拉斯維加斯金沙集團 (LVS) 2011 Q2 法說會逐字稿

Good afternoon.

My name is Ally and I will be your conference operator today.

At this time, I would like to welcome everyone to the Las Vegas Sands second quarter 2011 earnings conference call.

All lines have been placed on mute to prevent any background noise.

After the speakers' remarks, there will be a question-and-answer session.

(Operator Instructions) Thank you.

I would now like to turn the conference over to your host, Mr.

Dan Briggs.

Sir, you may begin your call.

Thank you, Ally.

Before I turn the call over to Mr.

Adelson, let me remind you that today's conference call will contain forward-looking statements that we are making under the Safe Harbor provisions of federal securities laws.

The Company's actual results could differ materially from the anticipated results in those forward-looking statements.

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

In addition, we may discuss adjusted net income, adjusted diluted EPS and adjusted property EBITDA which are non-GAAP measures.

A definition and a reconciliation of each of these measures to the most comparable GAAP financial measures are included in the press release.

Please note that this presentation is being recorded.

With that, let me please introduce our Chairman, Mr.

Sheldon G.

Adelson.

Thank you, Dan, and good afternoon, everyone.

On behalf of our management team and our Board of Directors, who are here with me today, I would like to thank you for joining us.

In an effort to get to more of your questions, I'll provide a brief overview of our results in the quarter, and then turn it over to Mike who will provide some quick operational updates.

We will then move to the Q&A part of the call.

So let's get started.

I want to begin by saying that across every corner of our operations, I could not be more proud of the team members and management teams who helped us achieve this historic quarter and these results are truly historic.

So let me spend just a minute reflecting on what the Company achieved over this past quarter.

First, a Company record $2.35 billion in revenue, a 47% increase compared to $1.6 billion during the same quarter one year ago.

Second, a Company record, and to the best of our knowledge an industry record, $902 million in EBITDA.

This is an increase of 90% over last year's $473 million of EBITDA.

Finally, the Company produced adjusted earnings per diluted share this quarter of $0.54.

This is compared to last year's second quarter which produced adjusted earnings per diluted share of $0.17, and what I understand is also a consensus estimate of $0.43.

More broadly speaking, our growth curve has continued unabated.

We have shown steady, consistent growth and, in fact, these results represent the eighth quarter in a row that we have increased our EBITDA from one quarter to the next.

As the only operator with a presence in the world's two most lucrative gaming markets, Macau and Singapore, we see absolutely no reason, no catalyst at hand, which would change this upward trend.

Let me now give some commentary on our specific property operations.

I'll start in Singapore where Marina Bay Sands recorded a whopping $405 million in adjusted property EBITDA.

While I believe the ramp-up process is still ongoing in Singapore, Marina Bay Sands generated net revenue of $738 million, and an EBITDA margin, are you listening, 55%.

Just want to make sure you heard it.

Rolling Chip volume, the VIP business, was a record $12.2 billion.

Non-Rolling Chip drop, mass market, was $1.1 billion, and slot handle reached $2.38 [billion.] Our combined mass win was nearly $4.2 million per day versus $3.7 million per day during the first quarter of 2011.

Now that's sequential.

That's an increase of 14% quarter-over-quarter which we think is pretty healthy.

As we used to like to say in Boston, how about them apples?

The property also saw its hotel average daily rate increase to $295 US while occupancy rose to 90.8%.

Demand is quickly starting to outpace supply at Marina Bay Sands and ADR and occupancy are continuing to rise.

It's important to point out that the property's non-gaming amenities like the hotel are very valuable contributors to its overall profitability, especially with the profit margins they're able to deliver.

Now I'm being advised that I need to help manage all of your expectations that relates to our business in Singapore, something I haven't been very good at in the past.

So I'll leave you with one simple conservative statement which is this, now that we have entered our second year of operations, it is increasingly clear that Marina Bay Sands is becoming the most successful integrated resort in the history of the hospitality, gaming, and entertainment industry.

So with what I think is an expectation managing remark behind us, let's turn to our results in Macau.

The Macau property's operated by our majority owned subsidiary, Sands China Limited, also enjoyed a very strong quarter.

Total net revenue for Sands China was $1.2 billion.

As you know, we place an emphasis on EBITDA and EBITDA margin and we continue to widely lead the market in both categories.

Macau property operations adjusted EBITDA was a record $392 million -- $392 million, an increase of 27.5% versus the same quarter last year, while adjusted property EBITDA margin was 33%.

Again, a leading figure.

The Venetian Macau delivered record property EBITDA of $258 million with a 35% EBITDA margin.

The Venetian Macau remains comfortable on its perch as Macau's leading mass market property and as we expected the opening of Galaxy Macau has served as an additional feeder for the Venetian and our Cotai Strip.

Gaming volumes grew in each segment of the business during the quarter with Non-Rolling Chip drop increasing to a record $1 billion.

Slot handle jumped 22% compared to the same quarter a year ago while Rolling Chip volume increased by 37% compared to last year.

The Sands Macau once again displayed its mettle on the Macau peninsula by delivering adjusted property EBITDA of $96 million, up 18% from the second quarter of 2010, and delivering a run rate that is approaching the record levels of profitability the Sands achieved prior to the opening of the Venetian Macau in August 2007.

Non-Rolling Chip drop was up 18% year-over-year, while Rolling Chip volume increased to $7.75 billion.

Slot handle set an all-time record of $463 million.

The Plaza Casino at the Four Seasons delivered $38 million in adjusted property EBITDA, up from $33 million a year ago.

The Plaza Casino is primarily designed to cater to the VIP part of the market and in a moment Mike will give you an update on our current initiatives designed to enhance our rolling business there.

Before turning to our US operations, I want to highlight one more thing in Macau which is the performance of our retail business.

Retail sales at the Venetian's Grand Canal shops were up 50% year-over-year, while sales at the shops at the Four Seasons soared by 70% compared to last year.

