拉斯維加斯金沙集團 (LVS) 2012 Q2 法說會逐字稿

Good afternoon.

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

At this time, I would like to welcome everyone to the Las Vegas Sands Corp.

second-quarter 2012 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)

At this time, I would like to turn the call over to Mr. Daniel Briggs, Vice President of Investor Relations.

Sir, you may begin your conference.

Thank you, operator.

Before I turn the call over to Mr. Adelson, let me remind you that today's conference call will contain forward-looking statements that are we are making under the Safe Harbor Provisions of federal securities laws.

The Company's actual results could differ materially from the anticipated results and 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 suggested net income, adjusted diluted EPS, adjusted property EBITDA, which are non-GAAP measures.

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

Please note that this presentation is being recorded.

In addition, we have made some supplementary presentation slides available on our website, including a presentation of hold adjusted, adjusted to property EBITDA over the last five quarters.

With that, I'll turn it over to Mr. Adelson.

Thank you, Dan.

Good afternoon, everyone, and thank you for joining us today.

We reported $845 million in EBITDA, of $2.58 billion in revenue, for the second quarter of 2012.

Our revenue for the quarter would have been $107.5 million higher had we held normally in Macao, Singapore, and Las Vegas.

Our adjusted property EBITDA difference from the prior year quarter is fully explained by the additional EBITDA of approximately $88 million.

Probably the hold as well as the decision to increase our provision for accounts receivable in Singapore by an additional $29 million.

We reported adjusted earnings per share of $0.44 for the quarter.

That number would have been $0.09 higher adjusted for hold, another $0.02 higher after adding back legal expenses in the quarter, so $0.55 in total.

Before Mike, Rob, and Ken provide more specific insights, let me share my view from the pilot's seat.

We own outstanding assets in every market in which we operate and we happen to operate in the best gambling markets in the world.

And when you have outstanding assets in the best markets, there will be significant opportunities for growth.

Let me now spend a moment talking specifically about our opportunities for strong growth and outstanding returns in Macao.

In short, there are four reasons for my optimism.

First, we have opened the first phase of Cotai Central and it has performed well and has been well received by customers.

Mike will give you some details in how we've done in Macao.

Second, our investments in Cotai are allowing us to grow faster than the market and revenue share, and in due course, EBITDA growth and bottom line profit profitability will follow.

Next, new interest to our [jet] linking more of China to Macao will be added steadily in the years ahead and will meaningfully enhance market growth in Macao.

Our investments on Cotai will allow us to handle, allow us to benefit disproportionately.

Final Parcel 3 will add another integrative use to our development for us in the world's largest and the most profitable gaming market.

With that backdrop, it's pretty easy to understand my optimism.

While we still have work to do, strong revenue growth is on display in our results today.

Even while Cotai Central won't truly begin its ramp until early next year.

On Cotai, we are on the verge of combining more than 9,000 hotel rooms with an unmatched collection of leisure and business activities and amenities.

And through a series of indoor and climate-controlled covered outdoor walkway and moving sidewalks, it will all essentially be under water.

We believe the Cotai Strip will continue to serve as a strong and essential contributor to the Macao government's publicly expressed desire to develop Macao into a world center of tourism and leisure.

When you factor in that no additional competitive capacity will be coming on Cotai for the next three to four years, the barriers to new entry into the market, the increased spend per visitor the market is currently enjoying, and the future completion of infrastructure projects that will connect Macao more conveniently to the remainder of China, the opportunity for continued growth is outstanding.

In addition to our inherent organic growth potential, we also have growth which will be achieved through the addition of Parcel 3. After the recent extension of the completion deadline, we now have an important new project in our development pipeline.

While we will continue to aggressively explore new opportunities in Asia, including in Japan, Korea, and Vietnam, and elsewhere around the globe, we have already submitted our Parcel 3 design plans to the Macao government and pending government approval, we hope to begin putting pylons in the ground by this November.

Before I turn it over to the guys to provide some additional perspective on our operations in Macao, Singapore, and here in the US, let me leave you with this.

Our core strength is that we are in Asian markets that present significant opportunities for revenue, EBITDA, and free cash flow growth in the future.

We also have the right team in place today to execute on those opportunities.

Mike's recent contract extension as President and Chief Operating Officer, together with Rob's extension as President of Global Gaming, and the addition of Chris Cahill, our Executive Vice President of Operations, gives us the strong leadership team for the future.

On top of that, our success and unique position within the industry provides us the financial strength and flexibility to both pursue and invest in new development opportunities around the world which we will do in a strategic and disciplined manner while continuing to return cash to shareholders.

So with that, let me now turn it over to Mike Leven and the rest of the team.

Thanks, Sheldon.

I will make some brief comments on operations in general, Rob and Ken will add some short comments, and we will move on to your questions.

Let me point out that available on our website is an adjusted property EBITDA presentation, which presents hold adjustments for each of the last five quarters.

We received feedback that would be helpful to all of you.

We listened and we will be providing that information going forward.

Moving to operations, we are pleased with the early performance of Cotai Central since we opened the first days of the property in April.

The positives are many.

Hotels are enjoying strong occupancy, including 61% in April, 74% in May, 85% for the month of June, and the ramp continues into July.

This is in fact higher occupancy than we enjoyed at this stage with either the Four Seasons Hotel in Macao in 2008 or Marina Bay Sands in Singapore and it is almost as strong as the Venetian Macao's performance in 2007.

The quality and satisfaction scores for both hotels are outstanding, with the Holiday Inn enjoying the highest customer satisfaction marks of any property in their Asian portfolio.

While the number of mass gaming units at Cotai Central is quite limited in its first phase with approximately 200 mass tables and 800 slots and ETGs, the win per mass table per day is easily exceeding the early performance at both the Venetian Macao and Marina Bay Sands.

