA of $97MM, which are in-line and 8% ahead of Street estimates, respectively.

Net casino revenue of $114.5MM
- Table revenue of $99MM
  - Drop of $536MM, up 12.5% YoY
  - 18.5% hold

$38MM of slot win

$448MM of slot handle, up 10% YoY and 8.5% hold
Last year was a very easy comp for LVS with slot handle down 36% YoY as they cut comps too deep

Rebates of $23MM or 4.3% of GGR

$121MM of room revenue - $190 RevPAR (+7% YoY)
$137MM of F&B revenue
$21MM of promotional allowances or 15.5% of GGR
10.5% YoY increase in operating expenses to $245MM – up 5% YoY and down $4MM QoQ

BETHLEHEM

We expect Sands Bethlehem to report $118MM of revenue and $26MM of EBITDA, 15% and 12% above consensus estimates, respectively.

$107MM of gaming revenues
- Table revenue of $31MM
- $76MM of slot win
$11MM of net non-gaming revenue
$47MM of taxes
$46MM of operating expenses (+12% QoQ)

OTHER

D&A: $198MM
Rental expense: $15MM
Corp and stock comp expense: $50MM
Net interest expense: $58MM