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Las Vegas Sands Corporation (NYSE:LVS)

Q2 2014 Earnings Conference Call

July 16, 2014 4:30 PM ET

Executives

Daniel Briggs – SVP, IR

Sheldon Adelson – Chairman and CEO

Analysts

Joe Greff – JPMorgan

Robert Goldstein – President, Global Gaming Operations

Shaun Kelley – Bank of America

John Oh – CLSA

Carlo Santarelli – Deutsche Bank

Felicia Hendrix – Barclays

Robin Farley – UBS Securities

Michael Alan Leven

Thomas Allen – Morgan Stanley

Steven Kent – Goldman Sachs

Operator

Welcome to the Las Vegas Sands Corporation Second Quarter 2014 Earnings Conference Call. I will now turn the call over to Mr. Daniel Briggs, Senior Vice President of Investor Relations.

Daniel Briggs

Thank you, Mike. 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 EPS and hold-normalized adjusted diluted EPS 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 those measures to the most comparable GAAP financial measures are also 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 Q&A portion of the call. With that let me please introduce our Chairman, Sheldon Adelson.

Sheldon Adelson

Thank you, Dan. Good afternoon everyone and thank you for joining us today. We are pleased with our financial results which reflect continued execution of our principal strategic objectives. We delivered strong growth in revenue, cash flow, net income and earnings per share again this quarter, with our adjusted diluted earnings per share increasing 31% from the prior year’s quarter to reach a second quarter record of $0.85 per share.

When we started bonus program on Macau this quarter it impacted our EBITDA by approximately $29 million, and our adjusted earnings for diluted share by $0.03. That means I don’t want to make this clear. Our EBITDA would have been $29 million higher which is $1.34 billion, and we now initiated the bonus program. We also meaningfully increased the return of capital to shareholders. And our $0.85 earnings per share would have been $0.88.

Let me take you through some of the highlights of our results in Macau through the quarter. I suspect there are a number of common questions that you want to ask in Q&A. So I will take this opportunity to give you my perspective on the issues and drivers that impacted the quarter. Macau adjusted property EBITDA grew by 22% to $801 million in quarter two. Had we not made the adjustment I mentioned previously, our Macau EBITDA would have been $830 million and the growth would have been 27%.

During the quarter we again outpaced the market in terms of gaming revenue growth. Our growth gaming revenue was up 12% versus the market that was up 5%. Two points to note here, firstly, our mass table and club revenues continue to grow ahead in the market. Secondly, during the period when VIP is experiencing a slowdown, our business makes us clearly more defensive than the overall market. As we have a much higher proportion of our growth gaming revenue on mass market revenue.

For the second quarter our gaming revenue mix was 44% VIP and 56% non-VIP whereas the Macau market, the overall Macau market was 60% VIP and 40% non-VIP. The VIP segment represents just 17% of our departmental profit in Macau [ph].

Now let me give you some gun material [ph] in each segment. With respect to VIP gaming, the fact is being on a slowdown of well documented. One, kind of liquidity conditions above the Chinese economy and the junket system. Two, the slowdown in the Chinese real estate market. And three, a general backdrop of uncertainty and caution in the economy. The latter has affected not just VIP gaming but also other sectors of luxury spending. The press has extensively reported a crackdown of corruption in the PLC, not in Macau. As in the past as I have experienced, that type of criton creates uncertainty, and that uncertainty temporarily slows the VIP market in Macau. Let me emphasize – it’s temporary and it’s cyclical. I’ve seen that happen several times in the past in last 10 years.

Clearly the World Cup had a negative impact on overall GGR in June, and particularly in the VIP segment. June VIP revenues are down by 20% versus May this year. I had somebody check this out and what we found was that the same thing happened in 2010, the previous World Cup. The client then was 24% whereas in 2011 to 2013 the average decline month-on-month is only 11%. So there was a 24% drop during the World Cup four years ago, and whereas the traditional May to June drop for intervening this was only 11%.

We aim to get our fair share of the VIP market which albeit low margin is still a $30 billion a year market. Now we continue to invest in our premium direct segment where we deal directly with VIP customers which expands to lower level of rolling volume decline in quarter two than our junket volumes. At the same time we will continue to reallocate resources between VIP and mass in order to optimize our profits. You will notice that compared to a year ago we have reduced VIP table capacity by 28% and increased mass table capacity by 14%. As a result our win per unit in VIP segment is actually up 32% year-over-year while our mass win per unit is up 17%.

With respect to mass table games, the market growth obviously continue to be very healthy with 33% growth. Suffice to say that even with the World Cup effect, the mass table revenue per day attune for all of Macau was only 1% lower than last October, the best month of 2013 – that was also the best month in Macau’s history up until the end of 2013, this is really worth noting. In terms of our own performance, we retracted by low hold in segment. We estimate that factor contributed about $32 million negative impact on our revenue for the quarter. If we adjusted for this mass slot, as well as the 14-month bonus, our Macau EBITDA would have been $850 million, not being under $1 million [ph] that we reported. So it’s a further adjustment that would bring it up $49 million more to $850 million.

Clearly we have experienced very strong growth in premium mass. And as the segment becomes a greater proportion of our non-rolling table win, the volatility and expansion becomes more of a factor, especially over the three months period.

Now we will comment on business mix on non-rolling. As most of you will appreciate, we have a dominant position in the core market, core mass segment, given the sheer scale and breadth of our gaming and non-gaming capacity and product. Q2 is typically a bit slower in terms of the base mass business and the non-gaming segments. As the second half progresses, with the summer holidaying months and then the seasonally strong October and December months, the full extent of our competitive advantage in the mass market will become much more pronounced.

I highlighted in the Q1 call our strategy of fully utilizing our room inventory for our high value mass gaming customers. We continue to execute very successfully on this strategy. Our database continues to growth rapidly, our revenue per room might remain stable despite a rapid increase in room usage. Now we continue to build customer loyalty. This is clearly evident in the continued success in the mass business in Sands Cotai Central.

I now want to make a few comments on margin. Sands China enjoys industry leading operating margins. This quarter we achieved 34% margin, up almost 200 basis points against the prior year. There are many factors contributing to our superior profitability versus the competition; business mix, operating efficiency, and the ability of our properties to attract an outsize share of Macau visitation. For example, in 2013 with just under 30 million visitors to Macau, we had 63 million visitations to our properties, that is outpacing the market. For every person that came in to Macau, we had two visitations in our combined properties. With growth of property – portfolio properties that position us as the destination of choice, virtually every type of visitor coming to Macau.

With that being said, there are number of factors affecting the margin for the quarter. Firstly there is the accrual for the 14-month bonus for our employees which totaled $29 million in the quarter. Secondly there is the impact on low non-rolling hold in premium mass. And thirdly the business makes it somewhat less favorable to margin. Rob can elaborate on these drivers in more detail during the Q&A but let me emphasize one point. We’re committed to judiciously reinvesting in our business in Macau, this includes unthreading [ph] our physical product and nurturing and retaining our influence. We also have every intention of continuing to promote local talent in Macau. In business, there is strategy and there are tactics. The growth of success today to arise from having the right strategy from the outset. Today everyone likes to talk about Macau’s diversification from pure gaming, whereas we are actually delivering on all aspects of diversification. I want to point out that our competitors curl their properties into greater resorts but not one as to nice facilities that we have which is the most important characteristic of an IR. We are the creator of the integrated resorts, and therefore we are the very first, and only two presenter of the convention-based integrated resort business model.

Let me highlight three truly unique differentials. First, the scale of our hotel room inventory covering every price point in every customer segment. Second, a retail mall portfolio which with the completion of The Parisian mall encompass four distinctly positioned but complimentary retail shopping experiences, all under one roof, you won’t have to walk outside and experience the weather to connect to all of our properties when they are completed. The utilization of our raised pedestrian connection over the Cotai Strip has increased commuting here – and I watch it every day, about 60%. And the end result of the retail mall on both sides of the pedestrian walkover – by the way, safe condition and with moving sidewalks, and – has significantly increased. So the point where the Four Seasons Mall is the highest grossing mall of sales per square foot anywhere in the world.

Let me highlight three truly unique differentials. First, the scale of our hotel room inventory covering every price point in every customer segment. Second, a retail mall portfolio which with the completion of The Parisian mall encompass four distinctly positioned but complimentary retail shopping experiences, all under one roof. Third, our unique and ambitious events and entertainment strategy, fully utilizing our advantages and having multiple performance venues, including the Cotai arena. We are the only property in all of Cotai that has an arena. Again, like so much of what we do – we have been pioneers in entertainment, and we now have a track record of bringing world-class events to Macau. I don’t believe any of these unique competitive advantages can be matched by our competition even after the completion of the next wave of their developments.

Let me end my opening remarks on Macau by looking back and looking forward. I have [ph] as my head. I was in Macau in May to join the celebrations of the tenth anniversary of the opening of Sands Macau. That year we opened, 2004, the mass table and slot revenues in the entire Macau market were less than $1.5 billion. In 2007, the year we opened Venetian, mass market revenues were $3.4 billion. In 2012, the year we opened Sands Cotai Central, mass revenues were $11.7 billion. The run rate for the past 12 months has reached $17.5 billion. Although then it will continue to be cyclical bonds along this path of cyclical growth. I have every confidence on our ability to continue to grow – and more than confidence, I’m absolutely certain we will continue to grow.

We have a still underpenetrated market. We are improving transport infrastructure, and we, Las Vegas Sands and Sands China, offer uniquely differentiated portfolio of properties and product offerings in Macau. When I created migration for the Cotai Strip I was widely criticized and bellowed. Today the market now knows that the cream [ph] for Macau is the Cotai Strip.

So that completes my opening remarks on Macau operations. Now I’m turning to Marina Bay Sands in Singapore. We generated $418 million of EBITDA at Marina Bay Sands during the quarter. Despite a 27% decline in rolling volumes, our EBITDA is up 18% year-on-year, and our hold-normalized EBITDA is only marginally down. I think this demonstrates the quality of the cash flow generation at Marina Bay Sands. As I’m feeling many of you are aware the sharp swings in rolling volumes from quarter-to-quarter are attributable in part to ultra high-end patrons. This segment contributes significantly to volumes, overall utility, and accounts receivables, but not nearly as much to profits and margin. We are maintaining this current base of highly profitable rolling customers as we continue to make significant progress in our receivables, the company via very clean reserve ration.

At the same time we continue to invest in our foreign premium mass growth initiatives. Of course, the value of Marina Bay Sands to our shareholders is much more than its operating results and financial success, impressive as these maybe, Marina Bay Sands serves as the most important reference site for emerging jurisdictions anywhere in world but considering large-scale integrated resort developments, particularly convention based. On that note, let’s move onto our potential environment into new jurisdictions.

In Japan, we are pleased to see the progress that has been made in the last 10 months. That I had recently began discussing the proposed IR legislation. We are pursuing the potential plan on development in Japan with great enthusiasm and believe our convention-based integrated resort development model will bring meaningful benefits to Japan in terms of business and raise the tourism, employment, and economic growth. We have also been spending time apparently to be aware as in Japan we believe integrated resort developments can deliver significant economic benefits with local return [ph]. In both, Japan and Korea, we are willing to commit substantial capital investment to developing large-scale iconic resources.

Remember, we are the pioneers in the industry, and we took risks when others hesitated. Our track record speaks for itself. Our development capabilities, our operating know-how in every business segment of the integrated resort and our financial strength are unmatched. We believe we are exceptionally well positioned to compete with these developments [ph]. Finally, let’s address the internal capital to shareholders.

The confidence we have in the strength of our business and the reliability and predictability of our cash flows have allowed us to progressively increase the return of capital to shareholders. Ours is a uniquely privileged business model. We can continue to return significant amounts of capital to shareholders through dividends and share buybacks, while retaining more than sufficient financial plethora, to pursue both organic growth and new development opportunities. I’m sure you’ve heard my model, yay dividends.

Over the last 10 quarters through June 30, 2014, we have returned $8.3 billion to our shareholders through dividends and stock repurchases, including over $6.7 billion to Las Vegas Sands shareholders, and then Hong Kong Dollars, the equivalent of overall $1.5 billion to the non-LVS shareholders of Sands channel. Also we increased the annual dividend by 42.9% this year. In addition of raised in the LVS recurring dividend, we increased to Sands channel limited into a dividend for 2014 by 30% to 87 Hong Kong cents per share. SCL also paid a special dividend of 70 Hong Kong cents in February 24. We had every intention of increasing the dividends at LVS and SCL in the years ahead as our business in cash flows continue to grow. I’ll repeat, yay dividends.

In addition to dividend growth, we returned $320 million of capital through LVS shareholders this quarter to our stock repurchase program leaving approximately $300 million remaining under our current LVS stock repurchase authorization. We look forward to continuing to utilize the stock repurchase program to return capital to shareholders, and to enhance long-term shareholder returns. In conclusion, we are continuing to successfully execute our business plan, and I’m more confident than ever about our future success. It’s my job together with our outstanding management team to make sure we stay disciplined and continue to execute the strategies that will both extend our industry leadership in current and new markets to generate strong growth in outstanding returns for our shareholders in years ahead.

With that, let me thank you and let me turn the call over to the operator to begin the Q&A session.

Question-and-Answer Session

Operator

(Operator Instructions). The first question is from Joe Greff with JPMorgan.

Joe Greff – JPMorgan

Good afternoon, guys. Sheldon you touched on the reasons for the VIP performance in the second quarter for the market as whole, and you mentioned liquidity and credit tightening. Can you talk about what you’re seeing on the VIP side and nearly as important as mass, but what you’re seeing on the VIP side with respect to either credit extended to players on the direct side or to the junkets?

Sheldon Adelson

I’ll turn that over to Rob who will comment on that.

Robert Goldstein

Hi Joe. Hi – the softness in the junket segment has been well documented, the explanations have been explored by a lot of people. Our Macau business, as you know, is not dependant on that. As Sheldon referenced, it’s about 17% of our EBITDA makeup. We’ll keep monitoring the progress in the segment and we’ll use our 1,500 tables and 9,000 rooms to make the best of our profitability. But again, our core driver is the mass business, it’s hard to sit here with the complete – all the answers, what’s happening in the VIP segment. And with so many diverse explanations out there, I’m not sure we get a whole lot of value, I just believe its back end consumer demand is soft and soft industry-wide, and I think it’s foolish for us to guess when that demand will return. And I think that’s as much that I want to say about that segment.

Sheldon Adelson

I’d like to add that that data applies to Macau and not to Singapore.

Robert Goldstein

Yes.

Sheldon Adelson

I think that the uncertainty created in the market by the correct – in the PLC always – it’s cyclical by the way and that always creates uncertainty and people – that’s reflected by fewer people coming to Macau. So even though none of it applies to Macau but it doesn’t affect people coming to Singapore, and we’ve seen an increase in Chinese customers, all those [ph] coming to VIP market, coming to Las Vegas.

Joe Greff – JPMorgan

And with respect to the VIP customer in Macau, are you seeing extended timetables to repay credit? Are you altering reserves or reserving more as a percentage of the credit that’s outstanding – that itself is more that the heart of my question.

Robert Goldstein

Sure. We are definitely monitoring credit extension, actually we’re pulling back with some of the credit but that I don’t think is the issue in Macau for us, it’s just backend demand, we’re very comfortable with our reserves, we think we’re in the right place vis-à-vis our junket partners, we’re not that concerned about credit from a risk perspective. I just continue to believe that the absolute’s are no one is completely clear in what is all the reasons for the pullback, and when that pullback reverses, we better take advantage of it, until that time we’ll monitor closely.

Joe Greff – JPMorgan

Great. And then on top of it, my follow-up –

Sheldon Adelson

It’s like you said Joe, it’s not a major part of our business – not the major part and it’s decreasing as a percentage of our total GGR.

Joe Greff – JPMorgan

Great. So, as my follow-up, do you spend a decent amount of time talking about capital return and what you’ve done historically, maybe – since we’re getting a lot of emailed questions on this, maybe you can revisit with us, how are you thinking over a period of time about increasing the dividend growth policy is from here? And that’s all for me, thanks.

Sheldon Adelson

We are – we had a Board meeting yesterday and I discussed with the Board that – I wanted them to think about the dividend policy and about stock repurchase, and then we would bring it up. We have enough money for the stock repurchase to go through on our regular program to go to this current quarter. And I expect that we will have some dividend news and stock repurchase news on the next earnings call for the third quarter.

Joe Greff – JPMorgan

Great. Thank you.

Sheldon Adelson

You’re welcome Joe.

Operator

Next question is from Shaun Kelley with Bank of America.

Shaun Kelley – Bank of America

Great, good afternoon guys. Sheldon or Rob, in the prepared remarks you also mentioned some of the reasons for where you guys performed on your Macau EBITDA margins, I think the third thing that you said was a less favorable business mix and I was wondering if you could actually elaborate on that a little bit just because I think we would have expected with mass being – with VIP being down and mass being up, the business mix would have been in your favor a little bit. So what did you mean by that comment and anything you call out of there would be helpful.

Robert Goldstein

I’ll take that. Let’s begin with the second quarter seasonality issue. We had a stellar first quarter, the result is well [ph]. We weren’t expecting that material growth seasonality, so that didn’t happen. Sheldon referenced the World Cup, I think that goes off saying that impact – we can’t quantify to the dollar amount but clearly it impacted our mass business, especially in the June period. The mix changed unfavorably, so a higher share of our business came out of premium mass which is a little bit lower margin, a few points lower. So the mix was definitely unfavorable in terms of the premium mass performed fine, we took some beating in terms of the whole percentage, a few points low, probably crosses $30 million plus of revenue, higher risk business as you know. Our strength, the LVS advantage resides in all those rooms and games [ph], and it really blossoms in performance of very, very well when the market blossoms. When the market softer, we don’t get that pure mass customer with the highest margins, and frankly we don’t get the fill up over our table positions in all of our sleeping. So I think we have been is inauguration, I’m total confident this summer reversal will happen, we believe the summer has been stellar for us, we have a lot of confidence in the ability to fill those rooms, all those gaming flush at weekends with more mass customers. We don’t want to see a fall off or premium mass, we’re spending a lot of dollars to drive that premium mass business as we’re compelled off, and again that’s our advantage but the truth is, with the – when the market is not as strong as it was in the first quarter we suffered there as weekend rooms were not as filled up and the table positions are not as filled up.

So I think the mix absolutely played again this quarter. I still – I showed the reference of the October period, we realized the demand in this market and the expectations are so huge but few months later it was a very good October, looks like a very soft June, it’s kind of ironic how the expectations declined measurably. But again, when you add it in the $32 million of hold-related revenue miss with $30 million, the 14-month issue, the World Cup issue, and the seasonality, I think it starts to explain some of the discipline that we have in terms of the mix and some of the margin, and what happened and – I fully believe it’s aberrational, I fully believe this time will be very, very gratifying for us and for shareholders.

Shaun Kelley – Bank of America

And then Rob, maybe not to beat the dead horse on this but – is the second part of this, so your overall mass table share then kind of dipped down sequentially, right. And you’ve opened up – you’ve dedicated more tables to this segment. So the question is, was that expected and do you expect that to then sequentially bounce back as some of these factors probably will out?

Robert Goldstein

As we have said Shaun, in previous calls, we’re agnostic about the use of tables. We have 1,500 gaming positions, tables rather; we have 9,000 plus sleeping rooms, we have 4,800 slot ETG positions, it’s a massive advantage of this market and as the summer months kick in, we will continue to deploy those assets based on market demand and market interest in them. Obviously junket segment is not where we’re focusing right now in terms of growth, the market will have to wait and see when that returns. Our focus remains – our driver of our core EBITDA remains mass, be it mass tables, mass slots, ETGs, premium mass, that’s our focus, that’s our core ability to grow this market. Do we believe? I couldn’t be more raging bull on Macau had it near this weekend, it is still the greatest gaming market in the world. I guess when we opened up, one thing I can’t help to think about 10 years ago, we opened up Sands Macau, there was questions about could Macau equal or surpass Las Vegas in terms of gaming revenues, I think we all know how that turned out. Cotai will continue to drive Macau beyond Hong Kong and Guangdong, into the provinces of China. The infrastructural improvements coupled with cultural fancy gamble makes Macau the most important market in the world and a very, very safe bet to grow and grow. And finally the penetration in mainland China is still 2% [ph]. So we think Macau is going to bloom, we sure do. We think $100 billion of GGR is reasonable to expect. This last month has been disappointing, but it’s a month in a very, very long race and I think when you see the summer quarter, you’ll feel a lot better about our performance.

Shaun Kelley – Bank of America

I think that’s very clear. Thanks, Rob.

Robert Goldstein

Thanks Shaun, I appreciate it.

Sheldon Adelson

I want to emphasize that one quarter doesn’t make a trend, and nothing is going to change in Macau, nothing is going to change into to come to Macau and play. It has not changed in thousands of years and it isn’t because there is no catalyst to make a change.

Operator

The next question is from John Oh with CLSA.

John Oh – CLSA

Hi, good afternoon guys. Could we talk a little bit about your mass business, especially in the premium mass. Are you seeing customer behavior or the demographics of the very high end of premium mass to be similar to the VIP segment and if this is the case, do you think this segment will be at risk of slowing down like what we are seeing in VIP today?

Robert Goldstein

John, its Rob. I don’t believe that’s the case at all. It’s a different customer, there might be some overlap, there certainly is some overlap but the great majority of mass customers, and even premium mass, are not coming out of junket segment, I think it’s a very different audience. And again, although we are flattish sequentially our year-on-year performance 34% plus indicates all the junkets have come down quite a bit year-on-year unfortunately, the mass business has boomed 34% out of the many businesses that grow 34% year-on-year and yet are worried about future growth. I think it’s clear the growth is there. This second quarter – while Sheldon referenced World Cup etcetera, I think there is a valid variables as the impact of our mass business and the business in the industry but I think it’s very myopic to think that’s going to be an issue for the future. And no, I don’t believe as the junket business is in decline – I believe we all resurrect, the mass business continues to do very well and I don’t believe there is risk of that deterioration, no, I really don’t believe that at all.

Sheldon Adelson

John I think it’s not as close a customer as you think it is because the VIP customer is used to going in the rolling program and the premium mass players are – they are not all from VIP coming downwards, they are playing in the non-rolling segment and it’s just a different kind of person. The player is not just coming from the VIP, coming down to say $100,000 and under, if they are coming up from the $1,000 to $2,000 and above that. So that’s what the premium mass is. We’ve got a $5,000 daily theoretical win from a premium mass customer. That’s not a settling down of VIP customers. And again, one is rolling, one is non-rolling.

John Oh – CLSA

Okay, thank you. And if I can follow-up with a question on hotel rooms. Would you talk to us on how would you think about your comping strategy in Macau? Do you think there is an opportunity to do things a lot more differently now versus from what you’ve done before, maybe get more aggressive with comping rules to take market share in mass? That’s it for me, thanks.

Robert Goldstein

I think it’s very simple. The biggest – let’s be clear, our biggest asset beyond gaming capacity is sleeping room capacity. And for those of you who watched this industry as I have for 35 years, the ability to put someone in a room above that casino is a number one driver where that person gambles. We have that ridiculous advantage of having 9,000 keys in our portfolio and growing shortly. So I think the answer as you know, that’s a huge advantage our approach has been simple, we’ve proven over and over again as we give away complimentary rooms the return is breathtaking. And as long as it continues the team in Macau can continue to deliver those kind of numbers. We are earning $2,000, $3,000, $4,000 per occupied room, that’s a huge advantage to us. So think about it, as that premium mass customer comes in further and further away with a larger budget, has to sleep at some place, can’t go back and forth in a day or two, we’ll be the place of choice in my opinion, for not just this year but for years to come in Cotai. And that relationship between where you sleep and where you gamble is unequivocal, it’s a hugely important. Now that decision years ago to build those rooms puts us in the poll position today, we’ll continue to deploy that resource as long as we get a $2,000, $3,000, $4,000 per night return on that complimentary room. So to me while others are running out of capacity, that becomes a wild advantage of this company as this market swings back to huge growth, and which it will.

John Oh – CLSA

So Rob, do you think you have – sorry, Rob, if I can follow-up, do you think you have the right room comp ratio today? And what do you think of widen mix?

Robert Goldstein

No, we want to be more comps drawn, we want to keep driving, we want to get to $5, $6, $7, $8 billion of mass table wins and the way to get there is to keep giving away rooms to wide customer base. So no, we don’t have – more complimentary towards the right customer mix, there is no place like in the world, it’s not like down in Las Vegas or any place in the US or any place anywhere where you can comp a room to a customer and get a $2,000 or $3,000 yield that night in the casino. No, the mix is keep comping as long as you maintain that margin and maintain that profitability we’ll be aggressively pursuing that customer. That is the strategy along with our mass customer who marches even 10 or 12 points higher. We’re in a very, very privileged place, this has been a disciplined month in June but look forward to the future because it will turn to growth year-on-year 33%, 34%, 35%. Those numbers – there is no place in the world like it, no place like it, and we’re in the right place with the right strategy at the right time.

John Oh – CLSA

Awesome, I like the sound of it. Thank you.

Robert Goldstein

Thanks John.

Operator

The next question is from Carlo Santarelli with Deutsche Bank.

Carlo Santarelli – Deutsche Bank

Hey everyone, good afternoon. I just had a question, it’s kind of a two pronged question on the premium segment. Rob, you mentioned and Sheldon mentioned in the prepared remarks as well about the margin drags, slight margin drag on that premium mass segment and when that’s a higher portion of the mix. I was hoping you guys could clarify that, and maybe in the same breath if you could talk a little bit about why we’re seeing mass hold percentages come down? In my understanding, and please correct me if I’m wrong, but the premium mass customer would be a customer who is more prone to buy at the window and I know you guys do a little bit of different accounting but does that premium mass mix because of the way that you guys calculated have a negative effect, does that premium mass customer becomes a bigger overall customer as a percentage of the total?

Robert Goldstein

No, not at all. I think it remains just the opposite. Here is where we look at the market. We’re lucky that still the majority of our mass business is non-incented – business that comes without a complimentary room, without promo chips, without gifts, etcetera. So I think the point is that customer when we are trying to reference was the mix change when it swings to the premium mass customer who is more highly incented because of the marketplace. So we’re getting high stories, let’s say $36, $37, $38 [ph] due to promo chips, complimentary rooms, complimentary meals, and we all know these things in the gaming world are part of that better premium mass customer. We’re very happy to take 38% of billions of dollars. However, when you marry that to our – what’s made our businesses spectacular in the first quarter in 2013 was, we are when capacities constrained, we have a guy who get the great lion share of the mass customer show $60 million plus visitations, who is that guy, who is that person? They are high frequent that comes in and has been gambling at our places, our ETGs because of the capacity. They can’t go to major stores because the rates are too high when the gaming norms. So we have a very, very fortunate place. I don’t think it’s – to the whole percentage issue, I don’t think it’s a question of changing, it’s not changing, it’s simply more volatile – the more you let go that larger sums of money, some of these folks are betting huge amounts of money on table, that volatility will translate into whole percentage, same thing in Las Vegas where we hold 25% of lot [ph] and 10 point south of that in mass mass, it’s no different. The geography hasn’t changed the mathematics from the tables. So our volatility – this quarter how we held a few points higher and gotten more mass mass, we had $900 million quarter which we’re going to see in the future. We’re not concerned about volatility, it’s part of the game; we’re not concerned about margins, we’ll take 38% or so on the premium mass. But again, our stellar advantage comes in that mass customer, although people do not have the capacity to service.

Carlo Santarelli – Deutsche Bank

That’s helpful Rob and then if I just could one follow-up on Singapore. It appears again, every time we see a big roll quarter it seems like hold and suppressed, and every time we see a big hold it looks like roll is suppressed. Are you guys still pretty confident that there is not a relationship between that just from a peer gamblers perspective who would happen to play more if they happen to be winning, so we would expect that inverse correlation between the two variables?