The win per slot machine, or ETG seat per day, is doubled what The Sands Macao accomplished at the opening and is four times the level of the Venetian Macao back in 2007.

It is clear that the early performance at Cotai Central bodes well for our future results.

Even before we opened the second phase of Cotai Central, the new capacity is allowing us for the first time in recent memory to grow faster year over year than the Macao market in every gaming sector category -- VIP, mass tables, and slots.

We grew gross gaming revenue 26%.

The Macao market grew 14%.

We grew VIP revenue by more than 20%.

The Macao market grew 8%.

While everybody else is talking about VIP contraction, we are experiencing VIP expansion.

We grew mass table revenues, including revenue from ETGs nearly 40%, and the Macao market grew 34%.

We grew slot revenue 19% and the Macao market was up 16%.

When the second phase of Cotai Central opens just 57 days from today, on September 20, we will add another 200 mass tables to the property, as well as 1200 more slot and ETG units.

Together with up to 2500 additional Sheridan-branded hotel rooms and suites, plus additional retail dining and entertainment amenities, we are confident that additional capacity and amenities will meaningfully improve the financial performance of the property.

Looking further ahead as the additional 1500 Sheridan tower branded rooms and suites come online throughout October, November, and December, and the air conditioned walk-over bridge connecting the Venetian and Four Seasons to Cotai Central opens in January of '13, the true ramp in the earnings power of Cotai Central will be reflected in our financial results.

In Singapore at Marina Bay Sands, we enjoyed good growth in all areas during the quarter, with the exception of the rolling volume.

Hotel RevPAR was up nearly 30% in the quarter compared to last year, with occupancy at 99.1%.

Our retail rents also reflected meaningful growth with mall revenue up 13% in the quarter compared to one year ago.

Adjusted for hold, our EBITDA at Marina Bay Sands would have been approximately $387.7 million.

The success of Marina Bay Sands and developing tourism to Singapore has been widely recognized.

Singapore's Straits Times recently reported the following -- Tourists arrival to Singapore were up a healthy 15% in the quarter ended March 31.

Travel agents reported that RWS and Marina Bay Sands still rank high on the must-do list for visitors in Singapore.

MBS with its sky park specifically pulls in crowds from India, China, and Japan.

Travel agents also share that most Japanese visitors to Singapore want to stay at MBS because it has become iconic throughout Japan and they want to be able to tell their friends that they stayed there.

Not bad press.

We are confident that this magnificent property in south Asia's most important tourism destination, with outstanding transportation infrastructure, a large population base, growing regional wealth, and the duopoly environment for gaming through at least 2017 will provide an outstanding platform for continued growth in the years ahead.

In Las Vegas, we reported $64.4 million in EBITDA during the quarter.

We held poorly in Las Vegas this quarter.

We should have reported approximately $76.9 million in EBITDA if we had held as expected.

Groups rooms business and pricing is picking up for 2013.

We are investing for the future in Las Vegas and renovating 1000 rooms in our Venetia tower, remodeling and redesigning the gaming floor at the Venetian and introducing whole new entertainment offerings in the fall.

With that, I will turn it over to Rob.

I look forward to addressing your questions in a few minutes.

Thanks, Mike.

Our gaming business is divided into three primary segments.

VIP, or premium tables, mass tables, and the slot ETG segment.

Macao's exceptional growth has been fueled by the growth of the VIP segment over the past two years.

Much has been said about the acceleration of VIP segment, but rumors of its death might be greatly exaggerated.

Our VIP segment has grown considerably over the past two years due to market growth and management focus.

The VIP segment will represent about $500 million of departmental income annualized to about 25% to 30% of our overall EBITDA Macao once Cotai Central is completed.

But the greatest opportunity for LVS in Macao resides in the mass table market, where we are in a very unique position.

Sheldon's $9 billion of integrated resort investment allows us to earn the lion's share of the growth on Cotai.

We will have a great opportunity in mass tables and slots in the years ahead.

The mass table market grew 33% for the most recent quarter and more importantly, represents a 45% margin as opposed to VIP's 12% to 14% margin.

The infrastructural improvements in Macao and the mainland will make this the most profitable segment in Macao.

With our Cotai position, we are well positioned to capitalize on that opportunity.

Singapore's incredible success since the opening in 2010 is well documented.

The VIP segment has not grown in the last quarter, but we believe its Singapore's tourism and our property's unique positioning will yield results in the future.

Our mass table and slot win exceeded $4.5 million per day this quarter.

We have seen some growth in that segment, but not the growth we previously experienced.

However, 300 million people within a 90-minute flight or car trip gives us confidence that there is considerable room for growth as tourism expands.

I look forward to speaking with you further on the Q&A session.

I'll turn it over to Ken Kay.

Thanks, Rob.

The balance sheet and cash flows are a simple story.

Our cash flow remains robust and we are confident about its future growth.

We retained the financial strength to both invest in new development opportunities and to return cash to shareholders and we will continue to do both.

Our Board of Directors approved yesterday our third consecutive quarterly dividend of $0.25 per share.

We meaningfully reduced our debt outstanding during the quarter.

We prepaid $400 million on the US restricted group facility, reducing the outstanding amount on that facility to $2.4 billion as of June 30.

In addition, we prepaid $131 million to retire our Macao ferry financing.

After the prepayments, our total debt outstanding at June 30 was $9.4 billion.

Our weighted average borrowing cost for the second quarter was 3%.

Our borrowing costs remain quite low and with the recent refinancing of our Singapore credit facility, we have no sizable debt maturities until 2014.

Despite retiring more than $500 million of debt during the quarter, we held approximately $3.5 billion of cash and cash equivalents on the balance sheet at June 30.

Our consolidated net leverage ratio at June 30, based on trailing 12 months of EBITDA, was 1.54 times.

