拉斯維加斯金沙集團 (LVS) 2017 Q2 法說會逐字稿

Good afternoon.

My name is Sarah, and I'll be your conference operator today.

At this time, I would like to welcome everyone to the Las Vegas Sands Second Quarter 2017 Earnings Conference Call.

(Operator Instructions)

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

You may begin.

Thank you, Sarah.

And thank you for joining us on the call today.

Joining me on the call today are 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 provision of federal securities laws.

The company's 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 a reconciliation of each of these measures to the most comparable GAAP financial measures is included in the press release.

We also want to point out that we have posted supplementary earnings slides on our Investor Relations website.

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

(Operator Instructions) Please note that this presentation is being recorded.

With that, let me please turn the call over to our Chairman, Sheldon Adelson.

Thank you, Dan.

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

This was a great quarter and I'm very pleased with our results.

Company-wide adjusted EBITDA was USD 1.21 billion, an increase of 26% over the prior year.

Adjusted earnings per diluted share increased by 38% over the prior year to $0.73 per share.

During the quarter, both our Macao and Singapore operations performed exceptionally well.

Sands China grew its EBITDA by 23% year-on-year, driven by strong mass gaming revenue growth, and Marina Bay Sands achieved its second best quarterly EBITDA since opening, with year-on-year growth of 38%.

I remain as confident as I've ever been in our company's prospects.

The Macao market is growing and its growth rate has been accelerating for 4 consecutive quarters.

At the same time, the significant new supply that has been added on Cotai since 2015 amounted to over 8,000 hotel rooms and over USD 13 billion of additional invested capital, has successfully been absorbed by the market.

Our Macao operation is experiencing strong growth in mass gaming and nongaming segments, and we have successfully established a new landmark, must-see destination resort in The Parisian Macao.

Our Macao mass gaming table revenue growth rate further accelerated from 18% in the first quarter to 23% in the second quarter.

In its third full quarter of operations, Parisian Macao achieved a quarterly EBITDA of USD 106 million.

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 4 interconnected resorts, over 840 stores across 4 shopping malls, 2.5 million square feet of meeting and exhibition space and 4 performance and event venues, including our Venetian Cotai Arena, which could be utilized either for our MICE business or for major entertainment events.

This critical mass of product and amenities allow 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.

Our retail mall portfolio across Asia continues to thrive, which demonstrates the success of our strategy to develop destination retail as a differentiation component in the critical mass of offerings in each of the Integrated Resorts in our global portfolio.

Both Macao and Singapore delivered double-digit retail sales growth for the second quarter.

Our annualized operating profit is now well in excess of USD 0.5 billion.

Both malls are poised for further enhancements in the tenant mix.

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.

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

Quarter 2 adjusted property EBITDA for our Macao operations was USD 600 million, an increase of 23% compared to the prior year.

Total net revenues increased by 23%, driven by growth in mass gaming and nongaming segments.

We maintained a strong EBITDA margin at 32.7% as we benefited from revenue growth and ongoing cost efficiencies.

Despite the significant increase in Macao's gaming and hotel capacity compared with the prior year quarter, our mass table gaming revenue grew by 23% year-over-year and our nongaming revenues grew by 22% year-over-year.

We experienced broad-based growth across both premium mass and mass segments; increased patronage and length of stay with hotel accommodation, increased spend at our shopping malls and entertainment events.

Our premium mass business performed exceptionally well, with growth of nearly 40% over the prior year.

During the quarter, hotel occupancy across our portfolio increased by 8 percentage points compared to the prior year, to 86%, with occupied room nights growing by 35% compared to the prior year.

The Parisian Macao grew its EBITDA by 29% sequentially to USD 106 million, with solid sequential growth in both gaming and nongaming revenues.

Not only has Parisian been successful as a stand-alone property, The Parisian also benefits our entire Cotai portfolio.

The Plaza Four Seasons property in particular has experienced an uplift in visitation and business volumes since The Parisian opened and the bridge between Four Seasons and Parisian was completed.

Every gaming segment at Plaza experienced strong revenue growth during the quarter, and Four Seasons retail sales grew by 7% over the prior year, despite the increase in the supply of luxury retail in Macao.

This year marks the tenth anniversary of The Venetian Macao.

