拉斯維加斯金沙集團 (LVS) 2015 Q3 法說會逐字稿

Good afternoon.

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

At this time I would like to welcome everyone to the Las Vegas Sands 2015 third quarter earnings call.

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

After the speaker's remarks there will be a question and answer session.

(Operator Instructions)

Thank you.

Dan Briggs, you may begin your conference.

Thank you, operator.

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

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 inform you that we have posted supplementary earnings slides on our investor relations website for your use.

We may refer to those slides during Q&A portion of the call.

Finally, for those who would like to participate in the Q&A session we ask that you please limit yourself to one question and one follow-up question so we might allow everyone with interest to participate.

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

Thank you, Dan.

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

I'm pleased we continued to execute our strategic objectives during the quarter.

And despite the continuing challenges in the Macao market, we delivered a strong set of financial results with company-wide hold-normalized adjusted property EBITDA, reaching $1.09 billion, an increase of 7% over the prior quarter.

At the same time we continued to return excess capital to shareholders.

It has always been clear to me that our unique MICE-based integrated resort business model positively differentiates us from our competitors, in terms of both financial performance and economic contribution to all those jurisdictions.

In Macao, our hold-normalized EBITDA was up quarter-on-quarter with continued sequential improvement in our operating margin.

In Singapore, Marina Bay Sands delivered yet another record quarter in mass gaming win-per-day, when measured in Singapore dollars, as well as a 20% sequential increase in rolling volumes.

On a constant currency basis, Marina Bay Sands hold-normalized EBITDA was up 22.4%.

At the heart of our company's success is having the right strategy at the outset.

We had the courage of our convictions to build early and aggressively.

We develop critical mass to scale and diversification.

And we offer product and amenities that are best positioned to capture long-term tourism and consumption growth in Asia.

We're unique in the scale and diversity of our portfolio.

We have focused on the most stable and profitable segment: the mass market.

We're clearly differentiated by the strength of our cash flow and balance sheet, and we're the further distinguished versus the competition by our track record as well as the pioneer of the MICE-based integrated resort business model.

That balance sheet strength at only 1.6 times net-debt-to-EBITDA allows us to stay fully committed to it development plans as well as our commitments to returning capital to shareholders.

Again this is unique in our industry.

Our retail mall portfolio, which features the industry's broadest and deepest set of retail offerings in both Macao and Singapore, is also unique.

I'm pleased to highlight that our retail mall revenues have held up well in today's retail market, which is softer, in particular, at the higher end.

Also we have the ability to monetize our retail mall portfolio in the future.

In Macao, our share of EBITDA in the six operator market has continued to increase to around 36% in the first six months of 2015, up from 34% in 2014.

In fact, in quarter two, our EBITDA share climbed to 39%.

In Singapore, our share of EBITDA of the duopoly market has increased to 65% in the first six months of 2015, up from 59% in 2014.

That's not withstanding the fact that projections of the Singapore market have been premature and exaggerated.

Our operations represent a substantial portion of the EBITDA generated in all of Asia for the industry.

This is truly a precedent.

Now let me take you through some of the operating highlights of our results in Macao for the quarter.

For quarter three on a hold-normalized basis, Sands China EBITDA was $537 million, up 1% over the prior quarter.

While we consider EBITDA shared the most important metric reflecting market performance, we also held the number one spot in revenue share in the quarter, with 23.6% of the Macao markets gaming revenue.

In the mass segment we do see signs of stabilization: the continued benefit from the scale of our hotel room inventory, the diversity of our product offering, and the attraction of the Venetian as Macao's must-see destination.

I want to remind you because we haven't talked about this before, that our -- the casino at Venetian Macau is less than 4% of the total amount of space in the Venetian Macao.

We sometimes get asked whether our capacity advantage is diminished given the recent market revenue decline.

I believe the opposite is the case.

In a market with peak periods, the weekends and holidays matter more than ever before, and where mass-market customers will generate the lion's share of the revenue of future profit growth, our capacity advantage low, in fact, we've further amplified.

I believe the Venetian Macao which a must-see attraction and everybody coming to Macao will be matched by the Parisian, because it's got a geographical theme that people really want to see.

Look at our market share revenue in the peak revenue periods.

26.5% in May, with the Labor Day holidays, 25.3% in August, the peak summer month, and then October around 25% again for National Day Golden Week.

Our hotel occupancy in the July and August summer months was 89%, 5 percentage points higher than that of the whole Macao market.

In VIP gaming, despite the continued weakening of the junket segment during the quarter, our premium direct business yet again delivered a solid quarter.

Our premium direct growing volumes were up 1% quarter-over-quarter versus the 17% decline in the overall market junket set.

With respect to cost efficiencies, we are well on track to achieving more than $200 million of savings in 2015.

