Good afternoon. I would like to welcome everyone to the Las Vegas Sands Corp Third Quarter 2014 Earnings Conference Call. I would now like to turn the call over to Mr. Daniel Briggs, Senior Vice President of Investor Relations.
Thank you, Courtney. Before I turn the call over 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 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 reference. We may refer to those slides during the Q and A portion of the call.
Finally, for those who would like to participate in the Q and A session, we ask that you 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.
Thank you, Dan. Good afternoon, everyone, and thank you for joining us today. I am pleased to report that we continue to execute our strategic objectives during this quarter, despite some obvious challenges in the VIP Gaming segment in Asia. We delivered a solid set of financial results increasing our company wide EBITDA to $1,284,000,000 but who's counting? In Macao, we achieved a 3rd quarter record of $809,000,000 in adjusted property EBITDA.
In addition, we continue to return excess capital to shields, Yay dividends. Confidence is not based on whimsical fancy, but is founded on the company's sustainable strategic advantages. Before I take you through some of the highlights for the quarter, allow me to spend a moment to reflect on our company's strategic position. First, we are the creators of the large scale convention based integrated resource. As a result, we enjoy the benefit of revenue diversification and we are able to cater to virtually every type of business and leisure business.
Today, well over 80% of operating profit in Macau in both our Macau and Singapore operations comes from mass gaming and non gaming segments with less than 20% of profit coming from VIP gaming. I built these results in Asia to capture long term growth of consumer spending in Asia. Scale, as we always have on the bottom line where it really counts. In the first half of twenty fourteen, we secured 34% share of overall EBITDA in Macao's 6 player market. Let me point out to you that the highest of the also ran was 18.4 just where just under twice the next one.
The next one was 13.7. Percent. The one below that was 11.2 percent. The one next to that was 13.4 percent and 9.4% was the last. We're at through 20 142nd quarter 2014, we are at 33.9%, but for the 3rd quarter, we are 34 percent.
Substantially in excess of both our fair share of table capacity and our 23% share in gross gaming revenue. Going EBITDA as opposed to revenue is a thing that matters most. I've been saying this for years. Likewise in Singapore, we generate around 60% of the total EBITDA in a duopoly market. 2nd, the share size of our cash flows with annual consolidated EBITDA of over US5 $1,000,000,000 allows us to pursue development opportunities in new jurisdiction and aggressively return capital to shareholders.
Again, pay dividends. Whether our growth is a bit faster or slower in any given quarter does not alter this unique strategic advantage. When others hesitated or counseled otherwise, I pursue development opportunities in both Macau and Singapore concurrently. As a result, I'm happy to say that the company today can simultaneously reinvest capital in existing operations and future projects, pay growing and generous dividends and continue with the judicious share repurchase program. Now let me take you through some of the highlights of our results in Macao for this quarter.
Macao adjusted property EBITDA grew by 3.2% to US808 $1,000,000 in quarter 3. Gross gaming revenues declined by 5% year over year versus the Macao market decline of 7%. So we up versus the market again. Clearly Macau's VIP market weakened further during the quarter. The reasons for this ongoing VIP decline are well documented and I don't think I need to repeat them here.
Everyone is talking about China reducing its growth from 7.5% to 7.4%. Percent. That's a reduction in growth of 0.1 percent, which can easily be a rounding error or a meaningless move. I don't think anyone could perceive an economic slowdown by GDP changing 1 10th of 1%. I think when it turns from 7.5% to 7.6% growth, I guess it will be happy days of The mass business in Macao is still growing at 15% per year, the envy of a lot of industries.
15% growth is still very solid top line growth. And we believe the mask business in Macao will continue to grow for the foreseeable future. And in particular, as new supply comes online in Macao, which very clearly remains a supply driven market. I've been saying this for years and my words will continue to come to pass. Also as I've said in the past, all things in life are cyclical.
We have experienced cyclicality in Macao in the past and we believe that the current softness in the environment in Macao today is also cyclical and that it's only a matter of time before the cycle reverses itself. No one has ever suggested that the behavior of Chinese and Asian people, which has been established over 3000 year history is going to change. The important point is that our strategy hasn't changed. Our business will continue to be anchored around the mass market and the secular growth of Chinese tourism. We have a unique portfolio that is designed to appeal to virtually every type of visitor to Macau.
Our property visitation in quarter 3 reached a new market of US18.2 million dollars up 8% year over year. Mass table revenue grew by 15% in the quarter, while our ETG revenues grew by 33%. Our hotel room optimization strategy continues to yield successful results. Sands Kotak Central achieved a new quarterly record in mass stable revenues, growing by 27% year over year. Where I'd say that's a ramping up and supported by a 24% increase in hotel rooms allocated to the mass casino.
