LVS Q1 2014 CONF CALL NOTES

How 'bout them buybacks?  LVS: The anti-HOT.  MBS finally holds well but volumes were ugly.

 

 

PREPARED COMMENTARY

Macau:

  • Another record quarter, adjusted profit EBITDA grew 49% to a record $940 million annualized dollars
  • Mass table win for the quarter, a record $1.34 billion annualized dollars
  • Growth rate was 40% faster than the Macau mass market as a whole
  • VIP rolling win +18.2% = $1.456b or  more than $39k/table/day
  • #1 position in Macau for GGR w/ 23.2% share of revenue 
  •  Cotai Strip + dining retail + retail + convention = improved cotai strip now attracting more valuable customer = increased returns across property portfolio

Confident about Macau growth:

  • Increase utilization of hotel & suite inventory on Cotai Strip - current 56% of inventory = 9,000 keys...will increase to 15,000 in late 2015 with addition of St. Regis and Parisian
  • More people visiting properties on Cotai Strip...and visitation will only increase because of Governmental investment in infrastructure (railroad, bridges, highway, and add'l immigration entry stations)
  • Visitors who travel from further distances will stay longer = increased spend on dining & retail as well bring larger gaming budget

Marina Bay Sands Singapore:

  • Hold well above normal (for a change)
  • EBITDA $435m

Current Developments:

  • Parisian Macau on budget and on schedule subject to gov't approvals, expect to open 4Q2015
  • St. Regis tower continuing and target opening 4Q2015, will add 700 rooms

New Opportunities:

  • Japan: activity levels remain robust
  • Korea: Increased potential & looking forward to development opportunities
  • The MICE model positions LVS very well and able to compete

Compliance:

  • take very seriously and lead industry and all constituencies, to lead industry, proud to lead industry in their efforts

Capital Allocation:

  • Will return of excess capital to shareholders
  • as EBITDA & FCF grow, capital not needed will be returned to shareholders
  • no requirement for significant capital needed in near future due to long lead time of new developments
  • $620M stock repurchase authorization remaining as of March 31, 2014
  • expect to repurchase $75M per month
  • leverage: gross leverage 2x debt/ebitda or 3x for future debt needed for new IR markets
  • will maintain strongest balance sheet within the industry

 

 

Q&A

  • VIP play/junket less robust any insights, changes in behavior? - nothing has stopped Chinese or other Asian from challenging luck.  Geopolitical issue impacting VIPs.  SCL's drivers are rooms and mass play, thus SCL less impacted.
  • Potential for supply and demand to meet/cross - no idea, not within the realm of the future, not within my (Mr. Adelson's) lifetime.
  • Share repurchase during Q1, $80.80/share average, update on purchases April to date?  No comment...but still see value in the stock.
  • How value stock vs. growth potential vs. $600M remaining authorization...FCF in 2014, so significant that could repeat buy-back with add'l $2B will make the decision on share repurchase vs. dividends during the course of the year.
  • Mr. Adelson hasn't sold LVS shares in 8 years...
  • Macau strategy shift to mass market - how drive yield per table higher?   Chinese population visitation to Macau ~2%, SCC and Venetian will benefit.  Grew tables 181 tables YoY, target table win of  $15k-$16k/table.  Key is amount of tables coupled with number of rooms.  This year's management bonuses are predicted on increase in table productivity
  • Dragon Palace: not yet open
  • 1928.HK share repurchase/listing requirement - trying to get free of listing in HKSE, but would take $15B - $20B to delist 1928.HK, but would rather payout to shareholders via share repurchase and dividends
  • VIP mix direct vs. junkets: not necessarily increase direct channel, good relations with junkets.  Most significant opportunity is non-Guangdong visitation which could be $600M, $700M, or $800M/qtr opportunity and will comp rooms to high-value casino customers
  • Mass: how use hotel rooms to increase mass play?  Venetian $470m vs. $348m driver was mass conversion 
  • MBS: all big play VIPs are direct, no junket involvement
  • Looking for additional 2,500 to 3,000 rooms in Macau.  Looking at land know as Tropical Garden, would also like to share in land on Lot 7.  Because of infrastructure build-out of bridge and train system.  Currently room constrained during peak holidays
  • Venetian Mass customer = $1,500 to $5,000 per night GGR.
  • Why leverage ceiling decrease from 3.5x from last conf call to 3.0x - no reason other than aversion to debt; earnings and FCF so plentiful
  • MBS: Land request to expand update - Singapore doesn't work quickly, look to all agencies for input and feedback.
  • Retail Mall sale view - as long as growing rents by 20%/year not looking to sell.  When growth slows to mid-single digits to 10%, then look to sell at 4% cap rate or lower.  EBITDA and rental revenue occurs because of percentage of sales, which occurs in 2H of each year.

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