Las Vegas Sands Corp. (LVS) Q2 2015 Earnings Report, Transcript and Summary

Good afternoon. My name is Kate and I will be your conference operator today. At this time, I would like to welcome everyone to the Las Vegas Sands Second Quarter 2015 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] Thank you, Mr. Daniel Briggs, Senior Vice President of Investor Relations. You may begin your conference.

Thank you, Kate. Before I turn the call over to Mr. Adelson, please let me remind you that today’s conference call will contain forward-looking statements that we are making under the Safe Harbor provisions of Federal Securities Laws. The 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 and hold-normalized adjusted net income, adjusted diluted earnings per share and hold-normalized adjusted diluted earnings per share and adjusted property EBITDA and hold-normalized adjusted property EBITDA, all of which are non-GAAP measures. A definition and a reconciliation of each of these measures to the most comparable GAAP financial measures are included in the press release. Please note that this presentation is being recorded. We also want to inform you that we have posted supplementary earnings slides on our Investor Relations website for your use and reference 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 limit yourself to one question and one follow-up question, so we might allow everyone the opportunity to participate. With that, let me please introduce our Chairman, Sheldon Adelson.

Thank you, Dan. Good afternoon everybody and thank you for joining us today. I am pleased we continue to execute our strategic objectives during the quarter and despite the continuing challenges in the Macao market, we delivered a solid set of financial results with companywide adjusted property EBITDA reaching $1.02 billion. At the same time we continue to return excess capital to shareholders. It has always been clear to me that our unique MICE-based integrated resort business model positively differentiates us from our competitors. In terms of both financial performance and economic contribution to our host jurisdiction, during the quarter was not surprising to see our company weather the cyclical downturn in Macao better than the industry overall. Our EBITDA in Macao grew sequentially by 6%. Against a backup of double-digit market revenue decline new competition in general wage inflation. Our Macao operations managed to improve the EBITDA and profit margin on a quarter-to-quarter basis. In addition, our gaming revenue market share in Macao reached 24.6 for the quarter, our highest market share in any quarter since quarter one of 2009. In Singapore, our Marina Bay Sands delivered another record quarter in mass gaming win-per-day when measured in Singapore dollar. At the heart of our company's success, is having the right strategy at the outset. We have the courage of our convictions to build early and aggressively. We developed critical mass to scale and diversification and we offer products and amenities that are best positioned to capture long-term tourism and consumption growth in Asia. I remained steadfast to my belief that we will grow and prosper in the long-term, while continuing to contribute to the economic development of our host jurisdictions. Our industry leading financial strength enables us to stay fully committed to our markets, our development plans and the return of capital to shareholders. We remain confident that our recurring dividends will increase in the years ahead as the Macao market and our cash flow grows. Now let me take you through some of the operating highlights of our results for Macao for the quarter. In quarter two, Sands China EBITDA was $564 million. This represents a decline of 29% over the prior year, but a 6% sequential increase over the prior quarter. Sorry, you guys who projected we would come in 50 million less than consensus. Furthermore, our EBITDA margin at our Macao properties improved by 200 basis points sequentially to 32.2%, primarily reflecting strong gains and cost efficiencies, which more than offset the impact of wage inflation. Hold-normalized EBITDA margin also improved sequentially by 150 basis points to 31.7%. In the base mass segment we continued to benefit from the scale of our hotel room inventory, the diversity of our product offering and the attraction of the Venetian as Macao’s must see destination. I'm also pleased that we managed to achieve market share gains while being disciplined and judicious in our casino reinvestment expenses. Rob will get into more details in the discussion later. In VIP gaming the strength of our premium direct business has offset some -- a lot of the weakness in the junket segment and enabled us to outperform the Macao VIP market. Our premium direct growing volumes were 3% quarter-on-quarter resulting in our overall growing volumes declining by 10% sequentially versus the 15% decline in Macao's VIP junket volumes. We also experienced strong growth in retail on revenues. Based on the latest published customers statistics overall Macao market hotel occupancy the period January to May of 2015 was 79% a decline of 8 percentage points compared to 2014. This decline in occupancy was principally related to the decrease in casino room occupancy across the market particularly in the junket segment. Sands China's hotel occupancy for the same period was 4 percentage points higher than that at the Macao market at 83% and our occupancy decline of 6 percentage points also outperformed the market. The scale of our hotel room inventory remains one of our key strategic advantages. It allows us to target higher value overnight visitors from Greater China and the rest of Asia and to grow the base of high value visitors from Macao. With the completion of the St. Regis and the Parisian, we will have almost 13,000 hotel rooms in four interconnected resorts. Over 840 stores plus four shopping malls with the potential to add several hundreds more stores in future development phases, subject to government approval. 2 million square feet of meeting and exhibition space and four performance and event venues including our Venetian Cotai Arena which can be utilized as for our MICE business or major entertainment events. We have the room inventory, the resort content, the iconic must-see destination and the operating experience in growing overnight visitor market in Macao. We remained fully committed to playing the pioneering role in Macao transforming and to the world's leading business leisure tourism destination. Our track record in being transformative pioneers in MICE, retail, and entertainment speaks for itself. Now moving on Marina Bay Sands in Singapore. We delivered another solid quarter in Marina Bay Sands which despite the impact of the strong U.S. dollar generated adjusted property EBITDA of US$363 million, despite a 9% decline in enrolling volumes our hold-normalized EBITDA was down by only 1% year-over-year. On a constant currency basis our hold-normalized EBITDA was up 6%. I think this again demonstrates the quality and resilience of the cash flow generations at Marina Bay Sands. Mass win in Singapore -- mass win for us in Singapore, per day was US$4.7 million, up 1% year on year. Again when adjusted for the currency effect our mass win-per-day in Singapore dollar terms was actually up by 9%, principally driven by our successful efforts and bringing in foreign premium mass customers to Singapore. We set another all-time quarterly record in mass win-per-day in Singapore dollars. In addition, we have maintained a prudent reserve ratio during the quarter and we will continue to maintain the highest compliant standards in the industry not only in Singapore but globally. Marina Bay Sands continues to service as the most important reference site for emerging jurisdictions that are considering large scale MICE-based integrated resort developments. On our MICE-based integrated reserve business model allows us to meaningfully contribute to the long term economic success of our host jurisdictions. Something we are both eager and uniquely well positioned to replicate in new markets. Las Vegas enjoyed strong gaming volumes, but low hold impacted our reported result. Bethlehem continue for growing delivered a second calendar quarter record EBITDA performance. Now on to my favorite subject, the return of capital to shareholders. Let me be clear, we remain committed to the maintenance of our generously recurring dividend programs and we remain committed to increasing those recurring dividends in the future as our cash flow grows. Our industry leading cash flows and balance sheet strength enable us to continue our recurring dividend programs at both Las Vegas Sands and Sands China while retaining more than sufficient financial resources to invest for future growth and pursue new development opportunities. We brought back 65 million of stocks in the most recent quarter. We have approximately US$1.7 billion remaining under our current stock buyback authorization and we look forward to continuing to utilize the stock buyback program to return excess capital to the shareholders and to enhance long term shareholder value. In conclusion we will continue to stay discipline and execute our business plan I am today more confidence than ever about our future success. Now let's take some questions.

