拉斯維加斯金沙集團 (LVS) 2016 Q4 法說會逐字稿

Welcome to the Las Vegas Sands fourth-quarter 2016 earnings conference call.

I will now turn the call over to Mr. Daniel Briggs.

Thank you.

Joining me on the call today is Sheldon Adelson, our Chairman and Chief Executive Officer; Rob Goldstein, our President and Chief Operating Officer; and Patrick Dumont, our Executive Vice President and Chief Financial Officer.

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 provisions of federal securities laws.

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

In addition, we may discuss non-GAAP measures.

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

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 the 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.

Please note that this presentation is being recorded.

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 have execute our strategic objectives during the quarter and delivered another strong set of financial results, with Company-wide adjusted EBITDA reaching $1.12 billion, an increase of 6% over the prior year.

Fully diluted earnings per share increased by 8% over the prior year to $0.64 per share.

During the quarter, our Macao operations achieved strong mass gaming revenue growth and delivered $610 million of adjusted property EBITDA, including a solid first full quarter EBITDA at $95 million at Parisian Macao.

In Singapore, Marina Bay Sands continues to deliver steady cash flow, supported by its mass gaming and non-gaming segments.

The resilience and consistency in cash generation reflect both the strength of our business model and the geographic diversity of our cash flows, which in turn underpins our balance sheet strength.

Accordingly, we can and will continue to return excess cash to shareholders, while maintaining our ability to invest in new development opportunities.

We're excited by the recent legislative breakthrough in Japan to permit casino gaming within integrated resorts.

We believe our pioneering track record of creating the MICE-based integrated resort, our development experience and our financial strength put us in the pole position that they can manage an opportunity Japan and other new development opportunities on the horizon.

As I look back at 2016, the year began with still-declining market revenues in Macao and the prospect of increased supply in competition.

Despite these challenging conditions, we successfully opened another truly landmark, must-see destination resort in the Parisian Macao.

The Parisian not only helped us drive double-digit growth in quarter four, but also greatly enhanced the critical mass benefits of our interconnected properties on the Cotai Strip, as evidenced by our visitations growing 23% year-over-year in the fourth quarter.

As you may recall, I first indicated back in January last year that we were seeing signs of stabilization in mass gaming revenues in Macao.

And in June, our mass gaming revenues saw positive year-on-year growth for the first time in two years.

This encouraging trend continued into the second half of the year as our mass table revenues grew by 6% year-over-year in quarter three, and further accelerated to growth of 16% in quarter four driven by the first full quarter of the Parisian.

Our marketing efforts continue to pay dividends.

Our Parisian Macao social media program has now exceeded 2 billion impressions, 2 billion impressions.

This awareness has translated into strong property visitation.

Based on our customer surveys at the various points of entry in Macao, since the Parisian opened, the most visited casino resort in Macao remains the Venetian, but in second place was the Parisian.

Our strategy was to create a critical mass of interconnected resorts on Cotai.

With the completion of the Parisian, we have almost 13,000 hotel rooms and four interconnected resorts, over 840 stores across four shopping malls, 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 for major entertainment events.

This critical mass of product and amenities allows us to cater to virtually every type of visitor.

Business and leisure visitors to Macao will be able to enjoy all of this and more under one roof at one destination.

Because of our industry-leading investments in MICE-based integrated resorts in both Macao and Singapore, we are unique in the absolute scale of our cash flow, as well as our dominant share of the industry's cash flow.

Scale, diversity and critical mass allow us to outperform our competitors.

This unique ability to generate consistent and industry-leading cash flow in turn underpins our balance sheet strength.

That balance sheet strength, at 1.8 times net debt to EBITDA at the end of the fourth quarter, allows us to stay fully committed to our development plans while continuing to return excess capital to shareholders.

Again, this is unique in our industry.

Now let me give you some additional highlights of our results for Macao for the quarter.

For quarter four, adjusted EBITDA for our Macao operations was $610 million, an increase of 5% against the prior year.

Overall net revenues increased by 12% driven by growth in mass gaming and non-gaming segments.

There were some items that benefited prior year's fourth quarter and impact the year-on-year profit comparison' which Rob and Patrick will explain later.

Our cost efficiency programs have continue to track well.

We achieved more than our stated goal of $60 million of incremental cost savings in 2016, and have realized more than $310 million of annual cost savings since quarter one of 2015.

Despite the significant increase in gaming and hotel capacity, compared with the prior year quarter in the Macao market, our mass table gaming revenues grew by 16% year-over-year, within which premium mass segment grew by 20%.

We experienced broad-based growth across both premium mass and mass segments, underpinned by our ability to drive increased patronage with hotel accommodations, shopping malls and entertainment events.