Our capital expenditures during the second quarter were $337 million.

We expect to spend approximately $500 million at Sands Cotai Central before the end of the year, and another $500 million thereafter.

We will continue to invest in our other operating properties.

We expect maintenance CapEx across our property portfolio to be approximately $350 million for the rest of 2012, taking us to about $500 million for the full year.

And although we're in the midst of our planning for next year, I expect we will be close to that same amount for 2013.

With that, let me hand the call back over to Mike.

Thanks, Ken.

Operator, we are now ready to begin the Q&A.

(Operator Instructions)

While you're compiling the roster, operator, let me ask all the participants to please limit your questions to one question and one follow-up.

We would like to have everybody that would like an opportunity to ask a question, have the ability to do so.

Thank you.

Mark Strawn, Morgan Stanley.

Rob, you mentioned the opportunity in the mass table side.

And going through some of the recent trends maybe you're seeing in that market in Macao, seems like visitation has started to slow somewhat from China.

Can you talk about what you're seeing in the market and at your properties and in Cotai in general?

Yes.

Mark, I think we see, as I mentioned in my remarks, is an amazing opportunity, which is unique to this Company, in that we're going to have over 1000 mass tables on the floor at the end of Sands Cotai and we're going to have over 9,000 keys.

We're seeing the ramp continue for us in mass tables.

We kind of divide it into the pure mass and I would call this the premium mass, then finally the supermass, meaning the tables earned as much as $20,000 per day, which is happening in our Venetian property.

I think for this Company, obviously that 33% growth last quarter just bodes very well.

Visitation may be slowing, not as strong as it was, but the better customers keep coming and the real question obviously for the market is, does the spend continue with the deacceleration of the VIP.

And you can make whatever argument you want to make.

We believe that that segment will continue to grow and we believe we'll be a player in each of the three subsegments because of the amount of tables we have to offer, the rooms, the retail, especially Sands Cotai Central.

It was built for that.

We've seen terrific growth the last two years and I don't see any reason why that would slow down for us.

We have the offerings.

We also have the ability to go to ETGs and more of the mass table side, which is being pushed out of the market.

Some of that demand is being pushed aside by some operators by raising table limits to 300, 400 Hong Kong per bet.

We can take that demand on our ETG levels because we have lots of capacity, about 7,000 slot ETG positions.

You know, I don't know how else to say it, but we think the opportunity for us is massive.

There's still 33% growth.

Even if that slows down to 25% or 20%, we're just very uniquely positioned and we feel very good about it for the balance of the year.

Thanks.

And just one follow-up on the free cash flow.

I know Ken mentioned the cash balance at the end of the quarter, and you continue to generate significant cash.

As you think about the uses of that cash going forward, whether returning to shareholders in the form of increasing the dividend or buyback or maintaining reserves for future development, can you update us on your latest thinking there?

Yes, it's Ken.

And I appreciate that.

I mean, you've pretty much enumerated all the possibilities there.

And as we look out over the horizon, I think all of those are definite possibilities that we're considering.

I think we get more intelligent with each passing quarter with regard to the realization of some of those future development opportunities.

And so as we take that into account, we'll obviously consider each one of those different alternatives with regard to returning some more of that money to shareholders as our cash balance continues to build.

Great.

Thank you very much.

Joe Greff, JPMorgan.

Good afternoon, everybody.

You talked about the credit provision at Marina Bay Sands in the quarter.

Can you talk about collections in Macao, and if you could help us understand what the balances are in Macao and Singapore at the end of June?

Yes, sure.

Let me just give you kind of an overall perspective with regard to receivables and then I can go into the specifics, if you will.

Just looking at Marina Bay Sands, for instance, I think we're in pretty good shape.

Any slower collection issues that we have encountered are really specific to isolated accounts as opposed to systemic problem or across the portfolio of accounts.

And just to give you some perspective on that, since the inception of Marina Bay Sands, we've had credit drop of about $10.4 billion and when you consider that our Singapore casino receivable balance at June 30 is about $822 million, that means we've collected over $9.5 billion of credit issued and played, which is about over 91%.

And then against that receivable balance, we've got about $192 million in reserve, or about 1.9% of the total credit drop, which gives you an idea of really how small the potential for bad debt really is.

That reserves about 29% of receivables, excluding open programs and less than 30 days accounts outstanding.

And then additionally, life to date, the reserve is about 6.9% of rolling win, which is within the range we've discussed before.

So despite the fact that the percentage of rolling wind this quarter was a little bit higher, I think we're tracking pretty much where we expected to be in terms of overall credit.

When you look at it from a Macao perspective, really the growth in receivables has predominantly come from the increase in accounts from junket and so at the end of June 30, 2012, we have in total receivables in Macao, it's about $680 million, about $510 million of that is really from junket.

So although we've had some increase from direct customers, it's big increases come from junkets, which obviously pay on a very rapid basis.

And we've continued to collect from the junkets as we have in the past, have really see no deterioration from that perspective.

Reserves are growing a little bit just from a prudency standpoint, against that total amount of receivables, we've got about a 15% reserve that's outstanding.

Great, helpful.

Then for the September 20, Phase 2A expansion at Sands Cotai Central, you talked about having additional 200 mass tables there.

Are you talking about incrementally new tables with government approving that, or are you talking about shifting those 200 tables and sourcing them from other properties?

So our indication from the government has always been that we would get 400 additional tables for Cotai Central.

On September 20, we will not have all of those 400.

We will be getting them throughout the rest of the year.

By the time we open the last property, the last 2000 or 1500 rooms in January, we will have guaranteed the 400 additional tables.

So there will be some movement of some tables on September 20.

Great.

That's all for me.

Thank you.

Thank you.

Shaun Kelley, Bank of America Merrill Lynch.