Hold-normalized EBITDA margin in Macao improved sequentially to over 33%, primarily reflecting cost efficiencies.

I am pleased that since quarter one, we have been able to sustain higher levels of market share while controlling costs and increasing labor productivity.

Rob can elaborate further in the discussion later.

With the completion of St.

Regis and Venetian, we will have almost 13,000 hotel rooms in four interconnected resorts, over 840 retail stores across four shopping malls, with the potential to add several hundred more stores in future development phases, subject to government approval.

2 million square feet of meeting and exhibition space, and four performance and event venues, including our Venetian Cotai Arena, which can be utilized either for our MICE business or major entertainment events.

We remain fully committed to playing the pioneering role in Macao's transformation into Asia's leading business convention and leisure tours of destination.

We have steadfast confidence in our future success, a track record in being transformative pioneers in MICE, retail and entertainment speak for itself.

Now moving on to Marina Bay Sands in Singapore.

We delivered another strong quarter at Marina Bay Sands, which despite the impact of the stronger US dollar, generated hold-normalized EBITDA of $411 million, up 12% from the year-ago quarter.

As I mentioned earlier, on a constant currency basis, our hold-normalized EBITDA increased over 22%, while rolling and non-rolling segments performed well.

Mass win-per-day was $4.8 million, when adjusted for the currency effect, our mass win-per-day was up by 8%.

That strong performance was principally driven by the successful execution of our strategy to bring premium mass customers from throughout Asia to Singapore.

As a result, we delivered another all-time quarterly record in mass win-per-day in Singapore dollars.

In the rolling segment, we enjoyed the best rolling volumes in any quarter since quarter one 2014.

On a constant currency basis, rolling volumes were up 36% year on year, and up 20% quarter on quarter.

In addition, we have maintained a proven accounts receivable reserve ratio during the quarter.

Our company remains committed to leading the industry compliance.

Now on to my favorite subject, the return of capital to shareholders.

I'm extremely pleased to announce that the Las Vegas Sands Board of Directors has approved an increase in our recurring dividend program for 2016 calendar year.

The 2016 calendar Las Vegas Sands dividend will be $2.88 for the year, or $0.72 per quarter.

This represents a 10.8% increase over the $2.60 dividend we're paying in 2015.

We remain committed to the maintenance of our recurring dividend programs at both Las Vegas Sands and Sands China, and we remain committed to increasing those recurring dividends in the future as our cash flows grow.

Our industry-leading cash flows, geographic diversity, and balance sheet strength enable us to continue these recurring dividend programs, while retaining financial resources to invest for future growth and pursue new development opportunities.

Yay dividends.

And yay buybacks.

We bought back 80 million of stock in the most recent quarter.

We have approximately $1.6 billion remaining under our current stock buyback authorization.

And we look forward to continuing to utilize this stock buyback program to return excess capital to shareholders and to enhance long-term shareholder returns.

I would also like to take the opportunity to welcome Mr. Wilfred Wong, who will join us on November 1 as President and Chief Operating Officer Sands China Limited.

Wilfred brings the distinguished track record in both the public and private sectors to Sands China.

We are pleased to be able to continuing to contribute to Macao's success in realizing its objectives at diversifying its economy, supporting the growth of local businesses, providing meaningful career development opportunities for its citizens, and reaching its full potential as Asia's leading business and leisure tours of destination.

Finally, let me share that I'm extremely pleased about the depth and strength of our management team, not only at Sands China, but in Singapore, Las Vegas, and in Bethlehem, Pennsylvania.

The strength of our team is clearly reflected in our ability to stay disciplined and continue executing our strategy in challenging markets.

I want to thank you again for joining us on the call today, now let's engage in Q&A.

(Operator Instructions)

Joe Greff.

Good afternoon, everybody.

Hi Sheldon.

Hi Rob.

I will start with a question on Singapore.

I thought Macao was just kind of down the middle of the fairway.

Singapore, I thought that's where the biggest positive variance was relative to our expectations in the forecast, I suppose on the mass side and also on the VIP side.

And you talked about it a little bit, Sheldon, but Rob maybe you can drill down a little bit what factors are driving, or at least relative to our expectations, to better performance there, what are you doing differently or better in the past?

Different sourcing geographically, that would be helpful to understand.

Thank you.

Sure, Joe.

The NBS still remains outstanding.

I think the quarter reflects our dedication to all our business segments.

The lodging piece held up very well both ADR and occupancy.

The retail piece actually grew year on year, which is exciting in these difficult times out of China.

Our gaming business remains exemplary.

I would caution you again, the VIP gets a lot of attention, but again, it's highly concentrated.

We did a very good quarter relative to the last six quarters, but the real star of the show, I think, in Singapore remains our non-rolling table slot ETG performance: 63% margins, $4.8 million a day.

