拉斯維加斯金沙集團 (LVS) 2012 Q3 法說會逐字稿

Good afternoon, my name is Amanda and I will be your conference operator today.

At this time I would like to welcome everyone to the Las Vegas Sands Corporation third-quarter earnings conference call.

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

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

(Operator Instructions) Thank you.

Mr. Daniel Briggs, Vice President of Investor Relations, you may begin your conference.

Thank you very much.

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 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.

We also want to let you know that we have posted supplementary earnings slides on our Investor Relations website for your use.

With that, let me please introduce our Chairman, Mr. Sheldon G. Adelson.

Thank you, Dan.

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

By now you should have seen our press release and the related earnings materials which are available on our website.

Joining me on the call today are Mike, Rob, Chris, and Ken.

As the founder, Chairman, and CEO of Las Vegas Sands and the Company's Chief Strategist, I am focused on delivering growth and maximizing shareholder value.

I think about our company pursuing these goals in four key areas -- one, organic growth on existing properties; two, development growth that is within our reach today; three, development of integrated resort locations new to Las Vegas Sands; and four, return of capital to shareholders through growing annual dividends.

To address point one, our organic growth at our existing properties, I would like to go through some highlights for the quarter in Macao where our industry-leading scale and infrastructure investments are creating impressive results in the largest and most profitable gaming market in the world.

Our quarterly results in Macao reflect company records in virtually every category, and we expect our operating momentum to continue in the quarters ahead.

For the quarter, our market share of gross gaming revenue in Macao was 19.3%, up from 14.3% last year.

That is a 35% growth in market share.

I just -- well, I'd also like to mention that our EBITDA numbers surpass any one of our competitors at any market share.

I just want to mention that in reports that we saw this morning, our market share gaming win in October in Macao was in excess of 20%, again demonstrating that we are growing faster than the market as our investments and strategies produce results.

Our rolling volume was up 45.5% this quarter to a record $36 billion.

That represents VIP market share of approximately 17% of rolling volume for the quarter, compared to just 11.4% one year ago.

If you remember, at that time I said that we were getting back into the good graces of the (inaudible), and this 49.1% increase in market share of rolling volume attests to that.

Our rolling volume was up 54% during the quarter, while the general Macao market was down 1% for the same period.

That is really spectacular.

While everyone else is experiencing declining volumes in their VIP business, we are able to bring strong growth.

Equally impressive is our strong organic growth and momentum in the mass segment in Macao.

Due to its higher margin structure, this segment is even more important to our future cash flow and bottom-line results.

Our non-rolling table win in Macao for the quarter was up 36.4% to more than $658.4 million, another company record.

Our table productivity also improved meaningfully this quarter with win per mass table across our portfolio of properties expanding year over year by 26% to reach nearly $8,700 per table.

Remember that we have the largest footprint in Macao.

That is because we took -- our original strategy called for us to take certain risks, and the risks worked out far beyond our expectations, except for Sheldon Adelson's expectations.

I thought it was going to be a grand slam home run and I was wrong; it was a grand slam home run, the World Series of tennis, not to mention ping-pong and the Super Bowl.

Can't be right all the time.

Our table productivity has also improved meaningfully this quarter, with winning per mass table across the portfolio to $8,700.

Now turning to Singapore, we [haven't really liked] this quarter in Singapore at just 1.79%.

That was really a low hold, and it cost us about $105 million in EBITDA during the quarter.

So on a hold-adjusted basis, we would have produced EBITDA of just over $365 million this quarter from Singapore, but who is counting?

As Singapore continues to progress as the destination for business and leisure travel and entertainment, and our marketing programs for the Asian region mature, our business at Marina Bay Sands will continue to grow.

We are implementing new marketing programs for both the premium mass market and VIP markets, beefing up our sales force and investing in aircraft.

The customers we are targeting with these efforts will come from the areas surrounding Singapore -- Indonesia, Malaysia, Thailand, and the wider Southeast Asian region, as well as from Hong Kong, Taiwan, China, Japan, and Korea.

I think I missed Vietnam; getting a significant amount of business from Vietnam.

Point two, development growth that is within reach today.

We will generate substantial growth on our results in Macao, as Sands Cotai Central ramps up, and as we are able to develop the Parisian on-site fully.

Turning to Sands Cotai Central, mass table and slot business reflected meaningful growth this quarter.

Total mass win per day increased by 15% compared to the partial quarter ended June 30, and reached $1.56 million per day.

We see strong operating momentum continuing in the quarters ahead, particularly as the additional hotel, dining, shopping, and entertainment amenities of phase two of Sands Cotai Central begin to make their contributions.

Because those amenities were open only for 11 days during the quarter, they had minimal impact on this quarter's earnings.

As a reminder, since April of 2012, we have opened more than 3,660 new hotel rooms and two new casinos in Macao.

In addition, we will open 2,000 new hotel rooms in January 2013.

That's growth.

I'd also like to say that our concept to bring in international brands is paying off handsomely.

We are running at very high occupancy rates in the hotel; we are bringing in business.

People questioned Holiday Inn, but Holiday Inn is running at extremely high rates.

The Conrad has more demand than it has supply, and the Sheraton just opened recently, last month, and we are doing splendidly at the Sheraton.

We still have one more tower to go which will open, I suspect, within the next 90 days.

