LVS: BORING QUARTER BUT POSITIVE TAKEAWAYS

Property EBITDAR of $260MM missed our Street high estimate by $20MM, but was higher than the Street.  For details please see the table below.  The quarter itself was fairly uneventful but the takeaways were not.

 

LVS: BORING QUARTER BUT POSITIVE TAKEAWAYS - LVS Q1 EBITDAR

 

The key takeaways came from the forward commentary:

  • Total expected cost cuts remain at $470MM. Progress should accelerate at a faster pace as we move through the year.
  • Management does not expect any covenant issues. In our model we had projected a tight Q3. However, significant progress on the $470MM in cost cuts could quickly take a covenant breach out of play. Besides, LVS maintains the bank debt buyback option to de-lever quickly in a pinch.
  • March was the best month of the quarter and April is improving on March in Las Vegas. Business is getting "less bad", making the numbers more believable.

For those of you that like detail, please note the following:

Las Vegas

  • Las Vegas Revenues came in 4.4MM below our estimate, while EBITDAR came in 7.3MM light
    • Part of this was because we assume slightly higher hold % (22%)
  • Operating expenses at the two properties decreased 58 bps - not enough to offset the drop in revenues, although at least according to LVS we will see a bigger drop in expenses going forward once we lap the ramp up in Palazzo in 1Q08 comps
  • Venetian: table drop was down 26% y-o-y while slot handle fell 19%, total revenues estimated at $166 with EBITDAR margins of 29%
  • Palazzo: table drop was up 46% y-o-y closing the gap of table performance with Venetian, while slot handle fell 19%, total revenues estimated at $151MM with EBITDAR margins of 27%
  • Looks like both properties were fairly flat with 4Q08 EBITDAR results
  • Overall - there was nothing really unusual here... table hold was a little light while slot hold was at the high end of their historical range

 

Venetian Macau

  • Venetian revenues came in 20MM light of our estimate and 17.5MM light of our EBITDA estimate
  • We estimate that higher than normal hold helped revenues by $30MM and EBITDA by $8MM
    • Mass win came in better than expected, due to slightly higher hold 21.9% vs our 20% estimate, positively impacting revenues by $16MM & EBITDA by $5MM
    • VIP hold was 16 bps higher than "normal" 3% hold, positively affecting revenue and EBITDA by $14MM and $3MM lower, respectively
  • Looks like one of the ways they are reducing expenses is by continuously "right-sizing" their casino
    • Tables are down to 616 from 808 a year ago, and down from 666 last quarter... that means a lot less dealers
    • LVS also removed 547 slot machines since 1Q08
  • Fixed expenses looked fairly flat y-o-y, but the company mentioned that we should see reductions going forward since 1Q08 still had ramping expenses for Venetian
  • Reduced the loss on the ferry operations by 1MM, y-o-y, and by 8MM sequentially

Sands Macau

  • Sands revenues came in line with our estimate and EBITDA was 1MM better
  • Sands has slightly lower hold of 2.59%, normal hold is about 2.75%, adjusted for low hold, revenues and EBITDA would have been 8MM and 1.6MM higher than reported
  • Like the Venetian, Sands also reduced their casino capacity
    • Tables are down to 443 from 626 a year ago, and down from 500 last quarter... that means a lot less dealers
    • LVS also removed 255 slot machines since 1Q08
  • Total costs decreased 14%, although we estimate that most of that is variable cost and that fixed costs have only come down moderately