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LVS missed our EBITDA estimate slightly but we were way above the Street. High hold % and strong baccarat volume drove LV.

 

"We are pleased to report that we delivered record revenues and adjusted property EBITDA during the first quarter of 2010. Strong top line growth in all our markets, coupled with increases in operational efficiency, contributed to substantial margin expansion and a record financial performance overall.  In Macau, we delivered $259.2 million of adjusted property EBITDA, with each of our properties, The Venetian Macao, Sands Macao, and Four Seasons Hotel Macao and Plaza Casino, delivering revenue and EBITDA growth, as well as EBITDA margin expansion.  In Las Vegas, increases in gaming revenue driven by record table games drop, in concert with the impact of our efficiency programs, allowed us to deliver $105.3 million of adjusted property EBITDA during the quarter, and to expand our Adjusted Property EBITDA margin to 32.3%, an increase of 410 basis points compared to the first quarter of 2009."

- Sheldon G. Adelson, chairman and CEO

 

CONF CALL

  • Will shortly recommence construction of sites 5 & 6
    • Doubling the hotel inventory on Cotai is critical to growing the MICE business
  • Vegas: Forward bookings are increasing for 2010 & 2011.  Stronger pricing trends in FIT - especially on weekends.
  • MBS Singapore
    • Mostly SE visitors
    • Both premium direct and slot play have been quite robust
    • Today's visitation has been primarily from international visitation
  • Their principal focus now is growing by focusing on sites 5 & 6, recovery in Las Vegas, expansion and tables of Bethlehem and of course the maturation of Singapore.
  • Believe that the high hold at Venetian Macao on mass play should continue in the future, given the mix of games, time of play and other factors
  • Focused on growing their direct VIP play in Macau - which grew to 21% of total VIP drop at Venetian
  • Four Seasons - direct VIP play was 43% of VIP drop
  • Sands Macao remains a cash cow
  • Sands Bethlehem:
    • Had its best quarter since opening, reflecting new marketing programs and higher win per day
    • Plan to add 89 table games this summer which should increase the property's attractiveness
    • Started building hotel, which will open June 2011
  • Vegas:
    • Looking forward they should see a higher mix of group bookings in 2010 and even higher mix in 2011
    • Have 515k group room nights on the books for 2010
    • Expect pricing will improve over time
  • Deleveraging strategy:
    • Repaid $850MM of debt this quarter
    • Have $1.3BN on their credit facilities (US & SING) and $4.2BN in cash
    • Have $5.5BN of liquidity: 1.5BN left to spend on MBS through balance in 2010, but as much as $400 of that will be paid out of cash flow in 2010, $400MM more will be paid in 2011 on MBS out of their cash flow
    • Will also use some funds to develop first 2 phases of sites 5 & 6 in combination with the project financing that they raised
    • US Restricted group: EBITDA $439MM, debt $4.3BN, cash $2BN, leverage was 5.4x 
    • Venetian Restricted group leverage was 2.6x  (Macao)
    • Expect the sale of non-core assets in the near term to help them going forward
  • Guidance on hold rates: VIP: 2.7-3% as the normal hold rate for RC play, for Mass play, they think it's more reasonable to use the 4 quarter moving average as normal instead of a one size fits all approach

 

Q&A

  • Table game cap in Macau
    • Assured for 400 NEW tables & 2,200 slots on sites 5 & 6 to start with. 
    • They will likely also move some tables and slots that they will have to move from other properties in Macau if they need to as well (170 tables that aren't being utilized or are marginal at other properties)
    • Adding 100 electronic tables too
    • Will be allowed to add 270 additional NEW games in 2013
  • MBS metrics
    • The electronic table games at Genting have been gangbusters.  They ordered games that they should get in 6-8 weeks
    • The slots are winning $400-900/day
    • The electronic roulette games play 10x faster then the live games
  • Why are the FIT rates on the weekends so good?
    • It's not across the board - just in FIT leisure.  Not sure why.  All of April was strong (+YoY)
    • Group demand is strong but pricing doesn't accompany that demand
    • For the last 4-6 weeks, weekends averaging $240-260 ADR
  • Lots 5 & 6 in Macao and the foreign labor issues?
    • Have 3,900 workers on the site now
    • They were assured that they will be able to get the labor they need
    • They will have to absorb the low amounts of unemployed workers as well
  • Biggest surprise in Singapore
    • Surprised by the premium direct play and credit applications - about 50% of play
    • Surprised by how much surveillance activities they had to do, and as a consequence they only opened half of their tables on the VIP side
    • Local crowd mix? 33% Singaporean 67% foreigners (Malaysia, Indonesia, Singapore)
    • Good news is that they had a lot of people during the opening day, but they weren't allowed to advertise until April 27th 
    • Will take a while to get the right mix of business. Looking at Baccarat mix relative to other games.
  • Volumes in Macau have been relatively subdued despite good hold
    • A lot of their emphasis has been building their direct play business
  • CoD - are they being more promotional?
    • They have not heard that CoD is changing their commission rates
    • They are selling more than 2/3 of their rooms on a cash basis and don't think that CoD is anywhere near that
  • Singapore VIP vs. Mass Mix
    • 48% of the revenues in the first 8 days were VIP 
    • In operation:
      • 70 VIP (out of 139)
      • 442 out of 559 Mass
      • 1450 slots out of 1600+ slots
    • Commission and rebate structure? They are paying much less then Genting and so far have not had pressure to move those rates so far
    • Ramp up of high end is going well but it is ramping
    • Gaming table win per unit is very encouraging - higher then what he originally estimated and what he used to come up with his estimate of EBITDA potential.  That's because they have higher quality of person visiting their property vs Genting's low brow visitor
    • If their ramp goes very well - in 12 months, the run rate number will be higher then what they estimated
    • They will increase their slots there to 2,500 (that includes electronic table games)
  • In Vegas: About 50% of drop came from Asian baccarat - held in the low 30's.  Held at 13% on the non-baccarat. They usually hold around 28% anyway on the baccarat play in Vegas.
  • 2.84% is their normal hold on rolling in Macau - claim that they were $5MM unlucky in the quarter for the RC business.  So they were unlucky on the Volume base  (RC 1.25%) and luckier on the Rev Share side. But when you combine RC and the RevShare then they were $5MM favorable.
  • Receivables: $118MM in Vegas (31% reserved) and $190MM in Macau
  • Rebates: 0.75% to 1.0% to players on direct play
  • 40-60% gross margins on the casino business in Singapore
  • Every $10 of ADR can contribute $20MM -$25MM of EBITDA in Las Vegas
  • Trying to say above $200 on ADR for groups in 2011
  • Co-op sales at Four Seasons - getting the final "ok" and as soon as they get that they can start selling. Mister of Public works has now been assigned that responsibility. They were looking for $1/SQFT
  • Can't sell the Singapore mall for 7 years and wouldn't consider selling it until its mature - 2-3 years away
    • Maybe I'm confused but he said that they can't sell it for 7 years??