• It's Coming...

    MARKET EDGES

    Identify global risks and opportunities with essential macro intel using Hedgeye’s Market Edges.

Solid quarter driven by Macau (esp. Sands Cotai Central and Four Seasons)

CONF CALL NOTES

  • Hold normalized EPS grew 47.2%
  • Hold adjusted EBITDA of $1.24BN
  • Growing faster than the market in both Mass and VIP in Macau
  • SCC is on track to produce $1BN of EBITDA per year
  • Bridge from HK airport to Macau will be completed by 2016 and should provide a big boost to Macau visitation. The airport provides service to 100 airlines.
  • Construction continues at the Parisian Macau.  They are targeting a late 2015 opening and potentially a bit earlier. 
  • Activity in Japan is increasing
  • Korea is also showing increased activity
  • Madrid:  still subject to the government approvals and incentive grants
  • $5BN of capital returned to shareholders so far.  $1.6BN remaining under the buyback program and in the future expect to buy back at least $75MM of stock per month.
  • 25% of their EBITDA in Macau is generated from non-gaming amenities
  • Focused on maximizing cash flow 

Q&A

  • 3 of the 4 properties in Macau had north of 30% margins. What are they doing to deliver such strong results?
    • In the Spring, they will open up 75 more mass games at SCC
    • As mass grows at their properties, that helps their margins
    • SCC has a lot of room to grow
    • FS:  Junket performance there is exceptional but are also getting great results out of their premium mass segment.  Think that getting the optimal mix at the property is key.
  • Operating expenses look higher at MBS?
    • They are focused on giving more rooms to their premium mass segment and attracting more overseas visitation. They are up over 46% YoY in that segment (visitation).
    • Their goal is to get to more than $5MM/day of premium mass play vs. $4-5MM now
  • What was the cash RevPAR/ADR at MBS? Looks like commissions increased?
    • Commissions remained the same
    • They are comping more rooms to overseas guests (RWS is doing the same thing). This has had some impact on margins.
    • Their casino ADRs are higher than cash ADRs
  • CFO search has not actually begun. Will not start until end of the year/beginning of 2014
  • FCPA investigation update? Nothing new to report.
  • Non-Guangdong visitation into Macau is also growing faster than Guangdong visitation
  • They will not be opportunistic re: stock buybacks - they have committed to $75MM per month until the $1.65BN is used up.
  • There has not been a discussion regarding special dividends. That will be discussed at year end.
  • Japan would be north of a $6BN investment 
  • In Korea they would spend less than what they spent in Singapore
  • In Vietnam it would be less than Korea given lower labor costs
  • In Taiwan, costs would be similar to Korea
  • Next year's capex: $500MM of capex on their existing properties - 50/50 split between maintenance and revenue enhancing projects
  • Table cap is good for them because it increases the yield per table and that benefits margins. Given the size of their buildings they can also keep adding ETGs.
  • Japan: no news regarding partnerships.  Have been all kinds of rumors but there has been no clarification of Japanese ownership. They are talking about finishing the first phase of legislation complete by December/ January.  Thinks that both Osaka and Tokyo want LVS.
  • Government approvals still needed for the Parisian project
    • Building permits
    • Table allocations (hearing that some people won't be happy with their allocations). They will just take the lower performing tables from their other properties.
  • Reserve levels in Singapore as high as they have ever been?  They have always reserved conservatively at 32% now. Collecting money has always been difficult since they are usually from mainland customers

HIGHLIGHTS FROM THE RELEASE

  • "The prudent management of our cash flow, including the ability to increase the return of capital to shareholders while maintaining a strong balance sheet and ample liquidity to invest in future growth opportunities, remains a cornerstone of our strategy. I am therefore extremely pleased to announce that our recurring annual dividend will be increased to $2.00 per share, or $0.50 per quarter, for the 2014 calendar year, an increase of 42.9%." 
  • The company repurchased approximately $299.6 million of common stock (4.6 million shares at a weighted average price of $65.18) during the quarter ended September 30, 2013
  • Venetian visitation "continues to grow and exceeded 4.5 million visits in the quarter"
  • Unrestricted cash: $3.2BN
  • Total debt: $9.8BN
  • 3Q Capex: $206MM; "including construction, development and maintenance activities of $152.7 million in Macao, $26.0 million at Marina Bay Sands, $25.3 million in Las Vegas, and $1.5 million at Sands Bethlehem"