The strategic advantages of the scale and critical mass of our portfolio of products on the Cotai Strip, including the air condition and people-mover pedestrian bridge, which will open in December connecting Cotai Central with the Four Seasons and The Venetian on the west side of the strip, will benefit all of our properties on Cotai and strengthen our retail mall business.

As the Macao market continues to grow, we can see a time in the not-too-distant future when Sands Cotai Central will have the opportunity to produce financial results that rival those of (inaudible).

The Parisian Macao will add another integrated resort property to our portfolio on the Cotai Strip.

We are targeting it in late 2015 or earlier.

We've already submitted our design plans to the Macao government, and pending government approval, we hope to begin pilot work in the very near future.

Point three, development of integrated resort locations new to Las Vegas Sands.

We are committed to identify and executing our new development opportunities in Asia.

We have teams working every day in these locations to pursue this goal in Japan, Korea, and Vietnam.

Traveling behind a little bit is Taiwan, which will take a much longer time, and we still don't have Thailand out of our sites.

We also have been investigating opportunities elsewhere around the globe including in Europe, North America, and South America.

During this quarter we advised the government of Madrid that we have selected the city of Madrid as our EuroVegas development location, as opposed to choosing Barcelona.

As I have said on numerous occasions before, we will only pursue projects with returns in excess of 20%.

As the Company's largest shareholder, I've a vested interest in going after only the highest value projects that would maximize shareholder returns.

Point four, return of capital to shareholders through growing annual dividends.

It gives me great pleasure to announce that our Board of Directors has approved an increase of our recurring quarterly dividend for 2013 by 40% to $0.35 per share per quarter, or $1.40 per year.

Let me add that we have every intention of increasing the dividend in the years ahead as our business and cash flows continue to grow.

I can only say one thing about that -- go dividend.

Lastly, I wanted to point out an asset of the Company of great value that people and the community may not have been focusing on all the time -- our retail mall business.

It generated over $100 million in revenue with 84% margin in this quarter alone.

That is a 16.9 increase -- 16.9% increase over the results from a year ago.

We believe that our retail assets are among the most valuable in the world and that cap rates for similar assets in Asia could easily approach between $9 billion to $10 billion in value, and that is not including additional retail we are going to put in in Lot 3 or retail that we put in Cotai Central.

As I said in my previous call that we were approaching the government to turn tropical garden into the tropical garden mall.

Our designs indicate potential of 800,000.

So that is a trigger we could pull at any time to fill our coffers and an important part of our fundamental business strategy.

With these proceeds we could easily wipe out all of our debt, easily, without building any new retail than what we have today.

In closing, our financial strength and cash flow are evident in our results.

As we have said in the past, our cash flows and balance sheet strength will allow us to both increase our return of cash to shareholders and retain ample liquidity to invest in future growth opportunities, both in our current markets and in other emerging jurisdictions around the globe.

With our strategic position and the strong, experienced leadership team we have in place to execute our strategy, I couldn't be more optimistic about the future of the Company.

I hope I've made my point with emphasizing our four components of future growth, but let me be crystal clear, we will always be a growth company.

So, Mike -- let me turn the call over to Mike and the rest of the team.

Thank you, Sheldon.

In the interest of time, I will take a few minutes to add some specific additional color on our developments, the situation in Singapore, Las Vegas, and Bethlehem markets.

Rob will cover Macao and Ken will cover the earnings and balance sheet.

Let's talk about a little more details of our development strategies and where we are as we continue to fill a pipeline with promising development opportunities around the globe.

The Parisian Macao -- the structure has been submitted to the Macao government, the designs are practically finished, and we are ready to go just awaiting government approval.

As soon as government approval comes we will put piles in the ground and begin the construction period, which should last a little bit more than 30 months, and hope to be open in that property by the end of 2015.

We will also reveal to the public all the designs and the plans when government approval comes.

In Asia outside of Macao, in Japan we are awaiting legislation which is supposed to be submitted in April to the Diet.

After that there will be an approval process for a year, or maybe two, as it goes through the Japanese procedures.

We are looking at sites in both Osaka and Tokyo, and we continue that investigations and have people hired on the ground working on our behalf.

In Korea we have met with government officials at the federal government level as well as the city levels in Seoul and Busan, Korea, where we are interested in attractive sites for our business.

I want to emphasize in Korea that we have not negotiated tax rates, that it is also a must that we have some kind of local play available to us in order to pursue our Korean activities.

We expect to have a situation where we have presented a Singapore type of restriction on local play so that we can in fact get into the Korean market.

In Vietnam, we have looked at numerous sites in Vietnam.

We continue to work with the government there.

Our eyes are on Ho Chi Minh City and Hanoi.

Progress is being made; however, there is a longer way to go there at the present time than in the other areas.

We've also been on the ground in Taiwan.

We are not interested in islands offshore, we are interested in the mainland in Taiwan.

We haven't made much progress there, but there is some interest going forward.

In Europe, our operation in Madrid for the EuroVegas strip continues.

We continue to meet with the government.

There continues to be activity in the area of grants and incentives, in the areas of the tender, the land acquisition, as well as the financing.

We are expected by the government to present our plans in some detail in early January and at that time we will also have more information on what the legislation is that will be passed in our favor.

In North America we are working with the Ontario gaming commission as far as a potential downtown site in Toronto.

We have decided on a location.

There are lots of things in the way at this point, including the approval of the Toronto City Council.

We don't know where that project is going to go at the moment, but we are ready to pursue it as soon as the project is released and our conditions are met.

