拉斯維加斯金沙集團 (LVS) 2019 Q3 法說會逐字稿

Good afternoon.

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

At this time, I would like to welcome everyone to the Las Vegas Sands' Third Quarter 2019 Earnings Conference Call.

(Operator Instructions)

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

Thank you and thank you for joining us on the call today.

With 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.

Please note 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.

Finally, for those who would like to participate in the question-and-answer session, we ask that you please respect our request to limit yourself to 1 question and 1 follow-up question, so we might allow everyone with interest the opportunity to participate.

Please note that this presentation is being recorded.

With that, let me please turn the call over to Mr. Adelson.

Thank you, Dan, and good afternoon, everyone.

As you all know, I've missed the earnings conference call these last few quarters.

So let me begin by saying I feel good.

I'm very happy to be here with Rob, Patrick and the team, and I look forward to our discussion today.

Let me also say that I am extremely touched by all the calls and e-mails I've received over the past several months.

It has been remarkable to hear from so many people, including many of you joining us today.

I deeply appreciate the well wishes and everyone who took the time to reach out to me.

It certainly means a lot.

With that, let me tell you about our strong financial results and our unique strategic position.

Our company is today as strong as it has ever been.

Our balance sheet is robust, as evidenced by our investment-grade credit ratings at both Las Vegas Sands and Sands China.

I want to point out to you that S&P included us in the S&P 500 as of October 3. So we've been part of the S&P 500...

About 3 weeks.

For about 3 weeks.

Okay, where are we?

Our cash flow generation is unmatched in our industry with annualized adjusted property EBITDA of over USD 5 billion.

Good thing it's not dividends.

Our development pipeline in both Macao and Singapore is exceptionally exciting with over USD 5 billion of capital projects coming to fruition in Asia over the course of the next few years.

These investments will further strengthen our leading position in the premium mass, MICE, entertainment and other nongaming segments in Asia.

At the same time, we will continue to enthusiastically pursue the right development opportunity in Japan.

Now let's turn to our financial results.

We had another strong quarter across all of our markets.

Company-wide adjusted property EBITDA was USD 1.28 billion.

In Macao, adjusted property EBITDA was $755 million, consistent with the prior year.

While overall Macao gross gaming revenues declined for the quarter, the mass market continues to experience a robust growth.

We grew our mass gaming revenues by 9% over the prior year with strong growth in both mass tables and slots, and in both the premium mass and mass segments.

Most importantly, our profitability continues to lead the industry, with adjusted property EBITDA margin at 35.7%, up another 70 basis points compared to the prior year.

We couldn't be more excited about our ongoing investment of USD 2.2 billion to expand our critical mass of nongaming offerings in Macao.

Various components of these projects are already underway, and we look forward to giving you further updates in the coming months.

We remain steadfast in our belief that Macao is the best market in the world with respect to the continued deployment of our capital.

We look forward to making additional investments in Macao as we contribute to Macao's diversification and evolution into Asia's leading leisure and business tourism destination.

With the opening of the Hong Kong-Zhuhai-Macao Bridge and the ongoing development of the Greater Bay initiatives, we believe Macao has the potential to become the MICE capital of Asia, and we fully intend to contribute to that goal both through our existing assets and future investments.

In Singapore, adjusted property EBITDA was USD 435 million, up 4% over the prior year.

Rolling volumes was strong and were above the level of the prior year.

Mass win per day remains solid.

The hotel continues to enjoy near-full occupancy.

And retail sales per square foot increased by 10%.

Our Las Vegas operations had another good quarter with adjusted property EBITDA of USD 93 million, an increase of 22% over the prior year.

Finally, we continue to increase the return of capital to shareholders.

The Las Vegas Sands Board of Directors just approved an increase in our annual dividend for the calendar year 2020 to $3.16 per share or $0.79 per share per quarter.

Yay, dividends.

I guess you missed me.

Thanks again for joining us on the call today, it's really great to be back.

Now let's take questions.

(Operator Instructions) The first question comes from the line of Carlo Santarelli with Deutsche Bank.

And Mr. Adelson, welcome back.

Maybe this question is best for Rob.

Just in terms of, obviously, what you guys saw in the 3Q, it looked like you saw some strength in both the core mass segment or base mass segment as well as a little bit of a pivot in the premium mass segment, which also grew fairly well.

Just wondering if there's any dynamics that you're seeing that are changing, as obviously, VIP remained a challenge throughout the 3Q and I guess, it was a little bit surprising to see the premium mass perform the way that it did.

