Good afternoon. My name is Amanda, and I will be your conference operator today. At this time, I would like to welcome everyone to the Las Vegas Sands Corporation third quarter earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. Thank you. Mr. Daniel Briggs, Vice President of Investor Relations, you may begin your conference.
Thank you very much. Before I turn the call over to Mr. Adelson, 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, adjusted diluted EPS, and adjusted property EBITDA, which are non-GAAP measures. A definition and 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 let you know that we have posted supplementary earnings slides on our investor relations website for your use.
With that, let me please introduce our Chairman, Mr. Sheldon G. Adelson.
Thank you, Dan. Good afternoon, everyone, thank you for joining us today. By now you should have seen our press release and the related earnings materials, which are available on our website. Joining me in the call today are Mike, Rob, Chris, and Ken. As the Founder, Chairman, and CEO of Las Vegas Sands, and the company's Chief Strategist, I am focused on delivering growth and maximizing shareholder value. I think about our company pursuing these goals in four key areas. One, organic growth in existing properties. Two, development growth that's within our reach today. Three, development of integrated resort locations new to Las Vegas Sands. Four, return of capital to shareholders through growing annual dividends.
To address point one, our organic growth at our existing properties, I would like to go through some highlights for the quarter in Macau, where our industry-leading scale and infrastructure investments are creating impressive results in the largest and most profitable gaming market in the world. Our quarterly results in Macau reflect company records in virtually every category, and we expect our operating momentum to continue in the quarters ahead. For the quarter, our market share of gross gaming revenue in Macau was 19.3%, up from 14.3% last year. That is a 35% growth in market share. I'd also like to mention that our EBITDA numbers surpass any one of our competitors at any market share. I just want to mention that in reports that we saw this morning, our market share of gaming win in October in Macau was in excess of 20%.
Again, demonstrating that we're growing faster than the market as our investments and strategies produce results. For instance, our rolling volume was up 45.5% this quarter to a record $36 billion. That represents VIP market share of approximately 17% of rolling volume for the quarter, compared to just 11.4% one year ago. If you remember at that time, I said we were getting back into the good graces of the tech reps, and this 49.1% increase in market share of rolling volume attests to that. Our rolling win was up 54% during the quarter, while the general Macau market was down 1% for the same period. That is really spectacular. While everyone else is experiencing declining volumes in their VIP business, we're delivering strong growth. Equally impressive is our strong organic growth and momentum in the mass segment in Macau.
Due to its higher-margin structure, this segment is even more important to our future cash flow and bottom-line results. Our non-rolling table win in Macau for the quarter was up 36.4% to more than $658.4 million, another company record. Our table productivity also improved meaningfully this quarter, with win per mass table across our portfolio of properties expanding year-over-year by 26% to reach nearly $8,700 per table. Remember that we have the largest footprint in Macau. That's because we took our original strategy, called for us to take certain risks, and the risks worked out far beyond our expectations. Except for Sheldon Adelson's expectations. I thought it was going to be a grand slam home run, and I was wrong. It was a grand slam home run out of the World Series of tennis, not to mention ping-pong and the Super Bowl. Can't be right all the time.
Our table productivity has also improved meaningfully this quarter, with win per mass- Portfolio to $8,700. Now I'm turning to Singapore. We had a very light this quarter in Singapore at just 1.79%. That was really a low hold, and it cost us about $105 million in EBITDA there in the quarter. On a whole adjusted basis, we would have produced EBITDA of just over $365 million this quarter from Singapore, for those counting. As Singapore continues to progress as a destination for business and leisure travel and entertainment, and our marketing programs for the Asian region mature, our business at Marina Bay Sands will continue to grow. We're implementing new marketing programs to both the premium mass market and VIP markets, beefing up our sales force and investing in aircraft.
The customers we are targeting with these efforts will come from the areas surrounding Singapore, Indonesia, Malaysia, Thailand, and the wider Southeast Asian region, as well as from Hong Kong, Taiwan, China, Japan, and Korea. I think I missed Vietnam, getting a significant amount of business from Vietnam. Point two, development growth that is within reach today. We will generate substantial growth on our results in Macau at Sands Cotai Central and so on, and as we are able to develop The Parisian on-site fully. Turning to Sands Cotai Central, mass table and slot business. Shut my phone off. Turning to Sands Cotai Central, mass table and slot business collected meaningful growth this quarter. Total mass win per day increased by 15% compared to the partial quarter end of June 30th and reached $1.56 million per day.