To your point of regionalization, I think we benefit by being in a place that has Malaysia, Indonesia, Korea, Japan as neighborhoods.

And we're very pleased with Tema over there, couldn't be more pleased in fact.

Actually, our share growth getting better and better.

Our magic number is still $5 million a day, haven't hit it yet.

Currency-adjusted, we're there actually.

So despite the foreign exchange headwinds, despite the problems in China, we have an annualized revenue of about $1.15 billion coming out of [Spot's] ETGs.

It's a great business.

It's not credit-dependent.

It's not China-dependent.

As Sheldon referenced, we dominate in that market in terms of EBITDA split.

We're just very encouraged by the business.

We see the trends getting more solid for us.

A lot of skepticism around Singapore, but it's not China-dependent.

It's not High-Roller-dependent.

It's very sustainable and we're very proud of the results and the team over there has really executed where we want to be.

So very pleased with it and hope we can keep that momentum going in the fourth quarter.

I think the discouragement or the pessimism about Singapore is based upon how our competitor in Singapore is doing.

Can you imagine we're doing double amount of business?

It's two to one.

That they're doing.

We own 65% of the market.

I attribute that to not only a location, quality of the product, and the most important thing is that Genting has never operated in a competitive market.

We have never operated in anything but a competitive market, so we understand how to compete a lot stronger than our competitor knows how to compete.

So I think the fact that they're not doing as good as we are -- we're doing twice as good as they are -- you want to holds us in tandem with what they're doing and I think that's why I wanted to emphasize the word differentiated from the rest of the market in Asia.

I do think, Joe, that building is exemplary; where it's at physically, how it looks architecturally, the food and beverage, the retail, it's pretty iconic.

We're just very proud of it and I think it's going to continue to do very well in the future.

So all good signs coming out of Singapore.

Great.

Thank you.

And then, for my follow-up question, again not Macao-related, but looking over the Las Vegas Strip, good RevPAR growth performance in the 3Q, (multiple speakers), what drove that and how sustainable are mid- to high-single-digit RevPAR gains going forward?

And that's really it for me.

Thank you.

Yes, we're proud to say it's our best quarter in Las Vegas since the difficulties of 2007/2008.

It was a real strong quarter from any perspective, but the star here is the lodging piece.

We did two two two and ADR at 96%.

It was record quarter for us in normalized basis plus $100 million in EBITDA.

The gaming piece held up pretty well, but again, the star here is going to be the lodging segment, which is getting stronger.

We see support from all the group segment, FIT.

Very encouraged by Las Vegas right now because of our lodging business.

Gaming continues to be very competitive.

It's fostered okay, nothing spectacular.

Our table jobs affected somewhat by the downturn in international play.

But, overall, our drop is $600 million-plus, a strong third quarter.

Just very encouraged by what we are seeing in Las Vegas from our perspective.

It's not been, the last couple years, as strong for us.

We're seeing return to a better time.

I think the group business has been exemplary in helping drive some that compressionate rate.

So very excited.

Our RevPAR and overall lodging trends for our properties here in Las Vegas.

Thank you.

Felicia Hendrix, Barclays.

Hi.

Good afternoon.

Thanks.

Rob, in the prepared remarks, Sheldon put you on the spot and said that you might talk about your continued ability to cut costs.

So I was wondering if you could do that and just how we should think about the ability for you guys to continue offsetting the negative operating leverage as the operating environment continues to stay challenging?

Sure.

Well, obviously, proven we can operate in what is a very difficult environment in Macao right now.

The VIP erosion and the continuing softness in the mass.

We're down year to date about $170 million year on year.

Our goal was to get to $230 million, $240 million, annualized.

The cut come from everywhere.

It comes from about -- 30% derives from payroll, about 25% from gaming and reinvestment in OpEx, about 25% from non-gaming OpEx, about 20% from marketing entertainment.

I think we can operate, Felicia, in this environment.

We've proven we can do it.

This year has been difficult, as you well know, and if it continues to be harsh in Macao, but we can operate and keep doing this and we're confident there's more to be done there.

But as you know, at some point, you cut into muscle and not just fat, and that's my concern is how much further we can go.

The 900-pound gorilla in the room is to return to growth in the mass market.

Our buildings are built for the mass market.

They're larger room capacity, large gaming capacity, large retail capacity.

They're built for mass markets.

We're built for today's Macao market.

Frankly, we're not as strong on the higher end.

We've never been as strong, which Sheldon always prophesied, unfortunately came true.

It'll be a downturn at some point in every market.

So we build better rooms, better retail, diversify the product.

I'm hoping, as a mass market gets stronger, the cost-cutting will be minimized, but if 2016 continues like it appears to be going, we're prepared to play in that arena.

We are cost-cutting across the board, it's not always easy for the team there.

They've done a very good job of doing it, but it can continue, and we can go deeper and harder.