When that opened in August 2007, The Venetian stood alone on Cotai.

Its opening marked the first step in my vision to create the Cotai Strip.

I was absolutely committed then, and I remain as deeply committed today, to continuing to support Macao's economic diversification and its transformation into Asia's leading business and leisure tourism destination.

Nongaming industries, such as retail, MICE and entertainment, are now well established in Macao and will continue to flourish and grow.

Meanwhile, The Venetian Macao has become the most visited Integrated Resort in Asia, if not in the world.

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

I believe this is the only MICE-based Integrated Resort complex of this scale in the world.

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

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

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

Now moving on to Marina Bay Sands in Singapore.

We delivered an excellent quarter at Marina Bay Sands, with EBITDA of USD 492 million, our second highest quarterly EBITDA since opening.

The quarter was marked by a particularly strong performance in the VIP gaming segment, where rolling volumes increased by 29% over the prior year as well as our retail mall businesses, where tenant sales grew by 11% over the prior year.

Normalized EBITDA margin increased by more than 6 percentage points, reaching 55% for the second quarter, supported by solid revenue growth and cost control.

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.

Our pioneering track record, development experience and financial strength puts us in the pole position to take advantage of new development opportunities on the horizon.

Now let's move on to my favorite subject, the return of capital to shareholders, yay dividends, and yay buybacks.

As you may recall, 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 -- to USD 2.92 for the year or $0.73 per quarter.

We remain committed to maintaining 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.

At the same time, we will remain opportunistic in returning excess capital via our share repurchase program.

We repurchased USD 75 million of stock during the quarter.

We look forward to continuing to utilize the stock buyback program to return excess capital to shareholders and to enhance long-term shareholder returns in the future.

Our performance demonstrates the resilience and consistency in our cash generation, which reflects both the strength of our business model and the geographic diversity of our cash flows.

Our debt to EBITDA leverage ratio remains low at 2.2x on a gross basis and 1.7x on a net basis.

My view of our leverage levels is that we are comfortable with the debt-to-EBITDA ratio of between 2x and 3x on a gross basis before any additional debt related to development opportunities in new markets.

As our EBITDA and cash flows grow, our leverage will naturally decline over time.

Our industry-leading cash flows, geographic diversity and balance sheet strength enable us to continue our recurring dividend and stock repurchase programs, while retaining ample financial flexibility to reinvest in our existing properties and pursue new development opportunities.

In conclusion, our cash flow generation continues to be strong and predictable.

The resurgence of growth in the Macao market has continued during the quarter.

The structural advantage from our scale, critical mass and product diversity was evident in our strong financial results.

We look to the future with confidence.

We have a strong organic growth outlook.

We are in a great position to continue reinvesting in our existing assets and to pursue new development opportunities, and we have both the intent and the financial strength to continue to return excess capital to shareholders.

Thank you for joining us on the call today.

And now we'll take questions.

(Operator Instructions) Your first question comes from the line of Stephen Grambling from Goldman Sachs.

Operator, let's move on.

Your next question comes from Thomas Allen from Morgan Stanley.

So last quarter, I think there was some debate around whether you want to target the VIP market in Macao, given the strength that we're seeing.

Can you just give us updated thoughts post this quarter?

VIP market.

Are you referencing junkets, Thomas, or when you say VIP, let's define that.

Yes, I mean, I think that there was debate around junkets, exactly.

So debate around how much you want to target the junkets, given the strength there when you've historically been more of a mass market company.

Well, obviously, we are mass-driven.

That's our calling card in the past and I think in the future.

That wouldn't preclude, though, us from participating in the junket segment.

Actually, we're redoing all of our rooms, and I think we're making a concerted effort to keep pushing hard in the junket segment.

Obviously, the margins in that segment are nominal compared to the mass segment, but we certainly want to be a junket house and have junket gestation for the direct profitability but also the other benefits to the premium mass segment.

So let's have no confusion, we want to be in the junket business for sure in Macao.

Okay, helpful.

And then you highlighted the significant increase in occupancy in Macao.

How are you thinking about allocating rooms now, to kind of drive the highest returns?

It's never really changed for us historically.

We allocate rooms based on profitability, be it junket, be it premium mass, be it mass or just cash customers.

We ran 86% occupancy across portfolio.