Operator we're ready for the first question.

[Operator Instruction] Your first question comes from the line of Felicia Hendrix from Barclays. Your line is open.

Hi good afternoon thanks for taking my questions. Sheldon in your prepared remarks and also in the press release you refer to efficiencies that you guys have been able to take advantage to help your margins and some of the flow through. Question is both for your Sheldon and for you Rob you talked in the past about some of the financial flexibility that you had to on cut cost. Can you just talk about some of the things that you did in the quarter and as you kind of look at the different scenarios for the market going forward, what kind of programs can you employ to continue to cut cost and basically to offset some of the cost pressures that you're seeing in the market, particularly in labor. Thanks.

Yes Felicia, its Rob, our team at Macao I think has done a really good job of addressing cost across the board. And of course there is always an opportunity to cut more cost but we have the balance that with our employees merit development and our long term plans to excel at Macao. We don’t want to throw the baby out with the bathwater. So a lot of cost related to marketing spend, cost against customer spend and then general cost, as we have the labor -- non-macanese labor for most part and keep mind that we are burden somewhat with having a very, very strong team in place already for the opening of the Parisian which will be very beneficial. Next year we open the Parisian and we care a lot of -- especially casino side most of our teams in place has been in place so well. So, the majority of the cost of this quarter related to promotional spend, marketing spend, some labor cost. I don’t expect to see this continue in terms of cutting additional cost in any kind of material way, we’ll just remain disciplined. I would add also fortunately the markets remained disciplined does how it spends money against the customers promotionally. We’re very pleased with the quarter, we want to maintain the margins we did I think for the quarterly which came in just under 32%, which is very acceptable to us especially in this very difficult time in the Macao, We’re was hoping for a GGR increase and even better margins in the future.