We see strong operating momentum continuing in the quarters ahead, particularly as the additional hotel, dining, shopping, and entertainment amenities of phase two of Sands Cotai Central begin to make their contributions. Because those amenities were open only for 11 days during the quarter, they had minimal impact on this quarter's revenues. As a reminder, since April of 2012, we have opened more than 3,660 new hotel rooms, two new casinos in Macau. In addition, we will open 2,000 new hotel rooms in January 2013. That's growth. I'd also like to say that our concept of bringing in international brands is paying off handsomely. We're running at very high occupancy rates in the hotel. We're bringing in business. The people question Holiday Inn, but Holiday Inn is running at extremely high rates. The Conrad is more demand than it has supply.
The Sheraton just opened recently, last month, and we're doing splendidly at the Sheraton. We still have one more tower to go, which will open, I suspect, within the next 90 days. The strategic advantages of the scale and critical mass of our portfolio of products on the Cotai Strip, including the air condition and people mover pedestrian bridge, which will open in December, connecting Cotai Center with The Four Seasons and The Venetian on the west side of the strip, will benefit all of our properties on Cotai and strengthen our retail mall business. As the Macau market continues to grow, we can see a time in a not too distant future when Sands Cotai Central will have the opportunity to produce financial results that rival those of The Venetian Macao. The Parisian Macao will add another integrated resort property to our portfolio on the Cotai Strip.
We're targeting it in late 2015 or earlier. We've already submitted our design plans to the Macau government, and pending government approval, we hope to begin pilot work in the very near future. Point three, development of integrated resort locations new from Las Vegas Sands. We're committed to identifying and executing on new development opportunities in Asia. We have teams working every day in these locations to pursue this goal in Japan, Korea, and Vietnam. Traveling behind a little bit is Taiwan, which will take a much longer time, and we still don't have target out of those sites. We also have been investigating opportunities elsewhere around the globe, including in Europe, North America, and South America. During this quarter, we advised the government of Madrid that we had selected the city of Madrid as our EuroVegas development location, as opposed to choosing Barcelona.
As I've said on numerous occasions before, we will only pursue projects with returns in excess of 20%. As the company's largest shareholder, I have a vested interest in going after only the highest-value projects that will maximize shareholder returns. Point four, return of capital to shareholders through growing annual dividends. It gives me great pleasure to announce that 40% to $0.35 per share per quarter, or $1.40 per year. Let me add that we have every intention of increasing the dividend in the years ahead as our business and cash flows continue to grow. I can only say one thing about that. Go, dividends. Lastly, I want to point out an asset of the company with great value that people in the community may not have been focusing on all the time, our retail mall business. It generated over $100 million in revenue at 84% margin.
In this quarter alone, that's a 16.9% increase over the results from a year ago. We believe that our retail assets are among the most valuable in the world, and that cap rates for similar assets in Asia could easily approach between $9 billion-$10 billion in value, and that's not including additional retail we're going to put in Lot 3, more retail that we put in Sands Cotai Central. As I said in my previous call, that we're approaching the government to turn the Tropical Garden into the Tropical Garden Mall. Our designs indicate potential of 800,000. That's a trigger we could pull at any time to fill our coffers and an important part of our fundamental business strategy. With these proceeds, we could easily work out of Macau without building any more retail than what we have today.
In closing, our financial strength and expanding cash flow are evident in our results. As we have said in the past, our cash flows and balance sheet strength will allow us to both increase our return of cash to shareholders and retain ample liquidity to invest in future growth opportunities, both in our current markets and in other emerging jurisdictions around the globe. With our strategic positioning and the strong, experienced leadership team we have in place to execute our strategy, I couldn't be more optimistic about the future of the company. I hope I made my point with emphasizing our four components of future growth. Let me be crystal clear. We will always be a growth company. Mike, let me turn the call over to Mike and the rest of the team.
Thank you, Sheldon. In the interest of time, I'll take a few minutes to add some specific additional color on our developments, the situation in Singapore, Las Vegas, and Bethlehem markets. Rob will cover Macau, and Ken will cover the earnings and balance sheet. Let's talk about a little more details of our development strategies and where we are as we continue to fill a pipeline with promising development opportunities around the globe. The Parisian Macao, the structure has been submitted to the Macau government. The designs are practically finished, and we're ready to go, just awaiting government approval. As soon as government approval comes, we will put piles in the ground and begin the construction period, which should last a little bit more than 30 months, and hope to be open in that property by the end of 2015.