And again, it's derived from all parts of our business.

It doesn't rely on any one segment.

So, unfortunately, that's where we're at.

We still think we made a lot of money in Macao.

It would be a lot more fun and exciting if we see return to some growth in the mass and premium-mass segments.

So that's our Macao situation for today.

That's good.

And also a good segue to my next question, my follow-up question, which is on the mass customer.

Just looking at the statistics, obviously the base-mass win-per-table continues to decline.

It's at a slower age.

Sheldon mentioned that is stabilizing, but, Rob, as we think about the competition that's coming online and the continued pressures that the customer is seeing from the market, from the government, where do you see the base-mass statistics settling out and can you describe the type of base-mass customer that you're seeing today versus a year ago?

Obviously their spend-per-visit to the casino continues to decline, but is it their entire budget down or are they just spending less in the casino, but increasing their spend on non-gaming activities?

So, again, where do you see the base-mass statistics settling out and what does the customer's budget look like?

I think you have to careful when you say base-mass.

It's very confusing.

We all know the junket piece where that's at.

That's pretty simplistic.

We can see that very black-and-white.

Mass is more confusing because I believe the base-mass business hasn't really changed that much.

What has changed is the premium-mass.

When you put that together and that equation becomes base and premium mixed together.

The fall-off in the customer, Felicia, has been in the premium-mass, in my opinion.

The base-mass customer is holding up pretty well.

I think you're seeing some stabilization there.

Where you're not seeing growth, you're not seeing return, is more premium-mass mixed in there.

And if you think of it this way, you walk into a high-end store in New York City or Las Vegas, you walk into a high-end retailer and you don't necessarily see a lot of customers there, but you see three or four a day that might make a huge purchase and that's what happened in Macao.

You've lost a lot of these premium-mass customers that were quasi-junket, quasi-direct play and that customer base has eroded.

Until that customer is back, I think you going to see a very slow return to a year ago.

And I think the pure base-mass customer loses $1000 or $500 a day.

If you go to Macao, it looks very busy over there.

They're alive and well, especially weekends and holidays.

So I think the real softness here is a derivative of the junket play somewhat.

It's that same person affected by economy, anti-corruption, liquidity, union pay, smoking.

I think it's the same story to extent.

Again, we need to see that segment returns, from Macao to regroup and get brighter and happier over there.

You need to see a return to more premium-mass customers.

I believe our base business is actually pretty good.

Our rooms look pretty good, our gaming business is holding up okay, but we're not getting that 5% or 10% of the population that drove extraordinary amounts of gaming win and that GGR took us back.

I think Macao will continue to be difficult.

And that's how I don't think it's base-mass.

I think it's premium-mass when you mix them together.

But maybe we can talk offline because I know my time is done here, but in your charts, you showed base-mass since the second quarter of 2014 is down 18%.

It's continued to decline sequentially, so I was referring to that market, really specifically.

I understand, but again, I think it's hard, to be real honest with you, I think for any of this, it's difficult to identify.

Not to disprove our charge, because BMA did this.

It must be perfect.

(laughter) But the truth is, it is hard, it is difficult to differentiate at times and any operator in Macao can tell you this, it is very difficult to differentiate base-mass, premium-mass, what table.

I'm not convinced that those charts don't reflect still a heavy smattering of premium-mass next to a base.

I think, from experience, anybody who's over there will tell you that it's so misleading because it's hard to identify exactly what is, you know, they all hold up a sign and say I'm premium-mass, not base-mass.

You're doing it based on our sample, our indications, I'm not convinced that our base-mass business is down 18%.

I think our premium-mass business may be down more.

That's where the softness is and continues to be.

I'm happy to take you offline and talk about it, but it's my firm conviction that you can't get every number right in a market that big, in terms of when you segment these markets, it's difficult.

Junkets are easy.

They're all in the same room.

They're all playing the same place.

Mass is much more difficult to really understand the segmentation.

And we do know for a fact that there are premium-mass players at play in the geographic area that we're identifying here as base.

They absolutely are in there and they contribute a piece of this, so this is illustrative only.

Yes, our mass drop was up.

I mean, our mass drop actually grew.

And I think what I rely on more, then, is sequentially.

Yes, not year on year, but sequentially.

I also rely on the people that work for us.

Because we get to talk every morning and you listen to the dialog and it seems to be more and more, we're seeing a lot of bodies, a lot of business in those buildings.

We're not seeing the better quality customers.

That's what drives table win-per-unit.

It drives higher minimum bets.

It drives the entire GGR.

And that's where I think the weakness really is.

Our drop, I think we're doing okay in the base-mass, but we're suffering on the premium-mass side.

John O'Neill, CLSA.

Hi, good afternoon, everyone.

Thanks for taking my question.

Well done on raising the dividend to $2.88.