Thanks. And then just as a follow up question Sheldon gave dividends and you just talked about your commitment to that returns to shareholders and also potentially raising the dividend. Just as you think about the difficult environment and you look at you different scenarios, what kind of scenarios are you using to underwrite your current decision or your current commitment to raising the dividends?

Before we announced in the last and this call that we are going to -- we intend it to raise the dividend in the future. We did a very thorough cash flow and we looked at all the sensitivities that could affect it. What they market I think is missing, didn’t miss to miss it, but we haven’t heard very much about it lately, is that we have built -- we created the integrated resort, MICE-based business model and the critical of the components that make up an integrated resorts is something that the competitors don’t have and we will say that, well I mentioned in my prepared remarks that there were several instances in which we outperformed the market. I was tempted to interrupt, but I knew somebody would ask this question while I was reading and but what I'm saying is that the critical mass, the -- our perception and not just to call this words and say we are an integrated resort, I remember when we put all the components of attraction and entertainment together on the strip everybody called themselves the Mega-Resorts because they were big. But people were forgetting that critical mass must see interactions. The very broad mixture of the various and in the debts of each of the integrated resort components is what assures us that we are going to continue. Why all of a sudden have we jumped in the whole quarter into first place? SJM has got 25 to 30 somewhat gaming licenses out there, brining money into them and why is it that we've always been number one in EBITDA and that is not going to change. The other guys can’t catch up to us, that train has left the station. When I first in vision the idea of Cotai Strip other people criticized me and said it’s never going to work and now everybody is cutting off their arms to get into Cotai. So my answer to you is, we are different we originally envision the difference, we built the difference, we continue to maintain and improve that difference.

Your next question comes from the line of Joe Greff from J.P. Morgan. Your line is open.

Good afternoon everybody. My first question relates to Macao margins obviously better than expected 150 basis points of sequential improvement on a normalized basis. You mentioned in earnings release that’s a function strong cost discipline, Rob can you help us understand what specific cost you are taking out or is it really just a more favorable mix that's spitting out a better margin, and if it is the function of taking out to specific hart, how much did you get out on sort of run rate basis in the 2Q that we can actually tangibly see going forward from here? And then I have a follow up. Thanks.

Well Joe across to all -- you can’t get these kind of cost out in one specific area, there is labor cost in there, mostly non-macanese. There is some direct marketing cost against the customer, there is cost against general marketing spend. We are looking at every aspect of our business and again just trying to be disciplined and not cut out the muscles, just cut out the fat, and were also being -- trying to look forward, the fact we planned in Macao for many years to come, and we want to maintain a great approach with a great environment for the employees and for the customers. So, It’s really is not one specific area, it’s general marketing, direct marketing cost, labor cost, anywhere and everywhere we see excess spend that we thing is irrelevant and it will continue to be that way. We’re not done, but I think we've done very good, the team there has been very disciplined, very focused, we understand it’s a harsh new environment we're operating in, we have to maintain margin and to grow EBITDA we have to do this. You see this in the first quarter, obviously, our spend is just improving, our spend against the customer, our spend against the employee, everything. So there is not one specific area, it’s across the board Joe and it won't stop here. We'll just keep looking at it, but again the bigger term picture you have to think long-term to maintain our leadership position specifically vis-à-vis the employee and the customer. We can't be short sighted and just cut cost to the cut cost.

Thanks Rob, and then one of the things I found interesting in your earning slide deck on Slide 14 was that, the base mass revenue was down sequentially more than the premium mass revenue was in a sequential basis. I would have otherwise thought it would have been the reserve, can you help understand that and I know you talked a little bit about success on the direct side of things under VIP, does that impacting the premium there?