Yes, nice surprise.

So as you know, I mean, Macao is the world's largest gaming market, and the current future growth of that market's predicated on the mass market.

If you look at Page 16 in the deck, you can see the continual year after year growth of this segment.

And this is the segment that matter, let's be honest.

And we are the market leader in those segments, mass to premium, mass and slots.

And that segment depends on rooms and suites and gaming capacity.

Even though we lead the market in rooms and suites, the completion of the Four Seasons Londoner will put us in a more favorable position than ever.

It's quality, it's quantity, and it will enable us to dominate this critical segment for years ahead.

And you couple that with our retail entertainment product, our competitive position is kind of hard to beat, and we're very fortunate.

As you referenced, our rolling segment results were softer.

But this segment represents less than 10%.

I think Dan said 7% or 8% of our cumulative EBITDA composite.

The other 90-plus percent is reliant on the mass segment.

And to your comment, the mass win for the quarter reached $1.6 billion, base mass was at $762 million.

I think that was an all-time high.

Our premium mass grew to $674 million, which is $16,000-plus per table.

And the slots went to $160 million for the quarter.

So our future and the future of Macao is mass, and visitation continues to improve.

The quarter for us was very, very positive, except for the softness in the rolling segment.

But our game plan, as you know, we've said it quarter after quarter and year after year, our game plan remains the same.

It's more product.

We're spending $2-plus billion at Londoner Four Seasons, but quality product.

The quality of what we're doing at Four Seasons, Londoner will surprise everybody.

It surprised us, actually.

It's been pretty spectacular.

And so we don't see a whole lot of changes in this quarter.

It's business as usual.

It's reinvest in the product, focus on the high-margin mass business, grow our fundamental advantage, which is more retail, more restaurant, more entertainment and most importantly, more lodging.

So no real surprises, we're very pleased with the results, especially as you referenced, the comeback of our premium mass segment in particular.

Great.

Thank you, Rob.

And just a quick follow-up on the conversion right now.

And obviously, the VIP volumes and lower hold there is kind of making it harder to see straightforward in the results.

But when you think about the work that you're doing currently and kind of where you are in the transition, how much disruption do you think is net leaving the system?

I know it's probably not easy to handicap, but I'm sure you're capturing some of disruption at your other properties.

Do you feel like there's leakage outside of the system from some of the work that you guys are doing there?

I think there's going to be disruption.

But your reference point is spot on.

I think we can capture, if the team does their job, capture some of that disruption over the region in Four Seasons and Venetian.

I like to think we can.

Having said that, it's a massive project underway.

I mean '20 will be a disruptive year at SCC, there's no denying it.

We're transforming a 10-year-old product into something much more desirable for the market.

So there will be some disruption.

I'm hoping the team, and they claim they can do it, will move most of that business over to Four Seasons, Parisian, other products.

Obviously we can do it because we've got the room capacity, lodging capacity, the gaming capacity.

And frankly, we also have the ability to direct people who come for the entertainment product.

It's a big positive.

As you know, that's a unique differentiator for us over there.

So hopefully, when the premium mass come to town, almost every week, we've got a terrific show in there, they can push that customer away from SCC, if they so desire.

But I think, as we've said repeatedly, the end result is well worth it.

What we're building at Londoner, we can't wait to show it to you, we can't wait to finish it.

And the same thing with the room product, we saw it a few months ago at the Four Seasons.

It's exemplary in every way.

Only time will tell.

We can't quantify the level disruption, yes disruption, how much we can lay off in other properties time will tell.

The next question is from the line of Thomas Allen with Morgan Stanley.

Echoing Carlo's words, hoping you have a speedy recovery, Mr. Adelson.

So just around -- sticking with Macao, does it feel like the market's getting impacted by the Hong Kong unrest?

And do you feel like your properties are feeling it?

In Macao, as you know, Thomas, it's the mass segment that drives growth, it's that simple.

In this challenging macro environment, we just continue to see it grow and grow.

And that business revolves around lodging, retail, entertainment.

And we continue, as you see the numbers, to grow in all these areas.

The mass keeps growing, premium -- even with our large base, our slots and premium mass kept growing.

And with our CapEx position, it just gets better and better.

I also think with our 1,300 new suites at Londoner and Four Seasons, it just will get better in the next 18 months for us, especially for family travel, length of stay, our great nongaming product.