We're now collecting more in percentage rents than we ever have at this point in the calendar year.

We have always been the most fervent believers in Macau's ability to succeed and flourish as a retail destination and clearly that faith is now being rewarded.

Moving on to the US, our Las Vegas properties reported adjusted property EBITDA of $93 million, an increase of 41% versus the same quarter a year ago.

Stronger cash hotel revenues from convention, group meeting and FIT customers reflect the improving Las Vegas environment.

Sands Bethlehem in Pennsylvania recorded adjusted property EBITDA of $21 million.

The hotel at Sands Bethlehem celebrated a successful opening during the quarter, and along with the forthcoming retail mall and event center, we believe Sands Bethlehem is well positioned for additional growth.

So with that overview of our quarterly results, let me now turn the call over to Mike for a couple of operational updates.

Mike?

Thanks, Sheldon, and good afternoon, everyone.

Let me start with an update on Lots 5 and 6 in Macau.

We have finalized franchising agreements now with two very prominent international hotel brands for Lot 5 and are now working with those companies to coordinate an announcement with those brands which we expect will come very soon.

The opening of Lot 5 is still on target for the end of quarter one next year, about eight months from today and will feature a 600-room, five-star hotel, rooms and suites, along with a 1,200-room four-star hotel, rooms and suites.

The property will also open with a variety of retail offerings, more than 300,000 square feet of meeting space, 11 food and beverage establishments, along with 106,000-square-foot casino and VIP gaming areas.

The opening of what we are calling Lot 6A, which will feature nearly 2,000 Sheraton-branded rooms, is on track for the third quarter of 2012.

Along with its casino, the opening of Lot 6A will include most of the 13.7-million-square foot complex's remaining dining, entertainment, retail and meeting facilities.

Thereafter, opening in early 2013, Lot 6B will feature an additional 2,000 rooms and suites under the Sheraton Towers brand.

In our view, the opening of Lots 5 and 6 is a watershed moment for Macau as it takes its place among the leading business and leisure destinations in Asia.

The addition of 6,000-plus rooms from three world renowned international hotel brands, each armed with powerful global distribution systems, will be a potent catalyst to growing our non-gaming businesses in Macau and in particular our MICE business.

We will be the only properties to open for the foreseeable future.

As Sheldon alluded to earlier, let me now provide an update on the initiatives we're implementing for growth to enhance our VIP business in Macau and more details on that from Rob Goldstein later.

Last quarter, we talked about building better relationships, hiring additional marketing talent and improving service standards as some of the software we'll be using to enhance the growth of our VIP business.

Together with those ongoing efforts, we have now approved and are embarking on a $125 million capital expenditure campaign which will help us complete the hardware part of the process.

These capital investments will be used for a variety of projects, several of which will be completed ahead of Chinese New Year in 2012.

We believe these investments are vital to the long-term strategic positioning of our VIP business in Macau.

Let me close my remarks with a couple of significant personal announcements.

First, we are happy to announce that we have appointed George Tanasijevic as President and Chief Executive Officer of Marina Bay Sands.

George joined the Company in 2004, working for us first in Macau, and was our very first Singapore employee.

In addition, Benny Zin, who has served in a couple of roles since joining Marina Bay Sands has been named the property's Chief Operating Officer.

In Macau, the SCL Board of Directors will approve later this evening the promotion of Ed Tracy to the position of Chief Executive Officer.

Ed, who is currently serving as President and COO of Sands China Limited, has just completed a very successful first year in Macau.

The combination of George, Benny and Ed, along with John Caparella in Las Vegas and Bob DeSalvio in Pennsylvania, gives us a team of experienced and dedicated leaders at each of our properties.

We are extremely confident that this team will provide stability and deliver growth across all of our portfolio.

So that concludes my brief remarks.

At this time, Rob Goldstein, Ken Kay, Sheldon and myself will be happy to address any of your questions.

(Operator Instructions) And your first question comes from the line of Mark Strawn.

Hi, guys.

Great quarter.

Two questions.

First, on Singapore.

I know you guys want to keep expectations under control, but maybe generally speaking, as we transition into the summer period, there is maybe a thesis out there before that the summer could be the seasonally strongest period.

Do you still think that's going to be the case as you look forward?

I've got to tell you, if July is any indication, it seems to be.

Is that the question, Mark, is the summer -- ?

Is summer likely to be the best quarter of the year?

But it's difficult to say.

Last year we were still ramping from the opening.

We continue to ramp and I think we'll continue to ramp for many, many months, if not years to come.

And this quarter, we're just finishing July.

We have 26 days to speak about but we're not going to speak about it.

But if July is any indication, that would indicate that summer would be the peak season.

But then, again, I read in an analyst report yesterday that December is supposed to -- that last quarter's supposed to be the best season.

I think it's too early to tell which is the best and which is the second best quarter.

Okay.

Is there anything on the event calendar, holiday calendar this summer that would cause any seasonal shifts at this point or it should be a pretty standard quarter with maybe some better seasonality is what it sounds like?

I don't see any of that at this point.

There are some Singapore holidays that go on and what have you, but I think that's everywhere.

Once again, I think as Sheldon said, I think we said this last quarter too, understanding the seasonality of Singapore is going to take a while.

I think it's going to take us another, probably through another six or eight months before we really get to understand what that seasonality is.

Right now and for the past quarter, as I said before, the segments that are working in the property are all working, tour operators, convention business, banquet business, food business, transient, FIT, gaming business, are all working together very, very well.

From a past experience, frankly, I've never seen a property of this size and magnitude ramp as quickly from the day it was opened and we still have a couple of more big events coming with Louis Vuitton opening in September and two more nightclubs and about another 30 or 40 retail stores.

So we're not 100% open even yet and we don't have the subway coming as well which comes in January or February of 2012.