Well my question is, I'm just trying to understand the implicit assumptions within what you guys are thinking as to what do you need to actually make maybe next year and in 2017 or what are the hurdle rates of EBITDA that you think are crucial for you to generate in Macao and also in Singapore for you to be able to sustain a dividend?

And also the thought process behind how do you think, or what your expectations are for the Parisian in order for us to understand what free cash flow could actually come out of this out of Macao and also for Singapore in order for you to sustain a $2.88 dividend?

So John, let me start off and then turn it over to some of the other guys.

But, big picture, we don't give forward guidance, but our perspective and the confidence that we have in our cash flow and our ability to continue to grow cash flow in Singapore, Las Vegas, Bethlehem, and over time, in Macao, is strong, or we wouldn't have raised the dividend.

And if you look out to 2016 next year, we're expecting that it could potentially be a tough year.

I think you got three new properties opening, but we're confident that when you go out two, three, four years, Macao will be a growth market again.

There's a big underpenetrated market in mainland China that the Parisian is designed to appeal to.

And together with the Venetian, I think you're going to have a very strong capability to generate increased amounts of cash over time and the increase in the dividend is reflective of that confidence that we have in the future.

John, it's Rob.

I think, to Dan's point, we have a lot of confidence in the Parisian being a product that will speak well to the mass business in the Macao market.

We have a lot of confidence in Singapore and Las Vegas and Bethlehem to perform next year to levels that are hopefully exceeding this year's levels.

The big question mark obviously remains Macao, no one's confused about that, and it's virtually impossible for us to tell you how to think about Macao.

It's so unknown to any of us.

It is the big question mark for any operator today and will continue to be.

We don't want to forecast what we think we're going to do.

We feel very confident about the Parisian's performance, but it won't get open until, best case, end of the year Q4, so it won't be a huge contributor.

Not necessarily end of the year.

Well, Q4.

The end of Q3, end of Q4 (multiple speakers).

So I think it's hard for us to say sit here and tell you what we think that number will be.

We feel great about three of our places.

Macao remains the question mark, and obviously, for us to take that guess today would be a mistake.

Okay great and if I can follow-up on a remark that you guys made: signs of stabilization in mass.

And I'd like to follow-up on what you said earlier, Rob, about the base-mass, which is something that you think is quite flat and I think the impact has been largely on premium.

What are your thoughts about the VIP market as it stands?

Have we seen some signs of bottoming or do you think that this is still a market that has very little visibility as it stands?

Thank you.

Well, I think the numbers speak for themselves.

The VIP market has gotten, it is where it's at and it's not a pleasant place.

I don't know with the catalyst would be to see VIP return.

I do think there's hope for the premium-mass to get better and that's where my hope resides.

I think VIP, the junket models, has such turbulence, both yesterday and tomorrow, that it's hard for me to see how that gets better.

I do think that premium-mass customer can resurrect and we believe the base-mass is stabilizing.

I think the weakness is in the premium-mass.

We think that the junket market is the one that's getting hit the most.

Our premium direct business is improving and we're getting some of those people that are not gone through the junkets, or that may have been gone through the junkets before, and we built a relationship with them, and we think their credit is good.

We are very strict on issuing credit.

So from our standpoint, we never went into the junket market as big as some of the other guys did, because it wasn't our fundamental business model.

Our fundamental business model is MICE-based and that didn't rely upon the VIP market.

When we first opened Venetian in Las Vegas, we only had, it took us a couple of years to start increasing the amount of the maximum bet that we would take.

We started off with $30,000 as a maximum bet and when we opened the Sands in Macao, we started off with about the same thing.

We didn't go after the junket market.

It happened to our growth and in Singapore we're not allowed to deal with Macao-style junket reps, with third-parties, and everything we do there is premium direct.

So it's still going on and we're still having VIP players coming in.

And look at the result.

Two thirds of the market belongs to us and one third belongs to our single competitor there.

The mass market is what we were built for.

Even though today, in Singapore, we'll take as much as $1 million a bet, $1 million a hand.

And we're the only casino in the world who will take that.

So I don't know, we're setting the pace for other people, perhaps, to do the same thing.

So we're basically built for the mass market and that's why we have so many hotel rooms, so much gaming capacity.

We built it for that market and now we're achieving the results and the mass market is now the low-hanging fruit for us.

Is that okay, John?

Thank you.

Shaun Kelley, Bank of America.

Hi.

Good afternoon, everyone.

Thanks for taking my question.

I just wanted to maybe speak about Macao on a higher level.

We've seeing a lot of policy announcements in the market, over the course of September, in particular, and I was curious to get your thoughts on the latest views as it relates to some of those, whether it be the mixed [leaves] of junket regulation and union pay withdrawal limits versus the announcement from the liaison's office about potentially doing some things to help out the gaming industry.