Retail sales at our malls grew by 9% year over year against the backdrop of declining retail sales in Macao. The sales in our malls dollar comp for nearly 40% of Macao's retail goods in categories in which we have a presence. Overall, non gaming revenue grew by 15% during the quarter. Sales China accounts for over half of the total non gaming revenues of the 6 gaming operators in Macau. Out of the 6, the average the efficiency would be 16% and a fraction we are over half, which demonstrates our clear leadership in this important and profitable segment.
Everyone likes to talk about Macau's diversification from pure gaming, whereas we are the only ones actually delivering on all aspects of that diversification. From the outset, my commitment to the government of bringing diversification to Macau has been unwavering. I believe diversification is important for Macau and I believe diversification is important for our business. The financial success of our business in Macao has also allowed us to share the financial benefits of our growth with our employee team members in Macao. We are by far the largest employer in Macau and we have provided generous wage and benefit growth for our team members throughout the years as well as unrivaled opportunities for their professional development and career progression.
There's been a great deal of noise lately from certain critics, certain circles about the negative impact of rising labor costs in Macau. Let me share with you that we are more than happy to increase the salaries of our employees there. And while our employee compensation and benefit costs have increased in dollar terms, meaningfully as we have grown in Macao from about US450 $1,000,000 in 2010 or 10.9 percent of SCL's net revenue to what will be slightly over US1 $1,000,000,000 in the 2014 year, approximately 11% of net revenue. So how does that make a difference to us when over 4 years our revenue has outpaced our increase in revenue has outpaced the increase in wage and benefit dollars. Clearly, our labor costs have remained very stable over the last 4 years when measured as a percentage of revenue and our rate of growth in net revenue has kept up with the growth in labor costs.
In fact, in some cases exceeded. We come back to our 3 unique differentiators. First, the scale of our hotel room inventory, catering to the broadest range of offerings and customer segments. 2nd, our retail mall portfolio. By the way, we have secured commitments by retailers for 85% of the retail malls at The Parisian and we're more than a year away from opening there.
Our 4th mall, The Parisian is our 4th mall in Macau. 3rd, our unique and ambitious events and entertainment strategy, fully utilizing our advantage in having multiple performance venues, particularly the Cotai Arena. We now have a track record of bringing world class events to Macau. I don't believe any of these unique competitive advantages can remotely be matched by our competition. Even after the completion of the next phase of their developments, While there have been or will continue to be cyclical bumps along the path of secular growth, I have every confidence in our ability to continue to grow over the long term.
We have a still underpenetrated Chinese market. We have improving transportation infrastructure. And we, Las Vegas Sands, True Sands China, have a uniquely differentiated portfolio of properties and product offerings in Macau. So that completes my opening remarks on Macau operations. Let me turn to Marina Based Sands in Singapore.
We generated US352 $1,000,000 of EBITDA in Marina Bay Sands during the quarter, while hold normalized normalized hold EBITDA was $50,000,000 higher at $367,000,000 Despite a 34% decline in rolling volumes, our whole normalized EBITDA is down by only 2% year on year. I think this again demonstrates the quality and resilience of the cash flow generation at MBS. Mass win per day reached this is a number we've been reporting to you for the last year or 2. It reached an all time quarterly record of US4.8 million dollars up 7% year on year, principally driven by our successful efforts in bringing in the foreign premium customers to Singapore. In the VIP Rolling segment, we have chosen to see some low volume and have focused our efforts on long term profitability.
We'd much rather take in the lower cost high end of the market and let somebody else take the much higher cost lower margin end of the market. We maintained a prudent reserve ratio, a very prudent reserve ratio during the quarter and will continue to maintain the highest compliance standards in the industry. At the same time, Bay Sands continues to serve as the most important reference site for emerging jurisdictions that are considering large scale integrated resort developments. It's obvious that that would put us in an advantageous competitive position as a candidate for emerging market opportunities when the first thing they're saying is they want a Marina Bay Sands, MICE based iconic structure and that's who we specialize. Both Japan and Korea have extensively mentioned MBS, Marina Bay Sands as their model for integrated resort development.
Marina Bay Sands is the most iconic integrated resort in the world. That iconic appeal has driven strong growth in valuation from residents of Japan, Korea and the world to Marina Bay Sands in Singapore. We have prepared and presented in Korea, one of the most iconic buildings ever will turn out to be the most iconic building in the world. And the we hope and we believe that it's received a very, very strong reception positive reception. Again, we're the creators of the convention based integrated resort.