So it's hard to say what that seasonality process is at this point.

Thank you.

That's very helpful.

And just one follow-up, if I may, on Macau.

Maybe this question is for Rob.

I know you've highlighted in the past some of the key maybe investments and getting in the right junket relationships in place in Macau to really drive that VIP business.

Do you have any general update on how that process is going, and maybe just a general sense of timing on some of those?

Mark, as I said before, it's an ongoing process.

It's a capital spend to improve physical product, it's relationship driven.

It's also additional conversion for more capacity of VIP.

I think if you break out our results, our Venetian numbers bode pretty well for the future, in the VIP segment we're leading the market.

We're struggling more in the Sands, and, obviously, there's a lot work to be done physically there.

And we're just at a point where we need to do better at the Four Seasons and we will.

But it's a three-part process.

It's conversion of the space physically to be more competitive.

It's better service and for certain it's enabling us to work with a better junket teams over there in Macau and having just spent a week there, I think we're making great progress.

It's not coming as quickly as I wish it would come except at the Venetian.

But I think we're getting there and I think you'll see it.

It took us a while to figure out Singapore and, obviously, we're seeing some results there and I think you'll find in the future that our efforts in Macau and the junkets, that will improve materially.

Thank you very much, and congrats on a great quarter.

Thanks, Mark.

Thank you, Mark.

Your next question comes from Janet Brashear.

Thank you.

As we're talking about Macau, I wonder if you could describe the mood in Macau as you think about the Chinese political transition in 2012 and whether or not there's a thought that there's any particular impact that that will have on Macau?

Nothing.

I mean, those people, I think, [Chijintinga] is going to be -- he's been to Macau recently and I think the relationship between, used to be the head of the Hong Kong/Macau/Taiwan affairs office, he's quite familiar with Macau.

I think if anything, hopefully, he's more disposed, favorably disposed toward Macau.

But since Macau is responsible for its executive and administrative decisions, under their basic law agreement forged many years ago, I think that we don't expect any unusual events, any extraordinary events, but I would -- now that you asked the question, I think that [Chijintinga] may be a little bit more favorably disposed toward Macau because of his experience with it.

As you think about the local political environment, as you said, within Macau, we've heard from some other concessionaires that they're getting guidance to add integrated resort elements to their Cotai plans from the government.

Are you getting any input as well or are they not giving it to you because you're so far along in your development at this point?

Well, we're the guys who brought up the subject with the government.

I've been saying that ever since we opened the Sands in 2004 that anybody that opens any property should be required to have a matrix of both gaming and non-gaming activities, and that to start off with that the gaming portion of the total construction square footage should not be more than 10%.

And if they cut back on certain percentages of, say, exhibition or convention space or shopping or hotel rooms, they ought to cut back on the casino space.

So we're all in favor of that and as we said, as my vision originally called for, the more critical mass we have in Cotai the better.

Galaxy has helped and supported our City of Dreams, helped to support Cotai as the place to go, and all you analysts who were talking about now that Galaxy is opened it validated the Cotai and the desire of everybody else, SJM, MPEL, Wynn, SJN, all the others are anxious to open in Cotai.

Now, I want to remind you that when I came up with the vision, it was a swamp and a bay.

Nobody wanted the land.

Now everybody wants the land.

So it just validates our -- I'm very happy.

I remember saying many years ago that I would even welcome Steve Wynn on Cotai to create some critical mass.

But now that I've had dinner with Steve Wynn, I'd even welcome him more.

So getting critical mass in Cotai is the important thing and I see it happening.

Thank you.

Thanks, Janet.

Your next question comes from the line of Joe Greff.

Hey, everybody.

Few quick questions here.

On Singapore, the volume metrics across the board were much better than we had forecasted and probably with the most upside relative to our estimate on the Rolling Chip volume.

Can you comment there why you think you grew Rolling Chip volume?

Is it more effective guys in the field?

Is it gaining market share?

Is it something you're doing at the property?

Is it something with your competitor creating a different set of competitive pressures?

If you could help us understand that, that would be helpful and then I'll follow up with a couple more.

Well, obviously, Joe, it's a lot of things.

It's not one variable.

It's many.

Obviously, the product itself is iconic and very helpful in terms of [tradition,] people want to come to [NBS.] It's a product that people know, not just in the rim, but worldwide.

Two, I think it's a very desirable -- Singapore is a wonderful place to visit and the mainland Chinese and other people in the rim, the Japanese, very comfortable in that environment.

It's a very special environment, easy access culturally comfortable.

I think that you're seeing more and more of that.

I'll also point out, I think it actually works very well with our Macau operation.

As David Sisk and Ed Tracy and I were having a discussion about Macau and we think it's not even -- it's not negative impact, maybe it's positive.

But we're finding customers we haven't seen before, large customers, different customer seeks out the Singapore experience.

I think it just gets better as the mainlanders get more comfortable and the Japanese and Thailand, it's a very diverse mix.

It's plentiful.

It's very elite.

As our product improves, we're building more suites in the 55th floor of Tower Three, I think you'll just simply see it get better over time.

I can't speak to RWS.

I haven't been in contact with them recently.

But I suspect Singapore's a market that's starting to mature and getting stronger every day.

And I see no reason to think it can't continue to grow and improve.

It's a different experience than Macau.

It's a very, very special experience.

I will take my hat off to our team in the field.

I think our team, led by Larry Chiu, has been exemplary.

We have a really strong presence in every major Asian capital.

I think those guys, the property and the field have done a spectacular job and the results speak for themselves but I think we're just at the beginning of that process.

We're not mature yet at all.

Maybe put another way, Rob, on the VIP side in Singapore, is it driven by an increased number of VIP patrons or is it new or repeat or is it spend per VIP trip?

It's both.

I think it's increased VIP.

Sheldon says it's one from all the columns, like a Chinese restaurant.