How are you guys feeling about the policy environment in Macao right now and how incrementally supportive do you think the government is likely to get from here?

Well we have always been respectful of the Macao government's desire.

When we first got in, we said we were going to bring in, as part of our presentation to them, we said we're going to bring in national and international brands, which we've done.

We brought in Intercontinental Corporation, we've brought in Holiday Inn, we brought in the Hilton Conrad, we brought in Sheridan, we brought in Four Seasons.

We keep our commitment.

If you talk to anybody in Macao, the current government, the former government, and you ask which company, which of the concessionaires or sub-concessionaires out there has followed the direction that the government has outlined, the answer is going to come up either LVS, and then we changed our name to Sands China in Macao.

We have a belief that our gaming license in Macao is a privilege and not a right.

So we do everything we can to develop and direct our properties toward the goal that the government wants, the diversification of tourism.

Look at, we've got 10.6 million square feet in one property, one 3000-room property, the Venetian in Macao, and we've got 13.5 million to 14 million square feet of Sands Cotai Central.

You don't need that for a casino (laughter).

The idea is to put in, we are the pioneers of integrated resort business model.

That's what the Macao government wants, that's what we offered to the government, and we will continue to do that.

Obviously, we can always hope for things to be better, but we don't have control over that and we've got to respect we're in China, let the Chinese decide what they want to do with the concessionaires.

Again, it's our privilege, it's not our right.

So do everything we can to justify getting the blessings from the Macao government.

It's their government.

It's their right.

And we'll do whatever they ask us to do.

Shaun, we really affirm that the governments want to see Macao prosper and succeed.

We are very fortunate to be there.

I think Sheldon's history in Macao speaks for itself: 11 years ago, he opened the first in-modern-era casino in the peninsula, the Sands.

It's made a lot of money for this company.

It's opened doors up for all kinds of people to make lots of money in the peninsula.

He then, three years later, spent, at that time, a record-breaking $2.7 billion.

$2.4 billion.

Oh, $2.4 billion.

$300 million I forgot about (laughter).

$2.7 billion is the Parisian.

$2.4 billion at the Venetian, and it opened up the doors to Cotai.

At the time, no one believed Cotai was viable.

Today, for the first time he looked at numbers, Cotai exceeds peninsula in GGR.

The point we're making is we're lucky to be there.

We've done very well there, we've been good partners with the government and we believe strongly in the future of Macao and we're fortunate.

We open a new building up next year, and we hope for a lot of success, but I think you look to the actions of the company, the success of the company, the prophesies of Sheldon, it'll be a $13 billion capital spend.

That tells you how we feel about Macao.

Perfect.

Thank you guys, both, for the color and I guess, the follow-up, same theme, would be, we're starting to get more questions from investors about the concession renewal process, and as we move into late 2015, from I think what we last heard from the government, they were going to be in an evaluation phase.

I was just curious, do you know if that dialog is ongoing and/or where things fit today as it relates to that?

Any update or thoughts on when we might hear something more on that?

To the best of my knowledge, I read the clippings from both here and our SCL PR and Government Relations Department.

I haven't heard a word, haven't read a word, haven't heard a word about the mid-term evaluations in Macao.

So as far as we know, if it's happening, they're not publicizing it and if it's not yet happening, they'll be getting to it.

It'll happen when it happens.

Our worrying about it doesn't advance it any further.

They'll do what they want to do when they want to do it.

Perfect.

Thank you very much.

Our concession expires in 2022.

That's still seven years away.

Perfect.

Thank you very much.

Thomas Allen, Morgan Stanley.

Hi.

How are you?

So, Studio City is opening in Macao five days.

Just wanted to hear your latest thoughts on how you expect the property to impact the market overall and are either you doing anything differently to benefit from the new opening or are you seeing others doing anything surprising?

Thank you.

No we're not doing anything different at all.

We run our business as we have in the past, Thomas.

But we're that hoping that Melco and Galaxy just bring business to Macao.

We're hoping for their success, obviously.

We're all in this together.

We need to see Melco do well.

We're rooting for them.

We're big fans of what they've done in the past, we're big fans of Galaxy's.

The new building, I think, is excellent.

So we're cheerleaders here.

We're rooting for these guys to make lots of money and bring business to Cotai.

We are happy to see Cotai continue to evolve and be the deep footprint in Macao.

We're happy to GGR crossover now that Cotai exceeds the peninsula.

And we're just looking for more and more success for all of us because, let's face it, this is a rise in tide will carry all the votes.

So we're hoping for a great opening, a great opening building for them.

Competitively, I think that our Parisian-themed building, we just topped off the Eiffel Tower.

It's going to be a fantastic attraction.

Fantastic.

And I think this is what the market wants.

Why is the Venetian a must-see property?

Because it's something they can't see anywhere else.