One thing we should reference is the base mass, the continued improvement in transportation infrastructure.

Connecting Macao will drive growth and visitation, and we can capture a large share of that growth through having iconic destinations in our theme resorts, like Londoner, Venetian, et cetera.

So in this challenging environment, we are really pleased with our results and just see it getting better down the road.

Helpful.

And then two more specific questions.

It seemed like convention, retail and other revenue at all your properties was down a lot.

What was driving that?

And the second question is just, I noticed you've been mix shifting your Macao tables away from base mass to premium mass.

Could you just talk -- I mean, recognizing that premium mass revenue was stronger this quarter, it has been more choppy.

So just wanted to hear the rationale behind that.

So I missed this -- the shift, I think what I heard you say is the shifting from base mass to premium, I hope we are, hope we can.

Obviously, that's our goal.

Our goal always is to get as many premium mass customers in there and move away from base as we can.

But that's a challenge when you have so many tables.

Very, very pleased with how that's happening.

And you saw the results in the number we came up with for the premium mass for the quarter, nice recovery from Q2, we had a bounce the wrong way.

I just think our structural advantages there are so damn strong, it's hard to refute where we're going.

I don't think anybody can argue with all our keys and not just having quantity but quality.

All the entertainment -- the retail, as you saw the numbers, I think it's on Page 27, we referenced the retail numbers.

It's just our advantages here are good, and they'll just get better with time.

Your reference to...

One thing, you mentioned the convention and other.

One thing to note is that, that is also where we have ferry revenue.

And so there's been a decline in ferry revenue year-over-year.

So that's what's driving that.

The majority of that is related to ferry, okay?

Yes.

Tom, just to follow up on that slide.

You referenced the growth from 434 to 450, which is accompanied by an increase to $674 million in total win, [16 2] per table.

Yes, it's a good trend in the right direction, and I hope we continue that way.

I'd love to end up with a double premium mass tables, if we have the demand to make it happen.

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

Could you all talk to the decision to walk away or I should say, redirect your focus from Osaka to other markets in Japan?

And then maybe just talk to any other markets that you do have your eyes on for development?

Sure.

We looked at Osaka, and we're very -- we think it's a wonderful market, a wonderful city.

We had a great experience there.

But in the end, we felt our strengths and our -- what we do for a living so well, it was better represented in the opportunity in the Tokyo Bay region in Yokohama.

And as you know, it's very competitive there.

It's a very interesting market, a lot of capital required, a lot of thought process to make sure the numbers work, and we just thought Yokohama was just a better fit for our skill set.

We are hard at work.

The government has issued the RFC.

We're hard at work at that right now, and we'll see how it comes out.

It's -- I think there's some time to ponder how Japan plays out in the end, and we hope to be right in the middle of it and make the best decision for the -- our company and our shareholders.

And can you just remind us of how to think about the amount of leverage that you'd be willing to kind of flex to, should you pursue that?

And if you don't, it still seems like you're running, I think you're at 1.5x, where could that move as you start to pursue the other development opportunities?

And where do you think about the right level longer term?

So I think this goes back to the original fundamental story of the company.

One thing our Chairman has been an expert at, and the company has been very strongly supported by, is allocation of capital.

And so if you look at the developments that our Chairman has pursued, they've always been large scale with very high returns.

And so that underpins any decision we make about any new potential new jurisdiction.

Conveniently, it also works hand-in-glove with our ability to return capital to shareholders over time as our CapEx rolls off.

So this is the framework that we use when we look at any jurisdiction.

So to think about it in terms of leverage, as the Chairman mentioned in his opening remarks, we have an investment-grade balance sheet.

And that's been a work in progress over many years.

So we're very proud to achieve the levels of leverage that we have today.

That proven financial management that we've exhibited has produced results and gives us a lot of flexibility to pursue really any jurisdiction that comes available.

So from that standpoint, right now, if you go to Page 8 in the deck, you can kind of see a snapshot of where our leverage is.

On a total consolidated basis, we're at 2.3x; on a net basis, 1.5x.

So it really depends on the timing of cash flows.

We've built some developments recently.

The Parisian, you can kind of see the development schedule there.

We laid out in our last quarter's presentation how we would handle Marina Bay Sands expansion, that kind of gives you a sense of how we would look to spend capital as we create a new development.

But as a practical matter, given some of the growth that we anticipate from the CapEx that we hope to spend over the next 3 years, we hope to maintain leverage levels in our current context, I think particularly when you give credit to pro forma EBITDA as the developments get closer to fruition.

