Las Vegas Sands Corp. (LVS) Q2 2012 Earnings Report, Transcript and Summary

Daniel J. Briggs - Vice President of Investor Relations Sheldon Gary Adelson - Chairman, Chief Executive Officer, Treasurer, Chairman of Las Vegas Sands Llc, Chairman of Sands China Ltd and Chief Executive Officer of Las Vegas Sands Llc Michael Alan Leven - President, Chief Operating Officer, Secretary, Director, Chairman of Advisory Committee, Acting Chief Executive Officer of Sands China Ltd, President of Las Vegas Sands LLC and Chief Operating Officer of Las Vegas Sands LLC Robert G. Goldstein - Executive Vice President and President of Global Gaming Operations Kenneth J. Kay - Chief Financial Officer and Executive Vice President

Mark Strawn - Morgan Stanley, Research Division Joseph Greff - JP Morgan Chase & Co, Research Division Shaun C. Kelley - BofA Merrill Lynch, Research Division Jon T. Oh - Credit Agricole Securities (USA) Inc., Research Division Felicia R. Hendrix - Barclays Capital, Research Division Steven E. Kent - Goldman Sachs Group Inc., Research Division Carlo Santarelli - Deutsche Bank AG, Research Division Harry C. Curtis - Nomura Securities Co. Ltd., Research Division Robin M. Farley - UBS Investment Bank, Research Division

Good afternoon. My name is Venietta, and I will be your conference operator today. At this time, I would like to welcome everyone to the Las Vegas Sands Corp. Second Quarter 2012 Earnings Conference Call. [Operator Instructions] At this time, I'd like to turn the call over to Mr. Daniel Briggs, Vice President of Investor Relations. Sir, you may begin your conference.

Thank you, operator. Before I turn the call over to Mr. Adelson, let me remind you that today's conference call will contain forward-looking statements that we're making under the Safe Harbor provisions of the Federal Securities Laws. The company's actual results could differ materially from the anticipated results in those forward-looking statements. Please see today's press release under the caption Forward-Looking Statements for a discussion of risks that may affect our results. In addition, we may discuss adjusted net income, adjusted diluted EPS, adjusted property EBITDA, which are non-GAAP measures. A definition and a reconciliation of each of those measures to the most comparable GAAP financial measures are included in the press release. Please note that this presentation is being recorded. In addition, we have made some supplementary presentation slides available on our website, including a presentation of hold adjusted, adjusted property EBITDA over the last 5 quarters. With that, I'll turn it over to Mr. Adelson.

Thank you, Dan. Good afternoon, everyone, and thank you for joining us today. We reported $845 million in EBITDA, of $2.58 billion in revenue for the second quarter of 2012. Our revenue for the quarter would have been $107.5 million higher had we held normally in Macau, Singapore and Las Vegas. Our adjusted property EBITDA difference from the prior year quarter is fully explained by the additional EBITDA of approximately $88 million. From the low hold as well as the decision to increase that provision for accounts receivable in Singapore by an additional $29 million. We reported adjusted earnings per share of $0.44 for the quarter. That number would have been $0.09 higher adjusted for hold and now they're $0.02 higher after adding back elevated legal expenses in the quarter, so $0.55 in total. Before Mike, Rob and Ken provide some more specific instance, let me share with you my view from the pilot's seat. We own outstanding assets in every market in which we operate. We happen to operate in the best gaming markets in the world. And when you have outstanding assets in the best markets, there will be significant opportunities for growth. Let me now spend a moment talking specifically about our opportunities for strong growth and outstanding returns in Macau. In short, there are 4 reasons for my optimism. First, we have opened the first phase of Cotai Central. It is and it has performed well and has been well received by customers. And Mike will give you some details on how we've done in Macau. Second, our investments on Cotai are allowing us to grow faster than the market and revenue share and in due course, EBITDA growth and bottom line profitability will follow. Next, new infrastructure linking more of China to Macau will be added steadily in the years ahead and will increase meaningful and will meaningfully enhance market growth in Macau. Our investments on Cotai will allow us to handle, allow us to benefit disproportionately. Final, Parcel 3 will add another Integrated Resort development for us in the world's largest and most profitable gaming market. With that backdrop, it's pretty easy to understand my optimism. While we still have work to do, strong revenue growth is on display in our results today even while Cotai Central won't truly begin its ramp until early next year. At Cotai, we are on the verge of combining more than 9,000 hotel rooms with an unmatched collection of leisure business activities and amenities. And through a series of indoor and climate-controlled covered outdoor walkways and moving sidewalks, it will all essentially be under one roof. We believe that Cotai Strip will continue to serve as a strong and essential contributor to the Macau governments publicly expressed desire to develop Macau into a world center of tourism and leisure. When you factor in that no additional competitive capacity will be coming on Cotai for the next 3 to 4 years, the barriers to new entry into the market, the increased spend per visitor the market is currently enjoying and the future completion of infrastructure projects that will connect Macau more conveniently to the remainder of China, the opportunity for the continued growth is outstanding. In addition to our inherent organic growth potential, we also have growth which will be achieved through the addition of Parcel 3. After the recent extension of the completion deadline, we now have an important new project in our development pipeline. While we will continue to aggressively explore new opportunities in Asia, including in Japan, Korea and Vietnam, and elsewhere around the globe, we have already submitted our Parcel 3 design plans to the Macau government, and pending government approval, we hope to begin putting pylons in the ground by this November. Before I turn it over to the guys to provide some additional perspective on our operations in Macau, Singapore and here in the U.S., let me leave you with this. Our core strength is that we are in Asian markets that present significant opportunities for revenue, EBITDA and free cash flow growth in the future. We also have the right team in place today to execute on those opportunities. Mike's recent contract extension as President and Chief Operating Officer, together with Rob's extension as President of Global Gaming and the addition of Chris Cahill, our Executive Vice President of Operations gives us a strong leadership team for the future. On top of that, our success and unique position in the industry provides us the financial strength and flexibility to both pursue and invest in new development opportunities around the world, which we will do in a strategic and disciplined manner while continuing to return cash to shareholders. So with that, let me now turn it over to Mike Leven and the rest of the team.