One item to note for the fourth quarter, we held towards the low end of our expected hold range in mass tables.

We estimate low hold and mass tables, particularly at the Parisian, impacted our EBITDA negatively by between $15 million and $20 million.

During the quarter, hotel occupancy across our portfolio increased by almost 4 percentage points against the prior year to 89% despite significant growth in both our own inventory and the inventory in the Macao market.

This again highlights our advantage during peak periods with the higher hotel occupancy feeding positively into our gaming and retail revenues.

In a market where peak periods, the weekends and holidays, matter more than ever before and where mass market customers will generate the lion share of future revenue and profit growth our capacity advantage was further strengthened by the addition of the Parisian.

The Parisian Macao generated $95 million in adjusted EBITDA in its first full quarter of operations.

Mass table and slot revenue per day at Parisian was $2.2 million despite low non-rolling hold while hotel occupancy was 91%.

The addition of the Parisian to our Cotai Strip development really takes our critical mass and diversity of offering to another level.

This is the only MICE-space integrated resort complex of this scale in the world.

The completion of the bridge between the Four Seasons and the Parisian in November has further increased the synergies in traffic and patronage between our properties.

With foot traffic of approximately 14,000 per day in the month of December, it is also worth noting that despite the recent increase in the supply of luxury retail in Macao, our retail sales at the Four Seasons retail mall grew by 6% in quarter four.

In summary, we regard it as a privilege to contribute to Macao's success and realizing its objectives at diversifying its economy, supporting the growth of local businesses, providing meaningful career development, opportunities for its citizens, including through our Sands Academy, and reaching its full potential as Asia's leading business and a leading tourism destination.

We have steadfast confidence in both our and Macao's future success.

Now moving onto Marina Bay Sands in Singapore, we delivered a solid quarter at Marina Bay Sands with EBITDA of $366 million.

Our mass win per day was in line with the prior year.

At the same time, Marina Bay Sands continues to serve as the most important reference site for emerging jurisdictions that are considering large-scale integrated resort developments.

Now let's move onto my favorite subject, the return of capital to shareholders, the A dividends.

The Las Vegas Sands Board of Directors last year approved an increase in our recurring dividend program for the 2017 calendar year to $2.92 for the year, or $0.73 per quarter.

We remain committed to maintaining our recurring dividend programs at both the Las Vegas Sands and Sands China.

The current dividends are the cornerstone of our return of capital policy 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 our recurring dividend programs, while retaining ample financial flexibility to invest for future growth and pursue new development opportunities.

We achieved many important strategic objectives in 2016.

My original vision for the Cotai Strip at Macao was further realized with the completion of the Parisian.

The new property enjoyed a strong opening against a backdrop of increased competition, and has rapidly become a new landmark destination in Macao.

The structural advantage from our unmatched critical mass and diversity of offering was evident in our strong financial results during the quarter and the year, both in Macao and globally.

All this enables us to look ahead to the future with confidence.

We have a strong organic growth outlook, we're in a great position to pursue new development opportunities, and we have both the intent and the financial flexibility to continue to return excess capital to shareholders.

That concludes my prepared remarks.

I want to thank you for joining us on the call today.

Now let's take questions.

(Operator Instructions)

Shaun Kelley from Bank of America.

Hi, good afternoon, everybody.

I just wanted to maybe start with the revenue picture in Macao.

Obviously, it feels like on a year-on-year basis things have improved quite meaningfully, but as we start to look at the sequential movement between Q4 in Q3, it feels like you did not pick up a lot of market share when we compare your overall revenues to the market.

So I was curious, as Parisian is ramping, do you think there is more opportunity on the revenue line, and how do you feel about your steady state or your current market share?

Shaun, it is Rob, how are you doing?

Are you referencing all the portfolio or just the Parisian?

Is your question about the Parisian's future or the whole portfolio?

It is really the whole portfolio, Rob.

If I look at the back of the envelope, it looks like share was probably in the low 23% range, and it was actually slightly higher in Q3 than it was in Q4 when you had a full quarter of the Parisian.

Right.

Let's put Macao in context.

Q2 of 2016, we did less than $500 million in EBITDA, and yet in Q3 and Q4 cumulatively we did $1.24 billion of EBITDA.

We successfully absorbed the Wynn opening and the Parisian opening.

And, of course, the Parisian did over $115 million in EBITDA for Q4, plus the 17 days it was open in Q3.

So inside of six months, our run rate has improved to roughly [basin] in Q3 and Q4 to about a $2.5 billion annual EBITDA run rate.

The big difference between Q3 and Q4 from my perspective is the hold percentage and the mass table side.

We are, it's staggering, these numbers, but we are throwing off $5 billion this quarter of table drop, so if you adjust the 1.3% miss Q-on-Q, we were up 1.3% in Q3 over Q4, it is about $60 million some of top-line revenue.