So when you look at what we're doing, really, this is a transformational story of our company.

This is the second leg of a very large investment scheme.

We're expanding in our 2 best markets.

We're deploying billions of dollars of capital into Singapore, deploying billions of dollars of capital currently into Macao and opening probably our most competitive and best prepared product.

So we're very excited over the next couple of years.

And hopefully, that will provide an additional natural deleveraging and facilitate additional capital return.

One very quick kind of a quantitative follow-up.

Can you just remind me, what was the total room count year-over-year, I guess, in Macao?

We're trying to back into it, it seems like it's down, but I don't know if you have that number handy.

So if you go to Page 61 in our deck, I realize it's way in the back.

I'm getting there.

We're actually laying out all the -- we actually lay out all the hotel rooms, including new capacity, which we've highlighted.

So that's your [part of your answer].

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

Sheldon, good to hear your voice.

And you sound 100% versus the last call, so I'm glad you're on.

I wasn't on the last call.

[I am at again 95%.]

Just Rob or for anyone there in the room.

If I'm doing my math right, it looks like in Macao in the 3Q, your mass table hold percentage was a little bit higher than where it's been or where we would maybe deem it to be at a normalized level.

Are we looking at that right?

And was there anything with table hold on the mass side?

And obviously, that may be why premium mass grew at the high rate than it did, and maybe you can kind of help us understand maybe what was going on there, whether it's mix or changing some of the tie bets or something else?

There's been a lot of talk about Lucky 6 in the market.

All you guys have written about it.

I think there's -- starting to have some impact in the Macao market or even in Singapore.

Yes, we're a touch above, Joe, Q2.

It's not material, and we're actually a couple -- a few points above it in terms of the Q3.

It's not material.

I wouldn't consider it important.

Again, in our business, 0.5 point or 0.25 point with all this volume, it's not relevant.

I do think, as you know, baccarat, like all of our businesses, is a mathematical equation.

As the customers opt to play different proposition bets, be it Lucky 6, pairs, ties, whatever, it plays the house advantage.

And I do think you're seeing baccarat changing the baccarat I started with a long time ago.

It's evolving to a different place, and it's helpful to the industry, as these different bets evolve, as you know, the flat bets or the bank player is not as advantageous to the house as pairs and ties and now Lucky 6. So hopefully, we'll see it trend up to 25, 26, 32, 67.

But the truth of the matter is we're delighted to see the volume of play we've got, the hold percentage wasn't material.

But I think it is material to keep your eye on what's happening in the baccarat business since that is the predominant game.

And the game's diversification into more proposition bets is very healthy for the house, not just our house.

It just so happens we have more house than anybody else over there.

So the benefits flow to us.

But as far as it being materially different from the quarter before, it's not.

It's pretty much the same range.

Great.

And then switching over to Singapore, as my follow-up.

Rob, do you think you're getting a lot of business from China going to Marina Bay Sands that otherwise, for whatever reason right now, might be hesitant to go to Macao?

No, I don't think that's an issue at all.

I think the customers we've gotten to Singapore, it's foreign-based as you know.

Our growth proposition is interesting as we look at that business in Singapore.

We built that when -- Sheldon really developed that 13, 14 years ago, we sat in this room and penciled that.

And one thing we did, we couldn't have seen the dynamic growth, Joe, in the premium mass, super premium mass that comes from all over the rim.

And so we've built a typical, very nice hotel, but with lots of suites for high rollers or rolling customers and lots of typical guestrooms for other.

The evolution of the premium mass, especially the super premium mass from a lot of places, all over the rim, not just China, has really changed the dynamic.

And that miss on our part, which we couldn't have seen it, we just were blind to it.

It didn't exist.

But that's why we're doing #4, to make that tower really target specific, high-level focus on the premium mass customer that we don't get enough of.

And that's where the growth option resides in Singapore.

The other piece I think we add to the Singapore discussion, this arena we're building.

People don't quite understand, the importance of that arena in Macau is breathtaking.

When you look at our business week after week, month after month, we just can't get enough arena business in there because the casino wants it so badly.

It drives customers' decisions when to come, where to stay.

It's a ridiculous advantage that we don't have in Singapore, and that will correct that a few couple of years when we open 4.

But I think Singapore, it's not about more business coming from China or less, it's about that property to achieve its total potential, taking the CapEx dollars we're going to deploy and being laser-focused on the segments that drive it.