Yes, we actually had some junket space that -- physically we convert some junket space in the plaza, for example, over to the premium mass. We’ve had some success going direct to the customer in the premium mass side, the Plaza has had its very good quarter, and we'll continue that, make that transition. As the junket we can softened in some cases, leave us. We're making that transition. So we're getting more revenues out of that premium mass side and premium direct side that we had in the past and I think it is a positive to this, hoping some strength in the junket space but hasn't been there. So I think our success bared and also we've controlled the margin against that premium mass and premium direct customer and that's been part of the reason why the Plaza performed so well this quarter.

Your next question comes from the line of Jon Oh from CLSA. Your line is open.

I'll start with a follow-up on Rob's point on cost earlier, as you think about the cost cut and I think you've alluded to a sustained -- or least a sustainable cost that going forward in the future, how do we think about the new competition that has come up, we had galaxy opening in May, we've got couple of more properties opening maybe over the next 9 months or so, how much of the cost have you taken out specially as it relates to general marketing, do you think it could be something that you may want to maybe exercise some restrain to stay competitive, due to your point about you want to be relevant in the long run. I’m just trying to map out how do we think about the sustainability of what you've taken out in the second quarter and how do we extrapolate that over next four quarters or so?

I would like to point out to you the number of years of experience between Rob and myself and others in this industry and the number of years of experience of other people actually sitting in the hot seat and making hot decisions. Galaxy made an enormous mistake. The other companies will make big mistakes. They're already making big mistakes. Now don't ask me what they are because I don't want to create another Houdini. Houdini doesn't tell his secretes and LVS' and SCL [ph] are not going to tell its secretes. Now they can't -- they're going to throw properties onto the markets. But if you look at the fact that -- take for instance galaxy one, they would never end the business before at all. So they have little experience -- cumulative experience in their executive ranks, and two, to back up their strategic judgments. SGM has been a -- [indiscernible] has been a monopolist for decades. I don't see that they have the ability, they're not used to living in a competitive environment all over, and it’s the same thing by the way with [indiscernible] in Singapore. They never worked in the competitive environment. We never worked in anything but a competitive environment. So you take Lawrence Fo [ph] very bright guy, very nice man, he's done a good job starting off slow, picked up so then Galaxy’s standing outflow picked up, but at one point you got to something besides opening the doors. And Whin [ph] is used to competing but he is specialized as we all know, he has specialized and done an excellent job in the high end of the market. And what's the last one MGM, MGM the only thing they have ever developed was City Center and for those of us in the United States, particularly those of us who live here in Vegas it doesn't need any further comments. So from our standpoint, we are very pleased we've worked in competitive environments all of our life. We have been never, not worked in a competitive environment. So we know what it takes and I can tell you the mistakes that have been made, as I don't want to go into them and make it public because I don't want to stop them from making mistakes in the future, after all we are competitors. But other people are making mistakes we're not making the same mistakes. We're sticking -- we’re staying the course, we're sticking to our critical mass. A very broad, a very in-depth entertainment and consumer attraction component of the Integrated Resort model which we claim we have started, we’re the pioneer if it.

The diversity of the room product we have and the price points we have and the manors we have that given us a terrific advantage in this market. We have 9,000 keys and the Parisian will bring 3,000 more and then the Saint Regis, one thing is happening is this is becoming much more of traditional resort market. I mean weekends, high demand periods, special event periods, holidays is when a lot the casino win is coming out of those high demand for room time periods. And have 9,000 keys representing all types of accommodation rates, the diversity here is critical and in peak periods it helps in earning power terrifically on our margins frankly. So this market looks lot more like it used to be in Las Vegas where more resort markets, where you had a lot demand on weekend, lot of demand when there is special events, we’re very fortunate to have diversity of product and pricing. So our room product more than ever is performing and big part of our success.

What I would like to say here Jon is that notwithstanding my previous comments about our competitors, we do want to work together with them because collectively we can work together and bring a lot of visitation to our grounds, to Macao. We could fight over the customer and our claim to be able to do a better job fighting over the customer when they get off the plane they get off the boat or they get off the bus. We could do that, that’s legitimate, we could fight but we got to work together to help Macao, to improve it and to improve the visitation.

If I can follow-up with the question on policing. There was a recent transit visa relaxation that came into effect in early July and I think a lot of us saw that that’s a positive signal. Many investors have asked if this particular reversal is an indicator of maybe the government's willingness to take a softer stands on Macao, on any future policy decisions. Do you think that’s a fair statement? Do you think that this is an at least signal that things are going to be better going forward? Would you read it that way?

John there is just no way for any of us to forecast the government's position in terms of this smoking -- I think we should just wait to see, I think it would be silly for us to pretending that we don't know. We hope for the best, we wait patiently the government's direction, be it smoking, be it visas. But for us to even pretending that we just don't know. We have respect for the government, we’re hopeful that they’ll support Macao, the citizens there are our employees, our future resides there. So we’re hoping for the best and waiting for further direction. No forecast though.

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

I was just wondering if you guys could give a little bit more color on some of the trends that you are seeing on a customer basis, because within Macao if we look at RevPAR you guys are obviously seeing a numbers that are down in the mid-teens right now although I think as was mentioned in the prepared remarks the numbers are pretty good relative to the market but I was curious on the decline in RevPAR versus you are actually seeing some continued sequential growth and year-on-year growth for sure in the retail business. Can you help us understand what you think you are seeing, reading between the lines on customer behavior at the stage at least on the mass market?

I think that the other hotels really -- the operators are really having difficulty and challenges confronting the situation being the challenges for all of us in Macao. We are maintaining the higher -- and they have taken all their rooms and doing something with them that they didn't do before they got to sell them, they are not selling the rooms, they don't have the expenditure of selling the rooms, all they did was give them all away, we have experience in selling the rooms is what I said before. We’re -- I'm sorry to sound boastful like this, I apologize for it, but we have to look at the reality. The reality is that our experience tells us what to do, when other people are confronting experiences they’ve never confronted before. Rob do you want to say anything?

You mentioned retail and that’s why I want to stop for a second and mention that you know ex-jewelry and watches, our retail business is pretty good and I think it’s got on two fronts, one, we’re getting great traffic on our sales, it’s holding up pretty well. If you take out the very premium, not the fashion, but the watches and jewelry are particularly soft across the Macao market. You saw that in some luxury report numbers, but our retail malls provide both income but also visitation to the properties and I think is a really important point. We built these malls a long time ago and they get stronger year after year, visitation is stronger it's a reason to come to properties, we’re very proud what’s happening on the retail segment, how it translates down to the casino and the room occupancy. What you see in Macao, very clearly is that it’s mass market. It's a premium mass, it's no longer driven by junket GGR. I hope the junkets resurrect, but right now it doesn’t look promising. But what is happening in mass market is emerging and again mass markets demand lots of product, retail product, room product, diversity of pricing, lots of table, lots of spots. ETGs that’s who we are, that’s our background, we build our products for that. When Macao was developed and Cotai was brought to be, Sheldon’s vision always was a Vegas style strips with lots of visitation lots of mass market, its happening. And so our products are lot more -- I think they're diverse in both pricing and quality, the room product rings is over the board from very high end suite to base rooms, lots of ETGs, slot machine that’s just happening in Macao, very clearly. It's a mass market. Now the question becomes, in the future how fast can it develop and get deeper in the Mainland China and more China visitation, that’s the real question, to grow GGR. For all the operator that benefit and we are hoping we see that shortly. So that’s the trend we are seeing and we hope for the return of higher end, but right now we're living in a mass market with weekend penetration very strong, maybe not so strong and you see obviously deterioration of metrics because of the loss of 10% to 15% of the very high end customer that drove so much more GGR on certain tables.

Thanks for that, just as my follow, as tempting as it is to ask about Sheldon's view on Donald Trump I’ll hold back and I'd love to get some, love to get your thoughts on one other thing, which is on the dividend. Last quarter I think in some of the remarks you mentioned that the target was still at least to try and be able to increase your dividend by 10% for a year for the next three years. Is that something that you believe is still on the table at this stage?

I don’t see any reason why to even reconsider it. We constantly maintained a rolling evaluation and the rolling cash flows. There is no reason to even question it. Patrick you want say anything about that?

We spend a lot of time analyzing different scenarios with the board and with the Chairmen regarding our return capital program specifically to dividend. And we feel very confident that as our cash flow continue to grow that we will be to support the Chairman wishes on dividend growth.