Hi, good afternoon, guys.

I just wanted to ask about the Macao properties overall.

When I look at the group as a portfolio, now that you have Cotai Central in it, it gets a little harder to compare.

But one of the things that we're seeing is that it looks like, last year, property level margins were pretty steady in the 33% range across the Macao portfolio.

They were still pretty steady in the first quarter at 32%, but then they dipped to about 29.5%.

You obviously have some kind of ramp-up time and some operating leverage or deleverage at Cotai Central.

But was there anything else on the expense side or anything else that crept up as you think of the Macao properties overall?

Any reason you can't get back to mid-30s once you get more volume into the Cotai Central?

Macao was 29%.

29.2%.

29.2%.

Yes, the margin gets impacted by especially good VIP play that's grown.

It takes a little while for the mass to catch up.

We said that a long time ago, that that's what happened in the early opening of Sands Cotai Central as well as the efficiency when you start is not going to be the efficiency when you finish.

There is some pay overload getting ready for the next opening and whatever that's carried there and as it flattens out, you'll see those margins return into the 30s.

Shaun, it's Rob.

I think you know that Sands Cotai is underperforming in the mass table side and doing pretty well in the VIP side.

So the mix there is skewed towards the lower margin, 12%, 14% versus the 45%.

I got to tell you, I think once that really ramps up, where it's going to be and that property is fully opened, because right now it's a very young, very immature property, I think margins are going to be better there than any place in the group because that is built for the mass, premium mass, 6,000 keys, lots of retail.

I think the VIP growth can get better, but nowhere near the opportunity we've got to get to on the mass tables.

Once that margin goes from being a small part of the mix versus a large part of the mix on the mass table side, that will all self correct.

Everything is fine in the rest of the properties.

It all ties back to Cotai.

Okay.

That's great color.

And then my other question would just be on maybe the overall promotional environment and levels here as you see gross gaming revenue growth kind of level off.

Have you seen any areas of promotional activity?

Another competitor talked a little bit about probably some increased competition.

Obviously you guys are driving a piece of that with all the new supply out of Cotai Central, but what are you seeing on any sequential change in that would be helpful?

I think just the opposite.

We're seeing, there's talk about -- obviously junket segment has remained pretty much fixed.

No one is moving numbers there so I don't think that's a concern.

There's competition on the slot, ETG, and mass table side.

We haven't seen evidence of that, but it makes sense to me that there will be moving in that direction because that's where the growth is.

I mean, the story, as the deacceleration of VIP continues, the opportunities in Macao are going to move more to slot, ETG, and mass tables.

And I wouldn't be surprised to see some people being more aggressive.

But in the end, we don't see a need to move our margins or be more aggressive because we've got the product in place and the infrastructure in place to compete very well.

We've got the tables.

We've got the sleeping rooms.

We've got the food and beverage and the retail.

And as Cotai gets more and more mature, we've seen this referenced earlier in the call.

You saw it in Singapore, you saw it in eastern Macao.

Eastern Macao opened up to sub-$100 win unit per day and the slots tables were about $3,000, $4,000 per day.

That property now does four times that in terms of the win per units.

And so the point being is that matures, we see no reason to compete on pricing.

Just the opposite.

We've got the infrastructure to stay consistent.

Great.

Thanks, Rob.

Jon Oh, CLSA.

Jon, just a second.

This is Dan.

I just want to point out, Shaun as well that, if you look at Page 6 on the deck on the website, on a hold adjusted basis for the quarter, we are at 34.3% for the Company overall.

And I know if you look at Page 7, you can also see that on a hold adjusted basis, we're at 30.1% in the Macao operations for the quarter.

Okay, Jon.

All right, thanks.

I just have a question on Macao.

Could you give us some color as to the credit appetite from the VIP players in recent times, and also, the credit appetite of your junkets and also your direct VIP play?

Are we seeing any significant shift in that business?

I don't think the problem resides in the credit, Jon.

The problem resides in the demand side.

We've anecdotally talked to our junket people all the time and the feedback we're getting is not that they're not -- they are cautious with credit as they have always been.

I'm not sure it's significantly changed.

The difference, I think, I believe both in Singapore and Macao and even the US, is customer demand.

Where there's appetite for credit, we grant it, the same way we always have.

We try to be judicious about it.

I don't think the junket people, nor do I think our direct sales people are seeing us pull back on credit.

You're seeing a pullback in consumer demand.

And just a follow-up on Singapore, along the same veins on Rolling Chip, we've seen the number pretty much range around the $11 billion to $12 billion per quarter.

If you were to look at the seasonality of this quarter, is there anything specific to it that we should pick out as to the number that we saw or is there anything else that we should read into the demand of VIP play in the Singapore region?

I think we said before, and I think it remains true that Singapore is very, very chunky.

It's very, very concentrated.

The reality of Singapore is that you've got people making large bets with large bankrolls, but they come and go as they please.

They are not as seasonally driven as you might think.

They are driven by their desire to be there.

And you're right.

We are disappointed the growth hasn't continued.

We haven't seen it ramp -- we had quarters at $15 billion, $16 billion, we're back to $11.5 billion.

And I can't give you a good way to look at it other than to say it's highly concentrated; it's mostly out of mainland China; it's mostly foreign visitors to Singapore.

We have a lot of faith that we have a fabulous product in a very, very strong market.

But hard to put any color out there other than to say we live quarter to quarter and see how it goes.

We have a high concentrated market there, unlike Macao, which, its neighbor is mainland China and access is different.

Singapore, you have to fly to get there and it's a much more premium-driven market, with people gambling $5 million, $10 million.

You don't have the plethora of people betting $0.5 million, $1 million like you do in Macao.

Okay.

Thank you.

I would like to say -- this is Sheldon.

