拉斯維加斯金沙集團 (LVS) 2005 Q4 法說會逐字稿

Good day, ladies and gentlemen.

Thank you for your patience and welcome to the fourth quarter and full year 2005 Las Vegas Sands Corp. earnings conference call.

At this time, all participants are in a listen-only mode.

We will conduct a question-and-answer session towards the end of this conference. (OPERATOR INSTRUCTIONS)

As a reminder this conference is being recorded for replay purposes.

I would now like to turn the call over to Mr. Bill Weidner, President and Chief Operating Officer.

Sir, you may proceed.

Good afternoon, everyone, and thanks for joining us today.

With me today are Sheldon G. Adelson, Chairman at Las Vegas Sands Corp., Brad Stone, our Executive Vice President, Scott Henry, Chief Financial Officer, and Rob Goldstein, the President of the Venetian here in Las Vegas.

Before we begin, I need to remind you that today's conference call contains forward-looking statements that we are making under the Safe Harbor provision of federal security laws.

I would also like to caution you that the Company's actual results could differ materially from the anticipated results in these forward-looking statements.

Please see today's press release under the caption Forward-looking Statements for the discussion of risks that may affect our results.

In addition, we might discuss EBITDA and adjusted EBITDAR which are non GAAP measures.

A reconciliation of those measures for the most comparable GAAP measure is included in the press release.

As I mentioned, please note that this conference is being recorded.

You already know that 2005 has been a very important and a highly successful year for the Company.

Our financial performance reached record levels and our opportunities for growth have never been more compelling.

There are a number of accomplishments that we are very proud of, from both an operational and a financial perspective and I will provide you with some of those highlights today.

Full year adjusted EBITDAR came in at 665 million.

That's a 40% increase over 2004.

That marks a record for the Company.

We had record years in both of our properties, generating adjusted EBITDAR of 306 million at the Venetian Casino Resort in Las Vegas and adjusted EBITDAR of 342 million at the Sands in Macao.

We completed a series of target capital improvements at our operations in Las Vegas and Macao, which have not only enhanced our competitiveness but also improved the bottom line.

We made important advancement under our strategic plan to develop the Cotai Strip in Macao which I will talk about later in a little greater detail.

We have also taken a leadership role in master planning and developing a leisure and convention destination on Henggin Island in the People's Republic of China, less than a mile from and connected by a bridge to our Cotai Strip.

This represents a key part of our strategy to capture maximum value from the derivative demand that will inevitably be created by the development of the Cotai Strip.

In addition, we have taken steps to enhance our financial position ensuring that we have the capital and flexibility to fund our growth initiatives and pursue new opportunities going forward.

We wrapped up the year with a record fourth quarter, reflecting strong growth across the board of both our Las Vegas and Macao properties.

At the Venetian, we delivered a record fourth quarter EBITDAR of 84 million.

That's up 55% from the prior year reflecting a combination of strong hotel and gaming metrics as well as higher food and beverage revenue.

Table games volumes was up 17.6%, (indiscernible) came in above the norm at 26.4%.

On the hotel side, the recent expansion of our meeting facilities is already providing us with greater capacity to book group business, particularly in traditionally slower periods, and increased in booking flexibility also.

This helped us deliver one of the best fourth quarters in the history of the property on the hotel and food and beverage side of the business, and positioned us well for the seasonally strong first quarter.

During the fourth quarter, RevPAR was up 3.4% driven primarily by an increase of 3.3% in occupancy to 96.5%.

These gains, as well as the 45% increase in food and beverage revenues, are a direct result of our emphasis on the group business during the quarter.

In fact, if catering revenues are added to room revenues and divided by available rooms, the rooms and catering RevPAR grew from $237 in the fourth quarter of 2004 to $269.00 in the fourth quarter of '05 -- an increase of over 13%.

But looking forward, 12 months bookings in 2005 are 45% ahead of 2004 space.

Our other targeted capital improvements at The Venetian are also bearing fruit.

The opening of our Paiza Club and the renovation of our high-end suites have played a critical role in our ability to attract more premium customers and grow our high-end business in Las Vegas.

This is reflected in our table games drop which was (technical difficulties) producing a full year increase of 15.8% versus 2004.

Given the success of our Paiza Club, we recently expanded its private gaming capacity from three to six tables; and we are in the process of renovating our three Presidential suites, establishing our 34th, 35th and 36th floors as identifiable [but yet beyond play].

As we've noted in the past, an important component of our high-end strategy is our cross marketing efforts with the Sands Macao and its Paiza Club, particularly as we establish relationships with an increasing number of VIP players in that region.

In the fourth quarter for example baccarat drop increased 43% year-over-year.

Turning to the recent additions of our entertainment offerings, we are very pleased with the response to [Tao] and Blue Man Group, which both opened last fall.

As expected, Tao is generating significant traffic and brings tremendous cachet to the property.

The Blue Man Group production is ramping well, generating incremental traffic and has also added an important dimension in terms of overall ambience and appeal, especially in the evenings for the property.

As we look out to 2006 and 2007, there's a visible pipeline of new initiatives designed to further strengthen The Venetian both in terms of its appeal and the ability to generate incremental cash flow.

The new Phantom Theater to house Phantom of the Opera is on track for a June opening.

Construction is underway for a third theater, an 800 seat showroom, which is expected to open late this summer.

Mario Batali, the award-winning New York chef, will be opening two restaurants at The Venetian.

Both are to emulate Mr. Batali's No. 1 rated New York restaurant Fabo and they are slated to open later this year.

The Venetian will open its 39 table state-of-the-art poker room this spring and we are finalizing the broadcast and ongoing presence of the world's best poker players in the form of the Professional Poker League.

Phase 2 of our pool deck renovation is also underway and slated for completion by this spring.

The renovation includes the resurfacing and articulation of the balance of the pool area.

The addition of more luxurious cabanas and a new Cow Beach area, an elegant European-style private pool area, which will be accessible directly from Tao.

In terms of our room product, we are in the initial planning phase for renovations of The Venetian Tower, which will likely commence in the second half of 2006.

We are in the process of forming our plan which will update, improve and contemporize our Venetian rooms and ensure minimal disruption to our business.

Construction of the Palazzo which will add another 3,025 all-suite rooms, 105,000 square feet of gaming space, 400,000 square feet of retail space -- all interconnected to The Venetian -- remains on schedule for a third quarter 2007 opening.

Finally we filed for permits to expand our convention facility, assuming a timely approval process completion is expected in early 2008 that will add approximately 1.1 million additional square feet to our current capacity.

Shifting now to our performance and activities in Asia, our Sands Macao property turned in another spectacular quarter, generating adjusted EBITDAR of 103 million.

This record performance reflects continued strength of mass play and [evidence as] continued ramp up of the VIP Play.

The ramp up in Rolling Chip volume which measures VIP Play has been dramatic since we formally launched our VIP play in March of 2005.

Rolling volume came in at 1.99 billion in the second quarter, increasing to 3.19 billion in the third quarter and increasing, again, in the fourth quarter to almost 4 billion.

Actually 3.93 billion of Rolling Chip play in the fourth quarter.

We continue to grow our business on the mass side with table drop reaching 11.3 million per day.

That's up from 11.1 million per day in the first quarter, 10.1 million per day in the second quarter, and 9.5 million per day in the first quarter, reflecting expanded capacity and the introduction of promotional programs aimed at this segment.

Slot volume of the fourth quarter grew an impressive 73% to 224 million which continues to support our belief in the potential of the slot market in Macao.

Very important for us as we expand the thousands of slot machines as we open our Venetian in Macao.

In addition to our renovations, product improvement and Palazzo of expansion construction in Las Vegas, we have an exciting roadmap for growth and expansion in Asia as well.

As the Sands Macao -- at the Sands Macao, Phase I of our podium expansion opened in late January in time for New Year -- or Chinese New Year.

The new 10,000 square foot level of Fortune Gaming Area includes an addition of 28 tables and 67 slots.

And this May we will add 16 VIP tables increasing Paiza Club capacity by 30%; and upon completion of the balance of our program in August, we expect to add an additional 200 slot machines and 200 table games to take the total table capacity to 630 table and slot machines to 1100.

At the same time. we are also adding more Asian fast food to service the mass customer as we increase capacity.

Construction of the Venetian Macao which will anchor the Cotai Strip remains on schedule for a summer 2007 opening.

To that end, we are continuing to make significant progress at all aspects of the development of Cotai.

Most recently we entered into a nonbinding letter of intent with Four Seasons on Parcel 2 and expect to have signed a definitive agreement shortly.

Agreements with other brands are either in letter of intent documentation or in the final negotiations stages.

We continue to make progress on leasing [balls] on the Cotai Strip.

At our last update on November 9th, 2005, on our investor day, we revealed that we had signed offers representing about 10% of our Grand Canal Shops in Macao.

As of today we have commitments from 85 stores, representing over 30% of the space on our Grand Canal level in the mall at lease rates exceeding our expectations.

We will provide a full update on mall leasing activities in the next few weeks.

Looking just one mile away, the development of our Hengqin Island provides us with a tremendous opportunity to leverage our presence in Macao and realize the derivative real estate value development on the Cotai Strip.