And that's the miss in Singapore in terms of -- we make a lot of money there, we're very proud of the operation.

But there's so much more growth opportunity when we get the suites and rooms right, the entertainment right.

It's going to be -- I think it's going to surprise people how much upside there is in Singapore, very desirable place to visit, very safe, very user friendly, enormous retail.

Our mall just continues to -- we were there last month.

It's shocking how good it looks and feels.

Our new nightclub business there.

I just think we just have a lot of growth potential in Singapore, and it's going to be the entire rim.

Wealthy people, affluent people who want an exceptional resort experience will come to Singapore.

Your next question comes from the line of Felicia Hendrix with Barclays.

Welcome back, Sheldon.

It's super nice to hear you there and comforting as well.

I haven't sent any dividends for a long time.

So just switching gears to Vegas, acknowledging it's not a big part of your business.

In the chart, in the deck, it showed that your table drop was down year-over-year in kind of both of the segments.

And for the market, we know that baccarat drop was down quarter-to-date through August, but mass drop was flat.

So just wondering in the mass side, was September down in the market?

Or was that due just more to the types of conventions or groups you have in your casino?

And I think in the past, you've discussed about trying to improve that mix.

So wondering where you are in the process?

I don't have a specific answer for September, but I will tell you that we are focusing on getting more of this mass, and I'll call it premium mass business in our building.

Again, with 7,000-plus accommodations, we should be getting more of it.

We're looking -- we obviously keep focusing on the room product, the suite product, more attractions, more F&B.

I'm very pleased where our casino is going.

We've seen nice baccarat play throughout the year.

It was a soft quarter, you're right, relative to the previous.

But the mass and premium mass growth opportunities are here.

But I think as you know, and you referenced earlier, Felicia, it's a lodging dominant market and will continue to be.

Vegas is more from, when I started in Vegas it was gaming-centric, now it's lodging-centric.

And the guys who sit next to me have had a lot to do with that.

But I think the best days of Las Vegas are ahead of us in terms of -- as more MICE space comes to the market, as more things happen here, we welcome the competition, welcome all the wonderful things that are happening over the town.

And so we're not going to -- I don't think you can focus on Vegas gaming for a quarter, for a week, or for a month and get too excited either way.

It's going to be a steady grind to a better place.

We're not going to see -- I don't think you'll see as much Asian play in Las Vegas as you've seen in the past because the options in Asia are so damn good that it's hard to -- we still see great players show up occasionally.

But the days of us dominating Asian play, I think, is over.

And the days of Vegas becoming probably the greatest lodging market in the world are here.

And we want to be part of that transitional shift, and Sheldon authored it 20 years ago, with the convention-based focus.

That's where I put my attention about, as looking at Las Vegas.

That makes sense.

And just switching gears to Japan.

I think conventional wisdom is that -- the integrated resort there would cost about $10 billion.

So I was just wondering if we could get a reality check on that.

Yes.

I'd like one too, you're right.

It's a big number.

Yes.

It might be light.

It might be light.

That's kind of what I'm wondering.

Is there any way to kind...

Well, don't wonder too hard.

Patrick and I spend way too much time in Japan in the last 6 months.

I feel like I could write a guidebook.

And I'll say this about it.

It's an extraordinary place.

We really enjoyed going there.

But to your point, sometimes I come back on the plane and pinch myself.

I think back to the days when we developed the Venetian with Sheldon in Las Vegas 20-plus years ago and I remember saying to myself, "My God, I'm part of $1 billion development." And it's just kind of comical thinking back on it today that you can build a nightclub today for $200 million in this town.

So the reference point that you make is very, very well thought out.

$10 billion, $12 billion, it does give you pause.

And no matter -- I once came back from a trip and I said to Sheldon, we were having coffee, I said "Think about it.

You could spend the equivalent of what Sheldon has spent in China for many casinos and retail malls.

You can spend that in 1 building." 1 IR in Japan.

No matter how good you are at this business, that must give you pause and stop and think, is that prudent?

Can you really deploy?

Can you get the return?

And we've had those discussions.

And we've had them with the Japanese government.

And so our Chairman and our Board will make that decision ultimately.

But we -- and Patrick and I, we've learned a lot, but that's a very fair question to ask of any operator, not just us.

You know we have the balance sheet and the capability and the skill set to do it.