Thanks, Sheldon. I will make some brief comments on operations in general. Robin and Ken will add some short comments and we will move on to your questions. Let me point out that available on our website is an adjusted property EBITDA presentation which presents hold adjustments for each of the last 5 quarters. We received feedback that would be helpful to all of you. We listened and we will be providing that information going forward. Moving to operations, we are pleased with the early performance of Cotai Central since we opened the first phase of the property in April. The positives are many. Our hotels are enjoying strong occupancy, including 61% in April, 74% in May, 85% of the month of June and the ramp continues into July. This is, in fact, higher occupancy that we enjoyed at this stage with either the Four Seasons Hotel in Macau in 2008 or Marina Bay Sands in Singapore, and it is almost as strong as the The Venetian Macau's performance in 2007. The quality and satisfaction scores for both hotels are outstanding, with the Holiday Inn enjoying the highest customer satisfaction marks of any property in their Asian portfolio. While the number of mass gaming units in the Cotai Central is quite limited in its first phase, with approximately 200 mass tables and 800 slots and ETGs, the win per mass table per day is easily exceeding the early performance at both The Venetian Macau and Marina Bay Sands. The win per slot machine or ETG seat per day is double what the Sands Macau accomplished at the opening and is 4x the level of The Venetian Macau back in 2007. It is clear that the early performance at Cotai Central bodes well for our future results. Even before we opened the second phase of Cotai Central, the new capacity is allowing us for the first time in recent memory to grow faster year-over-year than the Macau market in every gaming sector category, VIP, mass tables and slots. We grew gross gaming revenue 26%. The Macau market grew 14%. We grew VIP revenue by more than 20%. The Macau market grew 8%. While everybody else is talking about VIP contraction, we are experiencing VIP expansion. We grew mass table revenues, including revenue from ETGs, nearly 40% and the Macau market grew 34%. We grew slot revenue 19% and the Macau market was up 16%. When the second phase of Cotai Central opens just 57 days from today on September 20, we will add another 200 mass tables to the property, as well as 1,200 more slot and ETG units. Together, we're up to 2,500 additional Sheraton-branded hotel rooms and suites, plus additional retail, dining and entertainment amenities, we are confident that additional capacity and amenities will meaningfully improve the financial performance of the property. Looking further ahead as the additional 1,500 Sheraton tower branded rooms and suites come online throughout October, November and December and the air-conditioned walkover bridge connecting The Venetian and Four Seasons to Cotai Central opens in January of '13, the true ramp and the earnings power of Cotai Central will be reflected in our financial results. In Singapore Marina Bay Sands, we enjoyed good growth in all areas during the quarter with the exception of the rolling volume. Hotel RevPAR was up nearly 30% in the quarter compared to last year, with occupancy at 99.1%. Our retail rents also reflected meaningful growth with mall revenue up 13% in the quarter compared to 1 year ago. Adjusted for hold, our EBITDA at Marina Bay Sands would've been approximately $387.7 million. The success of Marina Bay Sands in developing tourism to Singapore has been widely recognized. Singapore's Strait Times recently reported the following. Tourist arrivals to Singapore were up a healthy 15% in the quarter as of March 31. Travel agents reported that RWS and Marina Bay Sands still ranked high on the must-do lists for visitors in Singapore. MBS, with its sky park specifically pulls in crowds from India, China and Japan. Travel agents also shared that most Japanese visitors to Singapore want to stay at MBS because it has become iconic throughout Japan and they want to be able to tell their friends that they stayed there. Not bad press. We are confident that this magnificent property in South Asia's most important tourism destination with outstanding transportation infrastructure, a large population base, growing regional wealth and a duopoly environment for gaming through at least 2017, will provide an outstanding platform for continued growth in the years ahead. In Las Vegas, we reported $64.4 million in EBITDA during the quarter. We held poorly in Las Vegas this quarter. We should have reported approximately $76.9 million in EBITDA if we had held as expected. Groups' rooms business and pricing is picking up for 2013. We are investing for the future in Las Vegas, renovating 1,000 rooms in our Venetian tower, remodeling and redesigning the gaming floor at The Venetian and introducing a whole new entertainment offerings in the fall. With that, I will turn it over to Rob. I look forward to addressing your questions in a few minutes.

Thanks, Mike. Our gaming business is divided in 3 primary segments, VIP or premium tables, mass tables and the slot ETG segment. Macau exceptional growth has been fueled by the growth of VIP segment for the past 2 years. Much has been said about deceleration of VIP segment, but rumors of its death might be greatly exaggerated. Our VIP segment has grown considerably over the past few years due to market growth and management focus. The VIP segment represent about $500 million of departmental income annualized or about 25% to 30% of our overall EBITDA in Macau, once Cotai Central is completed. But the greatest opportunity for LVS in Macau resides in the mass table market where we are in a very unique position. Sheldon's $9 billion of Integrated Resort investment, allows us to earn the lion's share of the growth on Cotai. We will have a great opportunity on mass tables and slots in the years ahead. The mass table market grew 33% in the most recent quarter and, more importantly, represents a 45% margin as opposed to VIP's 12% to 14% margin. The infrastructural improvements in Macau and the mainland will make this the most profitable segment in Macau. With our Cotai position, we are well positioned to capitalize on that opportunity. Singapore's incredible success as the opening in 2010 is well documented, the VIP segment has not grown in the last quarter. We believe that Singapore's tourism and our properties' unique position will yield results in the future. Our mass table and slot win exceed $4.5 million per day this quarter. We have seen some growth in that segment, but not the growth we have previously experienced. However, 300 million people within a 90-minute flight or a car trip give us confidence that there is considerable room for growth as tourism expands. I look forward to speaking with you further on the Q&A section. I'll turn it over to Ken Kay.