We are in the midst of our master planning work as we progress approvals from the PRC government and we are finding a level of interest in terms of branded amenities, garnished interest and government support truly exciting.

As most of you know, we are in the process of obtaining a $2.5 billion senior secured credit facility to fund our near-term growth plans in Asia.

That includes the Sands Podium expansions, the Venetian Macao, the Four Seasons, the Shangri-La as well as our construction on additional complexes on our sites 5, 6 and additional Cotai projects.

We're finalizing documentation as we speak and expect the facility to close this spring.

These developments are being put in place to take full advantage of the continuing improvement of the economy of mainland China and the growing wealth and consumerism of the Chinese people and the economic recovery of the entire region, driven largely by mainland China.

In that regard, the gross domestic product of the PRC increased 9.9% in 2005.

Foreign direct investment exceeded 60 billion.

Foreign trade increased 26% to the Chinese currency, the RMB, increased 3% against the U.S. dollar since July.

The U.S.

Business Council even more importantly talked of the instruments and mechanisms being put in place to float the RMB.

That change of a freely floating RMB will be huge for our VIP play, increasing the amount of what analysts call legitimate VIP play that we can compete for.

It will also increase the amount of money players can bring across the border to play.

Chinese private savings reached 1.7 5 trillion in Chinese bank accounts.

The newly wealthy Chinese love to travel and spend.

The Chinese made 1.21 billion domestic trips in 2005, an increase of about 10%.

They made 31 million foreign visits.

The World Travel Organizations says China will be the world's biggest destination by 2019 and according to published reports, Chinese are the biggest traveling retail spenders.

They are buying luxury condos, yachts and things like that as well as retail items.

That demand is driving visitation to Hong Kong with over 23 million visitors, an increase of about 12% driving hotel occupancy and RevPAR.

Despite a rooms capacity increase in Hong Kong of 12.1%, RevPAR increased 19.8% last year.

In Hong Kong, retail sales topped 2.4 billion in 2005.

In Macao for 2005, visitation increased 12% to 18.7 million visitors.

Mass (technical difficulty) increased 44.5% while VIP play was down about 3%.

After a crackdown of the PRC central government on legal gaming during the second half of the year.

The Sands Macao Rolling Chip volume however was up 155% from the first to the second half in the face of that crackdown.

That supports our contention that the legitimate VIP business was not only not affected but is growing much more rapidly than the other type of VIP businesses done in Macao.

New developments in the quarter that affect Macao's future, 25 million more mainlanders will be eligible for the individual visit scheme come May 2006.

That IVS scheme allows mainlanders to visit Hong Kong and Macao without waiting for a visa.

It will bring that program from 225 million mainland Chinese to 250 million by May.

Macao will double airport capacity by the end of 2007.

It is these kinds of metrics and these kinds of developments that continue to support a bullish outlook for Macao and justify our aggressive investment posture there.

In terms of other development activities worldwide, we are continuing to pursue many promising opportunities.

In Singapore we are finalizing our response to the RFP for a spectacular project at the Marina base site, which is due at the end of March.

On the domestic front we filed our application with the state of Pennsylvania for a proposed development in Bethlehem a short 90 minute drive from New York City.

I would say that before we open our call for questions and answers I would like to ask that you refrain from asking any questions related to the registration statement that was filed today.

I'm sure you know and appreciate that we are restricted from discussing any and all aspects of that matter.

I would like to now thank you in advance for your understanding and now I would like to ask the operator to begin and open the call for a question-and-answer session.

Thank you.

(OPERATOR INSTRUCTIONS) Larry Klatzkin of Jeffries and Co.

Congratulations on great earnings.

One quick housekeeping option expense.

I assume you are going to be probably $0.08 to $0.10 share per year like your competitors.

Is that -- what kind are we talking in dollars?

And how much per share?

This is Scott.

It's more in the range of $0,02 to $0.03 a share.

That number that you quoted was a little too big.

And it's probably going to be in the range of $11 to $12 million a year, is our current calculation on that.

11 or 12 million a year.

Okay.

Good.

You guys deserve more but okay.

Hengqin Island, what kind of potential could we see from that?

What kind of magnitude are you thinking as far as -- are we talking 1,000 units, 2,000 units?

What kind of potential could there be?

I want to qualify a comment about Hengqin Island that we are in the process, that is, a rather protracted process of getting through the approvals in mainland China.

Departmental impact statements and things like that are -- they do not easily give to what are called WOFEs, wholly-owned foreign enterprises.

Large chunks of mainland China.

So it is an unusual and difficult transaction.

So I want to qualify that.