The question is, can we get a return that the guy on my left is going to endorse in his Board?

And we're working through those issues right now.

I think $10 billion is the starting point.

I don't think anybody can do it for less than $10 billion unless you're going to do something subpar.

So it's a fair question to ask.

Just to be clear, the $10 billion is likely the prime city locations that are being discussed.

Yes.

Right?

There may be other locations in smaller cities besides the main cities of Japan where the investment entry costs would be lower.

But we're not in that business.

We're not going to Hokkaido, we're not going to -- we're going to be in a top-tier city, which would mandate $10 billion.

And that may be light.

I mean the cost of building in Japan is a big issue.

And the way the deal has been structured, it's a challenge.

And we're the guys who -- we spent $6 billion years ago, and we spent $13 million or $14 billion or $15 billion, we were used to writing big checks.

But all that money in 1 IR does make you stop and pinch yourself and say, "Can you get the returns that your shareholders deserve?"

There was kind of a Captain Obvious follow-up to that.

It seems like there could be a scenario where you guys just say, overall, we're not going to get the kind of returns and we'll let someone else participate in Japan.

Is that fair?

Well, we're not there yet.

It's always fair.

Any way you look at, we look at -- in the end, it's really Sheldon and the Board that make that decision.

But everything we look at is predicated on return on invested capital.

We have a great balance sheet.

The reason why, we don't do things just to do them.

We do them because they make great sense for the company.

And I think -- by the way, it's hard to beat the opportunities we face in Macao and Singapore.

Those two growth opportunities, we're spending billions.

But it's money that's so well spent.

Our Macao results, I hope -- I can't wait for a couple of years now to see the results that we're doing in Macao, both in the Londoner and the Four Seasons.

I can't wait to see the result of all the infrastructure the government's doing there, is exceptionally good for the market.

It's been a great -- very enjoyable to watch Macao from an infrastructural development, the new trains coming to Gongbei, the new -- all the infrastructural improvements there are really helpful to the market.

And we have to tip our hat to the government for doing that.

Same thing in Singapore.

What we're building there with that theater, and those new rooms, is going to be a very, very good thing for this company in terms of invested capital returns.

Japan will take a little more thought process.

We're certainly not writing off, we're deep into it, and we'd like to be there.

But to your point, we've got to make sure in the end of the day, it's prudent and it returns -- Sheldon's always said 20, so it's got to be a big number to make it work.

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

Pass along my best wishes to you Mr. Adelson, as well.

Just wanted to touch on a couple of things.

One was just in the detail around the expansion that you're planning for the Cotai Strip, it looked like perhaps the timing or for the opening on the Four Seasons slipped a little bit on -- I think we've heard plenty about construction challenges in the market there.

But can you just give us an update on just general construction progress and time line for some of the things that are scheduled to open?

And any chance that the Four Seasons -- or you do have some rooms available for Chinese New Year?

Shaun, first thing is a reference, Page 19, ongoing strategic reinvestment.

On Page 19 gives you a great snapshot of our timing on this thing.

You're right, we had a little delay in some of the issues in Macao, but I think we're going to get to these time lines and we feel pretty confident that Four Seasons pretty much -- there's gaming happening as we speak today in the Four Seasons Macao.

There is a new gaming salon, I think 13 tables open.

We're working through the room issues.

The rooms, by the way, there's 290 of them.

These are immense 2,000 to 4,700 square foot, so these are mind-blowing suites relative to the market there today.

The Londoner, again, is under -- there's rooms open, about 150 opened currently already.

The gaming salons have not started nor the facades.

That will happen in '20 and into '21.

There's been some slippage due to the process there, but it's moving ahead.

Will we have rooms open in the Four Seasons?

Yes, we will, by Chinese New Year's, have some rooms open.

But fully completed, probably, unfortunately, it will be second quarter of '20.

My mom used to tell me all good things are worth waiting for.

It will be worth waiting for.

It's going to be a game changer.

Four Seasons is a whole new place, a whole new world.

That will be the best product in Macao in terms of size and quality.

And I think Londoner will be a very strong sister to the Venetian.

So that page is very -- it says it all.

It tells you the dates and times and answers all your questions.

Great.

And then just as a sort of a broader follow-up, and I appreciate that VIP remains a smaller and smaller portion of the business.

But Rob, could you just give your kind of color or thoughts on specifically some of the -- we know about some of the challenges around maybe specific junkets and some of the kind of credit policies as it might relate to broader China.

