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Starwood management:  meet a real shareholder friendly management team. Here is what we liked and didn’t like about LVS’s Q1.


  • Capital Return - Who would’ve thought 2-3 years ago that LVS would become one of the consumer sector’s most shareholder friendly management teams?  $810 million of stock repurchased and $409 million in dividends were paid in the quarter.  And this is a growth company!  We’re not ones to kiss up to management but kudos Sheldon and the gang.
  • Massive Mass Macau growth – LVS only beat us by $9m in EBITDA in Macau but the Mass volume beat was bigger.  Macau Mass volumes were 11% higher than we expected.  LVS dominates this most attractive and fastest growing segment in Macau and we’re happy to see a beat here.
  • Singapore held high – Most investors do not give stocks credit for good luck.  In this case, Marina Bay Sands has recorded an unusual string of bad hold quarters (but still passing per statistical rigor) prompting some investors to question the structure of Singapore’s Baccarat business.  For one, I’m just glad I won’t have to field another call for a while on this topic. 
  • Non-gaming growth in Macau, particularly at Sands Cotai Central
    • SCC RevPAR grew 45% on a base of almost 6K rooms.  F&B was also up 45%.  Hey Galaxy management, remind us again why non-gaming won’t work in Macau?
    • Venetian non-gaming revenues increased 24% including a 19% increase in RevPAR
    • Four Seasons ADR hit $429 in 1Q 2014, a new record


  • Singapore volumes – Q1 VIP volumes fell 29% YoY.  With luck clearly on the side of the casino in Q1, it’s not surprising that volumes would be a little soft, but -29%?  In Q4, volumes were also down (-17% YoY) but hold was low.  As can be seen from the following chart, the trailing 4Q trend is clearly negative.


Mass volumes also declined, down 3%, and the trend there is only flat.  This is a real concern for us and outside of easy hold comparisons, there is risk of declining Singapore EBITDA.  The economic and visitation data are not great.  Moreover, we remain concerned with the impact of the missing Malaysian aircraft (carrying mostly Chinese passengers) will have on Chinese visitation to Singapore.  Anecdotal evidence so far is not good.  With new casino competition South Korea and Japan likely, investors need to accept the huge Singapore cash flow stream as flattish at best, with some roller coaster quarters.

  • Sale of Macau retail assets – Management appeared to back off on the timing of any Mall sales.  On the Q4 conference call, Sheldon threw out a $10-12 billion in potential value (seems a little high) and indicated that they were commencing the sales process.  It now looks like we’re a couple of years out as management prefers to wait until growth has stabilized.  This may be the right strategy.
  • Expectations are high – A victim of their own success.  However, we do not believe investors are expecting 20% growth in GGR for the Macau market in May.  We are.

Here are the Q1 results: