Start Time: 16:37
End Time: 17:46
Las Vegas Sands Corp. (LVS)
Q4 2013 Earnings Conference Call
January 29, 2014 02:30 PM ET
Executives
Sheldon Gary Adelson – Chairman and CEO
Michael Alan Leven – President and COO
Robert G. Goldstein – President – Global Gaming Operations
Daniel J. Briggs – Vice President of Investor Relations
Analysts
Joe Greff – JPMorgan Chase Co.
Jon Oh – CLSA
Shaun Kelley – BofA Merrill Lynch, Research Division
Felicia R. Hendrix – Barclays Capital, Research Division
Steven Wieczynski – Stifel Nicolaus
Carlo Santarelli – Deutsche Bank
Cameron McKnight – Wells Fargo Securities, LLC, Research Division
Robin M. Farley – UBS Investment Bank, Research Division
Harry Curtis – Nomura Securities Co. Ltd., Research Division
Operator
Welcome to the Las Vegas Sands Corp. Fourth Quarter 2013 Earnings Conference Call. I will now turn the call over to Mr. Daniel Briggs, Vice President of Investor Relations.
Daniel J. Briggs
Thank you, Rachel. 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. We may refer to those slides during the QA portion of the call. Finally, for those who would like to participate in question-and-answer session, we ask that please limit yourself to one question and one follow-up so we might allow everyone with interest to participate.
With that, let me please introduce our Chairman, Sheldon Adelson.
Sheldon Gary Adelson
Thank you, Dan. Good afternoon, everyone and thank you for joining us today. We are extremely pleased with our strong financial results, which reflect continued execution of our strategic objectives. The highlights of the quarter from my perspective are as follows.
We delivered outstanding growth in revenue, cash flow, net income and earnings per share once again this quarter. With our hold-normalized adjusted diluted earnings per share increasing 33.8% to reach $0.87 per share. We produced another record quarter in Macao where we continue to grow faster than the Macao market in mass table games, the most important and profitable segment in that market.
We also realized strong growth in the VIP segments. Importantly growth was also displayed in our non-gaming hotel, retail and entertainment offerings in Macao. This enhances both the growth platform and profitability of our portfolio of properties on the Cotai Strip, while contributing to Macao’s diversification and appeal as a leading business in leisure tourism destination.
The confidence we have in the strength of our business and the reliability, predictability of our cash flows have allowed us to raise a recurring annual dividend for the 2014 calendar year to $2 per share, an increase of 42.9% compared to the $40 per share recurring dividend we paid in 2013. Our Board of Directors had announced that our first quarter 2014 dividend of $0.50 per share will be paid on March 31, 2014 to holders of record on March 21, 2014.
In addition to the dividends we paid in the fourth quarter of 2013, we returned nearly $225 million of capital to shareholders during the quarter through stock repurchases. Our financial results again reflect a strong performance of our principal strategic objectives that we have outlined in past earnings calls.
Focusing on organic growth, hold-normalized adjusted property EBITDA across our Macau property portfolio grew 55.8% to reach a record $887.6 million. Our mass table win in Macau for the quarter increased 58.3% to reach a record $1.22 billion in a market that grew approximately 40% in the quarter. So our growth rate was nearly 47% faster than the Macau market in the most important and most profitable segment in Macau.
We have grown faster than the Macau market in mass table wins every quarter this year. One year ago, we generated approximately 770 million in mass table wins and we grew that in each successive quarter to 867 million, 929 million, 1.06 billion and finally 1.22 billion in the fourth quarter of 2013.
Our annualized departmental profit in this segment has increased to approximately $2.2 billion from approximately $1.4 billion over the last year. That growth has allowed us to bring in additional $800 million annually to our departmental profit and EBITDA. I guess it’s the wonder that analysts and journalists are saying that we lead the market by far in mass market and in premium mass.
We see this trend continuing in the future for three reasons. First, more people visiting both Macau and our property portfolio on the Cotai Strip. Visitation from China to Macau is up 10% of the year end of December 31, 2013. While mainland visitation to Macau from outside the neighboring Guangdong and Fujian provinces was up 15%. Growth in the more distance provinces is meaningfully exceeding the visitation growth from the neighboring Guangdong and Fujian provinces.
We believe the growth trend will be enhanced by infrastructure as tens of billions of dollars of adjustments in Macau, Guangdong province in Southern China and enable more people to more easily reach Macau and accelerate Macau’s evolution as the leading business and easy destination in Asia.
The infrastructure investments include the world’s most extensive high speed rail network, a $10 billion bridge directly connecting Macau and Zhuhai with Hong Kong and more than $20 billion of investment in the Special Economic Zone of Hengqin Island, which is adjacent to Macau and Guangdong Province.
Second, as visitors come from further away they stay longer and they spend more money on dining, retail and entertainment. Overnight visitors to Macau have the time to enjoy a full complement of entertainment amenities of the Cotai Strip and are spending 2.1 nights on average in Macau. Now that 2.1 night length of stay for overnight visitors has increased and still 5 below Hong Kong average of 3.7 nights. We believe there is room for expansion in Macau’s average length of stay for overnight visitors and increasing length of stay will contribute to growth.
Third is our data base of customers continues to expand. We have the ability to further optimize our mass table productivity across our property portfolio. In particular, we will continue to have the ability to increase the utilization of our market leading 9,000 plus hotel room and suite inventory on the Cotai Strip for our most valuable mass gaming customers. And three, we’ve expanded on our mass table productivity to $12,143 of mass win per table per day across our Macau property portfolio from just $9,716 per day one year ago.
We’re confident that we have additional opportunities to optimize our table productivity across the portfolio in the quarters and years ahead. The VIP business is also exhibiting strong growth with our Rolling Volume increasing 26% to reach a record $49.54 billion. That represents Rolling Volume per table of approximately $1.23 million per day which was a record for the company and was up 33.7% compared to the quarter one year ago.
The Venetian Macao delivered another record quarter, and due to our market-leading investments in non-gaming offerings, continues to lead the Macau market in visitation and business and leisure tourism appeal. Our fundamental multi-tiered Integrated Resort development strategy, which features convention, exhibition, hotel, retail and entertainment offerings, helped delivered 17.4 million visits in the quarter to our property portfolio, including over 8 million visits to the Venetian Macao alone.
EBITDA at the Venetian Macao increased to market-leading $433 million for the quarter. When you take 8 million visits per quarter and you multiply that by four, that’s more than the number of individual unique visitors to Macau. When you take 17.4 million, that’s the equivalent of – let’s see 40, 50 – over 60 million people, I think closer to 70 million people for the year with only 30 million unique visitors arrived in Macau, which means that Venetian Macao is a must see for everybody who comes in, but of course one can conclude that we have 1 million people coming in 32 times or we have 32 million people coming in once each or likely it’s something in between. So when you think about it that you capture everybody, every visitation for every unique visitor, it’s an amazing statistic.
Sands Cotai Central, our latest and largest property on the Cotai Strip, continues its steady ramp and delivered $237 million in EBITDA this quarter. On a hold-normalized basis Sands Cotai Central generated 273 million in EBITDA during the quarter and is approaching 1.1 billion annualized EBITDA run rate. And that’s only for the first quarter this year. By the time we get to the fourth quarter we’ll be running at that point at hopefully a significantly higher run rate.
That’s the most important take away from the strong performance at both the Venetian and Sands Cotai Central. It’s a clear positive impact that the increased critical mass of convention, exhibition, dining, retail and entertainment offerings including over 9,000 hotel rooms brings to the overall tourism appeal of the Cotai Strip. Our property portfolio was attracting customers who were staying longer which in turn is driving growth for both properties.
The Venetian and Sands Cotai Central worked together to meaningfully enhance the overall appeal of the Cotai Strip, increasing both visitation and length of stay and attracting more valuable set of customers to Macau and the Cotai Strip. Thus increases in returns across our entire property portfolio. We couldn’t be more enthused about the future benefits to both the Venetian and Sands Cotai Central, but the additional dining, retail and entertaining offerings at the Parisian including 3,000 more hotel rooms and suites will bring to the Cotai Strip.
Now turning to Marina Bay Sands in Singapore. On the whole normalized basis we generated USD 372 million of EBITDA. Non-Gaming win increased to USD 4.63 million per day, I believe for the first time. In addition our hotel business reflected strong growth with ADR increasing to USD 425 and occupancy approaching 97%. We expect to drive growth in the future as we focus our marketing efforts on high value visitors in the surrounding South East Asian region.
Turning to development growth in our current markets, construction continues at The Parisian Macau, our fifth property on the Cotai Strip and our sixth in Macau overall. We remain on budget and on schedule. Subject of course to timely government approvals that may be required, we continued to target a late 2015 opening of our latest Integrated Resort. In addition we have now started construction on the same regions tower the fourth and final tower of the Sands Cotai Central. We are targeting the fourth quarter of 2015 for the completion of that project which will add over 700 additional hotel and apartment units to our portfolio on the Cotai Strip.
Moving on to the pursuit of opportunities for Integrated Resort Development in new markets and geographic areas. In Asia, activity levels in Japan have increased and we are pursuing the potential for Integrated Resort Development in this promising market with great enthusiasm and optimism. Korea has also shown increased activity, and we are looking forward to the potential development opportunities there. We believe our visionfor and on creation of the convention based Integrated Resort business model together with our history of market changing developments in Las Vegas, Singapore and Macau that deliver meaningful and measurable economic benefits for our host markets including the increased employment, business and leisure tourism and visitor spending position us exceptionally well as we compete for these development opportunities.
Finally, let’s turn to one of our favorite subjects, the return of capital to shareholders. Through December 31, 2013 we have returned more than USD 5.5 billion towards shareholders through dividends and stock repurchases over the last two years including over USD 4.8 billion to Las Vegas Sands shareholders and over USD 700 million to the non LVS shareholders of Sands China. As I mentioned before we have raised our recurring annual dividend to Las Vegas Sands to $2 per share for the 2014 calendar year, an increase of 42.9%. For Sands China Limited we have increased the interim dividend for 2014 by 30% to HKD0.87.
Sands China Limited is also paying a special dividend of HKD0.77 in February. We have every intention of increasing the dividends at Las Vegas Sands and Sands China in the years ahead as our business and cash flows continue to grow. At December 31, we have over 1.4 billion remaining under our current stock repurchase authorization at Las Vegas Sands and we expect to approach us at least 75 million of stock per month. We look forward to continuing to utilize the program to return capital to shareholders and to enhance long-term shareholder returns.
We’re pleased to have completed the refinancing of our U.S. restricted group credit facility and to have extended the tenure of that debt on very favorable terms till the end of the decade. Looking ahead we expect to maintain the strongest balance sheet in the industry which provides another meaningful competitive advantage as we pursue global growth opportunities. That’s a tongue twister. People have asked what leverage level we would be comfortable with in the future as our cash flows grow. We would be comfortable with the gross leverage debt to EBITDA ratio of between 2.0 times and 3.5 times before additional debt related to the future development of integrated resource and new markets. Note that our leverage ratio is 2 times today, so we have the capacity to increase our leverage levels as we seek that it still stays within the range.
So in summary, we are successfully executing our business model that we have outstanding operating momentum as we look to extend our leadership position in convention based integrated resource development and operation. We had a vision — we’re the visionaries of the convention based Integrated Resort business model and the leaders in the industry. Couple that with our financial strength and our disciplined focus on operational excellence, not to mention our good looks and churn, and I could be more confident about our future success. It’s my job together with our outstanding management team to make sure we stay disciplined and continue to execute our strategies that will both extend our industry leadership in current and new markets and generate strong growth and outstanding returns for our shareholders in the years ahead. Yay! dividends!
With that let me turn the call over to the operator to begin the QA session.
Earnings Call Part 2:
- Professional Services
- Investment Company Information
- Las Vegas Sands
- Macao
Las Vegas Sands" CEO Discusses Q4 2013 Results
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