Our meetings, incentive, convention and exhibition facilities in Singapore have contributed meaningfully to Singapore's appeal in Asia as a nice destination. Amala Marina Bay Sands is the most important shopping destination in Singapore, which by itself is among the most important shopping destinations in Asia. On that note, let's move on to our potential development opportunities in new jurisdictions, in which I'm traveling. In Japan, we are pleased to see that progress is being made. Earlier this year, the Diet began discussion of proposed integrated resource legislation and the legislative process there continues.
We're pursuing the potential for an IR development in Japan with great enthusiasm and believe our unique convention based integrated resort development model will bring meaningful benefits to Japan in terms of business and leisure tourism, employment and economic growth. We have also been spending extensive time on the ground in Korea towards a mostly and we have been doing so for some time. As in Japan, we believe integrated resort developments can deliver significant economic benefits for the local and national economies. In both Japan and Korea, we are willing to commit substantial capital investment to develop large scale truly iconic integrated resource. There is also the potential for Vietnam to move to allow domestic entry with social safeguards in the context of an IR development.
It could also very well be that Vietnam emerges as utility. And we are assertively exploring opportunities in that market. Financially, we have the wherewithal to pursue developments in all three of these jurisdictions concurrently, if the opportunity to do for itself. Our development capabilities, our operating know how in every business segment of the integrated resource and our financial strength are unmatched. We believe we are exceptionally well positioned to compete for these development opportunities.
Finally, let's address the return of 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 return of capital to shareholders. Ours remains an equally 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 firepower to pursue both organic growth and new development opportunities for the periods that it will take to develop to plan and develop these and at the same time to generate significant cash flow that gives us plenty of extra money. Over the last 11 quarters through September 30, 2014, we've returned over US8.3 billion dollars to our shareholders through dividends and stock repurchases, including nearly US7.1 billion dollars to Las Vegas Sands shareholders and in Hong Kong dollars the equivalent of over US1.5 billion dollars to the shareholders of Sands China.
Also last year, we increased the annual dividend for LVS 42.9% for the 2014 calendar year. In 2015, I am pleased to announce that the Board of Directors has recently increased the dividend by 30% to $2.60 per year or $0.65 per quarter, Yay dividends. The increase in the dividend will take place beginning in the Q1 of 2015. We have every intention of increasing the dividends in the years ahead as our business and cash flows continue to grow. In addition to dividend growth, we returned US300 million dollars of capital to LVS shareholders this quarter through a stock repurchase program, which I believe completed the previously authorized US2 1,000,000,000 dollars This completed the execution of our initial US2 $1,000,000,000 LVS stock repurchase on the business.
I'm now pleased to announce that the Board of Directors has also authorized an additional US2 $1,000,000,000 for further stock repurchases. We look forward to continue to utilize the stock repurchase program to return capital to shareholders and to enhance long term shareholder returns. In conclusion, we will continue to stay disciplined and execute our business plan. With the right strategy and the right management team in place, I'm more confident than ever about our future success. Before I turn the call over to the operator for the and A session, I wanted to take a moment to thank Mike Levin for the meaningful contributions he has made to the company over the more than 5 years he has served as its President and Chief Operating Officer.
His ability to execute my vision for the company will always be appreciated. To conference call as he will retire from his position as President and COO at the end of this year, We look forward to its continuing contributions as a member of the Board of Directors for both Las Vegas Sands Corporation and Sands Channel Limited. On behalf of the 50,000 worldwide employees of Las Vegas Sands, as well as our Board of Directors and management team and particularly for me personally, thank you, Mike, for the efforts you have made on behalf of both our companies. All of us here at Las Vegas Sands wish you all the best in the
the Your first question comes from the line of Joe Greff with JPMorgan. Your line is open.
Good afternoon, everybody. Questions for you all in Macao on the base mass and premium mass, departmental profit margin assumptions specifically referring to your slide 21 and the supplemental earnings slide deck. The assumptions are lowered for both base and premium adds relative to 3 months ago. I kind of understand I think I understand what's going on in the premium mass. Can you talk about what's actually going on in both segments relative to the 3 months ago?
And specifically when you look at this 3rd quarter results, are those the profit margins that you experienced? Or are you making further assumptions lowered assumptions going forward? And then on a follow-up topic, if you can just talk about the smoking ban impact, that's something obviously we all are curious about to hear your experiences. Thank you.