Robert Goldstein

Yes, sure. The bigger the percentage, the lower the roll because people – the players lose earlier on in the present, in their visit, and if they lose later that means this small roll, so we have a lower percentage of hope. I mean that’s dogma in the industry, that’s the love [ph]. I think – also, in Mr. Sheldon’s comment the idea that we can stimulate very honestly, I would be blown I always look at Singapore, it’s – the role is disappointing but it’s not disappointing relative to what we’re doing in Singapore. We made a very conscious decision, management in Singapore and the team here in Las Vegas, there is an incenting situation among over there which will not be part of, it’s over incenting in some segments. And frankly, we’re not going to play that business, we’re also being more judicious in quite extension because we see some of the concerns we have with – our policies are very strict about how we give credit and how we collect credit. So we are somewhat – I wouldn’t say disadvantage but we’re just more compliant if you will, and again, what we’ve learned is that sometimes driving the role of $14 billion, $15 billion is not vintage [ph] because you’re giving away huge commissions and huge amounts of credit extension. So we have made a constant decision to take customers that we feel we can collect from, we can extend to get that margin from, a fair margin. And this is a highly constituent segment, if we took, we can grow a rolling business anytime we want, it means giving away a lot more credit, a lot of things we think are not a good long-term decision. We’re very pleased if we end up with $50 billion annualized roll, that’s acceptable to us, and the whole percentage – I mean, we spend it all last year when we were suffering with inadequate hold, we told you we’d come back, it’s just mathematics, the chips don’t know who is playing and frankly, the people who won last year are losing this year. It’s a very simple mathematical equation, so we’ve had a very strong hold and we’re gratified by it but in the end of the day, the math always prevails and we always fall to 2.85 [ph] and beyond, there is nothing structurally wrong. What’s more pleasing to watch is our growth and our mass business over there are non-rolling slot ETG business is accelerating, we’re 4.07 a day, 63 point margins, so we can get Macau Singapore to be a 1.5, 1.6, 1.7 store [ph], we’ll accept that.

Sheldon Adelson

Carlo, this is Sheldon. What I want to say is that, if we had zero rolling, $1 and rolling, and a $1 billion in profit, on a quarter I think I’d take the profit, I’d take the EBITDA rather than the rolling. I’m shocked, I can’t put the rolling in the bank, I was going to only put the EBITDA in the bank.

Carlo Santarelli – Deutsche Bank

Understood.

Robert Goldstein

Carlo, we came back to Sheldon and Mike, we’re very clear it’s our last meeting over there and said, look, we’re going to sacrifice some roll but we’re going to get you a better margin and long-term better business and that’s what we’re doing in Singapore. We’re very gratified, we like to roll $15 billion, hold 5% but we’re going to take what we can get and so this quarter we’re very accepting of a very flat quarter.

Carlo Santarelli – Deutsche Bank

Thanks, everyone.

Sheldon Adelson

You’re welcome.

Robert Goldstein

Thanks, Carlo.

Operator

The next question is from Felicia Hendrix with Barclays.

Felicia Hendrix – Barclays

Hi, thanks and good afternoon. Sheldon, on the buyback, given the magnitude of the buybacks in the first quarter and then what you repurchased in April, the $175 million, I always thought that the buyback level would have been higher in the quarter, especially given where the stock was so. I’m just wondering was there anything legal or structural or anything in the quarter that prohibited you from buying more shares.

Sheldon Adelson

Nothing, just the way it went.

Felicia Hendrix – Barclays

Okay. So – and then you –

Sheldon Adelson

There was no other consideration whatsoever.

Felicia Hendrix – Barclays

Okay. And then obviously you said that you think you’ll get the further authorization which a lot of folks have been asking us about, so that’s a positive there. And then Rob, you recently opened the new premium mass area, Sands Cotai Central, Dragon’s Palace, I’m just wondering can you give us an update on the ramp of that area and when do you expect to see that running at a full run rate?

Robert Goldstein

It opened up you know, and successfully it’s not running the level we want to run at but the ramp is continuing. I think you’ll see it this fall, we wait –we believe it would take about three months to get there. Very confident of its performance, a slower start we anticipated, great candidly opened up in a wrong time in terms of these seasonality, opened up into the World Cup, opened up lot of things but we’re meeting – we’ll be there this weekend, have a look at it, the team there is high confident of its growth, and although we had a disappointing quarter from my perspective in terms of growth in general, and as Sands Cotai Central, those rooms sitting above it will start to get very, very busy this summer and so will the Dragon’s Palace. We’re completely confident of its performance.

Felicia Hendrix – Barclays

Okay, great, helpful. Thank you.

Robert Goldstein

Thank you.

Operator

The next question is from Robin Farley with UBS Securities.

Robin Farley – UBS Securities

Great, thanks. On the mass market things in Macau, I know you’ve talked about…

Sheldon Adelson

Could you speak up a little bit please.

Robin Farley – UBS Securities

Sure. On the mass market side of things in Macau, I know you’ve talked about hold, and mix, and the World Cup, but you haven’t talked that much about the competitive environment. Can you talk about what other operators are doing in the math market particularly as VIP has declined and kind of changed the competitive environment and maybe others focusing more on math? Hopefully you could hear that okay?

Sheldon Adelson

I’ll give you my overlook. They can’t focus on that because they don’t have enough tables. They don’t have a fraction, small fraction of the number of tables that we do, and the mass requires a lot of tables. So there is nobody who has got that number of tables or we have anything close to it. You could say that SGM has a lot of tables but they’ve got 20 sub-licensed casinos and a whole bunch of maybe 50 or so VIP rooms, if they still have, I’m not sure. But how can they do this. In other, they have the number of hotel rooms, they have the much seen properties, and they have the number of tables, number of hotel rooms, number of tables, they just don’t have. So it’s not as though our competitor could say, SCL is doing very well with the mass market, lets compete with them, we’ll go into the rest market. It’s like shell the needles [ph] 5.7 say, hey basketball is a great game, I’d like to get into it.

Robin Farley – UBS Securities

Okay, great. My follow-up question is on Singapore and let me just preface it with – I totally understand about hold affects your volumes, so that’s not the question.

Sheldon Adelson

I have my basketball but I don’t have the way, and it’s – our competitors may have the will but they don’t have the way.

Robin Farley – UBS Securities

Okay. So just shifting to Singapore for my follow-up question. I understand how hold affects your volume, so that’s not the question, the question is you mentioned that you felt that Singapore is not seeing the same slow down in VIP that you’re seeing in Macau, so first I guess, how do you know – what do you see next year comfortable if that’s the case, that it once just to hold the issue in the quarter?

Sheldon Adelson

If it’s uncertainty that the Chinese people are concerned about, they want to lie low to things recycle, I think they would lie – it’s clear they would lie low and we have the Chinese Government could see that if they were looking for them. And that the Chinese Government can go – they are not in Singapore, it’s not Chinese soil, so they can go to Australia, they can go to Singapore, they can go to Philippines, they come to Vegas, but they are most popular places. Since we offer more to the high rollers like much higher gaming bets, we offer credit of large amounts to big players, we get bet in Singapore and we’re starting to get some of that here in Vegas.

Robert Goldstein

Robin we’re back for second, that Macau is one of the – you’re comment, we’re just – you’re question is, Sheldon talked about – first of all, we’re dealing some of the most focused, intelligent, seasoned operators in the world, our competition there is very, very good, and we work very competitively but we – you just have to do what they do every day. However, to Sheldon’s point they are disadvantaged physically in terms of capacity and the market gets back this summer and this fall, that will be – from the overcome despite their intellect. The second piece is, I have not seen margin erosion at all in the – as the junket business becomes more challenging, I’ve not seen erosion at all in the margins in the premium mass. The aggressive behavior of the market has been there for the last couple of years, be it Nalco, Win, MGM, Galaxy, in terms of those margins, I have not seen erosion at all, in fact if anything I think it’s been maintained but that focus will get intense in the premium mass and we expect it. In the Singapore issue, we commented we’re not seeing necessarily a slowdown but we’re seeing a – we’re thinking differently about how to incent, how to give credit to the foreign customer coming into Singapore, I’m not sure it’s market driven much as our own initiatives that may have impacted our decline in the rolling segment in the first quarter.

Robin Farley – UBS Securities

Okay, that’s great, thanks. And just the last question is on the preason [ph]. Is there any change at all by a month or two or that is going full speed ahead exactly at the pace that you want it?

Michael Alan Leven

Robin, this is Mike. The construction at the moment has stopped depending when we see certain approvals from Macau Government that we hope to obtain shortly. We’re positioning ourselves right now to be able to resume full activity once those necessarily approvals are received. And we have no plans to change the anticipated opening at the end of 15th at this point.

Robin Farley – UBS Securities

Thank you.

Robert Goldstein

Thanks, Robin.

Operator

The next question is from Thomas Allen with Morgan Stanley.

Thomas Allen – Morgan Stanley

Hi guys. As we think out throughout the year, there are a couple of [indiscernible] in market, you have the smoking ban going in October. Can you talk about how you expect to deal with that, I don’t know just on same in Four Seasons, haven’t heard any update there. So can you talk about how those are coming along and how do you think those could better up in the year? Thank you.

Sheldon Adelson

I got distracted. The smoking – well, we’re building smoking rooms that we’re going to drop down in the middle of the vast gaming floor. And the rules are still being clarified as to how much of the gaming floor is VIPed, and what is the VIP – what’s the definition of VIP. It appears as though premium mass if it’s in a separate room and it’s enclosed, it will be considered VIP. So that’s where we stand out. We have a much greater premium mass business than our competitors. So with the combination of VIP rooms are going to be allowed to be smoking and as a matter of fact the ramping up of the Dragon Palace is – that was the subject of question few questions ago. We’re waiting for the arcades [ph] to smoke in there, and we have an open entrance to that property and we put a strong sense of urgency on the design and construction of an enclosure to make it a fully enclosed room, essentially fully enclosed. So, you know – I don’t know, I haven’t smoked since I was a teenager and that’s at least 10-12 years ago. And so – I don’t know about how people are smoking but I could tell you that the press is saying that they don’t expect, and you guys, you analysts know this better than I do, that people are not expecting more than 2% or 3% impact on the smoking issues. I don’t know if that’s true or not, I hope that that’s all that is, I thought that we might be able to deal with these cigarettes but I understand these cigarettes have been outlawed in Macau, so they can’t use these cigarettes in Macau. Listen, many years ago when the no smoking ban first came in, I used to be a frequent visitor to the Peninsula Hotel in Los Angeles, and I loved smoking the cigar bar because I was then a cigar smoker. And I said to myself, it will kill the cigar bar, nobody will ever go in there again, they might have to close it down and turn it into a coffee shop or something. Then next time I went, there were as many people as there were not smoking at all than they used to be with people with big fat cigars and small pen cigars. So, I don’t know – people have a tendency to roll out the punches and they evolve with the rules – with the governmental rules on the smoking issue, and listen it’s good that they don’t smoke. So – but we don’t know, your guess is as good as us, at least it’s as good as mine, there could be other people in my company who – after all we have 50,000 employees, it could be a lot of people that think differently than I do and they may agree with you but I’d be honest enough to say I’m not that smart and I don’t know. But I’m not giving up being smart on other things. I’m not saying doing that.

Robert Goldstein

I think there was a second part of that question regarding saying we just…

Thomas Allen – Morgan Stanley

Sorry, I’m on a train. So the second part of the question was, can you give us an update on the same in the Four Seasons. And then might – that’s it, thanks [ph].

