Las Vegas Sands - CEO Discusses Q3 2011 Results - Earnings Call Transcript

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Interesting transcript and Q&A of LVS.

The discussion of Marina Bay Sands dominated the conference call.

The earning from MBS is amazing.

The following analysis is from CLSA.

Quote:Marina Bay Sands just reported an incredible US$413m in ebitda for Q3.
The hold rate for VIP was 2.69% which is below theoretical so hold
adjusted the ebitda may have been around US$420m.

This is "incredible" for a few reasons

a) it implies an annualised ebitda of US$1.65bn. The property cost
US$5.5bn to build (a huge amount as a decent casino ion Macau costs
US$2bn) so this translates into a ROIC of 30% in the first full year of
operation and a payback period of less than 4 years. The life of the
property is at least 30 years.

b) this ebitda number compares to the ebitda in Macau of US$390m and
Macau has 3 properties including the largest casino in Macau - the

c) ebitda generated in Vegas was only US$94mn from Venetian and Palazzo.

The other interesting stat is the hotel occupancy (on 2,600 hotel rooms)
was 98% with a ADR of US$327!

Unfortunately there is NO read across for Genting Singapore.

Why? bc we dont know whether the strong EBITDA was due to the mkt
growing or mkt share gains.
If we analyse previous quarters there is no negative or positive

BUT, the bottom line is that Singapore is NOT growing ANYWHERE near the
pace of Macau NOW.

a) bc Singapore is not a direct play on China.

b) bc the mkt already grew from $0 to $6bn in 18 mths. As a reminder,
Vegas is only US$6bn. We expected the mkt to be US$4bn in 2011 and
consensus was looking for only US$2bn ie the mkt size is 50% larger than
our est and double consensus.

Going fwd we only expect around 10% annual gwth in gaming revenues but
bc the ebitda margin is 50%, this implies 15-20% ebitda growth annually
and 20-25% net profit gwth.
BC there is nearly zero risk of new entrants or wasted capex, the
cashflow will increase by the same amount.

ie - we think these two IRs can grow the cash flow CONSISTENTLY by 20%
per annum for the next TEN years.

This qualifies as a superb investment esp considering GentIng Singapore
is trading on 16x PE 2012.

The next catalyst for GENS will be the completion of the second phase in
3 mths time, which includes a significant expansion of VIP hotel
suite/villa capacity. This is important bc the current offering is VERY
Personally, i wonder why the casino+hospitality folks like Genting Spore and LVS look at EBITDA only? Is it because only those numbers are easier to wow? Wink

I remember in The Intelligent Investor, it did ask us to beware when bombastic terms like PRO FORMA, EBITDA are used...

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