But the truth of the matter is --

One from each column.

Each column.

The truth is, Joe, it's all of the above.

We're seeing very, very high end customers.

We're seeing diverse representation from a geographic perspective.

We're seeing repeat because people like the product and honestly we're seeing it being the kind of place that we -- it talks to Indonesia as well as Malaysia, Japan.

The mainland Chinese have definitely found comfort there.

So it's all of the above.

The kind of numbers we're experiencing and the growth, 20%-plus, it doesn't come from one piece, it comes from different variables.

All of the above, very honestly.

We're maturing as a team.

We're maturing as a property and Singapore is just a great place to visit.

It's a wonderful situation right now for us.

Great.

I think, Joe, too, I think we should also add, Joe, because I anticipated the question that Rob and the guys, we have not changed the structure financially.

We have not changed the credit financially.

We're doing the same things from an organization standpoint.

I think Rob's being a little modest here.

My own view of it is that he's put together a phenomenal team of people and these people are now just starting to really, really go and I think that's why -- that's really why we're seeing the big difference.

Obviously, the hotel was there before and now that team is maturing and the expectation of their performance not only there but wherever else we go in Asia, we're going to have a base to be able to grow from there.

Goldstein, modest, never happen.

Very modest.

Great.

And then --

Thanks, Joe.

Then switching over to Macau, if I may.

Of the Rolling Chip volume, what was the mix between direct and junket?

The mix hasn't changed a lot.

We're still running, the great majority, obviously, is about four to one in favor of junket.

But our goal is to not be out of direct business but not suffer the junket side as a result of favoring the VIP.

In the past, we were premium focused.

We want very badly to encourage strong relationships with the major junket people in Macau.

We're trying to emphasize if a customer wants to come direct, they can.

But I think David and Ned have figured out that we want to service both ends of the spectrum.

We don't want to lose our junket perspective.

That's still the driver.

Sheldon has referenced the importance of junkets in Macau.

We're really just beginning there.

Once we figure out our service objectives and get our relationships right and honestly fix our house physically, especially in the other two properties, not the Venetian as much, I think you're going to see a lot better, improved performance.

We're still -- we offer the premium direct option but we stress the junket side and want very much to support our junket relationships.

Great.

And then a question for Ken on the Singapore refinancing, if you can give us a timing update?

On Singapore or are you talking Macau?

Singapore.

Singapore --

We haven't done Singapore.

Yes, we haven't started that process yet.

We're getting to the tail end of the kind of refinancing in Macau and once we've put the finishing touches on that we'll be down talking to our lenders with regard to the opportunities in Singapore.

So probably that conversation -- those conversations will take place in the next month, month and-a-half.

Great.

Thanks, guys.

Good results and, Sheldon, you and Steve should have dinner more often.

Thank you.

If I do, I'll turn vegan.

(laughter)

And your next question comes from the line of Jon Oh.

Hi.

I'll start with a question on Macau.

Could you give us a quick update on, especially the Venetian, across the board on mass market, by your Rolling Chip as well as the direct VIP, especially since the opening of Galaxy Macau, have you seen any significant change in foot traffic and also in (inaudible), the VIP players that are coming, their frequency of visits, any color would be helpful?

We're very supportive of the Galaxy effort.

I was there last week.

I think it's definitely helping.

What it's helping do is make Cotai a good option for the customer.

There's no question that they're bringing value to the market.

Have we seen significant improvement?

No.

I think we've seen it helps our cause.

It's a positive force.

We're rooting for those guys to continue to grow and do better because obviously it's always good in any market for your competitors to do well.

I think we're seeing it's helping us.

Is it material?

Not material to the VIP nor the mass.

What's material is our guys are doing a better job of marketing the building, taking advantage of our access to the borders.

I think our mass marketing approach gets stronger by the day.

Our border reception gets stronger by the day.

Our ferry business is stronger by the day.

We've got to help build our house and Galaxy is a positive, but it's not material at this point to our core business and VIP, nor mass.

So is it fair to say that for now the observation is it's a positive, it's not a negative?

No, it's not a negative.

For sure it's not a negative.

It's a positive.

It's a question of how positive it can get.

Again, as more players come to the Cotai piece of Macau, it's better.

We're the biggest player there, we've made the best effort to be there.

Sheldon got up there way in advance.

So as (inaudible) 5 and 6.

We own so much real estate we welcome and want to see more growth in Cotai clearly.

Has it been material at this point?

No.

It hasn't driven our business in any segment.

Okay.

Just a follow-up on Singapore.

A great quarter and it's encouraging to see the Rolling Chip volumes are up almost, I think, by my count, 50% since fourth quarter last year.

Could you maybe just share with us on what are your thought process with respect to junkets being approved in Singapore?

How far is the government into that approval process and any guidance on timeline as well as any color, that would be very useful.

Thanks.

First, we all know the junket issue is a government issue.

We don't know -- we can't speak to the government's intentions.

We simply await their advice and counsel and when it happens, it happens.

We have yet -- we've had a number of junkets for review by Mike and Sheldon that we're considering.

We have not submitted one application yet.

So to sit here and opine as to what the government will do timing-wise or eventual result would be folly.

I'd like to make a comment that I may have spoke otherwise in the early going a year ago.

As I understood it in the past, they said -- the government said that if a junket rep was approved for one property, it would have to reapply to do business with the second property.

But maybe I misunderstood that or they made themselves misunderstood.

The way it is today is that if they're approved for RWS, all we have to do is make a request.

That's correct.

Without resubmitting all the information and getting second approval.

So essentially whoever submits for one property will -- the junket rep will be able to work essentially for both properties.

There's still, I don't know -- the scuttlebutt is that they should have some answers by the end of the year.

The scuttlebutt also is that a lot of the Macau's (inaudible) junket reps have not yet submitted apps.

Who knows, it's up to the government.

We don't know and we'll see what happens.