I would like to say that we're in the gambling business.

The rate of hold goes up and down and one quarter does not a trend make.

Anybody who thinks that the cultural habits of the Asian people is changing because of one, one reduction in the hold, even though it amounted to over $100 million at the top line -- anybody who thinks that this is a change of culture is just missing the boat.

For thousands of years, the Asian people have been seeing gaming and chance-taking as their form of entertainment and the -- anybody who thinks that a quarter is creating a new trend, there is nothing on the horizon, nothing within sight, nothing on the horizon, that would suggest that the gaming habits of Asian people are going to change.

There must be something in the wind or in the air or in the food that had a -- we didn't have -- first of all, there's a lot of big numbers that says that we're not going to grow from $100 like we grew when we were at $10.

So the percentage of growth is going to be a smaller number.

But anybody who says that the culture that has existed for thousands of years and the habits of the Asian people is changing because of one quarter with low hold, I think is just missing the boat.

Thanks, Jon.

Felicia Hendrix, Barclays.

On Sands Cotai, you all have talked a lot about how the property probably won't hit its full stride until the third quarter of next year.

Just wondering, is there any reason to believe why margins would not be Venetian-type of EBITDA margins?

I think it will be better, Felicia, only because Venetian -- here's the pluses and minus.

Venetian is a theme property, gets a ridiculous amount of visitation, 100,000 people on a good Saturday.

And that theme is very powerful and potent and so is the retail and that drives terrific visitation, no question.

The difference is the Cotai property has double the sleeping rooms and an equally strong retail product.

It's not themed, in my opinion, the Venetian theme is superior.

Once we connect, one of the things we need to do right away and we're getting to it by the end of this year, is connect the two properties by a walk-over bridge.

I think that's going to be very impactful for visitation to both properties.

In essence, we have a 7,000-room property, Venetian Cotai -- 9,000, Venetian Cotai and the Four Seasons.

But there's no reason why once -- the shortcoming in Sands Cotai is in the mass and premium mass, which is the sweet spot of that property's physical ability.

I think once we figure that out and get our space right -- also, let's face it, we didn't put enough slot ETG product on the floor.

Let's not kid ourselves.

It was a mistake not to do that.

We have 800 positions right now that are outproducing all the other properties.

So we've got to get more slot ETG positions.

That comes together in the fall.

We got to get that cross-over bridge that happens by year end.

We've got to employ more sleeping rooms for the gaming sector.

I think when all of that comes together, the margins will be very fat and happy.

We're really happy where the junkets are landing and that keeps growing, but the real upside for that property is slot ETG mass premium tables and that's the margin's sweet spot.

Come on, guys.

Let me call to your attention -- it's a very good question, Felicia, and let me answer it.

First of all at the Venetian margin, we have rooms whose ADR is substantially higher.

We've got 2500 rooms open and we've left all the non-gaming activities.

We've got a huge 350-tenant shopping mall.

We're connected to the high end shopping at the Four Seasons.

We had a showroom open.

We just closed it recently.

We have a lot of non-gaming income that's contributing to the EBITDA percentage.

I want to point out to you that in growing the, the 1200 rooms of Holiday Inn and the 600 rooms of Conrad, in ramping it up, we are running at extremely, very, very good occupancy percentages, but we have come up with -- revenue management is intentionally kept low so that we could ramp it up in the future and get higher numbers.

So if we're looking at $100 at Holiday Inn and $150 at Conrad, we're comparing that to $250 and $300 a day at the Venetian with more rooms.

The second issue is that all of the non-gaming activities at Cotai Central are barely half open.

So we're opening the 6,000 rooms -- we'll have 6,000 rooms open within a few short months.

We're opening the second tower of about 2000 keys, September 20.

In addition to that, we're going to open about 500 rooms in the third room tower of another 2200 rooms.

So we're opening on September 20 a lot of the additional non-gaming activities that we have in the Venetian that we don't yet have open in Cotai Central.

With that additional income from the additional amenities that have generated that income and a casino that's a lot closer on the mass side, another 200 tables on the mass side, then we're going to have a percentage that will be where the Venetian Macao is and where it will continue.

So when we get all the non-gaming and we get the gaming open and we stabilize the prices for the hotel rooms, then we will have significantly greater than what it is today.

We're in the ramp-up period.

Can I have one point, Sheldon.

Just for fun when you do the math--

Only get one question.

Okay.

This is for fun -- (laughter)

Only get one.

One bite at the apple.

I'm sorry.

Bring in an apple for Rob, please.

Just one thought for you.

Our Four Seasons numbers are in excess of $12,000 win per unit per day in the mass.

And the Venetian run around $9,500.

Blend that at $10,000 per day.

Cotai's running right now at about $5,000 per day.

When that number gets to $10,000 per day on 400 tables, we have got a run rate of $1.4 billion at 45%.

If that happens, you're making $600 million, $700 million on the mass.

If and when that happens, if we can simply match our existing portfolio out in Cotai, Sands Cotai ends up making $600 million, $700 million departmentally next year.

Our goal, with Ed Tracy and David Sisk and the guys who run that place, trying to do is figure out how to ramp that number using rooms, retail, et cetera.

When that happens, you're talking before the junket play kicks in, in excess of $600 million, $700 million of departmental contributions.

So that solves all of your problems as far as margin and being profitable.

We think that's very, very doable.

It's not pie in the sky.

We're not aspiring to something that's not achievable.

I think it's very achievable.

In addition to that, I would like to point out, we have a piece of land that we acquired when we acquired lots 5 and 6. And it's called the Tropical Gardens.

It's a big strip.

It goes well beyond the length of our properties, the depth from east to west.