I'll take it Joe. I'll start with the easy one. Smoking, we don't think has been impactful. It's difficult all things going in Hong Kong and obviously the other pressures in Macau all the headwinds we're facing is hard to segregate the smoking issue directly. But our anecdotal feedback is pretty positive that it doesn't appear to be impactful at any segment.
The smoking areas are being utilized and business appears to be unaffected by the smoking issue. As for the margin issue, I think we're all aware that there's competitive pressures in the premium mass segment. I think you'll hear that on anybody who's been in Macao recently. We have the wonderful structural advantage of having a lot more control, a lot stronger position in the mass mass or base mass segment. We remain steadfast and I believe we can get a 45 plus percent margin there.
That's somewhere we think today and tomorrow the decisions made by this company 10 years ago will resonate for years to come in terms of having more gaming positions, more sleeping rooms, more retail and simply more control over that segment. So we're much a big believer in standalone tables and more tables, more gaming capacity, more retail, etcetera. So we're very secure that we can run the highest margins as 45 plus percent in the base mass or mass mass segment. Competitive pressures on a boil right now in premium mass. I think you'll see by other the competitors as well as our numbers that the win per unit is one metric, but flow through is another.
Our margins have dipped a bit. I think though with the declining junket situation, I think there will be more pressure on premium mass. Having said that, our blended flow through is going to stay around 40% and we believe it will rise with the market getting stronger. Again, our strength, the breakdown of our mass revenues is still leaning heavily towards the pure mass side or mass side, which gives us a very strong advantage to maintain margin. And we think the other competitors are going to have more a different situation because we have obviously structurally a better place to be.
On the premium mass side, I think there has been escalating pressure and that will continue.
Your next question comes from the line of Shaun Kelley with Bank of America Merrill Lynch. Your line is open.
Hey, good afternoon, guys. Just two questions for me. My first would be on the buyback, I think previously you guys have given some kind of general target around maybe $75,000,000 so a month. Just kind of any guidance you could give our folks in terms of being more opportunistic on that given the recent dip in the share price? And then my follow-up would be on the capital expenditures, it looks like things were pushed out a little bit on the Parisian and maybe some of your other projects as well.
And I'm referring to one of the slides late in your slide deck.
If you could just give
a little bit more color on some of those changes in kind of capital expenditure expectations that would be great. Thank you.
Hey, Sean, it's Patrick Dumont. How are you?
I'm great, Patrick. Thanks.
In terms of the buyback, the focus on the Board has been that it will be programmatic in nature. The levels haven't been exactly set as of yet, but it's something that we'll identify over the next couple weeks.
We just got the okay. This is Sheldon. We just got the okay from the Board. I think it was Monday. And we're having a Board meeting coming up next week.
In Macau, we're having 2 separate Board meetings, LVS and SCL. And we will attempt to come out with the details of the program. It will probably be somewhat similar to what we've done so that we could spread it over a period of time. But then again as there are any opportunism arises, we should take another look at that.
And with respect to Parisian targeted opening date?
Parisian targeted opening date, we have 2 categories of opening date, partial opening and complete opening. The last I'm going to look at it next week. As I said earlier, I'm going to Japan, Korea and I'm also going to Macau. Last thing I've been told is that a full opening will occur in March, but we can still achieve a partial opening of the casino and some number of rooms if the government will allow us to do that in November or December. So it's not a binary issue.
It's maybe we have a partial opening, which has occurred in the past to us and everybody else. So I hope we can open partially in November, December 15.
Thank you very much.
Thanks, John.
Your next question comes from the line of Thomas Allen with Morgan Stanley. Your line is open.
Hey, good afternoon. Two questions on Macau. The first one just following up on the earlier commentary regarding premium mass competition. And also just on slide 21, you're showing that there's lower growth there versus base mass. You continue to shift tables to the premium mass segment over the past couple of quarters.
Are you going to slow that down at all? Or are you going to shift back to mass mass? And then second question is just around the Macau market in general. Visitation continues to be quite strong up high single digits, but gaming revenue growth has obviously decelerated. Can you just talk a little bit more about kind of the shift in the customer mix?
Are there are related customers coming fewer times? Or just any interesting dynamics you can highlight? Thanks.
First thing Thomas, we'll move tables based on market demand obviously. We've moved away as you know the last couple of years from the junket segment into premium mass as well as pure mass. And that'll be the continuing mantra for the team over there as time tells us what to do. It's very simply a managerial position to take that wherever the most money is made from the table that's where we'll deploy it. And there's no magic to we've done in the past.
There's no magic in the future that the market will dictate that. At this point, as you know, there's excessive supply on the junket side and probably on the premium mass side. So my guess would be more focused on mass mass where our biggest advantage resides. As for the new growth in the visitor, first of all, I think it's very positive that we're seeing more growth in Macao. I think it bodes well for the future of Macao and I think it bodes well for the story.
China, we believe, is very continue to be very supportive of Macao. The President will be there this December. The infrastructure improvements continue on massive scale. And given a more settled environment, meaning Hong Kong becomes calmer, smoking is absorbed, we believe the Macao story will continue quite nicely and future supply will grow demand and Macao offer China's growing middle class a first class destination. Having said that, as you noted, there's not the same amount of growth in the GGRs commensurate with the growth in the pure visitors to Macau.
I think that will change in time. We believe very much so that as new markets open up and the transportation matures that problem will solve itself. It's a much better situation than having less demand for the city in terms of visitorship. So clearly, we want to see more GGR growth coming out of new visitors, but the numbers are what they are. We remain very confident that the mass mass business, which is our strength in the backbone of our strategy, will yield a great profit in the future.
And those future people coming to Macau, they won't just sleep there and eat there and go see shows and shop, they will in fact gamble.
This red herring of the smoking issue, which I talk to the people in Macau every day seems to have no impact. A few people grumble a little bit about going into the smoking rooms, but they're an obedient society and they do what the government says. And they go to the smoking rooms and they seem to enjoy and they come back out. It reminds me, I forget what the colloquial title was of the year 2000. There's no nature God and nature knew which must have known whether it was Eastern Standard Time or Central or Mountain or Pacific Standard Time or maybe Hawaii time that or maybe the first reporting at midnight Australia time, I don't know.
But it was all a big hullabaloo about nothing. So to quote, I think it was Shakespeare, it's all a tempest and a tea party. Was that Shakespeare? I'm not sure. I'll ask you.
What was it? Okay. We have a Brit here. Is that is that Shakespeare? Almost paraphrasing it.
Paraphrasing it. Okay. It's Bill Belchak. Well, he's not really a Brit, he's Scottish.
Almost not a Brit. Any else, Thomas?
Your next question comes from the line of Carlo Santarelli with Deutsche Bank. Your line is open.
Hey, everyone. Good morning. Thanks for good afternoon. Thanks taking my question.
Just on the VIP side in Macau, it appears as if there's a little bit of a difference in the incremental margin for the add backs. And I'm wondering if maybe there was a delta in your direct hold this time that's causing it to look a little bit different?
I don't think so.
Carlo, you're asking about a mix issue. I guess you guys all leak data that doesn't include our specific hold on our non junket business.
Yeah. I was just
wondering Yeah. I can tell you that the margins in VIP in Macau are healthy, commission rates are not going up.
That's what I was looking for. Thanks, Dan.
Yes.
Your next question comes from the line of Felicia Hendrix with Barclays. Your line is open.
Hi, thanks. Thanks for taking my question. Can you with the new authorization, the new buyback authorization, can you just discuss for a moment how you're planning on funding that? Will that be continued from free cash flow? Are you planning on increasing leverage?
How are you thinking about that? And then I have a follow-up about Singapore.
Well, Money. Money. According to the song, it's burning a hole in our We haven't addressed that yet Felicia. We know that we have plenty of money and we are contemplating we've been using all cash for the development and construction of the Parisian Macau and we are now going to go out and get a separate project financing that will recover a lot of the cash that we put in there. So earnings at the rate of 5%, 5.5%, 6%, 6.5% that I see some of you analysts come out with, I think per year, I think we're going to have plenty of cash flow.
Yes, that's helpful color. Thank you. And then just on Singapore, Rob, you've talked to we've seen it in the numbers. You're sacrificing some of your role for profitability, which is a great strategy. Just trying to think about for those of us who are modeling this, what is the optimal level of role you're trying to get to as you maximize the profitability there?
It's a hard question to answer Felicia because
I was saying how high is up. We would love to be
rolling 60,000,000,000 dollars a year. We just have some headwinds we just can't overcome. One is the commissions, we remain steadfast in our belief that to pay too much commission makes no sense in terms of margin and profitability. 2nd is we're very cognizant of the atmosphere in China and lending exorbitantly in China. So call is too conservative for today, but as you can see by this quarter's results, we are bearish in terms of that segment right now.