But in the meantime, we're doing very well, thank you.

Okay.

Thank you.

Thanks, John.

Your next question comes from Felicia Hendrix.

Hi.

Good afternoon.

Rob, I was just wondering, you mentioned -- well, actually, Mike, you mentioned but Rob I was wondering if you could touch on this.

The $125 million capital campaign in Macau, if I heard correctly that's going to be finished by Chinese New Year 2012?

Some will.

Our goal is to finish by Tuesday but it's a little difficult.

Today's Tuesday.

We have a lot of work to do, Felicia, in our houses and it touches, as Mike referenced, all three stores, Plaza, Venetian, Sands, it will come intermittently.

Probably the first piece will come the end of this year.

Piece will come during the first quarter.

Some will not happen until second quarter.

It's an issue of design approval out of Las Vegas, getting appropriate contractors and labor and the team there, Ed and Dave, I feel comfortable with, designs fit their operational needs.

It's just like our approach in Singapore, it took a while to get there.

It will take a while to get there in Macau.

We still think we're a year away from having maximum capacity and the right spaces.

Unfortunately, the process is probably another 12 months.

We'll get pieces of it in this year.

We ought to give an advance warning to Ken Kay that for the $125 million we'll have to tap our petty cash account.

Your petty cash, Sheldon, or is that -- ?

(laughter) Either the Company's or mine.

I've shown my willingness to use my petty cash account in the past and now they want to take the interest rate back from me.

And then, Rob, just on that same subject, you were saying that the Venetian you're not as far along, there's just more work to do with the junkets.

I'm just wondering as you talk to them, what are their sticking points and I know this all takes a long time, but I'm just wondering how long you think it might take to return to low-teens market share on the VIP side?

Right.

Well, we're very convinced it will happen -- we said from day one it's an 18 month -- 12-month to 18-month process.

I think it's three things that we think have to happen.

One is the relationships.

I think David and our team over there are really focused on -- and I think we're there on the relationship side.

The four or five junkets we want have now committed to us verbally.

Some are moving -- you'll see move this quarter into spaces.

Two, it's the physical build-out to make the space both pleasurable to be in but also operationally -- service levels we have to do much better at.

And, honestly, it's not a deal-driven relationship as much as it is relationship-driven.

I think that's where our team has really done a great job of putting it together.

But I don't think you'll see the full benefit of the thing until first quarter of 2012 and then beyond that.

I really feel very confident we're going to get there, and I think we're seeing it every day.

Our team in Macau gets it.

We feel our shortcoming especially in the non-Venetian properties.

I mean, at Venetian we're very pleased with our share this quarter.

We're starting to feel a sense we're participating in the growth in Macau in that segment.

We already, I think, are dominant players in the mass but clearly we've got growth, and I also referenced that that growth spills over to our focus on high end slots.

The Wynn guys have done a tremendous job on the high end slots.

We're very strong on the mass but we think there's a lot of opportunity on the high end slots.

(Inaudible) And the same process which is hiring people to solicit those people, the right people to service those people and the right physical spaces and all that is part of that capital we spoke about.

It's not significant relative to the upside of this Company.

We feel we can do better in Macau and we will do better.

That's really helpful.

Thank you.

And if we could just move to Las Vegas.

Clearly, your marketing strategy proved successful this quarter.

But you also benefited from the strong convention calendar for you.

So I'm just wondering how you're thinking about your cash comp mix in the third and fourth quarter?

And then also, I'm sure you know that Steve Wynn mentioned strong demand at his property in July in Vegas and I'm wondering if you're seeing that as well?

Let me answer the first question.

What we've done in the cash comp situation is adjust over the year.

What you will see in this quarter and in the next number of quarters are going to be based upon how the management adjusts the cash and the comps.

We've been successful, particularly in moving it the way we want to.

There are some opportunities, we believe we're seeing, that we'll take advantage of.

Our forecast is pretty good on that matter, both in cash and comps the way we're managing it now for the rest of the year, looking at it.

We've got a good convention calendar the rest of the year, so that allows us to manage the cash and comps a little better.

I think there's still some upside for us in that area.

The Venetian, I should also mention, when you're talking about capital in Macau, we're also investing a significant amount of capital in the Venetian here.

We're doing a lot of work in our room facilities as well as our casino situation and by mid-time next year we're going to have a lot of new stuff in this building.

And we're one of the very few in the Vegas market that has the capital capability to change the outcome.

So we're going to be doing that.

We've got some catch-up to do and it's being allocated.

Has your room demand been strong in July?

I think generally the Vegas market in July in total has been pretty good.

I'm hearing from the other competitors that it's been pretty good.

And I think our performance in July will be about what the expectation level is for what people are saying about Las Vegas.

Okay.

Thanks.

And just finally, in Singapore I'm just wondering where you are with your ETG capacity, the electronic table games?

We know what ETG is.

There's no room left to grow there.

As of this week we got the last piece on the floor.

We're fully allocated now based on government approval.

So we're there totally.

We've got room for another 175 units.

Is it going to be ETGs or slots?

It would be slots.

Today, Felicia, at this date we're there.

But we weren't there at June 30, the end of this quarter.

The ETG numbers -- we're running at about $650, $675 per seat, per day and on the weekend we're getting to $1,000, $1,100 a day on the ETGs.

This is an amazing ETG market.

It sure is.

It's really incredible.

I wish we had the slot (inaudible) percentage.

But we've got to give the same percentage.

Each seat doesn't compute its own game.

There's one game to control all the -- whatever number of seats there are, 75, or 150.

We grow our win by sequential Q-on-Q by 18% and we look forward to keeping it going in that direction.

As Sheldon referenced, the ETG market there is one of a kind, much stronger than anyplace else in the world and it appears there's no slowdown.

So very encouraging ETG numbers.

Great.

Thanks a lot.

You're welcome.