And it cuts in couple of other properties on the other side of the back service room, 339 feet wide, and we have come up with an idea to develop that not with another integrated resort, but with a multi-level very, very high-powered retail mall that will be both a stand-alone mall, that will be a major attraction, and contributes further to Macao being the shopping city between Hong Kong and Macao, and we will have a connection to lot 6 from that.

We don't know, we're in the process of doing design, and we could have anywhere from 500,000 to 800,000 net leasable square footage and we'll have another air conditioned moving sidewalk walkway going over to Parcel 3. And so it will be a circle, all under one roof, that part of the Cotai Strip.

This was my idea.

This was my vision.

The other competitors may not have any additional land.

The Macao Studio City will be built next to our lot 3, but we have a big footprint there, because we were the guys who started it.

I started it.

Nobody wanted to buy into the idea.

Now everybody wants to give their right arm and maybe their left arm, if they are lefties, and they want to get into Cotai.

Nobody wanted to get into Cotai before.

We are looking -- we've got more development.

If we can do that Tropical Garden development, and we think we can, we -- there's the other part.

It's on -- I don't know if it's part of lot 2 or lot 3.

There's another part of the Tropical Gardens that we are asking the government to develop and there's still a couple more other development pieces that we could do.

We haven't done the fourth tower on lots 5 and 6, and there's still the potential for another tower of either rooms or apartments in the back of the Venetian and possibly on the west side of the strip on the Tropical Garden.

So we've got an awful lot of development opportunity that nobody else has, because our vision, our development, they passed on it in the past.

Now they are trying to catch up, so they got to go to the back side of the strip.

Thank you.

Thanks a lot.

I actually do have other questions, but I'll let other people get in the queue.

Thanks.

Thanks, Felicia.

Steven Kent, Goldman Sachs.

Hi.

I looked at your slides, actually Slide 20, and I look at your hold adjustment property EBITDA and I appreciate that you're starting to show that.

And if you look at the quarterly spread between the reported and the hold-adjusted, it's getting wider over the past five quarters, going from $36 million to now in this quarter $88 million of difference.

Now, sometimes it was positive.

Sometimes it was negative.

But I sort of thought that as you got more and more used to your customer base and as the volumes increased that this would start to smooth out.

So I wanted to know whether there was a customer profile or the way they are playing that is changing, and should we expect even more volatility as you get bigger, which would go against I guess the law of large numbers, that they should start to smooth out?

It's Rob.

I think you're absolutely right.

It's a big spread this quarter, but it will probably be the other way next quarter, because volatility is diminished as we have volume, and the volume keeps increasing, as you can see.

We had a bad run in Singapore.

It will self correct.

And I don't think we have any trepidation whatsoever that in the end of the day, this Company has very little volatility.

Despite this quarter's swing, when you look at this Company the end of the year, it's a non-event.

Rob, is it starting to correct already?

I can't -- (laughter) -- let me give you some numbers -- let me break out July for you.

I just don't think it's something that you've got to waste a lot of time on.

I think at the end of the day, we will be where we need to be.

We look at our business day in, day out based on volume.

We're more interested in volume than the hold percentage, because we have some very good days and very bad days.

This quarter had some bad days, but I don't think it's something I spend a whole lot of time on.

We're handling -- no one's ever done -- years ago at Caesar's palace -- this is a big thing.

Every quarter four guys win or three guys would lose.

This Company has so many thousands of people gambling so much money, I think when the year's over, it will be a nonevent for you and everybody in this room.

Steve, this is Sheldon.

I would like to point something out.

Up until this quarter, we had 11 straight quarters of growth.

When you have 11 straight quarters of growth, how do you interpret volatility?

I'm not sure, Sheldon, if you're asking me that question.

All I'm saying is that as the business gets bigger--

I'm asking you that question, Steve.

Okay.

How do you conclude volatility out of 11 straight quarters of growth?

Well, your own slides shows the volatility, Sheldon, it's getting wider and wider.

Steve, this is Mike--

One quarter to last year's quarter --

if you look--

Unless you're looking at something I don't have.

I have it.

If you look at the quarter on quarter, second quarter '11 and third quarter '11, it's basically the same volatility level.

What you are saying is in '12, it's larger in '12 than it was in the first quarter and second quarter, it's larger.

There could be a multiple of reasons for that.

You could have more players playing.

That would give you a wider variation on the hold.

At the end of the day, if you look at the normalization range, whatever is played and the revenue and the volume is going to end up at that level of volatility.

So I don't think it's anything you can really forecast, except that if you end up at 2.85 or 2.9 or 3 as your hold and your real forecast is what is the revenue number, what is the roll number.

And we could be, you know, so I don't -- as Rob said, I don't think it's any science to it.

I think it's basically going to end up in the same place.

What we gained in the first quarter, we lost in the second quarter.

Yes, I think, Steve, that's the appropriate comment Mike just made.

We picked up $72 million plus side Q1 against the expected hold adjust and we lost back $87 million, so net-net on billions of dollars of volume, the net's less than $20 million first half of the year.

That could be -- it just isn't that big a deal.

Steve, the other thing to think about--

The difference in -- what you are calling volatility and the delta between, an adjusted and unadjusted, this has nothing to do with us.

This is the nature of the law of averages.

Sometimes you're up, sometimes you're down.

So it has nothing to do with any operational policy or whatever we do.

One day we could be, the difference would be 100% and the next day it could be minus.

There's nothing that we can control and there's nothing, I don't believe there's anything that one can interpret out of the difference between the hold adjusted and non-hold adjusted over a period of time.

And, Steve, when you think about the fact that Singapore, if it holds very heavy, all of that comes to us every single bit of it except for the taxes.

And when we hold light, obviously we -- the impact is much, much greater on the flow-through basis because your taxes are around 10% in Singapore and your taxes are 40% when you hold heavy or light in Macao.

So that makes a big difference on what flows through to EBITDA.