But based on what with the new (indiscernible) high planning institute right now we are talking about an FAR ratio on the approximately 6.2 square kilometers that would allow us to build between 40 and 50 million square feet of things.

Those things could be anything from hotels to second home apartments, to clubhouses, to commercial facilities.

We'll build some contention and some exhibition space there also.

But it's, we would be allowed to develop (indiscernible) short of a massive project there.

Great.

Another question would be just discounts and commissions on table games in the fourth quarter in Macao?

Pardon may?

The dollar amount of discounts and commissions on table games in the fourth quarter.

That would be in the area of 1% of the goal or 40%.

You can take the rolling program times 1% (inaudible) that would be amount of the actual commission and discounts.

They don't really have discounts there.

It's primarily commissions based on Rolling Chip program.

So 1% of Rolling Chip program.

As far as sites 7 and 8.

Some of your competitors have said that those may not be yours.

Can you just respond to that?

We met with the chief executive about four weeks ago approximately, discussed our development plans, divulged to him where we were in the process of our brand development.

He assured us that sites 7 and 8 are ours to develop.

In the meantime, we've been given permission to actually access sites 5 and 6 to begin the site work.

And we were notified today that we will be granted a license on the site 2 development.

We are moving forward on the predevelopment of 7 and 8 and actual fiscal development of 5 and 6.

Last question.

With the Chinese government you have the deadlines of June '06 and 12 '06 for casino and convention.

Where are you getting -- I mean, we expect to get the extensions but what's going on with that?

Part of the loan document documentation working with the Chinese government or the Macao government rather.

We formally requested the extension to the deadlines.

Several of us around the table have had conversations with representatives of the government who told us that the extensions will be granted as part of the loan documentation.

Jay [Kogen].

Banc of America Securities.

Good afternoon.

I've got a few questions on Macao as well.

Following up on Larry just asked about Henggin Island.

Bill, could you maybe just going go in to a little detail on exactly what you have to do from a process standpoint to be able to move forward, break ground and on Henggin Island, how long we will be talking?

You said it's a relatively significant undertaking.

Understand what that means here.

What does it mean over there?

The next benchmark dates will be in mid to late April.

To give you an idea of the process we've been working on this for just about 2 years.

We started with the [Duhai] level of government which is the city government across the border from Macao.

We worked our way from the [Tzuhi] level to what is called the 9 plus 2 regional level which is the nine southern provinces of China and Hong Kong and Macao which we have made into an economic cooperative area.

From there we got the approval last October, November from the mayor of [Guandong] Province.

That is the provincial level and now we are working with the Tzuhi Planning Institute who are working with the folks of the 9 plus 2 to develop the full master plan for the island.

Our next presentation with our six master planners will be to the Tzuhi Planning Institute in mid April.

We present environmental impact statements.

We present FRA ratios.

We present the outlying plan for the development in terms of the number of units in terms of the various components and aspects.

So it is a process that is a very detailed one.

We would expect to be allowed to actually get on the site to do some real work on the groundworks by sometime this summer, and would expect hopefully by the end of the year to have some form of assurance from the government that we can move forward.

And if everything worked out perfect from year one, do you think something -- you said 40 to 50 million square feet but maybe that comes on (indiscernible) as how should we think about sections opening up or greater visibility to do exactly what you're doing?

From there, we would be -- probably was, we developed in three phases and a couple of sub phases to be able to take one bite at a time and our approximate amount of expenditure in the first phase is somewhere in the area of $300 million numbers.

What we are working on just for simply for planning purposes.

A combination of infrastructure work, the first golf course, a number of housing units, the marina area and some units and yacht slips and things like that that were late to the Marina.

And if I can maybe ask a couple of Macao related questions.

In regards to the mall when you mentioned as you said we're going to get some more information in the next couple of weeks; but when you said you guys were ahead of your expectations from a rental standpoint, was that ahead of what you were expressing at the November analyst day or from prior budgets?

I just want to make sure I understand that comment.

That's the November.

I think we had a range and then a midpoint of a range we were talking about there where we are so far happy with what is coming on.

When you say the Grand Canal Shops -- is that The Venetian part of the 1.6 million square feet or is that the entire 1.6 million?

That's The Venetian part and the Four Seasons part will be part of our next announcement.

Here are the actual formal announcements so we will be developing that communication over the next couple or three weeks.

Then one last one if I can.

I didn't see the Sheraton brand anywhere in the release so your comment, you mentioned another Asian-related hotel brand.

Has something changed with respect to that site?

No we just haven't specifically talked about it, I think, because things will be -- will come along fairly clearly the next few days, few weeks.

David Anders with Merrill Lynch.

Couple of questions.