As Sheldon mentioned, the return on investment is critical, particularly in North American locations.

At the present time there is lots of talk in New York, particularly in Queens.

Rob Goldstein and I have had numerous meetings in that market already, and we are continuing this week -- I'm sorry next week, to go back to see if we can pursue an opportunity in that particular area.

Once again, subject to tax rates, subject to all of the other conditions that would make our products successful.

In South America, we have had people on the ground in Brazil, both Sao Paolo and Rio de Janeiro looking at opportunities there, and we have started initial investigations in Argentina.

So we are very busy.

We have a full development department working in these areas and we expect that over the next year or two many of these situations will come to fruition, either fit our model or will not.

Once again, I should emphasize, as Sheldon said, if it doesn't meet -- if any of these don't meet our return hurdles, we certainly will not pursue them.

Let me turn to Singapore for a moment.

After unusually rapid ramp up period, our VIP volumes and mass table business have now been stable for all of the last four quarters.

VIP volumes have been between $11 billion at the low and $13 billion at the high in the roll in each of the last four quarters.

Mass table revenue has also been steady at between $260 million and $280 million over the last five quarters.

Slot revenue has decreased by 8% this quarter compared to the same quarter last year because of a decrease in local play.

This concerns us and we are putting strategies in place -- you will hear some of this from Rob -- in terms of how we can replace that business with additional business that we are after.

The hotel room and MICE business have performed exceptionally and are operating at near capacity.

There is rarely an empty room in the Marina Bay Sands these days.

Retail has also grown meaningfully and we are in the process of developing additional dining and entertainment offerings in our mall.

Looking ahead, our greatest opportunity for growth lies in attracting new premium mass and VIP customers from outside Singapore.

These visitors from around the region, including from Indonesia, Malaysia, Thailand, mainland China, Hong Kong, as well as Japan and Korea, will provide the growth.

In Las Vegas our business has been stable.

We held very well this quarter and the bright spot in Las Vegas continues to be strong growth in play from Asian visitors to Las Vegas and we have the air capacity to continue that business.

We had some group cancellations this last quarter, but the volume of group bookings for 2013 looks quite a bit stronger.

Sands Bethlehem, a simple comment there, continues to grow effectively and we are quite pleased with Sands Bethlehem.

As a matter of fact, during the recent storm, Sands Bethlehem's electronic capability was still on board because of the generators that we had in place.

We actually sold out the hotel to the last four nights and were one of the few places in Bethlehem that had power.

Before I turn it over to Ken, I want to give a special thanks to Ed Tracy and his team at Sands China.

In the last few months we have opened 4,000 rooms, three hotels, two casinos, numerous food and beverage and retail facilities and meeting facilities in a situation where employment is full.

Macao runs a 2% employment rate and I want to commend those people for the great job they've done in getting us to date.

Plenty of growth to come but the openings have been superb.

With that, I would like to turn it over to Ken to take you through some of the financial situations.

Look forward to your questions.

Thanks, Mike.

Revenue expanded 12.5% despite low hold in Singapore.

Hold adjusted property EBITDA was $950.7 million, down a little less than 1% compared to the quarter last year.

Our strong growth in Macao was offset by a smaller contribution from the VIP business in Singapore compared to last year.

Our hold adjusted EBITDA margin of 34% remains healthy and reflects our higher market share in Macao of lower margin VIP business.

We expect hold adjusted EBITDA margin to expand as our mix of mass and non-gaming revenues in Macao grows with the ramp up of Sands Cotai Central.

Hold adjusted diluted earnings per share was $0.53, down $0.06 from last year's third quarter.

The decrease in earnings per share was driven by increased depreciation and amortization expense related to the opening of Sands Cotai Central, higher minority interest, and increased share count.

Lower EBITDA had a $0.01 unfavorable impact but was entirely offset by the favorable impact of lower interest expense, income taxes, and other items.

Our cash balance at September 30 was $3.75 billion, our trailing 12 months EBITDA was also $3.75 billion, and our net debt is approximately $5.7 billion.

Our debt outstanding is both long dated and cost effective, with only approximately $100 million coming due in the remainder of 2012 and 2013 and at an average borrowing rate of approximately 2.9% this quarter.

Our net debt to EBITDA on a consolidated basis is approximately 1.5 times.

This is a very comfortable position for us and supports the decision to increase our recurring dividend by 40% for 2013 while retaining ample resources and liquidity to pursue future growth opportunities.

Looking ahead, we would be very comfortable within that leverage ratio of up to 3 to 3.5 times if we were fortunate enough to have several integrated resort projects in development simultaneously.

As those projects come online and begin to generate cash flow, the ratio would naturally decrease.

So, again, our strong balance sheet gives us tremendous financial flexibility.

We maintain the flexibility to utilize additional strategies to enhance shareholder returns in the future.

The Board focused principally on increasing the recurring dividend at the last meeting.

Share buybacks and special dividends will continue to be on the potential list of future alternatives, but will be weighed against the requirements for future investments in growth.

With that, I will turn the call over to Rob.

Thanks, Ken.

In Macao we are generating exceptional growth momentum in every gaming segment -- mass tables, slots, ETGs, as well as VIP.

We are earning $8,700 per table per day versus $6,900 in last year's numbers in the mass table segment.

The additional hotel inventory of 1,800 Sheraton rooms came online in September and an additional 2,000 rooms will come on board early next year.