I know it's not statistically important, but in the long run, when you are dropping $20 billion we will get to the right number.

But we held less in Q4 than Q3, adjusted we would have seen that number pop by about $60 million, $63 million.

Again, we're absorbing a lot of additional capacity.

We have a lot of belief that the Parisian if going to get stronger and stronger.

We have held incredibly poorly there, unfortunately, as Sheldon referenced in his opening remarks, we actually held about 18% on a volume that was about $900 million, so that is disappointing.

The Parisian should have added another $15 million, $20 million to its numbers, it didn't.

That also holds true with the SCC, did less than, did about $19 million and same with the Plaza.

So we had a little bit of, I wouldn't call it bad luck, we're just at the lower end of the range which adversely impacted the top line.

On a go-forward basis, we couldn't be more bullish.

We think we have the right assets.

We think we have the -- in a market that's clearly about scale and capacity, we have the lodging, the retail and gaming capacity to service the demand.

And that is especially true, we believe, on high-volume weekends and holidays like the one we will have next week.

This is the future of Macao.

We are at the epicenter of that future and that growth, and we're very, very much a believer in double-digit mass revenue on the table side will translate very well the future for us, and we're a big believer in Macao.

We have come a long way in the last six months from what I think was a very, not scary, but concerning time in Q2 to we feel a place of strength here in January.

A lot of confidence in the future and a lot of confidence in the revenue growth.

And, Rob, maybe just as a quick follow-up, did the promotional environment, or do you think the competitive landscape pick up a little bit in Q4 as people are starting to try and stabilize with what is going on in the market?

Did it feel differently than it felt for the first few weeks after the Parisian opening?

There's always going to be a market, look, it experienced a massive junket drop, what, 70%, and it's just recurring to a healthiness.

There is going to be some occasional signs of promotion, but, again, in a mass market it is difficult to overspend, unless you're just being silly about it.

Can you provide a few more meals or a few rooms, yes.

But a lot different than a high roller environment where the comp excesses can be excessive.

So do I think there are a few things here and there, yes.

But do I see in our portfolio or in others' indications of massive over incenting, or over promotion?

I do not.

I think the market remains pretty disciplined.

We all recognize that in the end you've got to deliver margin and you can only give out so much against a mass market.

I do not think that is the problem.

I just think we need to see sustainable mass table growth and an acceptable range in the hold percentage to get us to a 650 or 675 number in the future.

I do not think we're that far off, in fact.

Joe Greff from JPMorgan.

Good afternoon, everybody.

Rob, just a question on the Parisian ramp throughout the fourth quarter.

Would you say adjusted for the high VIP hold and adjusted for the low win and premium net, would you characterize the property's ramp as pretty consistent or accelerating throughout the quarter?

Or was it more even or did it decelerate through the quarter?

And if it's the latter, to what would you attribute that?

Well, Joe, I think first you have to recognize, I will reiterate what I said earlier, that is that when you drop $900 million, and you hold only 18%, you say to yourself you lost $25 million or $30 million right there.

And that is not a pie in the sky number, our historical hold is in the 21% or 22% range.

So I right away say, okay, give yourself a $25 million to $30 million kick there in a positive direction.

The VIP hold was a little high, but it does not really mean that much at the end of the day.

It's high, but the truth is that, that segment is not the key segment.

It is dwarfed by the importance of the contribution from the mass, it's much more important.

I think it was a steady ramp.

I think the Parisian has a couple things to think about.

The bridge opened up in late November or early December.

That has been a positive towards the ramp, that is adding more body count inside there.

Secondly, I mentioned the hold percentage which is -- you cannot refute the fact that we should pick up 3 points over the course of the year, and we will.

Three, I think the Parisian will keep ramping because, as Sheldon referenced, 2 billion people have now gone online and had a look at the Parisian somehow, someway.

That is a staggering number from anyone's perspective.

Lastly, I think we're somewhat surprised at the strength of the premium mass demand for Parisian.

We positioned it more as a mass property.

We're rethinking the room mix, we're adding some more suite product.

It won't kick in until late in 2017.

My point is we're just so pleased at the results thus far, it is a $400 million-plus run rate.

It should do a lot better once it beats a few more customers.

We have some people played lucky and good for them.

One particular customer just -- she wins every day.

She is doing very well and she affected the numbers.

But as we get the suite product right, as those impressions keep building, as that bridge keeps maturing the ramp will continue.

I did not see a real change in numbers, it was pretty steady throughout.

The Parisian is an unqualified winner.

Anytime you get $100 million roughly at the open like we did the first quarter and some change, that is an impressive start.

But there's better days ahead for the Parisian.