Bill, I missed the progression of the table count at the Sands Macao.

If you could walk me through that again and then I have two additional follow-ups.

We opened what we called the [Fortune] casino.

As I mentioned here for Chinese New year.

And that was an addition of 67 slot machines and 28 table games.

By May we will add another 17 Paiza Club games which will be a 30% increase to the Paiza Club.

Actually expanding the Paiza Club into what was our Shanghai East restaurant and (indiscernible) the kitchen so we can improve our food and beverage service there and add 30% to capacity and improve the quality of the Paiza Club, overall.

Then by August, we plan on adding another 200 table games and another 200 slot machines to take the total table count to 630 tables and about 1100 slot machine count.

As a follow-up, Sheldon, maybe you could talk a little bit about monetizing the real estate.

I know you've always said you wanted to get everything open before you thought about selling it.

Is that still the plan?

And then, Scott, maybe if you could comment on the [hold] percentages.

Looks like you paid a little (indiscernible) in Vegas and on the table.

I calculated probably helped revenue by about 30 million and I am not sure what kind of margin you want to put on that but maybe you could quantify the earnings affect?

David, this is Sheldon.

We haven't changed our strategy.

Our strategy is to still sell noncore assets and provide the benefit, the noncore assets is established for in the first place.

So nothing has changed.

We expect to move forward with that.

Hi David.

This is Brad Stone.

I'll respond to the whole percentage situation.

We did.

We held 26.4% in Las Vegas and that was driven heavily by baccarat and in normal times we say that's about 5%, 5 to 5.5% higher than we would traditionally expect to experience.

I think one thing that's happening here is at The Venetian is a significant growth in baccarat as a mix of business.

The town I believe if you look at the historical numbers, baccarat in Las Vegas holds in the 25 26% range bit so obviously as baccarat becomes a higher mix of your business you would expect your hold to go up not obviously to 26% but higher than perhaps what we've been communicating in the past.

Give an idea.

In 2003, 2004 we -- our baccarat drop represented, roughly, I believe the number was about 33% of our total drop.

That moved up to about 60% -- sorry, 36% in the year 2005. 2004 -- and our most current year baccarat drop revenue was about 44% of our drop.

So, we've seen a steady increase as we've built assets to attract higher end business which is predominantly baccarat Asian business put on link so I guess the long and short of it, that we're getting to here is that we believe we are going to starts seeing our whole percentage probably increase above the typical 20.5 to 21% that we have been saying would be our normalized in the past.

So the quarter again we have a very healthy 26.4%.

And depending on what you want to (indiscernible) as a premium, it could be 25 to 30 million of addition. (technical difficulties)

David? (MULTIPLE SPEAKERS)

I put it on mute.

Okay, the next question, please.

I think we had a little delay there but we're ready for the next question.

Steven Kent with Goldman Sachs.

I'm not sure if you can talk about this today but can you give a sense as on the retail leasing program whether these are U.S.-based retailers or Chinese or Hong Kong-based?

And I don't know if you can talk about the deal structures on these or are you going to do that in a couple weeks?

Also, I'm not sure if I caught this in your opening comments, Chinese New Year and Macao did follow a similar pattern to last year where business was slow the first few days and then ramped back up?

Yes; two answers there.

I would say that the retail brands, the 85 stores that we talked about are basically the international, global, usual suspects that anyone will recognize.

Anything from Mont Blanc and Roger Dubois to Dunhill, Mikimoto, (indiscernible).

It would be -- they are the premium retail brands that you would see anywhere in the world.

The announcement will articulate it more but I think you'll see that it's pretty well everything that you would expect and more.

As far as Chinese New Year, the pattern was similar this year to last year.

When the Chinese are close to home, the first few days of Chinese year are very family-oriented.

So they don't necessarily come out to the casino although our visitation numbers were up about 10%, in the period before Chinese New Year, it increased about 10% through the remainder of the second week of Chinese year here in Macao.

But the patterns are very similar.

Now here we got a little different pattern because when they come away from home because they are away from home, they don't, they may bring the family but usually they don't.

So you get a longer, more protracted Chinese New Year's here than you get, actually, in Asia.

Actually in Macao, itself.

The pattern is very similar but our volume was up in terms of foot traffic and volume up, in terms of table game activity.

Celeste Brown with Morgan Stanley.

Back to the mall.

Can you discuss the sort of discount to what you're seeing for the smaller boutiques that you'd expect for an anchor?

Would -- or would you expect an anchor to pay sort of a similar level of rent?

Similar to here in Las Vegas, the anchor is the strip and the [rooms] themselves so almost all the space we're selling are small space.