We're very pleased by that, and I think the difference between us and most people I think reflects our ability to sell 13,000 sleeping rooms and yet still take care of the casino customers.

And I think one thing you should think about with us is we've successfully enhanced our business model and marketing initiatives to adapt to the continued evolution of the Chinese consumer, mobile, social media, e-commerce.

We successfully leverage social media product placement and our diverse nongaming offerings to build that industry-leading online mobile social media presence in China.

I mean, at The Parisian alone, we have 3.6 billion digital impressions.

The Venetian and Parisian are the 2 top -- they're the most searched Macao properties on both Baidu and Weibo.

And on WeChat, we've got more followers than any other Macao companies combined, all the companies combined.

So again, we believe very much in selling hotel rooms because we have a large platform of 13,000 sleeping rooms, but profitability is guided by each segment, be it casino, be it cash sales, be it junket.

So we're open-minded to all those segments, but our key is to keep our rooms busy, occupied and producing lots of EBITDA.

Your next question comes from the line of Joe Greff from JPMorgan.

A question for you guys.

Obviously, the VIP business was rip-roaring at Marina Bay Sands.

What drove that?

Is it a different marketing approach?

Is it credit?

Is it macro-driven?

How concentrated or how broad-based was the rolling chip strength that you saw?

Sure.

Well let's be clear, we obviously had a stellar quarter, which was driven by the rolling segment and we had stronger volumes and above-average hold percentage which helped MBS too.

I think it was our second best quarter in the history of the property since we opened.

The nonrolling...

It was 7 years ago.

Yes, a long time ago.

The nonrolling table and slot ETG volumes were stable, although they didn't grow, a little bit disappointing.

And the lodging component was softer than usual because the Singapore lodging market is softer.

But I think this quarter reflects the many opportunities of profit we have to drive our business at MBS.

Even taking out ex the large whole percentage, we delivered about $385 million of normalized EBITDA, which sets up the potential for a huge year this year at MBS.

There's nothing new there in terms of marketing strategies.

What we are doing is reducing commissions in the rolling segment to enhance our profitability, enhance our margins.

We successfully keep pushing back on the commissions and testing the waters to see how far we can go.

You'll see that enhanced profitability in the rolling segment this quarter, and we play lucky.

Let's be clear, we had a lot of luck this quarter.

Probably about $100 million of increased hold.

But having said that, we're very pleased in a quarter where the usual drivers were absent, we didn't see the big lodging component, we didn't see the big component coming out of the nonrolling slot ETG segment.

We still delivered great results and it was all about the very high end and playing a bit lucky.

But I would again look at the commission structure and how it's changing.

I think we run about 65/35 in terms of the composite market EBITDA in Singapore.

And so we're very proud of the results there, albeit our traditional drivers were a little absent this quarter.

Great.

And just kind of a big picture on Macao for Rob, for anybody on the call.

How do you think about future investment or reinvestment in your property, particularly when you think about your peninsular presence and you think about Sands Cotai Central, what type of retheming or rebranding opportunities do you have to increase market share?

How are you thinking about those things now?

Right.

It's a good question, Joe.

First of all, we are the market leader in Macao, a market EBITDA leader.

We once hit $3 billion in EBITDA there a few years ago and our goal is to return to that place again.

We will absolutely invest aggressively in all aspects in Macao, be it SCC, be it The Parisian.

The Parisian had a nice quarter.

We think we can do better.

It's a based on mass volume.

And I think it's based on a terrific job, the team there, on the digital platform, and we're very pleased with our best performance at The Parisian, but we believe there's a lot more profitability.

It has extraordinary curbside appeal.

It has extraordinary connectivity to Four Seasons.

It's a very glamorous property inside the building, the casino.

What it lacks is a better room product to address the premium mass.

We're addressing -- we're spending aggressively now.

You'll see some of that product come on board in early '18 and by the end of '18 be completed.

And I think once that's done, The Parisian's going to be a very, very strong competitor and do much better than the $106 million this quarter.

We're very proud of the product.

We made some changes there, which most people do if they open a property.

We recognize the enormous appeal to premium mass and we think we do a lot better at The Parisian.

We're very pleased, as Sheldon referenced, the growth of the Four Seasons.

That seems to be benefiting both from a retail and gaming perspective, from the connectivity to The Parisian and The Venetian.