And lastly, I think the connectivity between Four Seasons, Venetian, and some day we will get the other bridge across the SCC.

That will make that race track, again, give us a very, very exciting set of assets, all integrated, working together, 13,000 sleeping rooms, 800 stores.

The Parisian has got some great legs ahead of it.

Thank you, Rob.

And, Sheldon, I was hoping maybe you can give us updated thoughts on any progress you might be making with monetizing, or partly monetizing the retail mall at Singapore?

I know you are still months away before you have permission to do that, but are you pre-marketing that, are you soliciting levels of third-party interest?

If you can give us some sort of update?

Thank you.

We're in preparation with our bankers to prepare that property to sell.

We can't sell it until March or April of this year, 2017.

It isn't going to take that long.

The interest we have is that it is the highest trophy mall there is in the world.

We anticipate almost an unprecedented price to sell 49% of it.

We are preparing, but we can't sell it until March anyway.

We want to give enough time to prospective buyers to do their due diligence, and from what we are told by a lot of people, it is the best trophy mall there is in the world.

We expect to receive a very hefty, very significant price for the 49% we're willing to sell.

Harry Curtis from Instinet.

Hi, guys.

Just a quick follow-up in Macao, you've walked through a little bit of the impact of bad luck, but according to the press release, in Macao, you did play lucky overall by about $44 million.

You must have held reasonably well elsewhere.

Can you give us a little bit more color on that?

I think most of us have not really had time to go through the details of the press release.

Yes, sure, Harry, it is Rob.

To put it in perspective, our business, 10% of our -- less than 10% emanates from the junket segment that we referenced in the luck factor.

So it may have thrown off a few more -- I'm looking at right now in the whole portfolio, the profit segment coming out of junkets is roughly 9% of what it is out of mass tables.

We have not historically normalized mass tables, perhaps we will rethink that.

To put it in perspective for you, if we drop $20 billion this year, which we think we will do more than that, you think of a range of 20%, 22%, 2 points would be $400 million.

At the margins, probably a couple hundred million dollars of EBITDA, so, obviously, very impactful.

In the past, the market has always looked to normalization of the high roller, the junket business, when in fact in this market today, for especially our portfolio, so not all that relevant.

While you're actually correct, we played lucky for a few million dollars, the truth is, the junket business is not that impactful relative to the mass business.

In the mass business, the miss was $60 million, $70 million, what number you use, whether you use 2%, 3%, so it kind of negates it and adds some more volume.

I'm not pretending that we did not play lucky in the junket, we did.

But, again, on a historical basis that has been the focus when, in fact, the focus has to shift at some point to the huge amount of money we are doing.

I think in the end the volatility in this mass segment is always going to be trumped by the -- in the end it works out just fine because the volume is so staggering it will overcome the volatility.

But quarter-by-quarter, my point is, a miss like this, we could have easily had a $50 million increase year, $60 million increase, had we held 1 point more.

You wouldn't notice it, it wouldn't appear statistically important, but it is a fact, and something we need to consider in the future.

I think the junket thing should be minimized based on the overall contribution to the EBITDA it makes.

I guess what I'm still a little bit confused, so when you guys report $566 million of hold-adjusted property EBITDA is that only adjusting the junket piece and not the mass piece?

Correct.

You are absolutely right.

It seems like we are out of sync with what is happening today because you are absolutely correct, Harry, we do not adjust the hold percentage on the mass, just on the junket.

Those numbers reflect that.

I think the Parisian, the Parisian held a bit lucky in the junket, but it was dwarfed by the $25 million, $30 million it could have gotten off the mass tables.

Our normalization may be a little bit inaccurate in terms of what is happening in the market today.

We may be alone because no one does as much mass business as we do, due to the amount of tables, hotel rooms, et cetera.

But nowhere I can think of is there $20 billion of table drop, in any jurisdiction.

Again, it is the point earlier, a 2, 3 points either way, $400 million, it is impactful.

Okay, that is interesting.

And then, Sheldon, if you could take a minute and describe what you believe will be the process from here in Japan and your thoughts on timing and possible -- your possible potential ownership interest there?

Potential ownership interest?

Right.

Partners.

We have had somebody in Japan this past week, who just came back yesterday, or at the beginning of the week.

The feeling about the partners is not very strong.

They say that it is likely, not likely to be in the law.

The law is being formulated by, I think, the inter-party committee that was formed before the first law passed.

They have one year to submit an implementation law that will determine the who, what, why, when, where and how of how they're going to establish an integrated resort with casino bill.

I don't have much more to offer than what you see in the press.

It is starting, I'm going over there in about three weeks to give a talk at an event there in the third week in February.

I am optimistic that, look, they are basing this on our Singapore property.

Prime Minister Abe has visited the property.