There'll be a couple of call them large space users, because there's a corridor configuration and deep space where you have a little larger user but I don't think there would not be a significant difference in the income per squirt foot.

The thing we're seeing over there is not only the base rents much stronger than in Las Vegas similar to those in Hong Kong but the percentage of rents are double-digit.

I mean, the low end of the percentage rents are 12, 13%.

And the high end of the percentage rents are 18%.

So it's a much stronger base, I guess you'd say, of developing revenues there than here.

The largest what you might call anchor brands are only about 15,000 square feet.

They may be income brands but they are not anchors per se as we know they're in the States.

In future phases here, we are looking at larger format electronic type stores and things like that to provide a variety of shopping there on the strip.

What we're doing is we're developing essentially a monopoly for retail.

If they went to Hong Kong, Hong Kong has brands repeated several times all over the place.

We are organizing the strip of a couple million square feet of retail space that we will essentially control.

And so once we have the critical mass in place it will fuel itself because it will be the dominant retail mall experience in Macao for a long time.

So anybody that builds more rooms just builds more bodies to frequent the mall.

So we're very excited about the overall opportunity there.

Can you also give an update on your views on some of the infrastructure development?

There's been some articles out of Hong Kong and China, discussing potentially the bridge not being built -- is that reactionary on the press's part?

I don't know.

I heard today, and I think I probably read the same article you did about the tunnel, that I think mainland Chinese are talking about developing between Senjin and Tzohi.

There is talk of a second bridge also in that area.

I think it's good news.

The more connection there is in the southern part of the triangle with the northern part of the triangle the more activity there will be.

Whether it's a bridge or tunnel, it matters not to us as long as Senjin and Hong Kong can more conveniently get to Tzuhi and Macao, it doesn't matter which one.

There's been a lot of development and support for the bridge overall.

I'm not sure that people aren't reacting more quickly than they ought to.

Anytime a proposal like that is rolled out, people think in terms of okay, what kind of profitability can my bridge get if I now have a tunnel competing with me?

But, bottom-line, one way or another there's going to be a lot more connections between the West side and the East side of the delta in the ensuing years.

Finally one other sort of housekeeping question.

Can you give us the table breakdown between the Paiza Club and and the mass in Macao?

Celeste?

This is Brad Stone.

Are you asking in terms of number of tables?

Yes.

Number of table.

Sorry.

The current configuration -- you mean final configuration?

Current and final.

The current one is right now, we have 55 tables in the Paiza Club.

And we have about 400, 385 mass games.

The final configuration again right now would be -- at least the way we're going, the 630 would break down into about 70, 75 Paiza Club games and the balance would be mass.

However, we are always looking at and preplanning the ability to expand the Paiza Club, if necessary.

We have other real estate we can do that in and as that market grows and as the need for VIP rooms for our junket (indiscernible) work demands, we will find space for them.

It's a very lucrative business for us; and the capital cost is minimal compared to the returns we can make by expanding that facility.

Kenneth Parker, a private investor.

I have had most of my questions answered.

I just have one question concerning your potential operations and development in the United Kingdom.

Is it appropriate to ask any of those questions on what your next phased operation would be in England?

Like everyone our interest (indiscernible) interested in the larger casinos.

They call them super casinos, we call them mini casinos but our interest is in what they call super casinos is a maximum of the 1250 slot machines.

We have consistently communicated our interest in forming, making presentations and forming ventures to be able to develop what they call super casinos.

Currently, the government only allows one in the legislation.

There has been a lot of push now to expand the number.

I think 44 different municipalities and interests there have approached government about interest in developing a super casino.

We think it's likely that the number of super casinos expand from one to some larger number.

But we are not going to know that until much later this year in terms of how the government would have to go back and reapproach Parliament to get it approved.

But our government is going to propose that the number of those larger casinos expand.

We are in place over there with several different ventures.

We are interested in developing a number of those larger casinos and we are awaiting government to tell us whether they want to expand them to some number beyond one.

Larry Klatzkin from Jeffries and Company.

Just some housekeeping.

Corporate expense going forward, you know you had the corporate came in line but you had the 5 million development.

Should we be looking for combined 15 to 17 million going forward a quarter?

Also CapEx timing.

What should we look for for the next quarter, Scott, and maybe for the rest of the year?

Let me start with CapEx.

CapEx going forward for 2006, we're not going to give it to you on a quarterly basis but we will give it to you for the year.

It's currently projected at between 1.6 and 1.8 billion combined between the U.S. or between Las Vegas and Macao.

The breakout for that is about 950 million to 1.1 billion in Macao and in Vegas, it's about $675 million to $750 million.

On the corporate expense side, Brad, you want to tackle that one?

I'll let you tackle it.

