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Here are the LVS notes from our meetings last week in Las Vegas

Macau:

  • LVS thinks that the mass business will grow in correlation with the GDP/infrastructure
  • VIP will be volatile
  • They are most bullish on Mass business
  • LVS won't be involved with Hengqin island development
  • Beijing wants to see the IPOs get done - pumping the numbers beforehand. The government also wants to see the Cotai strip get developed
  • LVS doesn't think they will loosen visitation restrictions. So basically the government is massaging the numbers to get IPOs and to get Cotai developed.  Guangdong was upset over the visa restrictions and people were getting killed over credit issues. It’s easy enough to come to Macau through a tour group
  • They don’t think that there is a correlation between visitation and gaming revenues for mass/VIP revenues.   90/10 rule - especially for Mass
  • Mass is more correlated to Chinese GDP growth.
  • Sands only has 20k visitors per day and they drop $600mm vs Venetian which does $700-800mm in Mass and has 50-60k visitors per day
  • Slots revenue is more correlated to visitation
  • Beijing just cares about job growth - that's why they want them to open Lots 5+6. They also know that in order for them to open they need to make some money.  Hence the motivation for allowing the selling of condos/selling of retail: LVS can reinvest in the strip
  • IPO will happen by year end - HK listing

Competitors

  • MGM is trying to get the mass business moving
  • CoD doesn't have the mass play
  • Oceanus - location will be an advantage

Las Vegas:

  • It’s all about room rates for them
  • MGM is still being very aggressive – they don't want to have a lot of inventory for 2010 - so they can markup City Center rooms
  • Wynn sets the rate. LVS prices right below Wynn, and everyone else falls in line
  • If they can raise rates they will make a ton of money
  • LVS would rather go into 2010 with a lot of inventory
  • It took a while to get the Palazzo "running"
  • If City Center prices above Wynn/Encore - and fill - then it’s great for everyone
  • Room rates are firming but it’s just seasonal
  • They think that, following the Encore addition, Wynn had to go deep to sell their rooms

Balance Sheet

  • LVS will send back $1.4bn back to the states following IPO – they had $2.2bn of cash at 6/30 at the US subsidiary. 5.2bn, including 3.6bn of cash.
  • Without the Macau IPO there is no equity in the USA

Capex

  • $50mm of maintenance capex in Las Vegas
  • Venetian looks a little tired – they will need to invest some capital

Singapore:

  • LVS is trying to have a large credit operation in Singapore in order to operate a direct marketing business
  • Expecting Jakarta, Singapore, Bangkok, Kuala Lumpur - not so much China (less than 5%)
  • LVS can enforce a gambling debt in Singapore
  • They will have some junkets there but it is hard to qualify under Singapore law
  • We believe the lack of junkets will slow the ramp in Singapore
  • They would be surprised if they didn't have the same visitation as Sands although they are not sure that most of them will gamble because of the admissions tax
  • Focused on a February opening - but won't know until November. They will open with 1,000 hotel rooms when they open (February 28) - out of 2,850 rooms.  The remainder of them will open within 90 days of opening.  LVS will open with 50% of the retail, then up to 90% in 90 days and last 10% will slowly roll out
  • LVS thinks that just hotel and retail can do $250MM in EBITDA for a full year (down from 330MM because of a drop in RevPAR).  With respect to retail, they are happy to rent at $300 per foot.  $400 was the peak
  • They thought they could do ADR of $270 with 90% occupancy.  Currently it seems like the performance will be closer to ADR of $200 with 90% occupancy
  • To come into the casino one needs to pay 100 Singapore Dollars ($60) if you are Singaporean. It costs 2,000 Singapore Dollars for the year
  • They are not sure how long gaming will take to ramp.  For Sands Macau they have been building the business for two years
  • They think it will open very strong and keep growing as all the other attractions there open.
  • The cost will be $5.5bn US dollars
  • Genting will open first - will give them something – 2,000 will incentivize them to do only one