And they should boost our growth as well.

Slot and ETG volume is up 29.4% this quarter, rolling volumes are up 45.5%, while total the VIP market in Macao was flat.

Our mass table revenue including stadium-style ETGs increased 48%-plus in the quarter to reach a record $669 million, and that represents a market share of 26.4% in the most important segment in the Macao market from our perspective.

If you look at mass tables, slot, and ETG win together, we are winning $8.5 million a day in the third quarter across our property portfolio, which is up about 35% from a year ago.

We are the market leader in mass win per day.

Looking ahead, we expect the lion's share of market share growth to occur in Cotai where with the majority of the market's sleeping rooms, shopping, dining, entertainment, and amenities are located.

We should be a primary beneficiary of that growth.

The ramp at Sands Cotai Central is visible in our results today.

Our mass win per day increased 15% in this quarter compared to April through June 30 period.

Our rolling volume per day increased over 13% in the September quarter compared with June quarter.

Our hotel occupancy is also strong during the quarter and has continued to ramp during the current fourth quarter.

Operator, can we have the first question, please?

(Operator Instructions) Mark Strawn, Morgan Stanley.

Good afternoon.

Rob, you mentioned some initiatives you're undertaking in both Macao and Singapore to re-accelerate same-store growth in those markets.

With same-store growth in Macao flattish and turning negative in Singapore over the last two Qs, where do you think those same-store growth rates can go over the next couple quarters and what are the real key initiatives you're putting in place that will drive those levels?

Mark, let's start with our strength, our strength is in Macao.

I guess we look at the portfolio now as opposed to individual properties.

The way I view this thing in the market for us -- portfolio market versus Four Seasons versus Venetian versus Cotai, I think what has happened here is, as you know, the mass revenues are booming there in Macao.

Think about $8.5 million a day of 45% margin business, pretty extraordinary.

I think we will continue to accelerate for the simple reason of capacity, hotel sleeping rooms, and the retail.

Once that bridge is completed in December, I think we end up with a 9,000-room hotel in Cotai.

I can't imagine - we are not going to do a whole lot more than continue what we are doing now which is fill the hotel rooms, fill the retail, and watch the market share increase.

I think David Sisk has to be singled out for he has done the junket segment.

We were, as you know, a few short years ago noncompetitive in that segment and now we are very comfortable where we're going with that.

But the real story in Macao, as everyone is aware of, is the mass table side and ETGs and slots.

We just see ourselves growing, gaining more share by the quarter and couldn't be more pleased we are heading there.

Same-store sales, I'd rather speak to same portfolio sales and I think they are going to be double digit from our perspective on the mass side.

Singapore is a different story.

As you know, we are flat in the VIP segment the last four quarters.

We had exceptional year-on-year quarter this time last year; that business is no longer there.

VIP is a challenge today on the growth story because we've seen ourselves softening up.

We have increased our event side significantly starting this quarter.

We see a very, very strong event last week and again this week.

We are doing more special events at the high end targeting the rolling customer.

The obvious challenge here, as you can see from the numbers, is on the mass slot and table side.

Singapore had been a growth story at 4.2 -- well, it started at 2.3 a day and went as high as 4.5 a day since we opened.

That is a challenge.

I think Mike and I think Sheldon both referenced we have a very different approach there, and that is going to be targeting premium mass customers.

Not rolling customers but $10,000, $20,000 customers from Jakarta, KL, Bangkok, Tokyo, Seoul, etc.

We are putting a team on the ground, incentives on the ground to try to drive more of that to premium mass customer into Singapore, more tourist driven.

And we think that is going to be very successful.

We have started that a few months ago.

We are putting a lot of boots on the ground and our belief is that is the growth in Singapore in the near future.

Thanks, that's helpful.

One follow-up on Macao.

Any update on when you think you will get the additional tables at Cotai Central?

And if and when you get those, do you plan to move tables back to the existing properties there?

Mike just came back and he believes January is the right date for the additional tables on Cotai.

What we continue to do, and I think Ed and Dave and that team everyday is examining the highest yield per table, be it Cotai or Venetian.

We have a good problem; we have a lot of business over there.

Even downtown, the old Sands continues to do some pretty good numbers.

So our goal is to maximize yield per table, profitability per table regardless of the hotel it is in.

As you see, Cotai ramping up our dilemma.

It is a wonderful dilemma is can we get to $10 million, $11 million, $12 million a day of table ETG wins.

So our goal is not to identify a property, but where that table performs best that is where it will go.

Thank you.

Joe Greff, JPMorgan.

Hello, everyone.

Just one follow-up question on Singapore.

How much of the declines in rolling chip volume in Singapore would you say is intentional or by design, just as a proactive way of maybe managing credit risk and being careful with extension of credit versus it being more of a demand-related issue?

Joe, unfortunately or fortunately, depending on your perspective, we are not managing it to go downward.

We are trying to manage it up.

We just -- the demand on the back end -- consumer demand was softer.

It has stayed in the $11 billion, $12 billion per quarter range.

I'd love to see it go back to $16 billion.

Obviously we are managing our reserve more aggressively, looking at our aging of our accounts, but it wasn't by design that the demand was soft.

It was by customer demand or lack thereof.

We'd love to go back to a $15 billion, $16 billion -- our goal is to get back to $15 billion, $16 billion roll quarters and collect the money as well.

