LVS: IT MAY BE ABOUT EBITDA MARKET SHARE

With the departure of Steve Jacobs, look for LVS to play up the positive Macau outlook. LVS’s EBITDA market share, rather than revenue share, should be the focus.

On the margin, Marina Bay Sands should still be the major stock catalyst in LVS’s upcoming earnings release (Wednesday).  Even though Macau is the largest revenue and EBITDA contributor, we already know the Macau revenues.  With the detailed breakdown – Mass, VIP, VIP hold %, etc. – in our possession, we should once again get close to quarterly Macau EBITDA. 

However, we think there will be another interesting dynamic to LVS’s Q2 earnings release and conference call.  Steve Jacobs, CEO of Sands China, was dismissed recently.  Therefore,  Sheldon will probably be inclined to assuage investors that there is nothing to worry about.  We expect LVS will be extra bullish about the Macau outlook and may even introduce a new metric:  EBITDA market share. 

LVS generated an estimated 33% of Macau’s casino/hotel EBITDA in 1Q2010, much higher than its 21% revenue share.  With its revenue share in decline, it seems prudent to focus on the more important metric of EBITDA.  Look for management to really play up this angle and for investors to eat it up.  Even in this metric, however, their share has declined, down from 41% last year.  Although to be fair, City of Dreams, L'Arc, and Oceanus were not open for the full year 2009.  See the chart below for Q1 EBITDA shares:

LVS: IT MAY BE ABOUT EBITDA MARKET SHARE - EBITDA

Back to Steve Jacobs again, there is no doubt that he did a great job cutting costs and focusing the properties on higher margin Direct VIP and Mass business.  We agree with our Macau sources that the operating team is strong enough to offset the Jacobs loss.  However, where shareholders may miss Jacobs is in Jacobs' focus on serving all of Sands China shareholders rather than just the majority shareholder – LVS – and in the development of Lots 5 & 6.  Nonetheless, these are longer term issues and while important, may not be in most investors’ line of sight right now.