We love to see returns in days of $15,000,000,000 a quarter with appropriate margins. It's tough to model because as you know it's highly concentrated. It's driven by not as many players as we like it to be. We're also in a very competitive environment vis a vis our competitor there plus the Philippines. I wish I can give you a color that I could believe in myself, but the team and I are working through it in the Taco Meeting next week to talk that very issue through.
We're trying very hard to remain focused on profitability. And for right now, I think you can model up more growth in our $4,800,000 a day and 60 plus point margin. I'm not as confident as giving any kind of forecast how we see the rolling business. It really depends on the environment.
Unfortunately, we have a competitor that has never worked in a competitive market before. The Kenting Berhard didn't have any competition. They're exclusive in Malaysia. So apparently they're still trying to get used to having competition. Competition, it appears as though their only response to that is to what we call quote by the business.
They are paying up to 1.7 and 1.8 anecdotally about for the junket, not the junket, but the they're paying the same thing to the premium direct direct VIP players. And we're still down at a much lower reasonable number no more than what we pay in Macau to the junket lips. So that's why we have we've grown to take over in excess of 55% of the market, GGR compared to their 45% of the market. And who knows maybe one day they'll get used to competing on the basis of a quality product, if they ever build 1 and they won't have to buy the business. I wouldn't say we're out
of that business. The one thing I'd caution is that it's a very thin and concentrated business. I'd like to say we're backing it in a big way. We have the product. We have the demand.
And we also have the headwinds of the fact we're very, very careful and very trying very hard to be the most compliant people in the industry. So moving money for us is also a challenge. So but having said that, we're hoping to have a stronger day in that segment in Singapore in
Let me give you an idea. This I wanted to discuss this about where we stand competitively and what kind of advantage we have in the emerging markets. For instance, when we plan an integrated resort, our competitors for instance, camping in Sentosa, We have when we say we have nice facilities, we have Asia's largest ballroom at 90,000 square feet column free, while our competitor has a 60,000 foot ballroom, which doubles up as an exhibition space and event center. We have over 400,000 square feet of additional of exhibition space when our competitor to downtown SunTek had or has only 200,000. So when we plan, we don't say, again, has only 17 meeting rooms.
We have 250, which can be combined into smaller ballrooms that will hold 6, 700, 800 people for dinners. And our ballroom is sold out 6 months in advance. So when we go into Japan or Korea and we said we have an integrated resort, we'll go in with somewhere maybe 5 100 meeting rooms and somebody else will come in and say, oh, we're an integrated resort. We have some of the components that LVS or SCL has and they'll come out with 20 or 30 meeting rooms. We based our meeting rooms on a formula that's calculated on so many square feet per sleeping room and the allocation of total room supply toward the MICE business.
So we say we have meeting rooms, we had meeting rooms. When we talk about having a mall, we have up to and in excess of 1,000,000 square feet of mall and our competitors come along and say, oh, we have a mall as part of our IR and see we've got 50,000 square feet and about a dozen retailers. So we could talk about 300, 400, 500 retailers in the mall and that gives us the critical mass and takes us to where we are in Macau. My original vision was, is and will be critical mass. But it's based upon an educated and informed calculation of how many mice meeting rooms, how much mice space we have based upon the number of sleeping rooms we allocate to mice, Based upon the entertainment, the look, we're the only place that has a museum and a we have museums and we have arenas.
And we plan arenas in our future developments. So that differentiates us between a competitive slate.
Great. Thank you.
Thanks, Alethia.
Your next question comes from the line of Robin Farley with UBS. Your line is open.
Thanks. I wonder if you can talk about your interest in Japan, if there's some discussion that locals may not be allowed. And does that change the scope of what you think you could do there or what you'd be willing to invest since locals would have been a significant part of a project there?
From our standpoint, I will say that we will not be interested in Japan or any other country on a foreigners only basis. We can't do that. Our business model won't allow it. I could point out to you that in Korea there were 16 the total 17 casinos. 1 Kangwan Land is with direct with domestic entry.
The other 16 foreigners only casinos don't do as much as combined as the single domestic entry casino does and it's different people have different estimates and depending what time of year, Korea is in the snow belt and so isn't North Korea is in I'm sorry, North of South Korea is in the snow belt as is Japan and I spent a lot of time in both places. But it takes anywhere from 2.5 to 4 hours to drive depending upon weather and traffic. But the foreigners only casinos in Korea cannot anticipate getting larger amounts of business. And therefore, they can't build a true integrated resort with all of its components that need the casino to subsidize the loss making components. So from our standpoint, we're not interested in developing a multibillion dollar resort and I don't nobody else can.
