The reaction to BYD, WMS, and especially WYNN's Q3 taught us that expectations were pretty darn high for this sector. With LVS off 20% this week, they've probably come down.
One has to have brass bones to own a gaming company into Q3. We think LVS is going to post a solid quarter but what does that mean? We felt the same about WYNN. Understanding that expectations were high, we weren't expecting a positive reaction in the stock, but an 11% plunge? Now that would've been a great call. Unfortunately, we didn't see it.
So back to LVS. We are projecting total company EBITDA of $266 million versus the Street at $245 million. Once again, we are above the Street, but will it matter if we are right?
In Macau, we think Sands EBITDAR will come in around $65 million, up significantly over last year's $43 million due to significantly higher hold percentage on RC, which was only 2.35% in 3Q08, and deep cost cuts. As a partial offset, table drop will be down in both RC and mass y-o-y. For Venetian we have EBITDAR increasing to 8.4% to $147 million, with the increase driven almost entirely by cost cutting at the property level. Four Seasons, on the other hand, experienced a huge ramp in table drop this quarter, especially on the RC side. High hold didn't hurt either. We estimate $16 million of EBITDA at FS versus just $3 million in 3Q08.
Las Vegas is Las Vegas and we don't feel like we have much edge on the number for Q3. We are at $76 million, pretty close to the Street consensus, and slightly above last year. Remember that in last year's Q3 LVS held at a very low percentage, which cost the company about $30 million in EBITDAR. It's not like we are saying business is better in Las Vegas.
LVS Q3 "YOUTUBE"
CONSTRUCTION PROJECTS
“At Marina Bay Sands in Singapore, construction, development and pre-opening activities continue on pace, and we are targeting an opening of the property in the first quarter of 2010.”
COST SAVINGS
“We have now increased our cost saving initiatives to more than $500 million of annualized savings. This is $30 million more than we had previously targeted. And we will continue our efforts to identify additional opportunities to increase that $500 million number. As of June 30, we have successfully implemented approximately 69% of these identified costs, eliminating $345 million of costs from our running rate.”
“We expect to have fully implemented approximately $200 million in annualized cost savings across our Las Vegas operations by end of this year.”
“The three prong strategy for the Venetian Macao continued throughout 2009 with the first initiative, the rightsizing of our business and the full implementation of our cost savings program, as well as other efficiency initiatives front and center. We have now expanded that program to target at least $300 million in annualized cost savings across our Macao operations…As of June 30, 2009, we have implemented approximately 70% of our targeted savings. That is up to $210 million from our annual run rate.”
OUTLOOK AND PLAN
“Looking ahead, we hope to benefit from both the launch of new marketing programs at the property [Four Seasons] and a natural increase in visitation to Cotai as our neighbor the City of Dreams continues to mature. We should also benefit from the recent addition of our 19 luxurious Paiza mansions, which have been full since they have opened.”
“We expect to increase visitation and play at the property [Sands Bethlehem] as our player development, promotion and bussing programs mature in the months ahead, particularly in the mid-week businesses situation.”
“So we expect overall that our original business plan will be amply executed in Singapore by selling the cash flow of the retail mall in Singapore and either substantially reduce or eliminate the total debt to build Singapore. In the case of Macao, the cash flow and the sale, of course, we have to wait until the current real estate property market improves, but it is going better in Asia than it is in the United States, and when it gets back to normal, we will sell our retail – we will consider selling our retail, if we can get the exaggerated price we are looking for.”
“And we do intend to start selling the Four Seasons apartments, serviced apartments as condominiums, hopefully by the end of this year. And I was in China, this past week… people are opening up – they are picking up their mattresses, taking their money out, and they are starting to buy apartments, and they made reference to the old style of Hong Kong apartment sales that several projects get sold out within two or three days of they being exposed to the market. So we do expect a very good response on the Four Seasons apartments.”
“And in Las Vegas, as the market returns to normal, and you're guess is good as ours, but things appear to be appearing more normal in today's – currently than has been over the last six to twelve months, then we would be able to hopefully restart our condominium project, the St. Regis project for condos and then substantially reduce our debt in the Las Vegas market plus upstreaming money from Macao and Singapore.”
ON WHAT SANDS' REACTION WILL BE TO CITY CENTER OPENING:
"The good news is demand is certainly there, it is returning, it is getting better for both the balance of this year and in 2010 and 2011. The issue is going to be rate because, obviously, we love to go back to running 45% of our mix being group driven, and it enables us maybe to fill and fill it fast, ADRs, and the banker revenues with it."
Sheldon: “But listen, we have got to – we can’t be as strong as we were in the past. We will have to take a little bit of time to ramp up to get back to normal.”
ON LIQUIDITY
Sheldon: “So I want to emphasize that there is no question whatsoever that in the near future we are going to have a decision on which is the best opportunity for us to create the liquidity that we would like to have. So this is not a question of if, it is only a question of when, and what are the most favorable terms for us. So when we come out with the answer, it will be an answer that will be the best answer available in the market today.”
ON TABLES IN PA
Sheldon: "they said it is likely to pass by the end of the summer, and if doesn’t, it will pass for sure in the fall."
ON HOTEL RATES IN LV
Sheldon: we think we can get away with something $50 or $75 more than what just a plain hotel room can get. So not all hotels, not all Vegas properties are created equal. We think we are created a little more equal than others and our ability to get back to normalized ADR is probably better and faster than our competitors. Of course, The Palazzo and Wynn are – still have a very, very high level of appreciation.