Your next question comes Shaun Kelley.

Hi.

Good afternoon, everyone.

Just wanted to start by passing along my congratulations to you, George, and Ed, on their promotions.

I guess my first question was on Singapore.

I just wanted to ask, you talked a lot about the VIP side.

But, Rob, could you just give us your sense on -- you've continued to indicate that the mass market has kind of continued to ramp.

Those numbers kind of beat our estimate.

Could you give us a sense just how that trended across the quarter and was it kind of ramping each successive month there, just kind of as you've watched the business continue to grow?

Yes.

Just keeps ramping.

It's consistent.

It's not one month stands out.

Just keeps growing.

You saw the mass table.

To me, the story in Singapore which has always been extraordinary, is the mass table and slot wins.

Q-on-Q, 15%, 16% sequential growth.

I don't know how to portray the future because every day is different but the growth has been steady, April, May, June, it appears to keep going that direction.

We have days we're winning $2 million plus from the weekend.

The whole percent be normalized in the mid-22%, 23% range.

There's been enough history now to see that.

So look, it's a wonderful story.

I don't know where it ends or how much it keeps going.

But we had a very consistent upward trend April, May, June with no surprise at the end or the beginning.

It's very gratifying, I think the team there has really done an excellent job of moving the floor, looking for every square inch of real estate to maximize the opportunity.

And, of course, the margins, which Sheldon referenced last year, we thought wouldn't be as aggressive but it turns out they're very attainable, we're 67%, 68% on a blended rate and no reason why it shouldn't continue.

So it's all very positive coming out of ETG, slot, mass table.

We went up 16% from 3.7% to 4.3% win per day in the mass market which is the mass tables and the slots with ETGs.

That's a 64% annual rate.

That's one [hell] of a ramp after being open for a year.

That's helpful.

And, I guess, just to follow up.

I mean, on the expense side the numbers were up again a little bit sequentially but this time obviously revenues were up significantly more.

Are we at the right level of kind of on a per day expense rate now?

Is this kind of about the right run rate for the property, exclusive of maybe a little bit on the retail side left to open, just as we think about kind of modeling going forward?

I think the answer is yes.

And some of those expenses go up if you look at -- it's dependent upon some of the VIP rolling.

As that goes up, you get some more expenses.

But at the end of the day, from the rest of the building on an undistributed expense basis, we're pretty much where we're going to be.

We don't see any real radical change in that.

So I think from a modeling standpoint you can model where we are.

By the way, we're always looking for opportunities to do better there and continue to look at it.

But I think from a stability standpoint after one year, we pretty much know what it's going to cost and how many FTEs we need to run that building.

Thanks, Mike.

My last question is on 5 and 6.

That's kind of the next big event catalyst for you guys.

Can you just give us your thoughts on how many tables you'll -- kind of right now you're planning on opening with, just kind of what's the target for the first part of the casino and then how many tables will be in the second batch which, I think, if I caught your comments right in the prepared remarks, would be with Lot 6A.

I think we've got about 200 tables in each of the two casinos, plus the 150 or so, 140, 150 in the Plaza.

I think it's 110 or 120 in the Plaza.

Between all of them, it's about 400 to 500 tables between the casinos.

520, 550.

And then the other thing is, though, the electronic table games are ramping up very well in Macau now and that's going to affect the amount of space we use in the casino.

We're not quite sure exactly what that count would be.

I think you can estimate comfortably 200, 200 in each and then about 120, 130 in the Plaza for now.

That's helpful, Mike.

Just to clarify, the ETGs count as slot positions in Macau?

Macau, I think it's --

More limitation on slots.

Yes.

I think it's one table for every 50 seats they count them.

It doesn't matter.

Doesn't matter.

It doesn't matter, it doesn't classify as a slot machine.

One slot machine for every 50 seats?

Right.

One table game.

One table game.

They're estimating that 50 seats would be the equivalent of one table game but there is no limitations on ETGs or slots.

As long as they're classified as slots, you're very comfortable.

That's helpful.

Thanks, guys, I appreciate it.

We'll get that -- we'll have more detail on that for you at the next quarter when we get real close to the opening and we'll know exactly what we're going to be doing, but that's in a state of flux at the moment but that's approximately what you're looking at.

Your next question comes from Harry Curtis.

Hi.

Can you hear me?

We can hear you.

Okay.

Hi, Harry.

First of all, Sheldon, we have to thank Dan Briggs for controlling our expectations for Mandalay Bay.

For Mandalay Bay?

I'm sorry, for Marina Bay Sands.

That shows you how old I am.

You threw me there, Harry.

Yes.

Okay.

Well, old timers aside -- okay.

Let's start with sites 5 and 6.

Rob, are you learning anything from your move back into the VIP side or the junket side in terms of physical plant, when it comes to 5 and 6?

Have you done any redesign there?

Yes.

How are you promoting that or building that out so that you can compete with those that have really significant share in that segment?

Well, it's pretty simple.

It's a learning process every day and there's no secrets out there.

The win number's extraordinary in that segment and we look at their design as well as the Galaxy people and we're trying to incorporate the best things from that, the best things available from those respective houses, along with our own experience at Venetian.

But in the end, Harry, it's access, it's service.

It's not that big a surprise, the same things remain consistent whether it's Las Vegas or it's Macau or Singapore.

It's access.

It's desirable environment.

It's service.

It's relationships.

It's not pricing.

It's more about those elements.

As we referenced earlier, we've got a long way to go but I think you're going to see some very, very promising results from us in the future quarters vis-a-vis junket segment in Macau including 5 and 6.

We're learning every day, we've been doing this for a long time but you learn every day from smart people and you learn to incorporate (inaudible).

I think 5 and 6 will reflect some of that.

I also think we've got some great opportunity, though, in the Plaza.

That's a great building.

It's under capacity as far as the VIP segment.