Okay, thanks, Dan.

Carlo Santarelli, Deutsche Bank.

Just a quick question on Singapore as it relates to seasonality there and when you come out of obviously having seen some changes in the market in 2Q, do you guys still have a pretty good sense or feel you have your hands around seasonality, whereas third quarter should likely be the strongest of the year, especially from the VIP side?

I think it's too -- this is Sheldon.

I think we still don't have a handle on seasonality.

The period of opening, the ramp-up period is still too short.

I think we need at least three or four years to determine on a definitive basis when and what the seasonality is.

I don't know.

Maybe my colleagues have some other answer, but that's my answer.

You've got to divide it, too Carlo, into the different parts of the business.

On the hotel side is one seasonality versus the high roller side versus the local business.

So I think on the VIP side, it's very hard for me to get a sense of a seasonality.

It's just -- we had a great -- obviously Q1's always a strong quarter because the Chinese New Year's.

Last year we bought the $126 billion roll in the third quarter, because honestly 25 people showed up that rolled excessively.

I don't think that's a trend or a seasonal thing.

That's 25 guys deciding to do something that quarter and gamble with us.

And that could happen this quarter.

And I don't think that's a trend.

I think that, that is aberrational in terms of the third quarter of '11.

Great, thanks, Rob.

That's helpful.

And if you guys wouldn't mind, could you comment a little bit about how you're seeing share in that market between mass and VIP?

Well, share, as far as work share--

Share versus your competitor in both segments.

Well, we're moving up.

I don't know how you would -- I haven't seen their numbers recently, but I think we feel very good about MBS and relative positioning to our competitor, RWS.

That's been indicated quarter after quarter.

We're not going to change our credit policies and change our promotional policies.

We stay consistent.

And I think it's good in the end; we've got the best of it and we feel very good about our competitive position in both mass, slot ETG, as well as the VIP segment.

I don't think we do a lot different than we've done already and the numbers are the numbers the last two years.

And they are a good competitor, but we're very comfortable we are vis-a-vis the two properties.

I appreciate it.

Thanks, guys.

Sure.

Thanks, Carlo.

Harry Curtis, Nomura.

Good afternoon.

Follow-up question on cash, on your balance sheet for Sheldon, you are sitting on a lot now.

It's going to be even bigger by the end of the year.

Sheldon, what would you like to see done with that?

(laughter) It's a personal question.

(technical difficulty) -- I would like to see some more dividends.

What I would like to see, I'm looking at the price of the stock.

I think I'm going to have a call with members of the Board to see if we could put aside some money to buy back some shares at these prices.

But certainly we're going to -- our intention, my intention, I think the Board's intention is to -- by the way, I simply don't vote on the Board.

Regarding the dividends, I think I have a little bit of a conflict of interest here.

But anyway, everybody -- we want the shareholders, whether it's me, my wife, my kids, my pets, my doggies or kitties, beside them every other shareholder in the Company wants dividends.

So we'll probably focus more on dividends, but I got to tell you, I'm looking at the stock price now as we're talking and it seems to me that it's one hell of a good reason to take a lot of the money and put into some buyback.

It's a superb opportunity for buyback.

Second question, a little less amusing, is the potential to amend the Casino Control Act in Singapore -- there is some debate over that.

The Singaporeans are attempting to restrict local visitation more and more.

Could you give us an update on where you think that process is going and given those headwinds, can -- do you expect to see mass casino volumes continue to increase?

First of all, the Singaporeans -- there's a law in Singapore that any discussions with the government, it's illegal to disclose that.

However, I can discuss what's been in the press, what we nominally call the PD, public domain.

Public domain shows that the government is interested in protecting the more vulnerable people in society.

But I as an individual and our Company has a stand of morality that we don't want to take money from poor people.

So we don't have any problem if they want to put a limitation on either the visitation or the exclusion of very poor people who live in three-room apartments and earn less than a certain number, that puts them in and also that, according to the paper, that receive welfare -- Singapore doesn't have welfare, but they receive money from the government to subsidize their living expenses.

We don't want money from those people.

That's not the kind of business that we run.

I don't want it morally.

The Company doesn't want money like that morally.

We want to see people enjoy themselves when they come to gamble and the mass market end of it, and if the Singapore government wants to put the limit on to keep financial stability in their society, I think that's good for them.

Listen, I come from a very poor family.

Nobody put limits on my parents and my father, when he wanted to go to Suffolk Downs in Boston and spend a lot of money on the ponies, I wish somebody would have put money on that, maybe I might have been able to go to summer camp.

You can go now.

I can go now.

Robert's just staying instead of going to summer camp, I should buy them all.

(laughter) But I'm a little handicapped, so I can't run, can't slide into the bases like I used to.

Good for the government.

My feeling has always been, if you don't like the way government does things, don't go there.

Now, we're already there.

We're doing very well and we don't make the kind of money we do and we don't see the future coming out of poor, unfortunate, very vulnerable people.

My wife and I developed three Adelson clinics to treat narcotic drug addicts.

And I have to tell you that a lot of them are very poor people.

They are exceptionally poor.

Of course we've got some affluent people once in a while.

But we care about these people and when I was a kid before I met my present wife, I opened up an adolescent drug abuse treatment center for 250 kids in [Stulton], a suburb outside of Boston.

So we care about people that have compulsive behaviors.

We care about people with their problems.

And coming from a poor family, I appreciate the travails of a poor family.

We don't want to make money from them.

But we simply respect what the government is doing.

But at the end of the day, do you think that the mass can continue to grow into 2013, assuming some of these restrictions intensify to some degree?

I think so.

Harry, also you're discounting the fact--

I just want to finish one thing.

75% or more, depending -- varies from day to day and there's a little bit of a downward trend.

The number of Singaporeans that come into the property is approximately 25%.