And we are reinvesting in The Venetian right now.

We're actually at 500 rooms out of order this quarter which took our room count down conservatively, about 20%, which impacted The Venetian's results.

So we're going to spend aggressively in Macao.

We are big believers.

We're grateful to be there.

It's a magnificent market.

We are the leader in EBITDA, and have been for years, and the biggest investor in the market, and that won't change.

We're going to drive more revenue.

And as this mass gaming story evolves, we plan to be a very, very big participant and grow our EBITDA.

And your next question comes from the line of Felicia Hendrix from Barclays.

So on the mass side, if we take the mass win estimate that's in the deck on Slide 13, the $4.15 billion, that -- and you kind of do a market share calculation based on your mass win and the price you maintained market share in the quarter . And last quarter, you grew share a little bit on the mass side.

I was just thinking then of your success with The Parisian and everything you're doing that your mass share would be growing a bit faster.

So just wondering how to think about that.

And then also in the deck, you highlighted that there was a sequential base mass decline in the quarter.

So I'm wondering if that's something that we need to discuss or if that's just seasonal.

Dan, you want to take that?

Sure.

I think, Felicia, I think the most important thing on the question is on Page 15, which is we grew 22.6% across base and premium mass.

So base mass grew 11% in a quarter that doesn't have as much visitation as say the first and the third quarter.

So it's a very nice result for us.

And then premium mass, as Sheldon mentioned in his comments, grew nearly 40% for us, 39.3%.

That's what matters, that's what counts.

We're growing very, very quickly.

We don't have precise information on all the other operators' growth.

We'll wait to see what they do.

You saw the results yesterday.

We've got very nice market share in mass and our expectation is that we can grow our market share in mass over time because of all the things Rob just mentioned.

So we're very, very pleased with the results.

It could very well be that the growth rate in Macao for the whole market is slightly less or slightly more than we've estimated.

We'll find that out in the next couple of weeks, but we know that the growth in the market is very strong at say 18%.

We're growing at 22.6%.

We're very proud of that and looking forward to continuing to move in that direction.

With respect to sequential, on SCL base mass, what I'd say is this is a seasonal business with visitors coming in the first and the third quarters, probably more so than the second and the fourth.

And as we continue to evolve, I think we'll see good stuff coming.

And I'll point to another slide in the deck, which is on Page 12.

If you look at Mainland Chinese visits, that's up 16% year-over-year in the second quarter of '17 compared to '16.

If you look at spend per visitor, that number is up 13% and this is just mass tables and slots for the visitors coming into the market.

So we see a very nice opportunity to continue to grow.

We expect that base mass business across Macao overall to grow at probably Chinese GDP plus.

So if that's the case and we're participating, we've got a very, very nice growth opportunity in the future.

That's helpful.

And just as a follow-up, can you guys just address the flow-through in the quarter in Macao?

It looks like it decreased a tad since last quarter?

I think our margins have been consistent, given our cost reduction programs.

I think the team over there has done a very nice job taking costs out of the business as the business scaled down in prior quarters.

Now that we're experiencing growth, we anticipate to see heightened flow-through.

From a labor standpoint, we've actually been pretty good.

I think some of our cost expansion here has been related to increased marketing to capture some of the market growth.

We're going to continue to invest in marketing as the business continues to grow because we think that's helpful for the long term.

So -- but as a practical matter, we should start seeing some operating leverage as revenue continues to grow in the market.

So I think it's going to be a little -- there's going to be some cyclicality in our margins just given the performance of revenue.

The first quarter has Chinese New Year's in it.

But I think as you look for the business over the long term, you should see us control our labor cost, control some of our fixed cost, and then look over time to increase our marketing spend as we invest in our business, invest in our customers and look to grow revenue and expand margins.

Your next question comes from the line of Shaun Kelley from Bank of America.

Rob, just wondering if you could give us a high level view on how you'd characterize the promotional or competitive environment right now in Macao.

We should be getting close to lapping some of the new supply additions from last year, including your own.

But any changes or tweaks to the landscape there?

Or is everything fairly steady?

I think things are pretty steady there, Shaun.

I think we -- unless I'm confused a little bit by our growth in the mass, Felicia's comments about base mass and premium mass indicates to me we've got healthy growth in both those segments and we have healthy margins, frankly, at 33% or so, I'd take it any time.