He was very impressed with it.

I think it is going to be modeled after our property, the Marina Bay Sands in Singapore.

I am optimistic, and people tell us we are in the pole position in terms of getting the concessions.

Some people say it could be the new bill that has to be done within a year.

It could be less than a year.

It could be a whole year.

So I really do not have anything new to add to that other than what you have read in the press.

Robin Farley from UBS.

Great, yes, I wonder if you could give a little bit of color, there have been some comments were permits for your management team in Macao, that are not Macao residents, are not going to be renewed.

I wonder if you could talk a little bit about how that -- was that expected by you and would that affect anything that is in place now?

Robin, I'm not sure which you are referencing, I'm a little bit taken aback.

What did you read that we didn't read?

It was a comment that there is a goal to target a certain percent of Macao management to be -- and originally, this was a 2020 goal, but the comment in the papers in the last day was that they maybe would like to see that this year instead of 2020.

I'm not comfortable referencing what you are saying, but I think the truth is our team, we are probably already there.

If we're not there already I would be surprised because I was there last month, and I think most of our people, management level, the people I deal with every day, the 100 or so people on the management side are all holders of the proper identification.

I do not think we have an issue with what you reference.

I read it last night in the clippings.

They are proposing that by 2020, I think it is.

At some point in the future there will be 85% of the senior management should be Macanese.

It was a 2020 suggestion that they might want to see this year was what the media was suggesting.

Yes, I think we'd be very confident, they could look at it right now as far as I'm concerned.

Our team will look under the table there, and I think we are there.

I don't think we have any issues because we've been doing this the last two years.

We're big believers in that approach and support the government's agenda.

We would like to have all Macanese people in (inaudible).

I do not think we have an issue today, but by 2020 I'm sure we will not have an issue.

I do not think it is relevant to us.

Felicia Hendrix from Barclays.

Hi, good afternoon.

Rob, regarding some performance in Macao, just wanted to revisit this.

For Sands Cotai Central and Venetian in the quarter, looking at the numbers that you reported, might say that the Parisian was cannibalizing these properties.

So we talked a lot about hold, so maybe it makes that noisy or maybe it is because the connector is not up yet, but I was just wondering if I could hear your take on that?

Thanks.

That is interesting.

I think beginning with, let's start with the fact that it's a new property, and, obviously, Galaxy, Studio City, Wynn Palace, you're talking about 4,500 hotel rooms, 600 new gaming tables in the last year and a half.

Obviously, we're looking at a huge increase in capacity, both lodging and gaming.

The you add the Parisian and, of course, the SCC, the Saint Regis for another 3,400 rooms and another 125 tables.

Huge increases.

As it relates to the Venetian, having just been there, I do not know how much more we can do with the Venetian.

It continues to be a $1 billion-plus property.

I do not feel it is being cannibalized.

I'll tell you one thing we are experiencing at the Venetian is, the Parisian is a great looking property that people gravitate to.

The sleeping rooms have not been as well received by some of the better customers who then move toward the Venetian and Four Seasons.

I think, if anything, the Venetian had a pretty good quarter.

It held fine.

It had no issues, luck, it had plenty of business across the board.

I do not know if we can see the Venetian -- if it runs at 1.1 or so, pretty happy with that performance.

We're redoing some rooms there and making the floor fresher and newer.

We keep making sure that place stays at the number one position in Macao.

But as far as appeal and people wanting to go there, it continues to amaze me how powerful it is after a decade of operation.

The SCC is different story.

The SCC, I think, is the polar opposite of the Parisian, meaning that the SCC did have a very tough quarter in terms of hold, it held on the mass, 19.1% on a base of $1.4 billion.

So that did not help, it clearly left behind significant dollars there.

Based on 2% or 3% move, it could have been $20 million or $30 million more.

Having said that, I think the weakness in SCC might come from the fact that Parisian is so [damn] attractive that the mass customer just gravitates to the Parisian, it's a fact of life.

On the flip side, the customer wants to sleep in a better facility might go back to the SCC after he sees the Parisian or the Venetian.

It doesn't have the connectivity.

If anybody would tell me that one property gets hurt a bit at the point of the SCC, I think the Parisian has been helping the Venetian and helping the Four Seasons Plaza property.

I think we have got some, we have to rethink, we've got some things happening which we cannot talk about in this call at SCC that would help its attractivity, both as a new attraction coming in there in the future, as well as the bridge will come along.

The side of the street with the Parisian -- the one takes SCC to Four Seasons.

That's a common thought about the bridge.

Is the bridge the Hong Kong [zoo] or the Macao bridge?

No, I meant, I'm sorry, Sheldon, our connectivity bridge from the SCC to the Four Seasons will help the SCC.

To the Parisian.