As you've all said to us many, many times, in that we are a growing business and I think the development, the business development line is a line that you are going to continue to see on a fairly consistent basis.

As far as corporate I think at this point in time, we are now fully ramped up to where we are going to be within a close range, Larry, now that we've fully made this transition from a one property Company to a multiproperty Company with a parent, public parent sitting on top of that.

So we should keep it where we have it now.

I guess the last question is, there was a press release out about Singapore saying they've finalized the (indiscernible) and (indiscernible) a little bit more.

Is that something new that's actually a little better for applicants?

A little better.

I mean it's at the margin.

It doesn't mean a lot.

There was a very cumbersome suggestion about how floor configuration, casino floor configuration should be handled.

They were mimicking the New Jersey model where if you want to move a table or a slot machine, you have to make an application of a change in floor to the government before they'd allow you to do it.

They have dropped that.

I -- we would expect Singapore to be strict in terms of how it deals with its gaming.

We would expect it to be a little more the New Jersey model let's say than the Macao model, I guess you'd say.

And we do believe that Singapore is an interesting place to be and that they will evolve as other venues and jurisdictions evolve.

But I think that was a bit of signal saying, we will look at our rules and within reason, be flexible.

Great, and also tax rate going forward as far as on the U.S. assets?

On the U.S. asset 35% effective tax rate for the fourth quarter was about 16.74%.

And that's going to fluctuate from quarter to quarter, depending upon the mix of business, Larry.

As you know in Macao where we enjoy an an income tax holiday certainly on profits from gaming operations through the end of 2008.

Dennis Forrest with Keybanc.

I want to ask Brad if he could finish the answer to a question.

I think David Anders was asking about hold percentages when you were cut off.

Then I wanted to follow up on that with another question about hold.

I'm not sure where I was cut off because I was continuing to talk.

You have a cellphone and you think you're talking to somebody and all of a sudden, there is nobody there.

I think you got around to, said, '05 the baccarat hold made up about 40% or the drop was 44% of table drop.

The point we were trying to make here is simply that, typically, we've communicated that we believe our normalized hold would be 20.5 to 21%.

I just think as we especially with our emphasis on baccarat and the Asian business because of our presence in Macao and the assets that we put in play in Las Vegas at The Venetian, and the assets we are developing in the Palazzo Project here, I think we're going to have to look at what we consider to be normalized hold percentage.

Obviously it's the mix of the higher hold percentage business increases.

So should our hold percentage so we are just seeing a ramping up and what I was articulating from 2002 2003 , 34% of our drop was baccarat, that it went to 36% of our drop in 2004.

And for 2005, it was 44%.

So as that mix of business changes, I think we would anticipate perhaps the whole percentage what we consider normal to go up, and I think that's part of what we are seeing here now.

We benefited from a great hold percentage in the fourth quarter but, again, I think the delta between what is normal and what we did is shrinking as we increase our mix of baccarat play.

Just to follow up on that.

The state puts out their monthly numbers.

They typically have somewhere around a 10 to 12% hold percentage on baccarat.

That includes rim credit.

Is that in variance from the way you calculate your baccarat hold?

Yes.

There's two ways to calculate -- that hold is calculated.

We use the more traditional gaming model.

The state I also believe does have in its report and I get the two confused.

There is one called Historical and one called Statistical; and what we look at is what is the norm for what we use in our industry.

And, again, my recollection last time I looked at it was that the state is in the 24, 25%, 26% range and that -- that statistic you're looking at is a different way in which they calculate it.

And I'm sorry I can't articulate exactly what that formula is.

But that is not the hold that we as casinos here in Las Vegas, casino operators -- that is not how we calculate it.

And that's not the typical norm or nomenclature when gaming companies report or we talk to analysts that we utilized.

It's their own unique statistic.

But they do have a statistic that reconciles with yours?

Yes, I believe they -- again, there's two and you could call the Game Control Board.

One is called Historical.

One is called Statistical.

Just realizing that the state reports at $72 million, revenue from regular other smaller houses don't have the kind of volume that we have -- Bellagio or MGM which (indiscernible).

Jay Kogen with Banc of America Securities.

Couple more quickies on Macao since you brought up a couple of these issues.

On the convention side if you can provide us a little bit more detail.

You said you have significant expressions of interest or something like that in the release on the call.

Just wondering if you can maybe flesh that out a little bit more for us in regards to what we might expect to see in 2007 and 2008?

How that may affect occupancies in this emerging Cotai Strip.

Then also on site 7 and 8.

Obviously those have been a work in progress.

Was wondering if you could give us any kind of update as to where it stands today as your best guess of how that development may shake out?