As far as the competitive environment, I think it's obviously a very competitive operating environment.

But from our perspective, it revolves around the base premium mass segment.

So we've not seen unreasonable competitive pressure.

I think it's actually very reasonable.

We did see some, obviously, price cutting on the hotel side a few quarters ago, and even that's bouncing back.

ADRs are improving.

And so I think the market there is rather rational and reasonable and measured, and I think it will continue.

As long as we keep seeing these double-digit increases in revenue and people aren't chasing the customers, I think that environment remains very reasonable to work in, and we're very happy with the environment.

And maybe -- so the quick follow-up.

I think I caught earlier, maybe in the prepared remarks, that normalized EBITDA margins in Singapore were 55% this quarter, but I'm not sure if I inserted the word normalized.

So is that a number -- like a solid number?

Or how should we interpret that?

Yes.

It's as solid as a rock now.

How do you say, it's 55%, unsolidly.

Yes, as we addressed, Singapore had an unusual quarter because we did have large volumes relative to the past and past year or so on the rolling, and obviously, when you hold well, that skews things a bit.

But I think if you step back, maybe even with the rather soft lodging market and a softer nonrolling table segment in the market, we did pretty well.

Margins held up pretty well.

And again, I think the power of MBS is evident this quarter by the fact that we had less traditional drivers, yet we had the high end emerge, and we held lucky.

So I think margins like that are reasonable, and you can believe them in the long term.

Shaun, this is Sheldon.

You got to remember that there is no reason for to reduce the traffic and reduce the productivity at Marina Bay Sands.

It is arguably the most beautiful building in the world.

If you want to have an argument, I'll engage in that.

I said arguably.

It is the most visited -- it's one of, if not the most visited hotel in the world.

There's nobody that goes to Singapore that doesn't see the hotel, that doesn't want to go up to its SkyPark and look out over Singapore.

It's just so attractive and so magnetic to people who come to Singapore.

I don't see any reason why the Marina Bay Sand's been open for 7 years, and we've done good and we continue to increase -- our mall is considered one of, if not the most beautiful mall in the world.

And while all the other malls are going down in Sing, we're going up.

So it's -- there's no reason for it to go down, particularly when people who come to Singapore, everybody who goes to Singapore, goes to see the Marina Bay Sands.

Shaun, I think one other thing to note is the margin that you're seeing there is based on the operating leverage of the business.

So that if Marina Bay Sands continues to develop a better mass business over time, if we continue to have the VIP growth that we're seeing, eventually we'll continue to scale, and you'll see some margin expansion in that business.

I could tell you, I'm involved in development and expansion.

And I could tell you I was in Brazil recently, and people had gone from Brazil to Singapore to see the Marina Bay Sands, just for that purpose.

People from -- everybody in Japan knows what the MBS is, and most everybody from Japan that has any interest in the potential Japanese Integrated Resort, everything they do is copying Marina Bay Sands.

So I'll wrap things, Shaun, there's one more thing about Marina Bay Sands, and about how we think about that asset.

Obviously, we're very proud of it.

It's a reference point for an exemplary IR anywhere you go in the world, be it Asia, South America or the U.S. And on Page 24 of the deck, I think one of the reasons why is we've invested aggressively in world-class entertainment.

If you look at that -- the list of acts, from the Rolling Stones to Michael Bublé to Elton John to Aerosmith, Diana Ross, et cetera, Asian acts, all kinds of top-tier K POP and J POP, sports, boxing, theatrical, it's a pretty impressive place.

We are the touch point in that part of the world for entertainment in Singapore, coupled with the view, as Sheldon referenced.

And as we travel to new jurisdictions, we're very proud of the fact that it seems to be the place that everybody talks about as what they want to have in their backyard.

So be it entertainment, be it MICE, be it retail, we reinvest heavily, and want to keep this superb asset looking like it looks and leading the way.

So (inaudible).

Your next question comes from the line of Robin Farley from UBS.

I just want to ask a little bit about return to shareholders.

And based on your opening comments, it looks like you did less share repo in Q2 than you did in Q1.

So I don't know if you could give any color on how you think about that?

Sure.

I think as we said previously, the return to capital cornerstone is really our dividend.