Thanks, Rob. The balance sheet and cash flows are a simple story. Our cash flow remains robust and we are confident about its future growth. We retain the financial strength, both invest in new development opportunities and to return cash to shareholders, and we will continue to do both. Our Board of Directors approved yesterday our third consecutive quarterly dividend of $0.25 per share. We meaningfully reduced our debt outstanding during the quarter. We prepaid $400 million on the U.S. Restricted Group facility, reducing the outstanding amount on that facility to $2.4 billion as of June 30. In addition, we paid -- we prepaid $131 million to retire our Macau ferry financing. After the prepayments, our total debt outstanding at June 30 was $9.4 billion. Our weighted average borrowing cost for the second quarter was 3%. Our borrowing costs remained quite low, and with the recent refinancing of our Singapore credit facility, we have no sizable debt maturities until 2014. Despite retiring more than $500 million of debt during the quarter, we held approximately $3.5 billion of cash and cash equivalent on the balance sheet at June 30. Our consolidated net leverage ratio at June 30, based on trailing 12 months of EBITDA, was 1.54x. Our capital expenditures during the second quarter were $337 million. We expect to spend approximately $500 million at Sands Cotai Central before the end of the year and another $500 million thereafter. We will continue to invest in our other operating properties. We expect maintenance CapEx across our property portfolio to be approximately $350 million for the rest of 2012, taking us to about $500 million for the full year. And although we're in the midst of our planning for next year, I expect we will be close to that same amount for 2013. With that, let me hand the call back over to Mike.

Thanks, Ken. Operator, we are now ready to begin the Q&A.

[Operator Instructions]

[Operator Instructions]

Your first question comes from the line of Mark Strawn with Morgan Stanley.

Rob, you mentioned the opportunity in the mass table side and going through some of the recent trends maybe you're seeing in that market in Macau, it seems like visitation is starting to slow somewhat from China. Can you talk about what you're seeing in the market and at your properties and in Cotai in general?

Yes. Mark, I think we see, as I mentioned, in my remarks, is an amazing opportunity which is unique to this company and that we're going to have over 1,000 mass tables on the floor at the end of Sands Cotai and we have over 9,000 keys. We're seeing the ramp continues for us at mass tables. So we've kind of divided into the pure mass, and I would call this the premium mass, then finally the super mass, meaning tables earned as much as $20,000 per day, which is happening in some of our Venetian property. I think for this company, obviously, that 33% growth last quarter, it bodes very well. Visitation may be slowing and not as strong as it was, but the better customers keep coming and the real question obviously for the market is, does the spend continue with the deceleration of the VIP? And you can make whatever argument you want to make. We believe that, that segment will continue to grow and we believe we'll be a player in each of the 3 sub segments because of the amount of tables it has to offer, the rooms, the retail, especially Sands Cotai Central is built for that. We've seen terrific growth the last 2 years, and I don't see reason why that would slow down for us. We have the offerings. We also have the ability to go to ETGs and more of the mass table side which is being pushed out of the market. Some of that demand is being pushed aside by some operators by raising table limits to HKD 300, HKD 400 per bet. We can take that demand on our ETG levels because we have lots of capacity, about 7,000 slot ETG positions. I don't know how else to say it, but we think the opportunity for us is massive. It's still 33% growth. Even if it slows down to 25% or 20%, we're just very uniquely positioned. We feel very good about it for the balance of the year.

And then just one follow-up on the free cash flow, I know Ken mentioned the cash balance at the end of the quarter and you continue to generate significant cash. If you think about the uses of that cash going forward, whether returning to shareholders in the form of increasing the dividend or a buyback or maintaining reserves for future developments, can you just update us on your latest thinking there?

Yes, it's Ken and I appreciate that. I mean you've pretty much enumerated all of the possibilities there. And as we look out over the horizon, I think all of those are definite possibilities that we're considering, and I think we get more intelligent with each passing quarter with regard to, I suppose, the realization of some of those future development opportunities. And so as we take that into account, we'll obviously consider each one of those, the different alternatives with regard to returning some more of that money to shareholders as our cash balance continues to build.

Your next question comes from the line of Joe Greff with JPMorgan. Joseph Greff - JP Morgan Chase & Co, Research Division: You talked about that credit provision at Marina Bay Sands in the quarter. Can you talk about collections in Macau and if you could help us understand what the balances are in Macau and Singapore at the end of June?

Yes, sure. Let me just give you kind of an overall perspective with regard to receivables and I can go into the specifics, if you will. Just looking at Marina Bay Sands, for instance, I think we're in pretty good shape. Any slower collection issues that we have encountered are really specific to isolated accounts as opposed to systemic problems across the portfolio of accounts. And just to give you some perspective on that, since the inception of Marina Bay Sands, we've had credit drop of about $10.4 billion. And when you consider that our Singapore casino receivable balance at June 30 is about $822 million, that means we've collected over $9.5 billion of credit issued and played, which is about over 91%. And then against that receivable balance, we've got about $192 million in reserve or about 1.9% of the total credit drop, which gives you an idea of really how small the potential for bad debt really is. That reserve is about 29% of receivables, excluding open programs and less than 30 days accounts outstanding. And then additionally, life-to-date the reserves about 6.9% of rolling win, which is within the range we've discussed before. So despite the fact that the percentage of rolling win in this quarter was a little bit higher, I think we're tracking pretty much where we expected to be in terms of overall credit. When you look at it from a Macau perspective, really, the growth in receivables has predominantly come from the increase in accounts from junkets. And so at the end of June 30, 2012, we have in total receivables in Macau, it's about $680 million, about $510 million of that is really from junkets. So although we've had some increase from direct customers, it's big increases come from junkets which obviously pay on a very rapid basis. And we've continued to collect from the junkets as we have in the past. We really see no deterioration from that perspective. Our reserves have grown a little bit just from a prudency standpoint and against that total amount of receivables, we've got about a 15% reserve that's outstanding. Joseph Greff - JP Morgan Chase & Co, Research Division: Okay, great, helpful. And then for the September 20 Phase 2a, expansion at Sands Cotai Central, you talked about having additional 200 mass tables there. Are you talking about incrementally new tables with government approving that or are you talking about shifting those 200 tables and sourcing them from other properties?

So our indication from the government has always been that we would get 400 additional tables for Cotai Central. On September 20, we will not have all of those 400, but we will be getting them throughout the rest of the year. By the time we open the last property, the last 2,000 or 1,500 rooms in January, we will have, guaranteed, the 400 additional tables. So there will be some movement of some tables on September 20.

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

I just wanted to ask about kind of the Macau properties overall. When I kind of looked at the group as a portfolio and now that you have Cotai Central in it, it gets a little harder to compare. But one of the things that we're kind of seeing is that it looks like last year, property level margins were pretty steady in the 33% range across the kind of Macau portfolio. They were still pretty steady in the first quarter at 32%, but then they dipped to about 29.5%. You obviously have some kind of ramp-up time and some operating leverage or deleverage at Cotai Central, but could -- was there anything else on the expense side or anything else that kind of crept up as you think about the Macao properties overall? Any reason that you can't get back to mid-30s once you get more volume into the Cotai Central?

We're down 29%.

29.2%

Yes. The margin gets impacted by especially good VIP play that's grown. It takes a little while for the mass to catch up to that. We've said in a long time ago, that that's what happened in the early opening of Sands Cotai Central and as well as the efficiency when you start, it's not going to be the efficiency when you finish. There is some pay overload getting ready for the next opening, and whatever that's carried there and as those flattens out, you'll see those margins return into the 30s.

Shaun, it's Rob. I think you know that Sands Cotai is underperforming in the mass table side and doing pretty well in the VIP side. So the mix there is skewed toward the lower margin 12%, 14% versus the 45%. I've got to tell you, I think once that really ramps up, it's going to be and that property's really fully open because right now, it's a very young, very immature property. I think the margins will be better than any place in the group because that is built for the mass, premium mass, 6,000 keys, lots of retail. I think the VIP growth can get better, but nowhere near the opportunity we've got to get to on the mass tables. Once that margin goes from being a small part of the mix, versus a large part of the mix on the mass table side, that all will self-correct. Everything is fine in the rest of the properties, it all ties back to Cotai.

Okay, that's great color. And then my other question will just beyond, just maybe the overall promotional environment and kind of levels here as you've seen gross gaming revenue growth kind of level off. Have you seen any areas of kind of promotional activity? Another competitor talked a little bit about probably some increased competition. Obviously, you guys are driving a piece of that with all the new supply out of Cotai Central, but just kind of what are you seeing with any sequential change, and that would be helpful?

I think just the opposite. We're seeing there's talked about -- obviously, the junkets segment has remained pretty much fixed, no one's moving numbers there, so I don't think that's a concern. There's competition on the slot ETG and mass tables side. We haven't seen evidence of that, but it make sense to me that they will be moving in that direction because that's where the growth is. I mean, the story as the acceleration of VIP continues, the opportunities in Macau are going to move more to slot ETG and mass tables and I wouldn't be surprised if some people are being more aggressive. But in the end, we don't see a need to move our margins or be more aggressive because we've got the product in place, the infrastructure in place to compete very well. We've got the tables, we've got the sleeping rooms, we've got the food and beverage and retail. And as Cotai gets more and more mature, we've seen this was referenced earlier in the call, you saw it in Singapore, you saw it in Venetian Macau. Venetian Macau opened up to sub-$100 win per unit per day in the slots. Tables were about 3,000 or 4,000 a day. That probably now does 4x that in terms of the win per units. And so the point being is as that matures, we see no reason to repeat on pricing, just the opposite. We've got the infrastructures to stay consistent.

The next question comes from the line of Jon Oh with CLSA.

Jon, just a second. This is Dan. I just wanted to point out, Shaun as well, that if you look at Page 6 on the deck on the website on a hold-adjusted basis for the quarter, we are at 34.3% for the company, overall. And I know if you look at the -- at page -- sorry, Page 7, you can also see that on hold-adjusted basis, we're at 30.1% in the Macau operations for the quarter. Okay, Jon? Jon T. Oh - Credit Agricole Securities (USA) Inc., Research Division: I have a question on Macau. Could you give us some color as to the credit appetite from the VIP players in recent times? And also, for the credit appetite of your junkets and also your direct VIP play, are we seeing any significant shift in that business?

I don't think the problem resides in the credit, Jon. The problem resides in the demand side. We've, anecdotally, talked to our junket people at the time and the feedback we're getting is not that they're not -- they're still, they're cautious of credit, as they've always been. I'm not sure it's significantly changed. The difference, I think, I believe, both in Singapore and Macau and even in the U.S. is customer demand. We have -- where there's appetite for credit, we grant it the same way we always have and we try to be judicious about it. But I don't think the junket people, nor do I think our direct sales people are seeing us pull back on credit, you're seeing a pullback in consumer demand. Jon T. Oh - Credit Agricole Securities (USA) Inc., Research Division: And just a follow-up on Singapore along the same veins on Rolling Chip, we've seen that number pretty much range around the $11 billion to $12 billion per quarter. If you were to look at the seasonality of this quarter, is there anything specific to it that we should pick out as to the number that we saw? Or is there anything else that should read into the demand of VIP play in the Singapore region?

I think we said before, and I think it remains true, that Singapore is very, very chunky. It's very, very concentrated. The reality of Singapore is, that you've got people making large bets with large bank rolls, but they come and go as they please. They're not as seasonally driven as you might think. They're driven by their desire to be there. And you're right. We're disappointed growth hasn't continued. We haven't seen it ramped. We had quarters of $15 billion, $16 billion, we're back to $11.5 billion. And I can't give you a good way to look at that, other than to say, that it's how we concentrate it. It's mostly out of mainland China, it's mostly foreign visitors to Singapore. We had a lot of faith that we have a fabulous product in a very, very strong market, but hard to put any color other than to say that, we live quarter to quarter and see how it goes. We have a high-concentrated market there, unlike Macau, which it's neighbor is mainland China and access is terrific. Singapore has to fly to get there, and it's is a much more of a premium-driven market with people gambling $5 million, $10 million. You don't have the plethora of people betting $0.5 million, $1 million like you do in Macau.

I'd like to say, that -- it's Sheldon, I'd like to say that this is -- we're in the gaming business. The rate of hope goes up and down and one quarter does not a trend make. Anybody who thinks that the cultural habits of the Asian people is changing because of one hold -- one reduction in the hold even though it amounted to over $100 million at the top line. Anybody who thinks that this is the change of culture is just missing the boat. For thousands of years, the Asian people have been seeing gaming and chance taking as their form of entertainment, and anybody who thinks that a quarter is creating a new trend, there is nothing on the horizon, nothing within sight, nothing on the horizon that would suggest that the gaming habits of Asian people are going to change. There must be something in the wind or in the air or in the food that had a -- we didn't have -- first of all, the law of big numbers says that we're not going to grow from $100 like we grew when we were at $10, so the percentage of growth is going to be a smaller number. But anybody who says that the culture that has existed for thousands of years and the habits of the Asian people is changing because of 1 quarter with low hold, I think, is just missing the boat.

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

On Sands Cotai, you all have talked a lot about how the property probably won't hit its full stride until the third quarter of next year. I'm just wondering, is there any reason to believe or why margins would not be Venetian type of EBITDA margins?

I think they can be better, Felicia, but only because Venetian -- here's the plus and minus. Venetian is a themed property, gets ridiculous amount of visitation, 100,000 people on a good Saturday, and that theme is very powerful and potent and so is the retail, and that drives terrific visitation, no question. The difference is, the Cotai property has double the sleeping rooms and equally strong retail product is not themed, in my opinion, the Venetian theme is superior. Once we connect, one of the things we need to do right away, we're getting to it by the end of this year is connect the 2 properties by a walkover bridge. I think that's going to be very impactful for visitation of both properties. In essence, we have 7,000 property Venetian Cotai -- 9,000 Venetian Cotai and the Four Seasons. But there's no reason why once -- the shortcoming in Sands Cotai is in a mass and premium mass, which is the sweet spot of that properties fiscal ability. I think once we figure it out, we can get our space right, we also let's face it, we didn't put enough slot ETG product on the floor. Let's not kid ourselves. It was a mistake not to do that. We had 800 positions right now that are outproducing all other properties. So we've got to get more slot ETG positions. That comes together in the fall. We've got to get that crossover bridge, that happens by year end. We've got to employ more sleeping rooms for the gaming sector. And I think when all that comes together, the margins will be very fat and happy. We're really happy where the junkets are landing, and that keeps growing, but the real upside for that property is slot ETG mass premium tables, and that's the margin's sweet spot.

Come on guys. Let me call to your attention. That's a very good question, Felicia, and let me answer it. First of all, at the Venetian margin, we have rooms that -- whose ADR is substantially higher. And we've got 2,500 rooms open and we've got all the non-gaming activities, we've got a huge 350-tenant shopping mall, we're connected to the high-end shopping at the Four Seasons. We had a showroom opened. We just closed it recently. We have a lot of non-gaming income that's contributing to the EBITDA percentage. I want to point out to you that in growing the 1,200 rooms of Holiday Inn and the 600 rooms of Conrad and ramping it up, we are running at extremely very, very good occupancy percentages. But we've come up with a revenue management is intentionally kept low so that we could ramp it up in the future and get higher numbers. So if we're looking at a $100 at Holiday Inn and $150 at Conrad, we're comparing that to USD 215, USD 300 a day at The Venetian with more rooms. The second issue is, that all of the non-gaming activities at Cotai Central are barely half open, so we're opening the 6,000 rooms. We will have 6,000 rooms open within a few short months. We're opening tower, the second tower of about 2,000 keys September 20. And in addition to that, we're going to open about 500 rooms in the third room tower of another 2,000, 2,200 rooms. So we're opening on September 20 a lot of the additional non-gaming activities that we have in the Venetian that we don't yet have open at Cotai Central. With that additional income from the additional amenities that are generated that income and at the casino that's a lot closer on a mass side and another 200 tables on the mass side, then we're going to have a percentage that will be where the Venetian Macau is and will continue. So when we get all the non-gaming or we get the gaming open and we stabilize the prices for the hotel rooms, then we will have significantly greater than what it is today. We're in the ramp-up period.