But it was consumer demand.

When you look back at the third quarter by month and maybe what you've seen so far in the 4Q, would you say that year-over-year trend that is negative on a year-over-year basis that it has stabilized or has it bottomed?

Are you seeing any degree of improvement or stabilization?

I think it stayed pretty flat.

I mean, look at Q2 of 2012.

We did $11.5 billion, $11.8 billion this time.

We had that exceptional third quarter 2011 at $16.7 billion, but unfortunately or fortunately, depends on your perspective, Singapore looks like a $45 billion to $50 billion annualized roll market at this time.

I mentioned earlier we want to be much more aggressive on the events side doing some very strong special events to drive that, but it would be margin [constant] as well.

We don't fear the credit side.

We just would like to see more demand of the right kinds of customers.

But our biggest challenge, very candidly, is to make sure that premium mass growth returns again.

That is the margin, 65%-plus, we would like to get back to, and that is the segment we are really focusing as far as we can do this short-term appreciation, I hope.

Great.

This is Sheldon, Joe.

What I want to say is that the VIP market out of China is reputedly slowing down in Macao, although we are not experiencing that.

But again, we have a pretty big footprint in Macao.

I think the same thing is happening in Singapore, that the Chinese are averse to uncertainty, and they don't know what is going to happen when the new government comes in either this month or next month, but before the end of the year.

So their issue of uncertainty will be resolved if people go back to their normal habits.

I, for one, having discussed this with the Chinese people and their behavior, everybody says -- everybody I've talked to says the same thing, they lie low when there is uncertainty and they become more high profile when the uncertainty is lifted.

And the uncertainty -- the only uncertainty that people can look at is from their own internal viewpoints in the PRC, how is the new government going to treat debt.

Once those issues are moved into the more certain column I think we will see a lot more VIP business coming back.

Great.

Thank you, Sheldon.

Sheldon, the last few conference calls you have spoken more and more about retail mall profitability and we've seen some improving trends there.

What are your thoughts on, I guess as they relate more to Macao, but what are your current thoughts on monetizing that, whether selling part of it or spinning out part of it via an equity spend?

How do you look at monetizing?

Because you do look at these very low cap rates and you are probably not getting that equity value currently.

If you were to monetize it you certainly could demonstrate those low cap rates out there.

That's all for me.

Thank you.

When I look at that Joe, I drool.

It is a very drooling, enticing, and stimulating batter.

I mean, I have been saying that our business model is unlike any other business model in any portion of the hospitality and retail business ever.

(technical difficulty) these non-core assets we have [solemnly] paid for the entire cost.

We've got about $9 billion to $10 billion today, and I'm not going to sell Macao until we finish the bridge, which is next month in December, and we let the cross traffic.

It is a unique bridge.

It is not like the bridges in Las Vegas where they are outdoors; they are exposed to the weather.

This is fully covered, fully enclosed, fully air-conditioned, and fully equipped with people movers, moving sidewalks.

People in (inaudible) are just going to go up there just for the experience of going over the bridge on moving sidewalks.

So we'll see how that impacts it.

If it does impact it well, I think we could probably reach another billion or maybe more.

But we are looking at whether or not we should turn that over now, in terms of monetizing it, or we should wait until we get the approval for the topical mall and we put the new retail in Lot 3.

So we are still in the mix of that.

In any event, this is a good time; it was a good cap rate.

I remember the time there wasn't a good cap rate.

We haven't focused on that so much because from my standpoint I focus on development and strategy.

And so I came up with the idea to do the 800,000 square foot mall.

That will add a couple or a few more billion dollars.

So it won't hurt to just keep new development.

All we know is that that money is out there to be gotten without any interest, so it feels very good to have that cushion.

We also have 26 more stores opening in the Four Seasons, 43 more stores opening at 5 in Cotai Central and, as Sheldon said, the potential of an 800,000 square-foot, 300 store mall next to the Sheraton on a tropical garden space.

So there is a lot more retail to mature for us to essentially maximize that retail facility.

And the new stores in The Venetian and the Four Seasons will open in November of this year, actually next month.

Thank you.

Shaun Kelley, Bank of America.

Good afternoon, everyone.

I just wanted to ask a little bit more about the ramp up at Cotai Central.

It looks like obviously from the market share statistics that some of us see the debut so far since September 20 has been -- looks like it is starting to be a little bit more successful.

Rob, could you give us a little bit of your thoughts in terms of how are you guys beginning to utilize some of the hotel rooms?

How you feel about the gaming side; is it mass or is it VIP that you're attracting into Phase 2?

Then, lastly, what you think about margins at that property because they were down a little bit sequentially, but I imagine they can be a lot higher over time.

Yes, I guess, Shaun, the way I look at the properties, first, we are very happy with the junket segment; couldn't be happier with what has happened on the junket side.

The team there -- that segment is producing very, very well and we -- to be blunt about it, we are surprised just how well it does so quickly out of the box.

We have growth (technical difficulty) it's our weakest performer right now on the mass table side, and part of the reason why is The Venetian is so damn strong.

And so is, of course, the Four Seasons, although much smaller offering of tables.

But I think our growth potential, both from a margin and EBITDA perspective, emanates from the ramp as we use more hotel rooms.

The retail gets opened as we get up to a $10,000 -- our goal is $10,000 winning premium per day like The Venetian did this quarter.

If we get there, you are going to see the Sands Cotai Central.