Right, to the Parisian.

I think in the end, the side of the street with the Parisian and the Venetian and the Four Seasons feels very good, not cannibalized.

If anybody is vulnerable a bit it could be the SCC.

Most of our high-end business stays there because of the room product.

It doesn't have the mass business we would like to get over there.

It is a disappointing quarter from my perspective, down $50 million in Q3, no way to hide that, disappointing margin.

A little bit of a hold percentage, could have popped it over 31%, but you are right, if anybody was affected it may have been the mass customer who now finds his or her way to the Parisian.

Okay, that's really helpful.

I have a question on margins, but just before we move to that, can you just remind us when that bridge, the connector, opens?

The bridge won't open, end of 2017?

Yes, we have so many different things happening at SCC.

The connector bridge was approved by the Board.

It is in development mode now, so Q4, Dan?

Q4 2017?

We're talking about the pedestrian bridge, Felicia, not from the Hong Kong airport.

Yes.

It is essentially a raised air conditioned sidewalk connecting the, what we refer to as parcel 6, which is the Sheraton, two towers at 2,000 rooms each, 2,000 keys, that connects to the Parisian.

The connection, it gives us a complete racetrack-type connection.

It is unprecedented anywhere in the world, that there are 13,000 rooms connected without having to leave the building.

You do not have to go outside to connect all those rooms of different price points.

All that retail, 800-plus, 840 or 850 retail shops and the entertainment, and the gaming, and the restaurants.

There's no place in the world like this.

Once we get that bridge open, we have got to promote the heck out of it so that people will understand that it is a once-in-a-lifetime kind of experience.

Rob, not Rob, Felicia, we need government approval on that bridge.

We do not expect it to be an issue, but we are waiting government approval before construction begins.

Okay, thank you.

Just moving on from that now, I wanted to ask about the Parisian and the margins there, EBITDA margins, and where you might expect the margins to stabilize for the property?

Or maybe looking at it another way, which property should the Parisian be most similar to in terms of OpEx per day?

That is a good question.

Sheldon said the Venetian, I would agree with him, I think the Parisian, by the way, let's be clear.

A couple things to think about.

A brand new property, just getting its sea legs.

We're spending more on advertising and more on promotion to get that thing off the ground.

We're very proud of the money we're spending.

We believe it will yield large-term dividends, but short term, we're spending money there to make sure that property gets significant awareness.

We think we have been vindicated so far because its performance is pretty good for a starting property.

Two, I mentioned earlier, we're thrilled about the premium mass demand, but a lot of these customers do want to stay in the current -- we do not have enough accommodations for them.

So we're going to accelerate some room growth, and there are larger rooms for some of these better premium mass who now stay at SCC or Wynn or Galaxy or somewhere.

Three, I think your margins should resemble the Venetian down the road with one exception.

It will never have the retail portfolio we have at the Venetian, obviously, but I do not think it is acceptable to be 27.7, 28.

To Harry's comment a couple of calls back, we on the junket side at the Parisian, we did play lucky at 4.2%.

But the contribution is not that terrific from the junket side.

The fact is had the Parisian looked like the Venetian, it would have picked up $33 million more in mass table win.

The Parisian is going to be a machine of mass table play, it just is.

As that margin will move, as that EBITDA will move, as that hold percentage gets to a more normalized range.

If this thing had picked up 3 or 4 points, it could have had a $125 million quarter, but it didn't, it just didn't play that luck.

We had a couple of very exceptional pieces of bad luck, which is fine.

It will even out in time.

But once we get that thing fully ramped, I do not know if we'll ever get the retail contribution because, again, the Venetian retailer is much larger and much more impactful.

But I think -- and we'll never get the room rate, I think, the Venetian gets.

But I do think on the gaming side we should be able to achieve margins that resemble the Venetian, and it should hold its weight.

And I think the Parisian has some great days ahead of it once we get the rooms right, get the bridge fully operational, pull out some of the advertising and opening costs.

This is a brand new building, it is an infant, and infants take a little more care and money to get them there.

The Venetian is an old girl, she's been around 10 years.

Now she's made $10 billion.

She's not quite an infant.

When we get this thing in place, we have a wonderful racetrack of properties, as Sheldon has talked about it before, it is all integrated, it is powerful stuff.

I think the Parisian is going to perform very, very well and you'll be pleased in the future with how it shows up in the margin line.

Carlo Santarelli from Deutsche Bank.

Sheldon, you talked a little bit about the potential for a 49% stake sale of the Singapore Mall.

Any sense of how you're thinking about proceeds from that in terms of repatriation of the cash, and maybe what intentions you would have with it were you to be successful in that sale?

Not should we be successful on the sale, we will we be successful (laughter).

We haven't decided what we're going to do.

