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Branch Rickey uttered those words but while luck didn’t put LVS in Macau and Singapore, it sure helped the quarter.

“Has a Company ever played this lucky?” – Hedgeye Client

This question was posed to me last night by a valued client.  I guess the answer is, maybe in percentage terms but certainly not in dollars.  Probably not even close.  But the reality is that it wasn’t luck that put LVS in a position to make an estimated $145 million off of luck alone, in one quarter.  It was amazing foresight and execution that got LVS into the two greatest gaming markets in the world.  Where else could you generate the kind of volumes that could produce more EBITDA from a luck swing than LVS makes in total in Las Vegas?  That’s more than WYNN and Encore makes and about the same as Bellagio, MGM Grand, and Mandalay Bay combined.

In total, LVS amassed $1.1BN of property level EBITDA which is indeed a fantastic number.  Thankfully, some of us can still do math, no matter how many times the management skirted the hold question.  Luck played quite a hand in this quarter’s headline number.  By our estimation, high hold across LVS’s portfolio benefited EBITDA to the tune of a cool $145MM and net revenue by $235MM. 

That said, there were plenty of bright spots in the report, but it’s always a question of expectations.  With the stock action leading into the opening of SCC, the bar seems to have been set high.  The company spent a lot of time talking about their potential Spain project which does scare us a lot.  We think that will be the lowest ROI project the company has invested in for a long time.  We would’ve preferred more discussion of SCC.  While way too early to make any determination of the ultimate success of SCC, luck has been looking for payback as table hold at SCC looks low in the first few weeks of operations.  LVS’s share in Macau has actually dropped post-SCC. 



Macau revenue and EBITDA were 1% below our estimate.

  • We estimate that hold helped segment results by $40MM of EBITDA and $114MM of net revenue
    • Rather than use the magic 200 moving day average, we used each properties’ VIP hold since opening  to calculate VIP impact and the TTM average for Mass hold impact
    • Excluding the most recent quarter, Sands and Venetian have historical VIP hold rates of 2.92% while FS has a historical hold of 2.69%
  • Direct play was $6.4BN or 20% of RC, which we estimate was up 37% YoY
    • Sands:  11%
    • Venetian:  27%
    • Four Seasons:  16%
  • Junket RC volume was $26.5BN, compared to $21.9BN in 4Q11 and up 33% YoY.  All of this growth came from Four Seasons.  Venetian was flat YoY while Sands was down.
    • Four Seasons Junket RC grew to $10.7BN from $2.4BN in 1Q11
    • Venetian Junket RC was flat at $10BN
    • Sands Junket RC fell 23% to $5.7BN YoY
  • We won’t know what happened to commissions until next quarter, but we do know that rebate rates were up across the board
    • FS:  36.9% or 1.04% vs. 24.9% or 0.97% in 1Q11 (drop vs hold %)
    • Venetian:  35.1% or 1.01% vs. 31.4% or 84bps in 1Q11
    • Sands:  not a fair comparison because of the massive hold differential
  • Fixed costs were up high single digits to teens
  • Mall revenues were indeed pretty awesome.  Even without base rents  we saw huge YoY increases.
  • The addition of EGT’s resulted in very impressive growth in slot handle.  Unfortunately, EGTs also have lower win %s.


  • High hold helped the property blow away even our likely Street-high estimate.  However, no matter how LVS tried to massage it, hold of 3.58% is about as normal as the Phoenix Coyotes winning a playoff series.
    • Excluding this quarter, MBS’s historical hold has been 2.83%
    • We estimate that EBITDA got a +$80MM boost from high hold
  • Rebate rate increased to 1.28%
  • We’re not convinced that the Singapore is poised for significant growth
    • Slot handle hasn’t grown since 3Q11 – it's actually been down the last 2 quarters (albeit just slightly)
    • Mass drop hasn’t moved in 4 quarters – stuck between $1.12 and $1.2BN            


  • Too bad no one cares about Vegas anymore because numbers were pretty good
  • Hold did benefit EBITDA by roughly $28MM - 3 year average hold in Vegas has been 18%
  • Slot handle and table drop hold likely exceeded everyone’s expectations as well
  • Looks like Sands continues to be rational with promotional spending
  • 4.5% rebate and promotional expenses decreased to just 12.5% of GGR from 18.8% in 1Q11 and 15.3% in 2011
  • Operating expenses, excluding  taxes, increased 10% YoY to $256MM