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The shorts were right about Singapore but low hold is not good enough in the face of accelerating market trends, growing share in Macau and a more shareholder friendly capital deployment strategy.

It was pretty well understood that Singapore would miss consensus expectations.  While the magnitude of the miss was huge, it was mostly due to a very low hold percentage.  We think the good clearly outweighs the bad here for LVS.  Macau had a great Q3 and more importantly, market growth is accelerating.  Moreover, LVS’s market share is growing and we think that trend will continue consistently over the next year, similar to the ramp up of Galaxy Macau.  +20% market share in October was better than recent expectations and LVS may just be scratching the surface on share gains.  Is 22-24% share out of the question?  We don’t think so.  LVS’s announcement of a 40% increase in the dividend was a nice positive and we are encouraged with management’s enthusiasm for further dividend increases.  We think LVS will begin to attract a whole new investor base without losing interest from growth-oriented funds.  It’s not often you find a growth stock (wait until new international markets begin to open – South Korea?) with the kind of cash flow profile of LVS.  Strong cash flow, a willingness on the part of management to return that cash to shareholders and a potentially huge pipeline of high returning projects is a powerful combination.



Macau revenue and EBITDA came in 1% above the Street, but 4% below our EBITDA estimate.  We believe that most of the discrepancy vs. our numbers is attributable to unfavorable mix at FS & Sands Macau, along with weaker overall results at SCC, offset by slightly better results at Venetian. Based on our calculations, hold had minimal impact on EBITDA this quarter—a $3.5MM benefit.  Sands China held at 2.81% across the portfolio. Direct play was 17%. 

Venetian Macau

  • After poor results in 2Q, Venetian bounced back this quarter, reporting EBITDA 8% above consensus and 1% above our projection
  • We estimate that high hold benefited the quarter by $28MM on net revenue and $16MM on EBITDA
    • Venetian historical hold rate since opening has been 2.93% vs. 3.32% in 3Q.
  • Direct play increased to 30% of total RC drop
  • Rebates were 32.2% of win or 107bps
  • Variable expenses of $355MM
    • $308MM of gaming taxes
    • $27MM of estimated junket commissions
  • Estimated fixed expenses of $94MM, up 10% YoY but down $2MM QoQ

Four Seasons

  • Four Seasons produced a disappointing Q missing our EBITDA estimate and the Street’s by 18%
  • We knew that hold would be poor, so what drove the miss?
    • Higher rebates/junket commissions
    • We suspect that not only was hold poor, but the mix was also unfavorable.  Otherwise, costs just went through the roof –which is less likely.
  • We estimate that low hold negatively impacted Four Seasons EBITDA by $3MM.
    • Four Seasons’s historical hold rate since opening has been 2.74% vs. 2.58% in 2Q.
  • Direct play was 16% of total RC drop, consistent with 1H levels
  • Rebates were 35.5% of win or 92bps
  • Variable expenses of $140MM
    • $108MM of gaming taxes
    • $25MM of estimated junket commissions
  • Estimated fixed expenses of $23MM, up 21% YoY

Sands Macau

  • Sands came in below our number, despite having better revenues.  We suspect that mix may have been unfavorable, or fixed costs were just higher than we expected.
  • Hold of 2.96% is just 2bps above Sands’ historical hold rate of 2.94% so any benefit to EBITDA was likely immaterial
  • Direct play fell to 8% of total RC drop
  • Rebates were 36.1% of win or 107bps
  • Variable expenses of $175MM
    • $148MM of gaming taxes
    • $17MM of estimated junket commissions
  • Estimated fixed expenses of $55MM, down 5% YoY but up $8MM QoQ

Sands Cotai Central

  • SCC EBITDA was 10% below our estimate and the Street's
  • Revenues were $23MM below our estimate
    • Net gaming revenues were $17MM below our estimate
      • Direct play was lower than we estimated but hold was in-line, causing $6MM less of gross VIP win
      • Rebates were also higher than we estimated, accounting for another $5MM of lower results
        • 38% or 87bps vs. our estimate of 34% or 79bps
      • Mass table revenues were $6MM lower than we estimated due to lower table hold
  • Net non-gaming revenue was $6MM below our estimate due to lower F&B and other revenues and higher promotional expenses
  • We estimate that low hold negatively impacted EBITDA by $9MM
    • We used a 2.85% rate to normalize EBITDA
  • Direct play of 9% of total RC drop
  • Variable expenses of $157MM
    • $137MM of gaming taxes
    • $14MM of estimated junket commissions
  • Estimated fixed expenses of $54MM, just $2MM above 2Q


  • While a miss in Singapore was not likely a surprise, a miss of this magnitude definitely led to some jaw drops. Most of the miss vs. the whisper number was hold-related, although trends across the board were disappointing
  • 3Q saw continued deceleration from 2Q
    • Slot handle was fell 6% YoY – the first YoY decline-- and 4% QoQ.  Slot handle has been slowly declining since 3Q11.
      • 3Q11 slot handle ($MM): $2,793
      • 4Q11 slot handle ($MM): $2,745
      • 1Q12 slot handle ($MM): $2,741
      • 2Q12 slot handle ($MM): $2,741
      • 3Q12 slot handle ($MM): $2,621
  • Mass drop decreased 6%- the first YoY decline since opening
    • Over the last 6 quarters, mass drop has fluctuated between $1,115MM and $1,206MM (8% range)
  • RC volumes declined 29% YoY, marking the 2nd Q in a row of declines
  • There were YoY declines in F&B, convention, retail and other revenues
  • Since the hotel is already running at full capacity, and rates are already at $360/night, there likely is not much upside from here as far as hotel revenues go.  The lack of hotel rooms is a general constraint for growing the Singapore gaming market
  • The hold impact of $105MM on EBITDA that LVS indicated in their release was in-line with our calculation
  • The rebate increased to 1.26%
  • Promotional spending decreased a bit to 21% of non-gaming revenue
  • Variable expenses were $104MM
    • GST: $31MM
    • Gaming tax: $68MM
  • We estimate that fixed expenses were $260MM, up 5% YoY


  • Vegas net revenue and EBITDA came in 2% and 5% ahead of our estimate.  The “strength” in Vegas was entirely driven by some Asian play and high hold. 
  • Over the past 4 years, average table hold for LVS in LV has been 19%.  We estimate that high hold benefited EBITDA in the quarter by $39MM
  • The rebate rate was 6.1% (vs. 5.2% last year and 3.8% in 2Q12)
  • Promotional expenses were 11.2% of GGR, much lower than last quarter's 17.6%
  • Operating expenses, excluding taxes, increased 4% YoY to $252MM