If somebody just wants to open a small casino box and try to get people from foreign countries say from China to come to Korea or Japan, all we have to do is look at South Korea and Jeju Island has got half of the foreigners only casinos and ask ourselves whether or not a plain casino with 1 or 2 restaurants can compete with the humongous and big integrated results in Macau and in Singapore. We only have to look at Australia and Philippines to see that they don't have the components of the true integrated resort. And but they do good job. They're well regulated. And I think we're not there and don't anticipate going there.
And we are not interested in foreigners only resource.
Okay. Great. That's helpful. And for my follow-up I wonder if you can comment on with Golden Week, whether that did players that had not been to Macau in a while come back, did it help collections? Is it your sense from the junkets that did that help at all with liquidity in the system?
Rob, Daniel will take that. We don't want to talk Rob, we're not going to talk about Golden Week and then about October in this call, I can't do it.
The reporting in the Q3 is not on Golden Weekdays.
Okay.
That's in the Q4.
Thank you.
Sorry.
Your next question comes from the line of Stephen Kent with Goldman Sachs. Your line is open.
Hi. Sheldon, when I looked at slide 28 of your deck, I saw how well once again the mall is doing. And I just wanted to once again ask your thoughts on selling it and then to combine that with the ability to use that cash, basically sell them all at pretty high profitability, pretty big multiples we're still seeing out there and then use that cash to buy back stock at an even faster pace and just create that arbitrage. I just wanted to see what your reaction was to that and whether that's something whether those are 2 separate decisions or whether they can be combined?
You want to know whether or not we are interested in selling the malls? Yes. I just want to note the number to you above the dark long arrow spanning all the bars. It says 19 0.1%. Do you think that this is an appropriate prudent time to sell while we're still growing and that includes a little slowdown to 9% in the last quarter or last two quarters.
Ridiculous. Part of our properties can go up 20%, 30%, where we've expanded and improved significantly the Mall at the Four Seasons, which is running on average about 5,500 dollars per square foot per annum. And we have the CFS boutique shops that are running at $7,000 a square foot. I was talking to somebody with authoritative data points in Saks Fifth Avenue in New York City and I think it's only running at $1,000 a push. And I look at the Four Seasons Mall, which does US7000 dollars per square foot compared to other like Neiman Marcus and other top U.
S. Brands, they don't come within shutting distance where the malls are. We don't yet see. If we ever come down to under 10% growth, we consider that I would never sell this mall at approximately 20% growth with the likelihood of more. We're redoing a lot of the slower malls and slow retailers in Macau.
We're adding on 330,000 net rentable square feet and we've submitted 4 other projections including an 800,000 square foot retail mall on the tropical gardens. And I hope to see the government when I go there next week. We are the leading IR developers in shopping by far. We actually as a matter of fact, one of the problems is that say, you look at 536, dollars there's no more $736,000,000 in the Q3 of 2014 when we continue our tweaking of MBS and Four Seasons and if we add on to when we add on more space at the Parisian, we are bigger than any of the REITs in Asia. So there's no single REIT that's in a position to buy us.
As a matter of fact, we'd be more in a position to buy them. But as long as we keep growing, I could see that number going up significantly over the next handful of years. And I don't know, we're going to have to the original plan was to monetize it. And at a 4% cap rate, which we think is achievable, we should be looking at it, but it's tough to want to sell when you're growing at 20%, 30% a year.
Okay. So that's really the because the valuations are already there and it's really that you're just continuing to see growth and still see some more opportunity there. Could I then just ask how are the discounts in Macau manifesting themselves? So what are the things that your competitors are doing to eat away at this? Is it giveaways?
Is it discounts on losses? What are the what are they doing that allows them to effectively do this, especially when you look at your own properties, which are so iconic, so attractive, it's hard for me to imagine what they could be giving to get people to come to their place rather than your place.
I mean, on the gaming side? Yes. They're not discounts here. Discounts take place here in Vegas. In the U.
S, we wish they were all discounts, but it's the rolling chip commission.
So that's where
Mass, Steve, what's the graph? Are you in the Mass, I assume, right?
Yes, I am talking about the Mass. What's going on there?
Steve, two things. Mass is obviously multi segment and on the we don't see our margins are maintaining the highest levels in the pure mass. And again, that's our strength. It resides there today, tomorrow and forever because the structural advantage due to asset class in our portfolio. And the premium assets is a lot more competitive.