So I think we can expect some pleasant surprises in the future in Macau in the VIP from LVS.

Harry, I just want to point out that it wasn't the absence of a completed room or one nicer room or one not so nice room.

It was that last year with Jacobs, he hurt the relationship with the junket reps and we're getting that back now.

So now people are willing to come back and we're getting new ones and they want more substantial presence.

Reminder that we were running very close on the gross income, a couple years ago, next to SJM, running in the mid- to high-20s as a percentage of market share.

Even though we don't think it's that important which reflects that we had a lot of the VIP market and we're the leading -- if people looked at Lerner's unusual metric of who was leading in the mass market, how many people were coming, we edged out SJM, the two Lisboa, the Grand Lisboa and the Lisboa properties on visitation.

So we're number one in visitation now according to that.

And so we're getting back the relationship with the junket reps and new relationships, so we're screening those out, and we'll have them back and I think people -- I don't know anybody that's put any estimates in for Lots 5 and 6 and I don't know why.

Maybe because it's taken so long to finalize.

But we think 5 and 6, it's going to be the only property open within the next three to five years and it will be open in part over two periods.

Rob, where are you in changing the physical plant on the Plaza?

It's capacity, Harry.

We're looking at the capacity opportunity and, look, it's a great building.

The Plaza mansions are great.

The Four Seasons itself is a terrific hotel.

It's world class, spa and shopping, the retail is doing very, very well there.

It's Madison Avenue, plus, plus.

But we're under capacity at 42 junket tables.

What Dave and Ned are focusing on is growing the capacity on levels two and three.

We're looking at other additional opportunities within that space to convert.

We think we do a lot better in terms of adding (inaudible) to get to over 100 tables.

There's huge EBITDA potential if we fix our junket relationships.

Sheldon referenced that a second ago.

But also it takes capacity growth on the gaming tables themselves and that's where we see the biggest single opportunity for us there.

We have sufficient capacity.

If we have room to make it larger, we have to take advantage of that room and the same thing, we want to get more tables into the Venetian.

So --

Okay.

It's also very honestly, it's getting the right junket guys in the space versus non-performers.

In the end it's just looking at your building and look at who's under performing.

If a junket can deliver twice to three times then why not have that junket versus one that's delivering one-third of that.

It's about the right people in the right spaces.

And then the last question relates to the promotional environment.

When you compare the promotional environment before Galaxy opened to what it's been, oh, say, in the last month or two, has it changed much?

I think there is more heated up competition in Macau in general and that's part of the caution on the mass side.

It's easy to drive top line.

The question is how do you drive top line and maintain your margins and EBITDA, and I think you are seeing -- a lot of people worship the revenue number, especially across the board in Macau.

The single worship seems to be on top line.

But at the end of the day you've got to make money too.

I think there has been some pressure from some of the operators because it's huge growth market and very tempting at every segment, mass, slot, table, junket to over spend.

I think you have to remain disciplined and that's how you make money, not simply drive the top line.

There is promotional pressure but I think our team has done a very good job of monitoring it and maintaining margins as you can see by the EBITDA coming out of Macau.

Okay.

Very good.

Thanks, guys.

You're welcome.

Your next question comes from Robin Farley.

Great.

Thanks.

I had a question on Sites 5 and 6.

You gave a timeline from Q1 2012 to early 2013, the staged openings.

I'm just wondering do you have the number of workers you need on-site today to hit those timeframes or do those timeframes still require additional workers?

We have the workers now to make those timeframes.

Okay.

Great.

And then on Singapore, and I know you're trying to manage everyone's expectations, but on that, the volume in VIP there, can you comment on how sustainable, in other words, do you think that the above average quarter -- I know you said you think Q3 may be the best of the year, but is this quarter sustainable with upside likely or was this kind of above average quarter in terms of what you expect for volume for VIP specifically?

Well, Briggs thinks it's going to double but I don't agree with that.

Robin, the truth is, it's a learning curve.

It's me.

(laughter)

Sheldon thinks it will double.

We've demonstrated slow and steady wins the race.

I said before, I'll say it again, the property is extraordinary and so is Singapore as a destination.

If we keep doing our job, I don't see any reason why we can't maintain and do better in VIP.

The team in the field is very, very good.

The business is there.

Singapore is a wonderful destination.

Can I answer with the third quarter better than the second quarter?

I cannot.

I really don't know.

But I believe -- I've always believed in Singapore from the day we opened it and I believe it's going to continue to perform very well.

Whether VIP third quarter is better than second quarter, I just don't know.

But I have a lot of confidence in the team, the building and the location.

Singapore is just a terrific place to operate and people want to come there.

So if the Pacific Rim keeps knocking out these ridiculous wealth creations, I'm assuming they want to gamble, I think we'll do okay.

We know, but we can't say.

What I want to say is that when you think about the possibility -- Singapore's only been open for a little more than a year, both properties, and to think that we've saturated the entire market of like 3 billion people within the market radius is not credible thought.

There's no way that we've saturated the market, just no way.

And the more that people get to learn by word of mouth that Singapore is the place to go.

We don't have to tell them Singapore is the place to go, but it's now the place to go to gamble.

It's the place to go for tourism.

It's the place to go for conventions and Singapore is now no longer known as a stuffy conservative place.

Nobody's making jokes about chewing gum, but everybody's talking about what great restaurants there are, what a good time you can have when you go to Singapore and what a great destination it is for both FIT and convention.

And I don't see -- nobody can convince me that we've even touched the area of saturation of the market.

I think Singapore's going to continue to grow and grow and grow.

Great.

Thank you.

By the way, Robin, did you hear the 55% number?

I heard.

I noticed that, yes.

Yes.

Okay.

And your final question comes from Bill Lerner.

Thanks, hey, guys.

Two related questions, both VIP.

Let me ask Rob, if I can.