But your thoughts specifically on some of these frontier markets?

Because we hear that come up from time to time in our conversations with investors as well, about the Philippines and Cambodia and some of the competitive offerings there, so just kind of what's your take from all the time you spend on the ground in the market?

Well, the numbers speak for themselves in Macao, it's been challenging there.

And I think the government will deal with those issues in the Philippines, et cetera.

It's not my area to comment on anything.

Whatever happens, you can read about it like I do, in terms of the Chinese government's take on all that, and we'll leave that to the government.

As far as Macao, we've been doing this a long time.

We've watched that market ebb and flow.

And we're certainly in a difficult time period.

I'd like to say it always resurrects, and it always seems to have in the past.

I believe we'll get better.

I just don't know when.

I don't know how.

As you referenced, it's about 7% or 8% of our composite EBITDA.

But yet it does have a value to us.

We'd love to pick up some more profitability there.

One thing we are doing by building the Four Seasons product, and even the Londoner, our portfolio is just tailor-made now for that junket space and that junket resurrection, if and when it happens.

I really don't want to pretend to know how and when that comes back.

I've been wrong in the past thinking it would be a difficult time, and they were on some life support situations a couple of years ago and they climbed back up the hill all the way.

I'm rooting for them, and we want to see it get better, but it's hard for me.

We spend a lot of time in Macao, listen to a lot of people, there's a lot of divergent opinions.

I would say we're rooting for that segment.

We believe that segment will get better.

But I just don't know how to be -- give you insight that's valuable as to when and how it resurrects.

So without avoiding the question, that's an honest answer.

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

Sheldon, glad you're back.

Nice to have you back.

Thank you.

Two questions, one is on Japan.

There are some others that are talking about consortiums and partners in Japan.

So I'm just wondering what your latest thoughts are on that.

And then I have a cash flow question.

Sure.

So in Japan, we're very confident in our ability to execute [in a greater] resort there to the standards of all of our other developments.

I think it would be helpful for us to look in the Japan market and find partners that could be useful to assist in the overall development.

And that could be partners that we trade with, that could be partners that invest with us.

We're really meeting with people now attempting to understand the dynamics of each individual market and looking to develop relationships to see how we can be helpful, and they could be helpful to us.

So much like some of the other potential concessionaires in the market, we're looking around to see if it's viable, how it might work and what the mechanics would be.

But it's something that could be very helpful if we come to the right structure and the right setup.

Great.

That sounds a little bit more open to partners maybe than what we've heard before, so that's helpful.

And then my other question is on share repurchase.

Just looking at the amount of share repo in the quarter, it's like a bit lower than the run rate in the first half of this year and in 2018.

Just what are your thoughts on share repurchase?

What we should expect going forward if there was something different about this quarter just getting more cautious because of the IP business or that kind of thing?

So I think when our Board meets quarterly and when our management team sits down and talks to the Chairman, we really think about total capital allocation.

And one thing that's been a hallmark of our Chairman's activities and his developments, as I said before, is really that capital allocation.

You can't just think of the share repurchase without considering our CapEx and our dividends.

If you go to Page 29 and you look at the remarks that the Chairman made at the beginning of the call, you'll see that we've, in effect, committed to spend north of $5 billion over the next couple of years.

And so we think reinvesting in the business is a much stronger indication of our view of the potential growth that we have versus return of capital through share repurchases.

We've always said that the cornerstone of our capital return policy is the dividend.

You see that the Chairman raised the dividend $0.08 for the upcoming year, which we're very excited about.

I think it's very shareholder friendly.

And if you look at the capital expenditures that we intend to make this year and the years coming up, we feel very strongly these will be very high-return projects.

And we think that -- we think these projects will facilitate a much greater level of capital return over time.

So we're being very cautious with the way that we purchase shares.

And as we said before, it's something that we would modulate as our cash flows become available.

So what you're really looking at is a holistic view of capital investment, the dividend cornerstone program and then excess cash being returned to shareholders through repurchases.

Your next question comes from the line of Jared Shojaian with Wolfe Research.

Just to echo everyone's comments, Mr. Adelson, it really is great to see you doing better and to hear you on this call.

So just sticking with the VIP and the mass trends here, if I look at Slide 36, the VIP contraction has taken a step down.

Obviously, it's getting worse.

But if I go back to Slide 16, the mass GGR is actually accelerating here sequentially.