We compete in that segment as well. And pressure there comes from labor costs, which Sheldon alluded to in his opening remarks, as well as promotional chips, as well as complimentary rooms, as well as lucky chips. There's a multitude of ways you can incent customers to gamble. And think of this, when you've got only so many tables in the market and the junket business is eroding, people are more focused on that segment. So I think you'll see across the board margins in that area are going to be difficult.
We're not feeling that at all in our strength, which is over $2,000,000,000 of EBITDA emanates from the pure mass side. And that's why we remain steadfast and believe we can maintain As the market is healthier, we like to grow our margin back into the 42%, 43%, 44% range combined. But for now, we're in the 30s in the premium mass and in the mid-40s in the pure mass.
Thanks for the color. Sure. Thanks, Steve.
Your last question comes from the line of Harry Curtis with Nomura. Your line is open.
Hey, Sheldon, I had a quick question on a comment that you made a couple of weeks ago about your I don't know if it was a hope or a belief that you could see an improvement in the VIP business over the coming few months. I'm just my first question is, what do you have confidence behind that? Or what might you be looking at to see that kind of improvement? And the second question that I had is, if you guys could talk about the expected number of tables that the Parisian is going to get, what are the formulas that if you were the Macau government you would espouse? Thanks.
I'll answer the last part first. The Macau government has said repeatedly that it will give favoritism to the operator that puts in more non gaming space than gaming. And they said nobody will get any tables if the gaming space represents more than 10% of the total amount of space to be built. This is our business model. I heard that one of our competitors was enlarging their lobby significantly, so they can have a greater ratio of non gaming to gaming.
I suppose counting lobbies might be part of that drink. I did say that it would be a few months I was quoted as saying 2 months and thank you Harry for asking that question. I forgot, but I did want to try to find a place to correct that. It was that day or the day before that the Chinese government had said that the investigation of the corruption was complete. I've since heard that complete.
I since heard that the investigation and corruption has been narrowed to a certain segment of their society. And it's not the impression that the press gave based upon that day, so the day before statement that they were stopping the investigation on the high profile people around the government, people that were gaming. So I'd have to rethink. I don't really know. I said that honestly and with good information at that time, But I think we're going to have to get greater clarification on what the central government means about the narrow portion.
I saw a couple of days ago that they were they enumerated the number of cases they were investigating. It was somewhere around 6000 or 7000 individual cases. I don't know what that means. They said they were party members, Communist party members that amounted to about 7,000. They were investigating.
I have no idea whether that's a complete number and incomplete number or I'm sure the government is putting out the right numbers, but what that represents in terms of how much they anticipated investigating. So if I were to ask the same question again today, I would say that it's tough to say it could be anywhere from 3, 4 months. Most of the analysts are projecting that by the Q2 of 2015 that it should either already be on the growth track or will accelerate being on the growth track by the Q2. But one thing I will say for sure, it's not going away. It's going to come back.
Again, nobody is changing the culture of 1,400,000,000 people. It simply isn't going to happen. It's not if, it's when. Does that answer your question, Harry?
It does. If I could just ask one other quick question of Rob. Rob, on a hold adjusted basis in Macau, and I think I've got these numbers right, but I'm not sure, it looks like your margins, your EBITDA margin was roughly flat year over year and which I think in this competitive environment and the decline in VIP has been is pretty exceptional. But the question is, given your more cautious comments about margins on the premium mass side, is it going to be tough to hold those margins flat? Or do you think that there are things you guys can do on the expense side to at least keep those margins flat?
Two thoughts, Harry. One is there's certainly things we can do and I think the team there is addressing the expense part of the ledger. But honestly, what we believe is that the mass business maintains and maybe even exceeds the margin as it gets stronger in this hopefully this quarter in 2015. So again, the great majority of our business comes out of the because our mass and our the reason our margin and our EBITDA is so strong in Macao is because we are a mass driven model over there. And so I think maintaining the margin is very, very possible if not growing the margin.
The question is the competitive set what they do in the premium mass segment. That's the one thing I can't understand what will happen there. Hopefully, that remains an environment we can work in the current structure not losing more margin in the premium mass side. Mass mass feels very good and we can control expense and perhaps even get some better cost control over our numbers. But in essence, our story is so much different than everybody else because of the fact the mass segment is our strength and that's where we reside primarily and that's the biggest part of our composite of our EBITDA.
And Harry to be clear on page 10 of the slide deck, we actually had a 100 bps increase in margins on a whole normalized basis from 34% to 35%. So margins increased by 100 bps on a hold adjusted basis despite that we're seeing this pressure premium math.
Very good. Thank you.
Thank you.
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