In Singapore, Rob, how bridled, I guess, is probably since everybody is so built up, rightly so, how bridled do you think Rolling Chip really is?

You've talked about limits, taking them up and I suspect the more -- the greater tolerance for risk you have, the greater demand you could see at VIP.

So that's really sort of a structural question.

And then the other's a bit more macro about Macau.

I think Sheldon answered it very well.

I think as long as the market in Asia continues to create wealth and people want to travel, I think the growth in VIP is not -- it could just continue to be very, very strong.

We've raised our -- I think we talk about this.

We believe -- I believe very strongly and Andrew and David and Mark Juliano, our team believes, have advised Mike and Sheldon that we think higher betting limits is a positive approach to take.

We've seen enormous action and the swings in Singapore are dramatic.

But the volume's equally dramatic.

I don't know what to say except what we said previously.

The demand is there for Singapore.

We're privileged in that we operate two unique places.

Macau definitely serves a different clientele.

I think the difference is we're seeing a customer who wants to come to Singapore, who can get to Singapore, can move capital to Singapore and doesn't need actually junket intervention.

What we're seeing is the growth of that market without junket intervention in terms of credit, et cetera.

But I don't know -- I see no reason why we can't grow our business in the VIP segment in Singapore for sure.

I think we're just at the beginning.

Hopefully, this is not the -- this is just the beginning not the top.

Okay, great.

And then --

I'm not sure I answered in Macau what you're asking, Bill.

Oh, I didn't ask Macau yet.

The Macau question really is, I guess, with the passage of time now, Rob, and your full focus in gaming globally, what's your sense on what's really going on at the VIP demand level there?

So we've been through reserve requirement tightenings that have not had a noticeable, if any, impact on credit issuance or just overall demand.

There have been other structural changes and macro factors that, I guess, any naysayer would have been wrong about with respect to impact.

Is there just something we don't understand?

The mass market seems like it's unbelievably nascent for a lot of reasons.

But junket, either side, sort of would love your view on that.

First of all, I think it's important we clear that.

This Company made a [naked] bet to be in Cotai.

It was a magnificent bet.

The capacity we have to grow our junket as well as our mass business is just -- it's unparalleled.

No one over there -- everyone's itching to go to Cotai but we're there, we're going to be there in a big way in a few short months.

I see my job and the teams I work with in Singapore and Macau is maximization of the real estate.

We made the right macro bet.

How we make the thing work and improve our businesses and I think clearly our mass business has been exceptionally strong and will get better as our properties get better.

I think the offerings are terrific.

The VIP's a very different business.

Having been there a couple days ago and almost trampled to death had coming off the ferry with families and all kinds of people, I never thought I would see in Macau.

The Macau that I started going to 30 years ago is a lot different Macau today.

But the VIP is a very different segment and if you read the publications and you listen to naysayers, there's trouble in the real estate, quote/unquote, bubble, et cetera.

Having walked through it last week and having spent a lot of time listening, you don't see evidence of it, Bill.

You see evidence of a very frothy, very healthy market.

A lot of people with a lot of money and a lot of desire to gamble.

If there's a problem, I sure didn't see it last week.

I went all through Macau, on the Cotai as well as the peninsula side, and, boy, it was sure frothy at the VIP.

I went through all the major houses and it was very, very impressive.

I don't see it.

Now I'm not an economist.

I can't predict what's going to happen with real estate in Shanghai or Beijing.

That's not my area of expertise.

But I can tell you that I'm not seeing any weakness on the part of the junket people.

I'm not seeing any weakness on the part of the customers.

I think our job is to get our fair share of it and we have yet to do that.

And I think Sheldon referenced it very well our past difficulties.

The future is ours.

It's bright, it's sunny.

And as long as our team stays committed and stays focused, I'm not that worried about the Chinese economy or the capital.

That's beyond our control.

Within our control we build the spaces and we simply cater to the customer and make sure the relationships are right and we'll be rewarded for it.

That's my take.

We've got to adjust our budget because we have to send out our towels.

You've heard of our towels that we send out to people who get egg on their face for their wrong projections.

We have got to send them out to almost every analyst on the street.

Ken, can we fit that in the budget?

We have money left over.

Thank you.

If you need change for a billion, give my wife a call.

Okay, will do.

Thanks, Rob.

Thanks, guys.

Thanks, Bill.

Appreciate it.

Ladies and gentlemen, we have reached the end of our allotted time.

I will now turn the call back to management for final remarks.

Final remarks.

Well, my final remarks is just what I repeated, which you've probably got from me before.

I see no reason why our continued growth pattern and our trend going upwards is -- will be abated, that any of our metrics will contract.

I think on the VIP side in Macau, we've got that problem solved.

All we have to do is just build out the spaces and we think we ought to be back to where we should be.

We're looking forward to an increase in the gross revenue but I'm very proud of the fact that what really counts -- you can't put gross revenue in the bank because you've got to pay expenses and taxes and commissions.

But I think that our EBITDA, we continue to lead the pack and by a substantial margin.

Now that's the most important thing.

We can put that in the bank and that's how we create value for shareholders.

So I see us continuing to go up.

I see Singapore as a very, very unique place and I think Macau will also experience it as more and more people go to places they like.

It's like a rising tide.

It's going to carry all boats.

And because I've never seen a boat stay under water when the tide went up.

Unless there was a hole in the boat.

And I've never seen a boat stay up in the air, stay up in the air during the tide, when the tide went down.

So a rising or an ebbing tide carries all boats.

And so I think Macau will -- look at the percentages of growth in Macau.

It's amazing.

It's just staggering.

So I think that what's happening in Singapore is that we wish that we had greater capacity.

I think in next quarter we'll be reporting some interesting things.

And so my motto for the day is, onwards and upwards.

Thank you all for being part of this call and we look forward to our next call.

Thank you for participating in the Las Vegas Sands second quarter 2011 earnings conference call.

You may now disconnect.