So I'd love to just get your thoughts on why you think mass has decoupled so significantly, why mass has really remained insulated from a lot of the -- some of the macro weakness we've seen in China.

First of all, thank you for pointing that slide out.

It's my favorite slide.

I could look at it all day long.

I think what you've seen is this become -- I mean, the investment proposition in Macao going back to the beginning was always 1 billion-or-so people at your doorstep.

That was always the whole idea of Macao.

And what you're seeing now is the maturation of that thought process.

VIP has created all kinds of headlines and all kinds of stops and starts.

But the one thing that's always been true is that -- and one thing that Sheldon really did when he built this thing, when he built all these casinos back in the day, people just didn't understand it.

They thought, "Well, how many do you need?" While other people were thinking about it, we were building them.

As people today are talking about what they're going to build someday in '23 or '24, we're building it now.

So we've never been reticent to spend money in Macao.

We've always believed that the engine here would be, and should be, all those people across the border.

And so as we see this, it kind of makes us feel validated.

And that slide you point out indicates the steady march towards '20, '22, '25, '30, who knows when this stops?

My guess is it doesn't stop.

The only thing that is preventing more mass growth in Macao is infrastructure, which the government has done a great job.

The trains now are going to soon -- at the end of the year, more trains coming right into the city.

I mean they're bypassing Zhuhai into the Gongbei border crossing.

More avenues are opening up, the infrastructure, the airport.

So it's no big surprise that the Chinese mass business is growing and premium mass is growing.

It's a very different business than the junket and the rolling business, always has been, which is much more capital-dependent and money-moving dependent and has all kinds of issues with it.

So to my way of thinking, this is the natural evolution of this market.

Think of -- it's got a back -- we always say gambling is local.

The only good thing about Macao is the local market, it's called China.

It's a big local market back there.

It's not California.

And it's a growth market, this is a very simple story.

Chinese consumer, Chinese march towards success and middle class status is happening as we speak, every day.

That's why LVMH and luxury companies can't wait to get there and have been getting there for years.

That's our story.

The reason we're going to keep growing to $3 billion, $3.5 billion, $4 billion is because we're building product to address that market.

And as the government gives us the infrastructure and gives us the airport and trains, we build the rooms and give them all the things they want, there's no reason why it shouldn't keep growing.

It is growing, and that's why that's where we're focused.

The junket business and the rolling business was always a wonderful side business.

It's always been helpful.

We welcome it, but you're not going to -- the margins there just dictate that you can't invest too much capital and expect it to make a great return.

Our business, as you see, even with all the macro concerns in the market today, our business keeps marching forward, 8%, 9%, 10%, 12% growth quarter after quarter.

The slides you referenced are indicative of a backyard called China.

And the backyard people are getting richer by the day.

They want to gamble.

And by the way, if you've been to Macao recently, it's more from a place that wasn't so terrific to an incredible place to visit now.

The people want to come because it's great.

The rooms are great, the food is great.

The retail, the shows, it has it all.

And I think that's why it's happening.

It's not going to stop.

And we're at the epicenter of that.

Our investments -- what this Board authorized a couple of years ago to put a few billion dollars more into Macao, we want to invest more money in Macao.

We're complete bulls on the growth and future of Macao.

That's why Sheldon and the Board said, do the Londoner, do the Four Seasons, keep building more.

When we get the green light from the government, we'd love to build more sleeping rooms and more retail and more restaurants and more entertainment because that's the future of Macau.

It's not going to stop.

I mean Macau has proven to be very resilient.

And to your point, despite the -- it's decoupled, but it hasn't stopped growing, it's -- in fact the decoupling is accelerating.

And also you should know that the driver of that premium mass customer is a younger, more affluent, lifestyle-driven person.

He or she is 35, 45, 50 years old, they want the best things.

They want the rooms.

They want the entertainment.

They want the food.

They want the retail that we offer.

It's not simply a gambling play.

And that customer is not capital dependent on the junket side.

They're very independent of the junkets.

So it's both a higher margin customer.

It's growing by the day, and there's no reason it should just stop.

In fact, just the opposite, it'll keep growing.

And that slide is why -- that's the powerhouse of Macao.

The growth is just incredible.

It's just $15 million, $17 million, $20 million, $22 million.

Why would it stop?

It won't.

So we're very pleased to see it.

Our products speak to it.

We keep investing there, and we're very grateful to be there.

And with that, we have reached our allotted time for questions.

We thank you for your participation and ask that you please disconnect your line.