Robert Goldstein

[Indiscernible]. There are no delays at the present time. Openings are always subject to government approvals but if we – if they maintain that construction schedule at this point, you should be able to open that building in next summer’s period. Four Seasons, we’ve completed 40 of the apartments and we are now waiting inspections in terms of being able to put those in the market, as the product will tell the situations that licensing process is with the government as we speak. And one last thing on the smoking, I had the capital committee of SCL, as well as LVS approve yesterday of $33 million of expenditure to put the no smoking facilities in which was suppose to be due by October 6 – the smoking facilities by October 6, and that construction will begin as we speak. So we should be ready. Some of the hotels – the older hotels have significant disadvantages in doing that, we are in pretty good shape for that.

Sheldon Adelson

You better speak fast or we’ll have them faster.

Robert Goldstein

Okay, I hope that answers your question.

Thomas Allen – Morgan Stanley

Thank you.

Operator

The next question is from Steven Kent with Goldman Sachs.

Steven Kent – Goldman Sachs

Hi, good afternoon. A couple of questions. One, Singapore, you’re now running and have been running a very, very high occupancies for a while, you’ve talked in the past about building something there or trying to build something, could you give us an update on that. And then second, just on the real estate side, at different points you’ve talked about selling the malls and getting some asset value at Macau. Can you just talk about if there are any limitations on your ability to do that and how we should think about it?

Sheldon Adelson

We have to – although they did say in the past that it will be okay for us to have stranded title [ph] on the malls and that there was no objection to that. We still are growing at a very healthy rate and as I said in my prepared remarks that the mall at the Four Seasons, the shops at the Four Seasons is the highest sales per square foot of any mall in the world, $7,000 a square foot, for the first level and the second level, I think the average for the entire mall, first, second, third or mezzanine level is $5,500 per square foot, and the next highest for the best of my knowledge, that I have been told is the Bell Harbor shops in Bell Harbor in Florida, Miami at $3,500 a foot. So we’re very proud of that and it continues to grow significantly. I don’t know why – we don’t need the money, and I got to wait until we finish apprehension and if we are able to build the tropical garden mall across and next to the second Sheldon Tower on the border of lot six and lot seven. I don’t know – we can either sell the existing retail properties. We have made Macau the second shopping –

Steven Kent – Goldman Sachs

I’m sorry to interrupt you, is there a restriction on your ability to sell them or is there – just you’re waiting for value?

Sheldon Adelson

Say again?

Steven Kent – Goldman Sachs

I said is there a restriction on your ability to sell or is it that you’re simply waiting for greater value, if I have heard both sides?

Sheldon Adelson

It’s not just waiting for good – no, there is no restrictions in Macau. There is a restructuring –

Steven Kent – Goldman Sachs

You can sell the malls?

Sheldon Adelson

We can sell the malls.

Steven Kent – Goldman Sachs

Okay.

Sheldon Adelson

If we don’t sell condominium title, we could sell the cash flows from the malls just like we sell stock in the company. There are no restrictions. And –

Steven Kent – Goldman Sachs

Okay. And then building a hotel room in Singapore?

Sheldon Adelson

It happens all the time to every husband in the world.

Robert Goldstein

Do you have something else to follow-up?

Steven Kent – Goldman Sachs

Sir, my question was in the original question which was, did you build a hotel in Singapore – or the idea at different points of building something in Singapore?

Sheldon Adelson

Right, we’d love to build another extension of our hotel. We’re running at 99.4% occupancy. And it’s probably the most occupied and greatest income per earning [ph] hotel in the world and with a 2,563 keys. But there is some land adjacent to it but we haven’t got any approvals from the Singapore Government yet. We are in very, very dire need of more hotel rooms and we’ve got that demand, we could sell it out handedly.

Steven Kent – Goldman Sachs

Okay. Great, thank you.

Robert Goldstein

Thank you.

Operator

This will be the last question as we have reached the end of the allotted time for Q&A. The last question is from Eric Curtis with Nomura [ph].

Unidentified Analyst

Good afternoon. Two quick questions.

Sheldon Adelson

Hi.

Unidentified Analyst

Hi Sheldon, can you give us an update on your CFO search and what are the features that you’re looking for in the individual you want to put in that chair?

Sheldon Adelson

We have the capability of the CFO in-house and we’re extremely pleased with it. We have both Corporate Finance and Accounting, and I – it’s simply just allocating the title which we haven’t gotten to because we’re happy with the functions.

Unidentified Analyst

Okay. So you’re not going to bring anyone in from the – externally then?

Sheldon Adelson

There is no need to bring somebody in externally.

Unidentified Analyst

Okay. And then the second goes back to the VIPP’s of it, and recognizing it’s not an enormous part of your business but to the extent that Beijing has increased the scrutiny on VIP players or VIP players just are feeling indirectly. Do you have any sense of what’s behind that and how long it might last?

Sheldon Adelson

This has happened several times in last several years. I remember at least three, four other times. And it doesn’t last more than a few months, three or four months. When the press starts to reduce their print about the crackdown on corruption in the PLC then it seems to go away. That seems to create a sense of uncertainty and I have looked into this at late, and that the Chinese people say that if once the government starts enquiring about things, it creates a sense of uncertainty. As much as the Chinese Government, it doesn’t want social instability, they – the population of the country doesn’t want uncertainty, they don’t know what’s going to happen. So it doesn’t necessarily mean that people are targeting them or targeting their category – it just means there is some uncertainty, and they don’t like uncertainty.

Unidentified Analyst

But as a quick follow-up, doesn’t this new administration strike you as being a bit more hawkish on the issue than the prior one?

Sheldon Adelson

I don’t know, I try as hard as I can not to get involved in foreign governments political affairs, and what their choices are. It’s not my business and I don’t want to be involved there.

Unidentified Analyst

Okay, thanks a lot. I appreciate it.

Sheldon Adelson

Thank you, Harry [ph].

Operator

That was our final question. And this concludes the Las Vegas Sands Corporation second quarter 2014 earnings conference call. You may now disconnect.

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