We're getting more and more vibes that something is going to open up in Asia. And clearly if you talk to anybody in any of the countries where we've been, let's use the word lobbing for a number of years. There isn’t anybody doesn’t thing that we're in the pole position in any one of these countries. So it's getting to smell like something is going to be coming up soon. And we've considered that in our cash flow vis-à-vis estimating the dividend and knowing that we're going to have enough to do, and we're not taking into account the opportunity to borrow money to pay the dividend, which by the way if we did we've have a very, very super healthy dividend. But at this stage of the game we're not anticipating borrowing to pay the dividend, we've got enough cash flow. Notwithstanding the reduction in overall cash flow because of the challenges in Macao we’re still earning a huge amount of money, billions of dollars.

But I guess just to be clear, dividend growth seems like its tied to cash flow of growth, is that a key part of the algorithm that the investor should be aware of.

I think that’s a fair statement.

Great. Thank you very much.

Your next question comes from the line of Thomas Allen from Morgan Stanley. Your line is open.

Can you just give us an update on the Parisian? Given the state of the market, are there any changes on the timeline or the scope or anything like that? Thanks.

I think the timeline is give or take about 12 months from now. For a full opening, we haven’t lately looked at a partial opening. It all depends there are still something, some imponderables out there. But right now the way things are going we don’t have as much labors as we'd like to have, et cetera. But we're happy enough with what the government is giving us, we're grateful, we're appreciative and right now it looks like we're probably going to have an opening in about 12 months.

And Tom just on the opening Sheldon address but again we think more than ever in this environment. The Parisian's European theme is exactly the right focus for the mass visitation and just like the Venetian's the most visited hotel in Macao. We think Venetian is just situated perfectly in terms of the consumer in today's Macao.

Great, thanks. And then just as my follow-up, following up on a previous question, just on your thinking around the rooms, can you give us some more color on the mix today versus maybe six months or a year ago on the number of rooms that are going into junket versus direct casino customers versus selling rooms? You guys have a lot of experience, you have over 7,000 rooms in Vegas. Can you just talk about how you're thinking about that mix in general?

Well it changes every day obviously and to your point, six months go a year ago is different. But the biggest single change you all know is the decline of junket participation in the rooms. So that used to be a very important part the mix, it’s become much-much less important. We are spending more time focusing in getting more premium direct customers and premium mass customers those rooms, we using them as more directly as a tool. We have been more aggressive in the pricing and how we get premium mass customers in. There as a time when we were as high as $1,200 and $1,400 a night, ADR. That’s dropped to half that, we are now looking at 600 to 700 bucks a night. And again resellers are networked, we are very aggressive on the pure cash sales, we’ve always have been, because it had to be from day one. Unlike competitors that may get a thousand hotel and comp 90% we've always been a heavily skewed towards cash sales. We built -- our network to sell rooms is a lot more advanced perhaps than others because we have to be in that business. But I think in the future you you’re going to see that the increase on pure cash sales, the decline of junket sales, the increase of premium mass and direct mass play. We’re becoming more self-reliant because the junket just can't pick up the slack at this point, and that makes a move based on the market, but one thing is very clear we make most of our money these day on weekends, weekends look a lot like they did a year ago. There is huge room demand on weekends, we run very high occupancies at very high rates, there is all kinds of competition amongst the segments on weekend, where the trouble comes in Macao like Las Vegas was when we first got here 20 years ago is mid-week demand is soft. There isn’t much junket pick up, there isn’t as much premium mass play. So we’re making a lot more of our money, it’s much more skewed to weekends because demand is there. The nice thing is, the old church for Easter Sunday, or synagogue for the high holidays, depending on your religious beliefs, but we have a lot more ability to fill those seats, those rooms on the high demand, at weekends, special event periods, holidays, we are -- that's where the money is being made in Macao today when you have got 9,000 soon to be 13,000 keys you can participate more than ever in their high demand period. So, just like the fight when the MGM guys brought the fight late in May, you couldn’t get enough room, and enough gaming tables, that's happening on weekends in Macao, that's where demand is and that's where the market is moving to. Everyone is struggling mid-week to my opinion, it's the weekends where the money is being made, so that's my take on the [loose] demand.