We're waiting to see, there are more noises coming out of Korea now that Japan is talking about legalizing casino gaming.

There are more noises coming out of Korea.

I'm not saying that it's got a prospect right now, as Japan has shown itself, but it could happen.

Korea could happen.

So before we decide what we are going to do with the money, we want to see what the development opportunities are.

We can always get money to build, to develop properties.

We have a very good relationship with the banks.

We just rewrote one of our bank loans for 25 basis points less and we didn't give them any more.

We just thought we should have 25 basis points less.

Our CFO came up with the idea, he called the banks and they just dropped the rate.

I asked him why he did not ask for 50 basis points (laughter).

Maybe even 100.

When I think back to the time when I was actually poor and it took everything I had to borrow $10,000 from a bank.

When I look at money now, I look at all of the banks we have in our portfolio, and I see they are all willing to go to the max.

We can get a number of banks each that will give us $400 million, each.

We can get plenty of money, but we have not decided what we're going to do with it yet.

Understood, great.

And then, Rob, if I could, obviously, the hold issue, or I should say the margin issue has been talked about quite a bit on the call.

One of the questions that I have is, as you think about the promotional environment, and it looks like your promos as a percentage of mass gaming revenue in the period were up about 90 BPS year over year.

I'm assuming a lot of that relates to the Parisian coming online, et cetera.

But could you maybe talk a little bit about what you are seeing in terms of promotional activity on the mass, and what maybe some of the competitive response has been?

I was there last month.

By the way, I'm sorry, I just want to finish, I answered your question before.

We're looking at potentially $3 billion to $3.5 billion on the sale, of 49%.

That alone tells you it'll be the most expensive mall ever sold in the world.

Sheldon, when you say we're looking at, is that where indications of interest have been, or is that what you are targeting as what you want for the sale and maybe --?

No, I really would like to see (inaudible) with a full handle.

I think that is unrealistic.

I am pretty sure that we will end up in that range.

That is what people are thinking about.

As a matter of fact, I am like Donald Trump, I think I've been a good negotiator.

I might want to do a little better job than what the (inaudible) wants to do for us.

Understood.

And then, Rob, sorry, if you need me to repeat, I'm happy to but --

No, Carlo, I got it.

No need.

Your question is interesting.

Having been doing this for too many years, I was in Macao last month looking at that very issue with our team and visiting properties.

One of the great things about our business is, the high roller business is always fraught with over spending and over promotion and over incenting.

It is just the nature of the beast because when people lose that kind of money the salespeople and management tend to gravitate and spend too much.

It has just been a part of my world for 35 years.

In Macao, that beast has gone away because it has become a mass premium market.

There's not as much to give away.

Free rooms, what, a free bus ride, a comped meal.

I wish we could give away more rooms because when we give away room we make a lot more money, we sell a room.

Unless you look at more aggressive comping of rooms and dropping theoretical rates -- I don't.

So if you are getting $1,000 a night and you drop it to $700 that is still a very good investment in your gaming floor and the use of your lodging capacity.

I do not see it.

I know people want to hear that there is over-incenting and over-promotional activities in Macao, I just do not see it.

I think we deal with some very, very smart people over there.

They are patiently waiting.

Are there more buses going to the ferry terminal and more people giving out free flyers, yes.

Are there more maybe free rooms, maybe.

But I don't think over incenting is the issue, and to your comment about our margin, I think that margin gets cured very quickly when you normalize, or you simply give yourself a higher end of the range.

I do not want to make it sound like we under held by some dramatic number, it wasn't.

But the point is on $20 billion, $20 billion, think about that number, a few points means a lot of money.

And so we can look very smart and next quarter we hold 22 instead of 19, all of a sudden the margin will go up by 4% or 5%.

So I think that is the bigger issue.

On a quarter-by-quarter basis, you examine these figures and look at margins with a very strong look.

I think that will move depending on, a little bit of luck on the hold percentage.

I don't think it will be an issue of over incenting, or over promoting.

I mean that is true for our competitors, as well as us.

I don't see the Macao market as out of control.

I'm sorry, Rob, do you think the statistical hold percentage on the mass side in Macao, is 22 the midpoint of where you think that number should be theoretically?

Carlo, I do not have a good answer, I'll tell you why.

We think it is in the range of 20 to 22, and I think it would be crazy to try to pin down an exact number.

I think a range is more acceptable because there's always issues of false drop, there's issues of -- there are things you cannot always take into account.

But I think in the range of 20, 22 is a reasonable range.

But my point is, even though it may not be statistically important, when you think about 19.2 versus 22.2, 3 points on $1 billion, on $10 billion, on $100 billion, the movement is significant.

It could make these results skew dramatically in our favor.