That's really what our Chairman and our board focuses on in terms of long-term sustainable growth, and that's really the focus of our return on capital program.

We use share repurchases to modulate return of capital to our shareholders.

So then we feel we have some excess cash, and we feel like providing some additional return to our shareholders, shrinking our share count, we'll go out and repurchase shares.

In this particular quarter, we chose to purchase $75 million.

In the future, we hope to do more, but that's what we did this quarter.

And that was just a function of, literally like liquidity in the quarter, or just thinking about that versus Q1?

I think it's really just a view on the outlook.

I think we tend to think about our cash flow growth, tend to think about the liquidity that we have, to think about a whole host of factors that kind of go into the mix, and we make for purchases based on our long-term view.

So across the year, we'll look at it more in that concept than we will particular quarter-to-quarter.

So I think the way we kind of look at it is going back across the year and saying what was our total return of capital, how were our shareholders treated and that's the context that we really consider it in.

Okay.

And then just one other very minor question, but are you still actively looking to maybe dispose of noncore assets?

Just wondering what your current thinking is on that?

I'd think that's something that we always are opportunistic about.

I think our Chairman has set up a very effective model where we reduce our cost of entry by ultimately selling down assets that are considered noncore, either in total or in part, and it's something that we'll always continue to consider to enhance shareholder returns.

But at this time, we don't have anything to report specifically, although the Chairman has said all along that this is part of his core and fundamental strategy for the business, and that's something we hope to follow over time, because it does create an unbelievable return environment.

Your next question comes from the line of Harry Curtis from Nomura Instinet.

Just a couple of quick clarifications.

Following up on Joe's question in Macao, can you walk through the projects or the property improvements that you're planning and give some general price tag on what you're planning to do this year and next in Macao?

So Harry, it's Patrick.

Nice to hear from you.

I think if you turn to Page 35 in our earnings presentation, you kind of see that we provide a forecast for our CapEx expectations for the entire portfolio, and then there's some details there regarding maintenance CapEx, some investments that we plan to do in existing properties, things that are specific to The Parisian and then some other.

And I think the key thing to note is that the $500 million maintenance that we intend to spend, although we haven't spent it in years past, as our property portfolio needs room refresh, needs high limit space changes, needs junket room adjustment, we intend to spend that money.

I think we have a very motivated team in order to grow the business.

I think we're working hard to identify areas of investment, areas of change that can be helpful.

And I think we're actively pursuing that in Macao, in Marina Bay Sands, here in Las Vegas and in Sands Pennsylvania.

So I think the key thing here is I don't know that we can call it a specific list of projects because they are numerous, but what I would like to highlight is we have a history of investing in our properties, of making the changes necessary to support earnings and cash flow growth and we've had the spending history that shows that we do it.

And so if you look at these next 3 years, you'll see there is a significant commitment made to both capital expenditures to provide growth as well as capital expenditures to make sure our assets are kept to where they need to be, to continue to boost the cash flow that allows our return on capital to happen.

So I'll turn it over to Rob or to the Chairman to see if they have any additional remarks.

But I just want to highlight, Page 35 lays out the amount of expenditures that we've spent historically, the way we've deployed capital and the way that capital intends to be spent in the future on a general basis.

I don't know if there's any specific projects that we'd like to highlight now, but I'll turn it over to Rob.

Yes, Harry, a few things just to think about.

We referenced The Parisian.

We're in the midst of converting into some suite product over there.

It'll come online in Chinese New Year's and throughout the year.

Otherwise The Parisian -- we're adding a restaurant or 2 in the gaming floor.

And we just finished redoing all the rooms and suites in the Four Seasons.

We're making changes to all of our junket rooms.

We're having 100% of the junket areas.

Obviously, adding all the new smoking rooms, like our competitors for 2019 finish date.

The Venetian, we're right now rehabbing another 500 rooms on top of the 500 we did last year, we're rehabbing the entire casino floor.

We constantly are adding restaurants, right now about 11 restaurants in Macao are being changed out for new product, to rehab.

I can't stress enough how much we recognize we're in a highly competitive market with very, very good competitors.

I was in Macao last month, and you walk through the new products and even the older ones, and they're very, very good.

So we're aggressively spending money all over Macao.

