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Not to take away from a very good quarter – better than we expected - but we’re coming up with a smaller hold adjusted number.

Q1 was a very strong quarter for LVS but we want to highlight a few things that stood out to us for the Q.  We calculate a net $17 million hold benefit in the quarter across LVS’s properties.  Immaterial yes, but materially different on a property by property basis from what LVS provided in their press release.  The differences can be seen in the table below.  Our respective methodologies primarily differ in that LVS uses theoretical hold for VIP of 2.85% while we use historical averages by property.


So we actually calculate a net hold benefit to the quarter, primarily relating to our use of the historical hold average of 2.70% at MBS versus 2.85% by management.  MBS generated $426 million of hold adjusted EBITDA, in our opinion, versus a $451 million number provided by management.  We would even argue that our number is probably aggressive given that volumes are likely pushed higher when punters play lucky (hold is low).  However, it’s impossible to determine the amount of excess play driven by low hold.  Overall, our hold adjusted property EBITDA estimate is $1.151 billion, $40 million below management’s estimate.   

The big picture here is that even with our lower estimate for hold adjusted EBITDA, this was a great quarter for LVS.  We’re positive on LVS over the long haul so don’t take our commentary as a slap against the company or the stock.  We just like to do our own analysis rather than accept any management's calculations as fact.  Call it healthy skepticism and we feel like we treat both our favorite and least favorite companies with the same approach.

Other Takeaways

  • Las Vegas:  A very unprofitable quarter in Entertainment (Tim McGraw show) drove down EBITDA despite a big increase in other non-casino revenue and good hold on the tables
    • Revenues were $27MM higher while EBITDA was $2MM lower YoY
    • Hold was 3.6% better in 1Q13 vs. 1Q12 (which was also higher than normal)
  • Macau:  Hold adjustment - why our math is different
    • Historical hold rate across all the properties since 2007 has been 2.90%
    • We don’t lump all the properties together but use historical hold for each property.  Flow-through varies across different properties since the mix of Rev Share and RC commission is different as is the level of direct play
    • We don’t have perfect information: don’t know the luck split between RevShare & RC junkets or the exact rebate to direct players; we don’t know the junket commission rate until the filings come out – that also impacts flow-through calculations
  • Despite the addition of tables, fixed expenses look like they declined across all of Sand’s China’s mature properties
  • Looks like Sands Macao shifted the mix of its slots more towards ETG’s as handle increased nicely but win rate continued to plunge to just 3.7%
  • The slot business at Four Seasons is all over the place.  Slot revenues more than doubled from 3Q12 to 4Q12 and round tripped in 1Q13.  After slot handle increased 44% YoY in 4Q; 1Q13 slot handle fell 7% YoY
  • FS direct play keeps shrinking as well.  It was down to 11% this quarter vs. 14% last quarter and 16% last year…and closer to 40% of total VIP roll in 2011.  RC volumes also declined 25% - the first decline in 5 quarters
  • Despite the addition of 2,100 rooms early in the quarter, net non-gaming revenues barely increased – less than 3% QoQ at SCC
  • MBS:
    • Rebate rate was 1.3%
    • Fixed expenses actually declined 2.6% YoY
    • Doubtful accounts were in-line with the last 3Q’s