I saw a design yesterday of the Studio City, and they have an egg-shaped Ferris wheel.

I couldn't figure out, and neither could our development department, figure out if the top half of the circle connects to the bottom half.

I don't know.

He's looking for a free ticket (laughter).

I would be happy to pay for it but they didn't have change of a billion (laughter).

And then just as a follow-up, just a clarification around Singapore, Rob, I've heard you say a few times now that you think people think or misunderstand that the property's not Chinese-customer dependent and you really draw a lot of your customers from across Asia.

Should we take that to imply that you're seen declines in Chinese play or is it, and then strength in other regions or in maybe local business?

Good question.

Well let's segment it because it's a complicated question.

Beginning on the high-end, we are seeing declined visitation on the very high-end customer for gaming segment, the rolling customer out of China has diminished for lack of demand.

Also we're watching our credit issuance there.

So, just like Las Vegas has been endorsing impact-divided issues in China, we're often in the very high end.

However, what we have seen in Singapore, to your point, is regionalization and on a rolling business, again, I always caution you, as you know, it's concentrated.

There's not 2 million customers there.

So it's heavily concentrate, but we've seen great success out of the region and that being Indonesia, Malaysia, some Chinese, some TRs, some people live in Singapore who are Chinese Nationals or have a permanent residency.

China's not growing in Singapore.

It's probably in decline in the high-end.

But the more important part of our business there is not Chinese-dependent.

That is that the non-rolling slot ETG segment which has never been Chinese-dependent.

Is mostly people in the region, again, it's Indonesian, Malaysian, Korean, Japanese and that's been the pleasant surprise, we've maintained and grown that segment and it's never been dependent on Chinese visitation.

I'm also pleased, our retail sales in the luxury segment in Singapore are actually up year-on-year again, despite the downturn in Macao's retail environment, so clearly we're in a different place in Singapore.

The region, at this point, has not been impacted by China as it has been Macao.

So, depending on where you look, our retail business is improving even the luxury, even the very high-end high-street stores are doing better, single-digit year-on-year increases.

Our rolling businesses is okay.

It's acceptable.

But again, the real strength of that building was people just can't seem to accept is we're not China-dependent on the slot ETG non-rolling.

That is the powerhouse.

That's the $1.1 billion, $1.2 billion that drives that building to these kind of numbers.

And I don't think that's China-dependent at all.

We do get some Chinese play, but again, the regional aspect of that customer segment is very strong and growing.

The exciting part for our team over there is we keep finding more $20,000, $30,000, $40,000 gaming customers out of those neighboring countries.

So, I guess you can say we're not China-dependent, we like Chinese business.

It's been good to us in the past but right now it's not the driver of Singapore.

Helpful.

Thank you.

Thanks.

Carlo Santarelli, Deutsche Bank.

Thank you, Operator, and good afternoon, everyone.

Sheldon, as you think about your Macao collection of assets today, and obviously Parisian coming on, in a year or so, when you think about the new supply that is coming to the market and having had a lot of experience dealing with new supply and the way competitive dynamics change, do you guys feel some of the work you're doing today on the cost side will mitigate some of that, and furthermore, are you seeing any evidence or getting the sense that folks will have to be more promotional as some of the new capacity comes online?

We're always going to have to be competitive and be sensitive to whatever new capacity.

I believe that the new competition will have to be, in order for us to be cannibalized, it would have to be a better thematic posture than what we have.

We still believe, first of all, we're putting up pedestrian bridges that will connect all our properties.

We'll truly be the Cotai strip, where we'll be able to get 13,000 hotel rooms without walking outside.

So we'll hit five or six casinos, depends how you count the casinos in Sands Cotai Central, without leaving the building.

There are and there will be, in the pedestrian bridges going across the strip, moving sidewalks.

We have like 30,000 people a day crossing in both directions and that's quite a traffic feeder.

I think that the Parisian, with its unique theme, will be highly competitive, and I think we'll have the third must-see property in Macao, the Venetian, the Sands Cotai Central, and the Parisian, which will be major attractions.

And I think from a competitive standpoint, I don't think the other properties, although as Rob said, we're rooting for all of them to be successful.

I think that the Studio City will be a little more competitive because it's a different look.

People want to experience a different look.

We happen to think that the geographic positioning, combined with our fundamental basic MICE-based business model, will be very successful.

We're looking at over 3000 units, and there isn't one of the other five properties that are building as many as 2000 keys.

So we're building approximately two keys for every key a competitor is building and we think that the uniqueness of our geographic theme, particularly, I tell you, we just topped off the Eiffel Tower and I got to tell you, you look at that, and you will see a very, very attractive theme.

So people, when we first opened Singapore and the Sky Park, the Ambience was built adjacent to the Singapore Ferris wheel, the Singapore Flyer.