I believe it is the ultimate mass product built for that market.

What they've done in the junket segment surprises me how well it is doing.

So if they get the mass table win up to $10,000 a day, get all the ETGs pumped up, that is where the growth opportunities are for the Sands Cotai Central to start pushing up against The Venetian in 2013 and 2014.

The margins will move with the mass.

Let's be honest, a 10%, 11% junket segment is still challenging on the margin side.

The ETGs in that building along with slots, it had a slow start.

It is all coming together.

As we get the mass, the premier mass side cranking and we get all the rooms open in early first quarter of next year and that bridge gets complete, I don't think there is any reason to doubt that this property should be a billion-dollar property down the road.

I feel wildly confident it is the right property for the market in Macao today.

Lots of sleeping rooms, lots of retail, lots of food, a great gaming floor.

I feel wildly -- I always felt confident that the Sands Cotai Central would rival The Venetian once it is fully operational.

That is really helpful, Rob.

Then I guess secondarily I'd just like to ask a little bit about the dividend announcement.

So we've obviously gotten very good feedback and it looks like, depending upon where the stock opens tomorrow, you would be right around a 3% yield.

Ken, could you talk a little bit about just what you would be comfortable with in terms of the payout ratio over time?

Just kind of any additional color on how much we could think about potentially increasing.

Would possible double-digit percentage increases be on the table in the future?

That would be helpful for investors.

Thanks.

A little bit of a loaded question there, I appreciate that.

So I think -- what I can tell you is when we went through the deliberations --.

(inaudible)

Exactly.

And so when we went through the deliberations on the dividend, we were really trying to focus in on kind of right-sizing the dividend and getting it to around a 3% yield, which is what you articulated.

And that is really where the lion's share of the discussion focused in on.

I think, depending on what conditions are going forward, our focus is obviously on increasing that over time.

As far as what the percentage of increase is, it really is a function of what we feel is the right size dividend at that point in time that that decision is made.

But that is the way we look at it more so than really on a payout ratio, because we've also got to take into account kind of what the horizon looks like, investments in future growth.

And so we have to factor that in and make sure we are in a balanced situation.

But for right now, the right size of the dividend we felt was the 3% and that is where we generated the increase of 40% to get to.

Great.

Thanks a lot.

Felicia Hendrix, Barclays.

Good afternoon, everybody.

Rob, you guys have given us a lot of detail and we really appreciate that.

Clearly the quarter was affected by hold.

Even adjusting for that though in the provision in Singapore, you did come in a little bit below our property EBITDA forecast.

So I'm just wondering on a hold-adjusted basis were there any properties -- you talked about Sands Cotai, what's going on there, but were there any other properties where you might have expected to see better flow-through?

So you are talking not in Singapore, but in Macao?

No, in general.

Obviously, the Sands Cotai numbers are good but they can be better, again, as the margins are hurting a bit due to the premium mass or lack of premium mass.

But I think The Venetian did very, very well.

The Four Seasons, it is a junket-driven property so it has always got that challenge but I think the Sands downtown was great.

Obviously the larger reserve in MBS hurt us, but that is just a recognition of the aging of some of the accounts.

But overall I think it is all there to see.

We've laid it all out for you, so I can't add much color to that.

Okay.

Actually just touched on something else.

What was the percentage of direct play at Four Seasons in the quarter versus last year at this time in the third quarter?

Direct play being defined as direct junket play, or I mean as our direct business?

Your direct business.

Let's take a look here.

We were down a bit.

We had rolling volume this quarter of 1.461 versus 1.507.

We held light, 2.69 versus last year's -- excuse me, I'm looking at Q2.

So Q3 2011, we were at 1.570 versus 1.461 on the rolling volume.

We held 4.39 last year versus 2.6 --

Rob, not to interrupt, she's looking at the difference between the junket business and the premium direct business.

Is that right?

Yes.

I'm trying to give you the premium direct or the junket?

What percentage of your overall VIP play was your direct generated play?

Oh, percentage of overall business?

It is mostly 7.5 rolling on the VIP junket versus 1.461 on the direct.

Okay, and --.

The lion's share, obviously, is VIP junket.

At the Plaza.

Yes, at the Plaza.

It is much higher at The Venetian.

I was just asking at the Four Seasons.

It's 7.5 versus 1.4, and we held last -- the hold is obviously in 3Q 2011, we held 2 versus 2.56 this year.

So it was about 16% in terms of the premium direct percentage.

And, Ken, what was it last year?

Hold on a second, I'll tell you.

It was $72 million versus -- $152 million for third quarter 2011.

It was Up 37%.

Versus $69 million.

(multiple speakers) Yes, it was about 37%.

Okay, thank you.

Our growth there has been out of the junket segment.

That's correct; I just am trying to figure out where the disparity was with our numbers.

Then is it -- Sheldon, is it a little too early regarding The Parisian to talk about the incremental number of tables you think you might get there?

Well, I can only quote what the government has said publicly.

What?

I said, oh, publicly.

Publicly.

No, I don't want to talk about what they say publicly.

We've asked for the minimum that we think we need to open Lot 3, but then I see other people are bidding more.

The government has said that they -- they've indicated publicly that they will give more tables to the people who are building more non-gaming.

They are not going to allow the total space to -- the matrix to come down to 25% casino and 75% non-gaming.

They want it down to 10% or less, which means that the guys who are going to build casino and hotels and a couple of restaurants, they are not going to get very many tables.

