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.