As soon as we opened, and we had a separate set of elevators and we charged 20 Singapore dollars for people to go up there, it killed the Singapore client.

They went into bankruptcy.

Because people would rather do more than just tale a Ferris wheel ride.

They want to have an experience at the top and I think the Eiffel Tower is going to give that to them.

So it's just that there is competition out there, it's the quality of the competition.

How competitive is it?

And how does it meet the needs and the aspirations of the mass market?

I think that -- look.

Forget about the issue of market share, although we're happy to be at the top end of the market share, I can't deposit market share in the bank.

I can only deposit EBITDA.

And nobody has even approached us in the last 11 years since we opened, in terms of EBITDA, so that's what really counts.

I can put EBITDA on the bank.

And we could be highly competitive, regardless of how many properties they open.

If you never ever open a property that is sensitive to the needs and to the aspirations of the customer, you can build 10 competitive places and we're still going to do well.

Understood.

Thank you.

We have time for one more question.

Robin Farley, UBS.

Okay, great.

Thanks.

I wonder if you could give a little bit of color around, maybe there's a big occupancy decline of Venetian Macau and I don't know if that was intentional to lower occupancy to eliminate some cost.

I'm thinking it was not, but how should we think of the decline in RevPAR and rate in occupancy, both given the hotel supply coming into the market over the next few months?

Robin, it's Rob.

Unfortunately, it wasn't planned that way.

There was no grand scheme to knock occupancy rate down (laughter).

It just fell.

As you well know, that market is adding rooms quickly, both from actual bricks and sticks being built, as well as the junket transition as people stop giving way with the junkets, there's more and more losing the market.

Mid-80s is acceptable, but we have work to do at the Venetian.

We also have some CapEx plans for some of the room product.

But that was not planned.

It wasn't to save costs.

It simply we did not have the demand we wanted to have.

We plan to fix it in the future.

Venetian is still the only billion-dollar property left, I think, in Macao, from what I can tell, based on run rate of this quarter.

I hope that changes in the future, with more people getting billion-dollar run rates to their properties, but Venetian had a weak quarter in terms of occupancy rate, had a good gaming quarter.

We had 89%.

No, this was 84% to 85%.

89%.

I think it was in the mid-80s.

No, not here.

In Macao.

Okay, good.

The point is, Robin, it wasn't planned.

That's not how we want to do -- we want that rate to go back up, we want our occupancy to go back up.

We are trying to keep our rate higher than other people in town.

There's a lot of slippage in rate, due to the capacity.

I think the junket, the transition from giveaway rules, comp rooms, to junkets down to cash rooms is an issue for today and tomorrow.

I do think Cotai will get stronger.

We're excited to, we're going to go over and see the new Melco product in the next week or two.

We're excited to see what Steve Wendt does in the spring and I do think that demand for Cotai is going to continue to grow and grow.

We're still the biggest footprint in Cotai and so I think it's going to be a very competitive, very positive in the end for the Cotai area.

But no, that wasn't planned.

We need to improve our numbers, both the rate and from an occupancy perspective, and that's what you're.

Maybe just as a follow-up to that, I know that the market, there's not a lot of forward-visibility in terms of room bookings, but just from what you do see past October 27 next week, is your early read on those first two weeks after that that it's helping occupancy with your property or not necessarily yet?

I don't have any insight at this point.

It's too early to tell, but I think it's, again, I'm a big believer that this Cotai area, when you get Mr. Win there and you get Lawrence Ho and these guys building these multi-billion-dollar properties, you're going to see a list for all this.

I really believe that.

I believe it may come at the expense of the peninsula.

I think the must-see products will reside on Cotai.

I think it's positive, Sheldon's comments about Parisian, I couldn't agree more.

Parisian will be a must-see iconic theme building, which I think Macao responds well to.

So, we're very pleased to be on Cotai with great buildings.

Does Melco help the short-term?

I don't know.

Does it help us long-term?

I believe it does.

I believe it helps all of us.

We have to win this thing together.

We need to see GGRs grow, we need to see visitation grow, and see premium-mass grow.

Our company is different than others in a lot of ways, but the one thing we do have is differentiable and continues this scalability.

We have a lot more rooms, a lot more retail, more gaming opportunities, so we need more visitation.

We need more better customers and I think the more that Cotai area grows, the more it benefits this company.

So again, we're believers in Macao long-term.

The visitation, the penetration of mainland to Macao Main is up 2%.

The infrastructural improvements keep coming.

We believe the government's sincere in their belief to see Macao succeed.

So, whether it's this week or next week, we're thinking long-term, big-picture, that Cotai does very well, and again as the biggest player in Cotai by many rooms and many gaming opportunities, we're going to be the biggest beneficiaries.

So that's it.

Okay, great.

Thank you.

Thanks.

I think that'll be all, right?

This concludes today's conference call you may now disconnect.