They only have like 2,000 tables to give out.

I don't think it will be surprising for them to say the guys who build 25% or more of casino will get the same number of tables that people who build 10% or less.

Our business model says that we build -- actually we have the largest casino in the world in the Venetian Macao and it is only 4.5% of the total amount of space.

All of our plans for all of the lots on the Cotai Strip would have amounted to, if we were able to build them all, 2.5% of total.

So we are setting the precedent to how they are going to do it.

So in our case, I'm pretty sure that if the government follows what it said publicly that we will get at least the number of tables we asked for.

I've since increased that because -- publicly I've increased it to 500, but we could live with 450, because the other guy is saying -- (inaudible) says they want 600 and MPL says they want 500.

But they are not going to build the entertainment, the shopping, the MICE space in particular and, as you know, we focus a lot on MICE space.

So they want people that are -- they are going to give the tables to the people, they say, that are contributing more to the leisure business travel objectives.

That is very helpful, thank you.

Jon Oh, CLSA.

Thank you, everyone.

Rob, if you could just give us a quick sense of your strategy in Macao in the premium mass market segment.

Could you quantify for us how big is your opportunity today, maybe give us a sense of how much of your mass market today would you classify as premium mass market?

And maybe give us a road map as to how much bigger you think you could be, specifically for Cotai Central.

I think, let's be honest --

The objective is to make money.

Yes, that is simple one.

Jon, way we view this is we are in a different place than anybody else because we have three distinct segments.

We've got super premium, which tables winning $20,000-plus a day; probably that is less than 5% of portfolio.

15% would probably be devoted to what I will call premium mass, and the lion's share, the bulk, would be in the pure mass business.

But we are in a unique place, let's be frank.

We've got more capacity than anybody else by a lot.

We've got more sleeping rooms, more retail, more food, so the way I view this is it is probably the single greatest opportunity I've ever seen in any market anywhere.

I could see a day when if we are able to do 8.5 how big does it get?

Depends on obviously -- we are going to grow faster than anybody because we've got the capacity and the sleeping rooms to grow.

Our buildings are built for mass, premium mass, super mass.

We are very focused on it.

We think we've done a terrific job of upping the junket segment, but our focus and our profit margins obviously reside in this segment.

I think one of the unique things about our buildings is that we can talk to the customers, not betting just HKD1,000 a day.

We can talk to people betting less.

We can offer them things no one else can offer.

So we've got a multi-faceted strategy to all three segments, but our biggest single opportunity obviously is those tables that we can drop minimums down and get that customer.

We think ETGs are a very important part of that.

How big can it get?

Jon, I don't know.

I read your reports and if I believe you, I can get very, very, very big.

And I think you're right.

I think the growth opportunities are enormous for us because we are in the sweetest part of the market where the margins are 45%, 48%.

I see a day when we can, on the ETG slot side, surpass $1 billion not too far down the road.

I think mass tables can be staggering, I really do.

I mean the market in the mass tables, I think all of us are dumbstruck on how well it has done.

But the biggest beneficiary is this company, and that is where our focus is.

How big can it be?

I don't know.

I would like to believe you're right, that it can grow double digit for the foreseeable next two years and we are the biggest beneficiary.

That's our biggest opportunity by far.

Do you currently have space allocated within Cotai Central for you to allocate specifically for premium mass, or is that just jumbled within the whole overall mass floor?

No, we're reallocating space now, Jon, up on the top floors as well as rethinking the floor.

Ed and David have a very depth in strategy to rethink Cotai and Sands Cotai with additional new rooms, new spaces.

We are rethinking as we speak, because that's where the opportunity for Cotai will be, on the $1 billion property it resides.

Just the last one for me, for Ken I guess.

Jon, hang on, Sheldon wants to make a comment.

There's a very big space that we want to reallocate called the theater.

We've got plenty of room, I think it's 70,000 --.

Theater box 5. Sheldon's referencing theater box 5 in Sands Cotai Central.

It's over 80,000 --.

We have the same box in what was lot 6, which is now the Sheraton lot.

We could turn that into mass gaming, mass premium, PMS.

We're thinking the floor, Jon, every which way we can, including a 39th floor of the current building, including Sheldon referenced the theater spaces.

We have -- yes, we have opportunity and we recognize it has got to be the right physical space to make it really sing to $10,000, $15,000 per table per day.

I do think with the bridge connecting 9,000 keys, all that retail, I don't think $10,000 a day across the portfolio is that ambitious.

I think it is very achievable for us.

Not one marketing move we're going to make is forever.

The situation is fluid, it's dynamic; we will try out new things.

What used to be high limits is now high limit diamond and ruby and is now being retitled premium mass.

If you look at our space in The Venetian, that is what Sheldon is referencing.

That premium, that mass play in the Venetian Ruby Diamond has been exemplary from the day we opened it.

It is an extraordinary success story.

Look at the Venetian doing $10,000-plus per table per day currently.

Where does it go?

I don't know.

It could be $11,000, $12,000 a day.

Okay, great.

A question for Ken.

The $1.40 of dividends from LVS, you know that is a 40% increase in payout but you have not really made any commitments with -- on Sands China dividends, 58% Hong Kong for every six months.

How should we go about thinking about that?

How are you sourcing that incremental $0.40 per share payout?

Are you taking that from Singapore?

And if you are, could you help us think about how should we model the tax implications of that?