We are struggling less than our competitors are struggling because we have a unique tool, it's called MICE. They can’t fill up with MICE, we can. So that's why our occupancy is higher, our rates our high cash rates, are higher and we could -- we have more of a mass market in the casino. It's again it's you got to look at what we -- what this fundamental business model is, we are MICE-based we’re supposed to fill up the mid-week at the rates of the weekend, when you have good MICE business. That's the fundamental nature of being in the trade show and the convention business.

Sorry, just to throw one other quick one in here, you guys don't often give a lot of metrics around your MICE business in Macao. Is there anything you can talk about in terms of year-over-year growth or anything like that, that may help us think about how that's helping kind of sustain your business in Macao versus competitors?

We provide those stats, but rather -- different times because it’s complex and time consuming. I’d like to move on next question. Would be happy to do offline with you Thomas.

Thank you very much.

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

Good afternoon and thanks for taking my question. I had a two-part question, both of which were pertaining to the balance sheet. First and foremost, as you talk about using a little bit more of your direct -- using the balance sheet a little bit more for direct play in Macao, could you talk us through the thinking in terms of credit extension and doing a little bit less with the junkets? And if you see that being a real focus going forward or just kind of offsetting some volatility in the near-term? Additionally, as it pertains to uses of cash from the balance sheet, what leverage level are you guys comfortable with as it pertains to paying the dividend on a go-forward basis? Is there a certain level of net debt to EBITDA where you would think that maybe additional dividend growth would be something that you'd have to think a lot more about?

Hi it's Rob. Can you go back I missed your first question I was listening to your dividend question. So, your question relates to junkets and the premium direct?

Exactly. Just how much you're willing to kind of use the balance sheet? I know in the position that you're in, obviously a position of strength from a balance sheet perspective, using the balance sheet for more direct play and kind of offsetting some of the junket softness is an option that's available to you?

Right. It's really not a balance sheet question from my perspective because it's a credit worthiness question. And what I mean when I say that is, we've got plenty of capacity to use the balance sheet if we could feel comfort about the credit issuance. I mean the first questions always not, can we afford to take the risk, is it good risk to begin with. And the problem I have unfortunately lot of the success in the Macao has been through the junkets because it's not as transparent to credit worthiness to some of these customers. So the people we know well, the people who have proven to be creditworthy and can pass all the regulatory compliance issues, we have been extending credit to, we did it aggressively in this quarter. We've done aggressively in the last few quarters. We loved to step into that position, but it's getting enough transparency and comfort from a regulatory perspectives who we are dealing with, to get issue of credit. We’d love to give millions of dollars of credit every day in Macao like we do in Singapore. As you know in Singapore we’ve issued probably $20 billion of direct credit, but the customer is very high profile, they're very scrutinized, they've got long track records and they're very regulatory compliant. If we can get that kind of transparency in Macao, we'd be big advocates of direct credit. Now we have no -- we're the biggest credit granter in the world by a lot in terms of the casino business. We're aggressive in Singapore. We're aggressive in Las Vegas. But to get there in Macao means we need to know the customers deeper and there are far more customers in Macao, much more diverse and much less transparent to us. As we become more conversant with those customers, understand it, I think we can issue more credit. But I wouldn’t look for us to replace the junket segment nearly the quantities they've issued. We're getting closer to a balance with our junket play. If I look at this quarter our junket play balance is a premium direct is getting more imbalanced, but do we ever get the same level of credit that junkets do, not in the near term, no. As a dividend question I'll turn it Mr. Adelson.

We’re committed to the dividends, as I've said a number of times our interest, my family’s interest is on the same page as yours. Our interests are very much aligned. To answer your question very specifically we are comfortable with a 2 to 3 times leverage to EBITDA, now we’re not near that and we don't have as I have said earlier in the call, our present intention is not to borrow money to pay dividends, we have sufficient cash flow and excess cash flow to be able to do that. And we're just thinking about new development opportunities. There's a lot of conjecture about what a new development opportunity in an emerging market like Japan or somewhere else in the Far East, keeping our powder dry so we can go after that aggressively and we could build, what it takes to build to win the day, to win the competition. We are keeping our powder dry in our borrowing capacity. We’re not uncomfortable with 2 to 3 times but we are uncomfortable right now to go out and borrow money to pay dividends. We as I said earlier, we’re beginning to feel vibrations that a development opportunity is hopefully around the corner.

We have now reached the end of time allotted for questions. This will conclude today's conference call. Thank you for joining us. You may now disconnect.