Can I have one point, Sheldon. It's just for fun if you do the math. Just one thought for you. Our Four Seasons numbers are in excess of 12,000 win per unit per day in the mass and the Venetian run about 9,500. So blend out 10,000 per day. Cotai's running right now at about 5,000 per day. If we get -- when that number gets to 10,000 per day on 400 tables, we've got a run rate of $1.4 billion at 45%. If that happens, you're making $600 million, $700 million out of mass, if and when that happens. If we consistently match our existing portfolio out in Cotai, Sands Cotai is making $600 million, $700 million departmentally next year. So our goal, I think what Ed Tracy and David Sisk and the guys who run that place are trying to do is figure out how to ramp that number using rooms, retail, et cetera. When that happens, you're talking before the junket play kicks in, in excess of $600 million, $700 million of departmental contribution, so that solves all of your problems as far as margin and being profitable. We think that's very, very doable. It's not pie-in-the-sky. We're not aspiring something that's not achievable. I think it's very achievable.

In addition to that, I'd like to point out, we have a piece of land that we acquired when we acquired lots 5 and 6, and it’s called the tropical gardens. It's a big strip. It goes well beyond the length of our properties the depth from East to West. And it cuts in a couple of other properties on the other side of the back service room, 339 feet wide, and we have come up with an idea to develop that not with other Integrated Resort, but with the multilevel very, very high-powered retail mall that will be both a standalone mall that will be a major attraction and contribute further to Macau being the shopping city between Hong Kong and Macau, and we will have a connection to lot 6 from that -- well, and we don't know, we are in the process of doing the design. And we could have anywhere from 500,000 to 800,000 net leasable square footage, and we'll have another air-conditioned moving sidewalk walkway going one over to Parcel 3. And so it will be a circle of all under one roof, that part of the Cotai Strip. This is our -- this was my idea, this was my vision, and the other competitors may or may not have any additional land. The Macau Studio City will be build next to our lot 3, but we have a big footprint there because we were the guys who started it. I started it. Nobody wanted to buy into the idea and not everybody wants to give their right arm and maybe their left arm, if they're lefties. And they want to get into Cotai. Nobody wanted to get into Cotai before. I think that we're looking, we've got more development. If we can do that tropical garden development and we think we can, as the other part that's on, I don't know if it's part of lot 2 or lot 3. There's another part of the tropical gardens that we've been asking the government to develop and there's still a couple of more other development pieces that we could do. We haven't done the fourth tower on lots 5 and 6, and there's still the potential for another tower of either rooms or apartments in the back of the Venetian and possibly on the West side of the strip on the tropical garden. So we've got an awful lot of development opportunities that nobody else has because our vision, our development, they've passed on it in the past, now they're trying to catch up. So they've got to go to the backside of the strip.

Your next question comes from the line of Steven Kent with Goldman Sachs.

I looked at your slides, actually Slide 20, and I looked at your hold adjusted property EBITDA and I appreciate that you're starting to show that. And if you look at the quarterly spread between the reported and the hold adjusted, it's getting wider over the past 5 quarters, going from $36 million to now in this quarter $88 million of difference. And sometimes it was positive, sometimes it was negative. But I sort of thought that as you got more and more used to your customer base and as the volumes increase that this would start to smooth out. So I wanted to know whether there was a customer profile or the way they're playing that is changing and should we expect even more volatility as you get bigger, which would go against, I guess, the law of large numbers that they should start to smooth out?

Steve, it's Rob. I think you're absolutely right. It's a big spread this quarter, but it will probably be the other way next quarter because volatility is diminished as we have volume and the volume keeps increasing as you can see. We had a bad run in Singapore. It will self-correct and I don't think we have any trepidation or whatsoever that in the end of the day, this company has very low volatility. Despite this quarter's swing when you look at this company, at the end of the year, it's a nonevent.

Bob, is it starting to correct already?

I can't -- let me give you some numbers. Let me break out July for you. I just don't think it's something that you got to waste a lot of time on. I think at the end of the day, we will be where we need to be. We look at our business day in and day out based on volume. We're more interested in volume than the hold percentage because we have some very good days and very bad days. This quarter had some bad days, but I don't think it's something I'm going to spend a whole lot of time on. We're handling -- no one's ever done -- years ago at Caesars Palace, this was a big thing every quarter 4 guys will win or 3 guys would lose. This company has so many thousand of people gambling so much money. I think when the year's over, it would be a nonevent for you and everyone in this room.

Steve, this is Sheldon. I'd like to point something out. Up until this quarter, we had 11 straight quarters of growth. When you have 11 straight quarters of growth, how do you interpret volatility?

I'm not sure, Sheldon, if you're asking me that question, but all I'm saying is as the business gets bigger.

I'm asking you that question, Steve. How do you conclude volatility out of 11 straight quarters of growth?

Well, your own slide shows the volatility, Sheldon. It's getting wider and wider.

Steve, this is Mike. If you...

One quarter to last year's quarter. If you look -- unless you look at something I don't have.

If you look at the quarter-to-quarter to the second quarter of '11 the third quarter '11, it's basically the same volatility. What you are saying is in '12. It's larger in '12 than it was in the first quarter or the second quarter, it's larger. There could be a multiple reasons for that. You could have more players playing. That will give you wider variation on the hold. At the end of the day, I think if you look at the normalization range, whatever is played on the revenue and the volume is going to end up at that level of volatility. So I think it's -- I don't think it's anything you can really forecast except that if you end up at 2.85% or 2.9% or 3% as your hold, your real forecast is what is the revenue number, what is the roll number? And we could be -- so I don't -- as Rob said, I don't think there's any science to it. I think it's basically going to end up in the same place. What we gained in the first quarter, we lost in the second quarter.

Yes, I think, Steve, that's the appropriate comment we Mike just made. We picked $72 million plus side Q1 against the expected hold adjust. We lost back $87 million, so net net net on billions of dollars of volume, the net's less than $20 million first half of the year. That could be -- it just is not that big a deal.

Steve, the other way to think about ...