Yes, sure.

Couple questions in there.

The Sands China Board will need to make a determination as far as what the dividend will be coming out of them for 2013, and that decision hasn't been made yet.

But I think if you just look at it from a cash flow standpoint, I think the way that I'm kind of thinking about funding the LVS dividend, which is about $1.2 million, a little bit less than -- I'm sorry, $1.2 billion.

So it is probably close to about $1 billion coming out of Sands China Ltd., and that would be net of the minority interest piece that would get paid out.

So that $1 billion would be flowing up approximately from them.

Then the balance would be sourced from either cash from Marina Bay Sands or cash that we have either in the US restricted group or at the parent level.

So that is kind of the way we are thinking about it, although no final determination has been made relative to that.

Then it is all really -- any money that we bring up from Sands China Ltd.

or from Marina Bay Sands is very tax efficient because we would be offsetting any taxes that would be owed on the repatriation of dividends with foreign tax credits that are generated in our Asian activities.

And so for all intents and purposes, that money comes up on a tax-free basis.

Okay, thank you very much.

Jon, this is Sheldon.

Obviously, we are going to have to get some money out of SCL, and we've got to share it proportionately.

And so we have got, to the extent that we are upstreaming the amount of money -- we just got the okay from the Board day before yesterday.

So we haven't heard from the SCL Board, but obviously we are going to have to share the good fortune.

And by the way, we are happy about that.

We get 70.3% of that.

Okay, thank you.

Steven Kent, Goldman Sachs.

Could you discuss the new development opportunities?

Maybe, Mike, you could speak to what you are envisioning in New York.

Then when you talk about the opportunity in Madrid, I guess I'm intrigued because on your slide you go through six steps that you are looking for, but the bottom one is that you need to see some changes in the economic conditions.

And that almost seems secondary now when I'm looking at the slides versus just a few months ago when that seemed to be more paramount.

I think, Steve, the economic conditions really -- during the course of the meetings with the Spanish government and the course of our meetings here, if something were to deteriorate significantly in terms of the euro, what have you, that is just a caveat that we are watching that.

This is a process that will go on for a number of months as we go through the process of legislations, final site selection, the tender, land acquisition, etc.

But if something turns dramatically negative in the short term, that is simply something that we would look and we would want anybody to know that we would be making a judgment on that basis.

So I think that is on the chart just to keep aware that something could happen.

We feel good about looking at the investment at the present time and looking at the future.

Basically if all things come in order, they could all come in order, but if something dramatic happens in the economic environment that causes real concern we would very much hesitate to go forward.

But if Spain stays the way it is right now, then you would go forward from an economic perspective?

I think if everything else worked according to our plan, yes.

You have to understand that one of the biggest triggers in the entire matrix is the fact that the building sensitivity analysis -- I don't want to say this publicly, but our gaming tax rate (inaudible) over there is going to be significantly lower.

So we could make significant adjustments to end up with our EBITDA percentage by the tax rate.

We make a 33% EBITDA rate in Macao with the tax rate at 40%.

We make 50% or 55% EBITDA of revenue in Singapore with a much lower -- with a tax rate averaging about 15%.

We get below that, which I'm confident we will, significantly and we have a certain things to achieve there to get below that.

Then we don't need anywhere near as much money by any measure -- win per unit per day or by the tables or slots -- so we might end up with the same amount of money with only 70% of the amount of business that it would take to do that in either of our other locations.

So you can't compare apples -- you can't compare apples to apples.

They are two different calculations.

Okay, and then the commentary on New York?

New York, basically, Steve, we have been having some conversations about Willets Point in Queens.

We previously have looked at Manhattan.

Most of the noise we get in Manhattan is that it won't happen.

We think there is a potential.

There has been some press about Willets Point.

We've looked at it; I will continue to look at it.

We are testing that market and talking to the owners of that situation about that kind of development.

Once again, that would very much depend upon what kind of arrangements we could make there, as well as what the tax rate would be.

There's lots of rumors and lots of things flying around, but we think that is a viable market and we are under investigation there now.

Okay, thank you.

Carlo Santarelli, Deutsche Bank.

The question was for Rob.

You talked a little bit earlier about your mass business, your premium versus your regular mass and obviously the 45% margins in your regular mass business.

Could you guys maybe quantify a little bit the differences between the margins of that premium mass customer and that regular mass customer to the extent that there are any in Singapore and Macao?

I think in Macao is not that material, Carlo.

You think about it, it blends at a 44%, up to the high 40%s.

I don't think there is a lot of difference.

It is mostly -- if it's complementary, it is room comps, it is meal.

But this spread is not great, it really isn't.

Singapore, I'd say the same.

It stays pretty consistent -- high 60%s, slots, ETG, mass table.

The margins grow, obviously, the win per table in both markets and the win per tables can -- $20,000 per table out of The Venetian some periods it may ramp up.

But, frankly, not a whole lot of spread that I can tell.

Great, thank you.

Then if I could just ask a follow-up.

Were there any changes in your provisions this quarter that hampered specifically the Singapore results at all?

I'm sorry, what was the first part?

Any changes in your provisions in this period?

(multiple speakers) Yes, we raised them.

Yes, quarter over quarter, so third quarter 2012 versus third quarter 2011 it was about a $15 million increase in receivable provision.

Okay, that's helpful.

Thank you very much.

This concludes today's conference call.

You may now disconnect.