Or as this quarter, we look a little weak on the margin at 32.9 versus 36.5, but last quarter we held 22.4 and we held this quarter at 21.1.

1.3% on $5 billion it causes some margin erosion.

My point is not that we're looking to control it, or giving an exact number, be aware that something -- more and more important, we built something in Macao.

What we've put together is unique, and 13,000 rooms in all of those different hotels and all those retail and all of that gaming ability.

This weekend, the numbers are going to be off the chart huge, and so we could hold luck and have an incredible weekend, or miss by 5 or 6 points and not.

It is not something we can control and not something I want to spend more time on, but it is a fact of our world that you can't ignore that massive number.

Is much more important than a few points on the junket side.

We have reached the allotted time for the call and have time for one last question.

The last question is from David Katz from Telsey Advisory Group.

Hi, good evening, all.

Two questions, or one and one follow-up, as per the rules.

What we've observed and heard about and read about over the past three to six months are a couple of things.

Some increasing comfort on the part of junkets and VIP players with returning to Macao.

And, second, some changes in the Chinese economy and commodity prices that have, I think, by all accounts increased performance in our expectations over the past few months from where they would have been three to six months ago.

That, I think, appears somewhat momentary, but I would like your views and context around that and how sustainable you think the GGR trends that we have been seeing and hearing are, say, throughout the next couple of quarters or the remainder of the year and whatever context you can discuss it, please?

David, this is Rob.

We're dead flat year on year on the junket volume.

We are [10.89] versus [10.95], so I do not see us experiencing -- where I do think do experience it, gratefully, thankfully, is in the premium mass side and the mass market.

That is where I think we are seeing the impact and the increase in play.

And the reason I am grateful is it is much higher margin business and it is, I believe, much more sustainable than the junket model.

I would be not being honest with you if I told you I understand commodity prices impact that business or not.

I do sense in China, I do sense in our business in Macao, a return to a little more confidence by the customer, our salespeople tell us that.

We see more belief in what is happening in China and more comfort.

But for me to make a macro statement that is going to be across the economy, I cannot do that.

I can only tell you we hear, our sample size, keep in mind, only 1% or 2% of all China business is Macao.

Our sample size, though, tells us that our premium mass customers feel better, they're spending more, the volumes indicate that, and that is the bread-and-butter of Macao, not the junket business.

We believe that is sustainable, our model will be vindicated, and we will be, I think, a big participant in the growth of those numbers in 2017 and beyond.

That is my take on it.

The clippings from Macao say that Paolo Martins Chan, the new head of the DICJ, whatever it is, it's a Portuguese acronym.

It is an acronym for the Portuguese name of what we call the Gaming Control Board.

He said that there is only going to be about 120 or just a couple more junket licenses given out.

When I think of how many there were in 2014 before the drop back in the business, there was 250, 270 junkets licensed.

Now there will only be 120.

There's a big difference.

When you are talking VIP versus a mass and premium mass, you are talking a win is a VIP house where a mass and a premium mass house.

We do have some of the VIP market, but to us it is not as important.

It is only a single-digit percentage of our total EBITDA.

Understood.

And if I can just follow that up and ask about capital allocation.

Your position on dividends has always been clear, but as we look forward, if you could talk about CapEx that you may be thinking about for the future, share repurchases, and how you are thinking about that, as well as your well-understood dividend policy, that would help, please?

Sure, hi, it is Patrick.

How are you?

Very well, thanks.

How are you?

If you look on page 32 of the earnings presentation that we posted to the website, you can see that there is a tail-off in our CapEx as our development projects complete over the next two years.

The key thing is that as we continue to grow EBITDA and grow cash flow from the operating assets that we have, we will also have a reduced CapEx burden that will hopefully even out to be approximately $500 million of maintenance CapEx per year.

Our cash flow profile will change materially from where we are today assuming we're able to achieve this.

The key thing here is while we've said that the dividend is the cornerstone of our return of capital return policy and you can see the Board and the Chairman's commitment to increasing the dividend over time as our cash flows grow, there will also be an opportunity for us to return cash through share repurchases as these cash flows materialize.

The other thing is, hopefully, we'll have an opportunity in Japan, or an opportunity in Korea, or another new growth, high growth jurisdiction, we will be able to deploy this capital and get a very high investment return.

We feel like we have the financial flexibility with our balance sheet to be able to return capital in the near term.

As our CapEx tails off we will be able to increase that return on capital, and, hopefully, we will have an opportunity in new jurisdictions to really grow shareholder returns by investing in new MICE-based integrated resorts.

That is the blueprint.

It's what the Board talks about at every meeting, and hopefully as time progresses, we will have an opportunity to make those investments and grow and create shareholder value.

This concludes today's conference call.

You may now disconnect.