LVS 2Q REPORT CARD

In an effort to evaluate performance and as a follow up to our YouTube, we compare how the quarter measured up to previous management commentary and guidance

 

 

OVERALL

  • WORSE:  Even on a hold adjusted basis EBITDA fell short of our expectations and the Street.  Moreover, we already had factored in low hold in Macau and Las Vegas. 

 

MACAU

 

MARKET OUTLOOK

  • WORSE:  visitation has slowed.  There will be more aggressive promotional activity in Mass/ETGs segments.  VIP customer demand continues to soften.
  • PREVIOUSLY:  The infrastructure of Macau continues to build, continues to get better and of course, we're dependent on the Chinese economic condition, which we feel is we'll have some level of softness from time to time, but overall is very well positioned for the future. I think over the next five years, you should be talking somewhere between 10% and 15% growth a year.”

MASS GROWTH

  • SAME:  premium mass continues to ramp up
  • PREVIOUSLY:  I don't think on a mass market basis we've seen anything negative whatsoever. 

TABLE ADDITIONS AT SCC

  • SAME:  management still believes they will add 200 mass tables and 1,200 slots in Phase IIA.  LVS is confident that by mid-January, SCC will have 400 additional tables.
  • PREVIOUSLY:  "“We're still getting requests for more VIP rooms in site 6, which we've allocated capital for to build and if we're not under construction now, we're all designed and ready to go to add an additional 60 to 70 tables in VIP on site 6.  The government is committed to lenders to provide 400 tables. They gave us 200 tables for the opening the first of the two mass casinos. And they're going to give us, presumably, the second 200 tables when we go to open our second casino.”

SHERATON RAMP

  • SAME:  will have up to 2,500 Sheraton rooms by Sept 20 (Phase IIA).  Phase IIB will start in Oct 2012 and will feature ~1,500 Sheraton rooms
  • PREVIOUSLY:  "The Sheraton, 4,000 room-Sheraton, which is two phases, will be open fully complete by the end of January and will pen 1,850 rooms, by the end of this September.”

COST MANAGEMENT

  • WORSE:   margins fell from 32.1% in Q1 2012 to 29.5% in Q2 2012.  Q2 2011 margins was 33%.
  • PREVIOUSLY:  “We're already managing our costs. I was looking at the numbers just a couple of weeks ago and our costs are way down right away. I mean, first of all a lot of our costs at the operating level are in the gaming area itself. They automatically reduce if you don't have the volumes, and from a cost management standpoint we run the highest margins in Macau by far, and our company is built now as a high-margin company.”

 

SINGAPORE

 

GROWTH AT MBS

  • WORSE:  we estimate MBS GGR fell 20% QoQ and 8% YoY.   On the bright side, hotel occupancy rose to 99.1% and REVPAR gained 30%.
  • PREVIOUSLY:  
    • “We've gotten to maturity in less than two years. So from now on you're going to see gradual increases in the Singapore market mostly from the VIP scenario because our hotel is running at capacity now and has been for a year.”
    •  “We also have mass market help from the new MRT station, the cruise terminal that will open and...  the Botanical Gardens that will open I think this November."
    • “Marina Bay Sands has become a really a significant retail destination. We have over 300 stores there driving traffic as well. So I think you'll see moderate... but consistent growth."
    • “Our hotel's running in the high 90%s, it's sold out most of the time on 2,500 keys at a very high rate.  The room [to grow] is really in the casino.  I would expect a high single-digit growth there over the next number of years.”

 

OTHER

 

EQUITY CONTRIBUTION TO NEW DEVELOPMENTS

  • SAME:  25% ‐ 35% of total developmental project costs to be funded with equity
  • PREVIOUSLY:  We'll go up to 30% to 35% equity in any property we do or any resort development we do. We will not go above that and we will go for development financing for the rest of that for the rest of those projects.”

NEW DEVELOPMENTS ROIC

  • SAME:  minimum of 20% return on total invested capital
  • PREVIOUSLY:  “20% is our hurdle. Don't forget, that's 20% cash on cash, it's a higher return on equity obviously."


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