The difference in what you're calling volatility and the delta between an adjusted and unadjusted, this has nothing to do with us, it's the nature of the law of averages. Sometimes you're up, sometimes you're down. So it has nothing to do with any operational policy or whatever we do. One day, we could be -- the difference would be 100% and the next day, it could be minus, and there's nothing that we can control and there's nothing, I don't believe, there is anything that one can interpret out of the difference between the hold adjusted and non-hold adjusted over a period of time.

And Steve, when you think about the fact that Singapore, if it holds very heavy, all of that comes to us, every single bit of it except for the taxes. And when we hold light, obviously, we -- the impact is much, much greater on the flow-through basis because your taxes are around 10% in Singapore and your taxes are 40% when you hold heavy or light in Macau. So that makes a big difference in what flows through the EBITDA.

Your next question comes from the line of Carlo Santarelli with Deutsche Bank.

Just a quick question on Singapore as it relates to seasonality there and when you come out of obviously having seen some changes in the market in 2Q, do you guys still have a pretty good sense or feel you have you hands around seasonality whereas third quarter should likely be the strongest of the year, especially from the VIP side?

I think it's too -- this is Sheldon. I think we still don't have the handle on seasonality. The period of opening and the ramp up period is still too slow. I think we need 3 or 4 years to determine a definitive basis when and what the seasonality is. I don't -- maybe my colleagues have some other answer, but that's my answer.

Got to divide it, too, Carlo, into the different parts of the business on the hotel side one seasonality versus the high-roller side versus the local business. So I think on the VIP side, it's very hard for me to get a sense of the seasonality. It's just -- we had a great, obviously, Q1 is always a strong quarter because of the Chinese New Year. Last year, we bought the $16 billion roll in the third quarter because honestly, 25 people showed up that they rolled excessively. I don't think that's a trend or a seasonal thing. That's 25 guys deciding to do something that quarter and gamble with us. And that could happen this quarter. And I don't think that's a trend. I think that's an aberrational in terms of the third quarter of '11.

Rob, that's helpful. And then if you guys don't mind, could you comment a little bit about how you're seeing share in that market between mass and VIP?

Share as far as...

Just your competitor in both segments.

We're moving up.

I've been seeing new numbers recently, but I think that we feel very good about MBS and relative positioning to our competitor, RWS. I think we -- that's an indicated quarter after quarter. We're not going to change our credit policies and change our promotional policies. We stay consistent and I think it's -- in the end, we've got the best of it and we feel very good about our competitive position both in mass, slot, ETG as well as the VIP segment. I don't think we do a lot different than we've done already and the numbers are the numbers last 2 years. They're a good competitor, but we are very comfortable, we are vis-à-vis the 2 properties.

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

A follow-up question on cash on your balance sheet for Sheldon. You're sitting on a lot now. It's going to be even bigger by the end of the year. Sheldon, what would you like to see done with that?

It's a personal question. Since I own 431 million shares, I'd like to see some more dividends. What I'd like to see, I'm looking at the price of the stock, I think I'm going to have a call with the members of the board to see if we could put aside some money to buy back some shares at these prices. But certainly we're going to -- our intention -- my intention, I think the board's intention, is to -- and by the way, I simply don't vote on the board regarding the dividends. I think I have a little bit of a conflict of interest here. But anyway, everybody -- we want the shareholders, whether it's me, my wife, my kids, my pets, my doggies or kitties, beside them every other shareholder in the company wants dividends. So we'll probably focus more on dividends, but I'm going to tell you, look at the stock price now as we are talking and it seems to me that it's one hell of a good reason to take a lot of the money and put it into some buyback. It's a great, it's a superb opportunity for buyback.

The second question, a little less amusing, is the potential to amend the Casino Control Act in Singapore, there is some debate over that. The Singaporeans are attempting to restrict local visitation more and more. Could you give us an update on where you think that process is going? And given those headwinds, do you expect to see mass casino volumes continue to increase?

First of all, the Singaporeans, there's a law of Singapore that any discussions with the government, it's illegal to disclose that. However, I can discuss what's been in the press, what's in -- what we normally call the PD, public domain. Public domain shows that the government is interested in protecting the more vulnerable people in society. But I, as an individual, and our company has this kind of morality that we don't want to take money from poor people. So we don't have any problem if they want to put a limitation on either the visitation or the exclusion of very poor people who live in 3-room apartments that earn less than a certain number that puts them in and also that according to the paper, that receive welfare -- Singapore doesn't have welfare, but they receive money from the government to subsidize their living expenses. We don't want money from those people. That's not the kind of business that we run. I don't want it morally. The company doesn't want money like that morally. We want to see people who enjoy themselves when they come to gamble and the mass market end of it. And if the Singapore government wants to put the limit on the key financial stability and as society, I think that's good for them. Listen, I come from a very poor family. Nobody put limits on my parents and my father, when he wanted he wanted to build his Suffolk Downs in Boston and spend a lot of money on the ponies, I wish somebody would have put money on him on that. Maybe I might have been able to go to summer camp. Rob is just saying instead of going to summer camp, I should buy them all. But I'm a little handicapped so I can't run, can't slide into places like I used to. So it's good for the government. This is -- my feeling has always been, if you don't like the way the government does things, don't go there. Now we're already there. We're doing very well and we don't make the kind of money we do and we don't see the future coming out of poor, unfortunate, very vulnerable people. My wife and I developed 3 Adelson clinics to treat drug -- narcotic drug addicts and I have to tell you that a lot of them are very poor people. They're very exceptionally grateful, of course, we get some affluent people once in a while, but we care about these people. And when I was a kid before I met my present wife, I opened up an adolescent drug abuse treatment center for 250 kids in Stulton, a suburb outside of Boston. So we care about people that have compulsive behaviors, we care about people with their problems. And coming from a poor family, I appreciate the travails of a poor family. We don't want to make money from them. But we certainly respect what the government is doing.

But at end of the day, do you think that the mass can continue to grow into 2013 assuming some of these restrictions intensify to some degree?