We don't know how much that's one per unit per day in the mass market from Singaporeans.

We haven't calculated that.

I'm not sure that we can accurately.

So from that standpoint, the number of foreigners that are coming in are increasing the mass market returns.

So we've got three quarters of the mass market, of the total visitation is fine.

We can't speak to the government's decisions or where they will go in the future, but we do believe strongly in the tourist market and the growth and the fact that the property's in a great part of the -- the marina is wonderful.

As that hotel ramps up and just keeps getting closer to 350, 375, more rooms, more development, I think we'll participate on the mass side very well, in the tourist sector.

That does it for me.

Thanks.

Operator, we have time for one more question.

Robin Farley, UBS.

Great, thanks.

I have a question on Singapore.

And we know it's volatile in terms of VIP volumes.

But if you look at it on a rolling 12-month average or trailing 12-month average to kind of smooth out quarterly volatility and smooth out any seasonality issues, looking at it on that basis, we're still not really seeing growth in volume versus the trailing 12 months, if you look a couple quarters back.

So I guess can you give a little more color on, you know, whether you think that's -- is that players that come and they are not coming back, or they are coming back, but there aren't new players coming in the VIP?

Just a little more color on that.

And then on the receivables front, can you clarify a little bit whether the significant provision here, is that for something that is actually uncollectible, or is it just that it's past a certain number of days, so it, it clicks over into having to take the write down on it or increase reserves on it?

Or it didn't sound like you're actually raising reserve policies, but I just wanted to clarify why the big chunk this time.

In one short sentence, we're going to have extremely highly conservative CFO.

(laughter)

I'm with him.

Well, can you clarify conservative CFO means changing reserve policies or just if the receivables are--

-- he likes to call the glass that's half full of water, he likes to call it half empty.

We like to call it half full.

I mean, did you change the reserve policies, or is it just--

No, no.

We didn't -- this is not -- I hate to say it's more of an approach -- it's Rob.

We sit down and Ken and the people in the field and as well as the people at the property and review these things every other week and I think we simply look at some of these accounts.

we don't look at necessarily about, it be 300 days, 180 days, look at people we've now seen not paying us, not delivering and we're taking a prudent approach.

It could change next quarter.

I don't think there's a change in reserve policy as much as recognition that some people haven't paid us we thought would pay us.

We were hoping they would pay us and they didn't.

I think the decision was a valid one.

It's consistent.

Last quarter, we also ramped up last quarter.

We take a more realistic viewpoint with where we stand with about $800 million of outstanding receivables.

Not to say we won't continue to pursue those collections, but I think it's the prudent thing to do and it's a lot more than a year ago, but that's how we look at receivables.

And it's a living, breathing issue.

It doesn't change for us.

We keep looking at it all the time and we go back and assess our weaknesses and our strengths and they came up with a bigger number this quarter.

Any thoughts on the, in terms of the volume?

As I said, even smoothing out on a 12-month basis?

Yes, I don't -- look at the last four quarters.

Look at $12 billion to $16.7 billion, $10.7 billion, $12.8 billion, now $11.5 billion.

The problem is I sound like a broken record, but I think it's consistently the same story.

And I think, I was reading the thing you did with Grant this week on the Singapore Macao gaming update.

I think you guys nailed it pretty well there.

It's a very, very concentrated market.

Unfortunately, unlike Macao, it doesn't have thousands of people coming in every day with $1 million or $0.5 million or $100,000.

It's much more dependent on very high end gamblers, who bet large amounts of money and primarily they come from mainland China or they reside in Singapore, as PRs occasionally, or they come from around the Asian region.

We just can't predict when they show up.

We did a couple special events last summer that worked very, very well.

We plan to revisit that approach.

We are going to get very aggressive on some very concentrated high-end events for people who gamble large amounts of money.

I would agree with you.

It hasn't grown that much.

It's very concentrated and the story remains the same.

There's no real -- nothing new to offer that would shed more insight to Singapore's VIP market.

It hasn't changed a lot the last four or five quarters.

I want to correct Rob Goldstein's stand.

You can tell he's an old guy because he used the expression I sound like a broken record.

I haven't seen any records since about 40 or 50 years ago.

(laughter) Don't you know we're in the digital age?

I'll try and get there.

Okay, and then just, just a final thing.

Just trying to get to the dollar amount of EBITDA that you're saying -- you would add back $88 million for low hold.

Are you adjusting that down by the properties where you play a little bit above your expected range?

Because the math that I'm doing here, back of the envelope, I'm not getting to as high a number and I'm wondering if you're lowering that by Sands Cotai Central playing a bit above average should be offsetting what you sort of feel should be added back?

Yes, Robin, what we're doing is across all the Macao properties in total by segment, so you have to look at the junket separate from the premium direct, if we don't hold within 2.7 to 3.0, if we are higher than the 2.7 to 3.0 by segment, then we're adjusting to the trailing 12-month average on the upside or the downside.

We don't adjust when we're in the normal range, if 2.85 is in the middle, you go from 2.7 and 3. No adjustment for that.

It's only for under 2.7 or over 3.0.

And so for Sands Cotai Central, it's above the range, but there's, there's no real trailing 12-month of that property.

Did you just sort of hold onto the above 3%--

Robin, we did the junket piece together across all the properties in Macao and they came in between 2.7 and 3.0 so there's no adjustment whatsoever to any junket piece in Macao under this methodology.

And I'm happy to take everybody through the methodology offline.

That's fine.

I guess we can't see the breakdown between junket and non-junket on holds.

Okay.

Thank you.

Okay.

Robin, we only have three months, we can't take a 12-month's trailing to that single property.

Right.

Okay.

Thank you.

Thanks so much for your time, everyone.

This concludes today's teleconference.

You may now disconnect at this time.