First, as far as the group business, the expressions of interest have now been turned into contracts.

Several have been sent out and a couple have been signed.

They will be bringing more information forward as we have enough critical mass of those put together so you can get a much better sense of where we stand there.

'07, '08 are shaping up pretty well particularly fall of '07 surprisingly enough and again it will be out in the next few weeks with a more fulsome report on that; the actual activities themselves, the results of the activity.

Secondly -- what was the second question?

It was about -- ?

7 and 8 update.

7 and 8 are being designed as we speak.

They are -- each of the parcels is approximately the same size.

So the way that we are handling the design of those is to call it -- call it, the space itself being similar but the actual design of the buildings themselves, being very different.

Seen very differently.

You mentioned earlier one of the brands that we have been talking with, and will continue to talk to that particular brand and others.

And we think over the next few weeks, we will get all the brands finalized.

And then we will be finishing the design on 7, 8.

From a financial standpoint, do you expect still to do it kind of in mind with how you are doing the (indiscernible) deal on site 3 where one --was it a higher likelihood that you brought up I think at the (indiscernible) that you might have additional interest possibly even wholly owning those sites?

Just kind of curious how you think that might flesh out.

I think we are going to exercise more control over the sites.

The interesting thing is when we began this idea everybody thought that the Cotai Strip or that area of Macao was in the boondocks.

Now suddenly make everybody wants to invest there and I think part of it is because the progress, not only in Macao, but people see the actual physical building of The Venetian as an anchor.

And it's our contention that those property pieces are very valuable.

So we look at how we structure what we do out there to be able to make sure we capture and maximize the value of what's available there.

We have several people interested in partnerships and developing these different sites.

And the question is whether we really want to give up the value to partners.

That's something we keep evaluating that overall.

So we are going forward with the design and the development anyway.

We are going to control that anyway.

There may be a possibility bringing additional partners in.

Or we may develop those ourselves.

Last question.

First quarter, kind of data points that I think Scott has provided to some degree in the past on Macao, for example.

I think in the past you provided the first month of VIP dropped and/or the mass market on a per day basis volume and then Vegas, if you have any comments on first quarter 2006 expectations for RevPAR?

No.

Traditionally we have done that since we were kind of in our first cycle.

In other words, we didn't really have a year on year comparison.

Now we do.

So I think we are going to get away from that particular practice.

Certainly in Las Vegas, we are a much more mature property now and so we, periodically, we would give that kind of communications when we were younger I guess you'd say in the process.

Or let's say, when we added the Venetia Tower.

We did that to say, look there is a huge increase of 25, 30% increase in capacity and gave some indication of that.

But we are normalized now.

And we are now lapping ourselves in Macao so we won't be giving out that kind of information.

Felicia Hendricks with Lehman Brothers.

Just to touch back on this quickly, Brad, when you were cut off with the prior question on hold, was when you said it could add 25 to 30 million additional revenues and then you got cut off.

Trying to figure out what kind of margin we might want to apply to that?

If you are discussing that.

I think the number -- I thought $30 million was for the year.

I think I was talking about the year end.

That typically -- I mean, it's hard to ever associate a direct margin but we usually say about 50%.

Usually at that business, when you have a delta like that it's not because you beat a bunch of $5.00 blackjack players.

You beat some big players.

And of course we have the associated discount, the gaming tax.

The comps, the gifts, the things like that.

So, typically, we would say that we'd hope maybe 50% margin on that business.

Then, Sheldon, when we've met in the past you've discussed kind of where your offers for cap rates were trending on the retail in Macao.

I was wondering if you could update us there?

There's no real update except that we had been approached.

We continually are approached by different -- let's call them REITs so real estate investment companies to presell the mall.

We are not interested in doing so at this time; and we don't see anything that should happen that would change that.

We want to get closer to or open before we seriously entertain any offers.

None of our expectations have changed.

So the offers are still coming in the low single digits?

What?

The offers are still coming in the low single digits?

Yes.

They're not offers.

I can't say they're offers.

It's just conversation that people call up and say you know we can consider X cap rate if you guys want to presell it to us.

But I wouldn't call those offers.

I'd just call it interest chatter.

Thank you.

There are no further questions in the queue.

I would now like to turn the call back over to Mr. Weidner for closing remarks.

Thank you very much and thank you for your attention today.

We had a very very good quarter, a very very good year.

We have a lot of things on our plate and it's a wonderful thing to have those kinds of opportunities on your plate and while we're busy.

It certainly is exciting and stimulating.

With that, I thank you for joining us today for our conference call.

We look forward to talking to you again in the very near future.

Thanks again.

Thank you for your participation in today's conference.

This concludes the presentation.