I think so.

Harry, you're also discounting I think...

Just let me finish one thing. 75% or more depending -- varies day-to-day and there's a little bit of a downward trend. The number of Singaporeans that come into the property is approximately 25%. We don't know how much that's one per unit per day. In the mass market, from the Singaporeans, we haven't calculated that. I'm not sure that we can accurately. So from that standpoint, the number of foreigners that are coming in are increasing the mass market return. So we've got 3/4 of the mass market, of the total visitation is fine.

We can't speak to the government's decisions or where they're going to the future, but we do believe strongly in the tourist market and the growth and the fact that the property's a great part of it. The Marina is wonderful. And as that hotel ramps up, it just keeps getting closer to 350, 375, more rooms, more developed. I think will be -- will participate on the mass side very well on the tourist sector.

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

I have a question on Singapore and we know it's volatile in terms of VIP volumes, but if you look at it on kind of a rolling 12-month average or trailing 12-month average to kind of smooth out quarterly volatility and smooth out any seasonality issues, kind of looking at it on that basis, we're still not really seeing growth in volume versus the trailing 12 months if you look at couple of quarters back. So I guess can you give a little more color on whether you think that if that's players, they come and they're not coming back or they're coming back but there aren't new players coming in the VIP and just a little more color on that. And then on the receivables front, can you clarify a little bit whether the significant provision here, is that for something that you've -- that is actually non-collectible? Or is it just that it's past a certain number of days? And so, it clicks over into having to take the write-down on it or increase reserves on it? Or it doesn't sound like you're actually you're raising reserve policies, but I just wanted to clarify why the big chunk this time?

In one short sentence, we've got an extremely highly conservative CFO.

Well, can you clarify what conservative CFO means, changing reserve policies or just if the receivables are...

The company -- he likes to call the glass that's half full of water, he likes to call it half empty. We like to call it half full.

I mean, did you change your reserve policies or is it just...

We didn't. This is not -- I hate to say it, it's more of an approach we sit down -- it's Rob and Ken and the people in the field, as well as the people at the property and review these things every other week, and I think and we look at some of these accounts. We don't look at necessarily about the 300 days or 180 days. Look at people we've now seen not paying, not delivering and we're taking a prudent approach. It could change next quarter. I don't think it's a change in the reserve policy as much as a recognition that some people haven't paid us we thought would pay us. And we're hoping they would and they did. And I think the decision was a valid one. It's consistent in last quarter. We also ramped up last quarter. I think we've taken a more realistic viewpoint of where we stand with about $800 million of outstanding receivables. Not to say, we won't continue to pursue those questions, but I think it's the prudent thing to do and it's a lot more than a year ago, but that's how we look at receivables. And it moves -- it's a living, breathing issue. It doesn't change for us. We keep looking at it all the time and we go back and assess our weaknesses and our strengths and we came up with the bigger number this quarter, I guess.

Okay. And then any thoughts in terms of the volume, as I said, even smoothing out on a 12-months basis?

I don't -- look at the last 4 quarters. Look at 12.2, 16.7, 10.7, 12.8 and now 11.5. The problem is, I sound like a broken record, but I think it's consistently the same story and I think I was reading the thing you did with Grant this week on the Singapore-Macau gaming update. I think you guys nailed it pretty well there. It's a very, very concentrated market. Unfortunately, unlike Macau, it doesn't have thousands of people coming every day with $1 million or $0.5 million or $100,000. It's much more dependent on very high-end gamblers who bet large amounts of money, and primarily, they come from mainland China or they reside in Singapore as PRs occasionally or they come from around the Asian region. We just can't predict when they show up. We did a couple of special events last summer that worked very, very well. We plan to revisit that approach. We are going to get very aggressive on some very concentrated high-end events for people who gamble large amounts of money. But I would agree with you, it hasn't grown that much, it's very concentrated and the story kind of remains the same. It's not -- there's no real -- nothing new to offer that would shed more insight to Singapore's VIP market. It hasn't changed in the last 4 or 5 quarters.

I want to correct Rob Goldstein's stand. You could tell he's an old guy because he used the expression, I sound like a broken record. I haven't seen any records since I was -- about 40 or 50 years ago. Don't you know we're in a digital age.

Okay. And then just a final thing, just trying to get to the dollar amount of EBITDA that you're saying, you would add back $88 million for low hold, are you adjusting that down by the properties where you play a little bit above your expected range? Because the math that I'm doing here back of the envelope, I'm not getting to as high a number, and I'm just wondering if you're lowering that by like Sands Cotai Central playing a bit above average should be offsetting some of what you sort of feel would be added back.

Yes, Robin. If it works, what we're doing is across all the Macau properties in total by segment, so you have to look at the junket separate from the premium direct. If we don't hold within 2.7% to 3.0%, if it's higher than the 2.7% to 3.0% by segment, then we're adjusting to the trailing 12-month average on the upside or the downside.

We don't adjust. We don't adjust when we're in the normal range. If 2.85% is in the middle, you go from to 2.7% to 3%. No adjustment for that. It's only for under 2.7% or over 3.0%.

And so for Sands Cotai Central -- for Sands Cotai Central it's above the range, but there's no real trailing 12-month at that property? Did you just sort of kind of hold on to the above 3%...

If the junket remains -- Robin, we did the junket piece altogether across all the mixed properties in Macau and they came in between 2.7% and 3.0% so there's no adjusted or whatsoever that any junket piece in Macau under this methodology, and I'm happy to take everybody through the methodology off-line.

That's fine. I guess we can't just see the breakdown, I guess, between junket and non-junket on hold. Okay.

We only have 3 months, we can't take a 12 months trailing on that single property.

Thanks very much for your time everyone.

This concludes today's teleconference. You may now disconnect at this time.