MBS room rehab across the board, a casino update refresh, and we just finished a new slot room there.

So there's no place we aren't spending money in.

It goes throughout, be it night clubs, be it restaurants, be it casino floor.

We're aggressive reinvestors.

We love the products we own, and we're going to be spending money throughout this year and next to rehab a lot of places.

So no lack of capital expenditures.

That's very helpful.

And then my follow-up question relates to Marina Bay Sands.

A couple of curious curiosities.

In your press release, it shows that mall revenues were flat quarter or year-over-year at $40 million, yet I think it was reported that last year, that it was about $64 million.

Was there some kind of an accounting change year-over-year?

I might have missed it.

Harry, I'm not sure what we're referring to.

Give us a chance to get back to you.

We're showing occupancy at 97%, rents are about $1,480 a foot, and it looks to me like the operating profit is about $35.1 million for the quarter.

If you turn to Page 26 on our earnings deck, we have the Asia retail mall portfolio, with operating profit and operating margin as well as mall revenue.

Maybe you could direct your question to that section and to that page and maybe we can answer it.

This was just specific.

Or on Page 9 in the release, we've got mall revenue at $40 million in '17 and $40 million in '16.

Correct.

So you're saying a year ago we had $60 million in the mall revenue?

It's what we show, but we've known to being wrong.

Let's chase it down together.

Let's chase it down together.

We've not -- Harry, it's Rob.

We've not had any significant changes.

Marina Bay Sands, it's pretty flat year-on-year but I don't think we -- we'll get you some detail on that, but I don't believe we had a $60 million quarter last year.

I believe that he is thinking about growth versus...

No, because the hotel runs about 30 -- about 90% margin, I don't think so.

We'll come back.

We'll clean up -- we'll come back to you, Harry, directly.

Yes, Harry, what you see, both on Page 26 and Page 9 of the press release is accurate, so I'm not sure what you're referring to.

But if you have any questions, please follow up with Dan.

I will.

And just staying in Marina Bay Sands for the last question is, on the rolling chip volume, in the first quarter, I just want to make sure I've got these right, it was $8.9 billion in the first quarter and $8.7 billion in the second quarter.

So it's sequentially pretty stable.

Is that a fair statement?

Yes, and it was -- if you look back a year ago, it was $6.7 million a year ago in Q2 of '16, so a nice growth year-on-year, but Q-on-Q, it's flat.

And obviously, Chinese New Year's fell in Q1, so it's a nice stable run rate of $35 million, $36 million.

Yes.

Yes.

That was where I was going is, do you think we're in a more stable environment now?

Because historically, that rolling chip volume has been quite volatile?

Yes, I think it's been stable the last year or 2. As you know, it's fallen off terrifically from the early days when there was belief we could do $50 million or $60 million.

But I think currently running in the $35-plus million range, I think that's realistic.

As you know, and I think it bears repeating, that this is a highly concentrated segment, that a couple of dozen players can make a difference in a quarter.

But we feel like we're running at a more stable rate the last 3 quarters within the 8 2, 8 9, 8 7 range.

But bear in mind, a year ago, we dropped down to 6 7, so a big increase year-on-year.

But this market, especially in Singapore, is like Las Vegas, 10, 20 people can make a difference.

And so I would caution you always to keep in mind it's volatile and concentrated.

Your next question comes from the line of Stephen Grambling from Goldman Sachs.

Can you hear me now?

Sorry about that earlier, and thanks for getting me back in.

Sure.

Glad you're back.

So sticking with Singapore, can you provide any update on the thoughts around monetizing the retail real estate there and provide any color into how that may play into your capital allocation strategy going forward?

Right now, still very early on, nothing really to report on the process, so I will tell you that I think as we said previously, that the Chairman's strategy all along, when he developed these large-scale Integrated Resorts that are MICE-based, and have a lot of critical mass, that a part of that critical mass will be noncore components.

And those noncore components are integral to the resort, but also have monetization capabilities.

And so we'll look to, in the future, monetize those assets as pricing allows.

And as the Chairman feels comfortable, we will enhance our shareholder returns.

So while we have nothing to report specifically at this time, we're optimistic, we're hopeful for the future.

We realize the value of the mall that's sitting there, as the Chairman said earlier.

It's a great property.

It's the most iconic mall in the world.

It's probably the most valuable mall in the world on a per square foot basis, and we're looking forward to the opportunity at some point in the future.

Hopefully, we'll get that chance.

Then on the Slide 30, you put down principal areas of future development interest, and if we maybe look at South Korea and Japan specifically, can you provide any updates there?

And what are some of the key factors that would make you maybe more or less interested in either one of those areas?

We've always been interested in both those locations, and I think that's no surprise to anybody.

We're cautious.

I think (inaudible) at this point there's nothing to really talk about.

We have been actively involved in trying to make ourselves known in Japan.

We've been there several times quite a bit, and we're hoping that process goes well, and hoping we'll be considered for a license at some point.

We're very bullish on Japan and very much hopeful that the process completes sometime later this year.

We'll just -- we are -- stay tuned and see what happens.

We're hopeful.

And then I guess the other follow-up is on South Korea.

Pardon me?

Your thoughts on South Korea.

Well there's been nothing -- they recently hit -- they had an impeachment, and the lady was indicted, the former lady President, and they put a new President in, but there's no indication what he's -- whether he's interested or not.

I think that, from having gone to Korea, South Korea many times, I think what -- they're waiting -- I think what will move that along will be the implementation bill in Japan that we hope will pass this -- before the end of the year.

But it's possible it could be delayed.

And I think that once they pass that -- remember, they have 17 casinos there, and only one allows Korean nationals, and it's about 3 hours' drive away from the biggest city from Seoul.

I think they've got bigger problems now with North Korea than looking at Integrated Resorts to attract more tourists.

So we don't know.

There's nothing new about Integrated Resorts being restructured in South Korea.

The most likely -- I've heard that Bangkok and Thailand is reconsidering IRs.

But it's very gratifying to know that everybody who talks about IRs in Japan is referring to one thing or more about Marina Bay Sands.

So it is an absolute must reference site.

It certainly puts us in the #1 position to be the top candidate for a win.

So we don't know.

There are different opinions as to whether or not Abe's loss of so many seats in the Diet, the Japanese parliament, we don't know.

Whether or not that hurts the move, but Patrick and Rob were just there last week, and they say that it doesn't seem to have any effect.

And they're still moving along and they hope to get -- I don't know why, but they've got to pass the bill for gaming addiction first.

I don't know what that has to do with anything, but they said they got to pass that first.

And we're hopeful that it'll pass the forthcoming month, in August.

And your next question comes from the line of Carlo Santarelli from Deutsche Bank.

Just quickly.

If you guys -- obviously not a material piece of your business, but if you guys could comment a little bit on what you're seeing in Las Vegas right now, and kind of how you're assessing current trends.

I think, Carlo, this quarter was disappointing in terms of the lodging component, which is more and more important in Las Vegas.

But George Markantonis who runs the building, tells me that the summer looks better to him.

Group business is ticking up considerably, and he thinks the second half, he will do well both from a -- he thinks the FIT business picks up and the Group business will be strong.

So hoping for more there.

Obviously, we didn't have as good a quarter as hoped for, after a stellar first quarter.

But George says the summer looks good.

Group business is accelerating and the FIT business as well is accelerating, so let's hope for the best in Las Vegas.

Great.

And then if I just could go back to one point you made, I just want to make sure I heard it right.

You talked a little bit about MBS and kind of what you're doing on the VIP side.

And did I hear you correct in saying your -- obviously no junkets in the market, so every relationship is direct.

Your rebates or commissions to your VIP customers, you've been kind of pulling back on them a little bit.

So even on normalized fold going forward, your margin profile within VIP should be improved?

Exactly correct.

We continue to cut back commissions at our second bite at the apple, and you've identified it perfectly, yes.

And just -- is there any kind of -- in terms of departmental margin improvement that you would expect to see from that?

Yes.

No, sorry, that you could quantify, I meant.

I apologize.

No, I don't want to quantify it, but I think you'll see improved margins and improved profitability in that segment.

We think we have a showcased property that people want to come to, and we are the market leader there by I guess by 65 to 35.

And we believe that we can perhaps reduce commissions and get better margin.

That's the thought process.

I don't want to quantify what that will mean, but it will be improved margins, improved profitability at MBS.

And this concludes today's conference call.

Thank you for your participation.

You may now disconnect.