We will also reveal to the public all the designs and the plans when government approval comes. In Asia, outside of Macau, in Japan, we are awaiting legislation which is supposed to be submitted in April to the Diet. After that, there will be an approval process for a year or maybe two as it goes through the Japanese procedures. We are looking at sites in both Osaka and Tokyo, we continue that investigation and have people hired on the ground working on our behalf. In Korea, we have met with government officials at the federal government level as well as the city levels in Seoul and Busan, Korea, where we're interested in attractive sites for our business. I want to emphasize in Korea that we have not negotiated tax rates, that it is also a must that we have some kind of local play available to us.
We expect to have a situation where we have presented a Singapore type of restriction on local play so that we can in fact get into the Korean market. In Vietnam, we have looked at numerous sites in Vietnam. We continue to work with the government there. Our eyes are on Ho Chi Minh City and Hanoi. Progress is being made. However, there's a longer way to go there at the present time than in the other areas. We've also been on the ground in Taiwan. We are not interested in the islands offshore. We are interested in the mainland in Taiwan. We haven't made much progress there is some interest going forward. In Europe, our operation in Madrid for the EuroVegas Strip continues. We continue to meet with the government.
There are continued incentives in the areas of the tender, the land acquisition, as well as the financing. We are expected by the government to present our plans in some detail in early January, at that time, we will also have more information on what the legislation is that will be passed in our favor. In North America, we are working with the Ontario Gaming Commission as far as a potential downtown site in Toronto. We have decided on a location. There are lots of things in the way at this point, including the approval of the Toronto City Council. We don't know where that project is going to go at the moment, we're ready to pursue it as soon as the project is released and our conditions are met. As Sheldon mentioned, the return on investment is critical, particularly in the North American locations.
At the present time, there's lots of talk in New York, particularly in Queens. Rob Goldstein and I have had numerous meetings in that market already, we are continuing next week to go back to see if we can pursue an opportunity in that particular area. Once again, subject to tax rates, subject to all of the other conditions that would make our products successful. In South America, we have had people on the ground in Brazil, both São Paulo and Rio de Janeiro, looking at opportunities there, we have started initial investigations in Argentina. We're very busy. We have a full development department working in these areas, we expect that over the next year or two, many of these situations will come to fruition, either fit our model or will not.
Once again, I should emphasize, as Sheldon said, if any of these don't meet our return hurdles, we certainly will not pursue them. Let me turn to Singapore for a moment. After an unusually rapid ramp-up period, our VIP volumes and mass table business have now been stable for over the last four quarters. VIP volumes have been between $11 billion at the low and $13 billion at the high in the roll in each of the last four quarters. Mass table revenue has also been steady at between $260 million and $280 million over the last five quarters. Slot revenue has decreased by 8% this quarter compared to the same quarter last year because of a decrease in local play.
This concerns us, we are putting strategies in place, you'll hear some of this from Rob, in terms of how we can replace that business with additional business that we're after. The hotel room and MICE business have performed exceptionally and are operating at near capacity. There's rarely an empty room in the Marina Bay Sands these days. Retail has also grown meaningfully, and we are in the process of developing additional dining and entertainment offerings in our mall. Looking ahead, our greatest opportunity for growth lies in attracting new premium mass and VIP customers from outside Singapore. These visitors from around the region, including from Indonesia, Malaysia, Thailand, mainland China, Hong Kong, as well as Japan and Korea, will provide the growth. In Las Vegas, our business has been stable.
We held very well this quarter, the bright spot in Las Vegas continues to be strong growth in play from Asian visitors to Las Vegas, and we have the air capacity to continue that business. We had some group cancellations this last quarter, the volume of group bookings for 2013 looks quite a bit stronger. Sands Bethlehem, a simple comment there, continues to grow effectively, we're quite pleased with Sands Bethlehem. As a matter of fact, during the recent storm, Sands Bethlehem's electronic capability was still on board because of the generators that we had in place, we actually sold out in the hotel to the last four nights and were one of the few places in Bethlehem that had power. Before I turn it over to Ken, I want to give a special thanks to Ed Tracy and his team at Sands China.
In the last few months, we have opened 4,000 rooms, three hotels, two casinos, numerous food and beverage and retail facilities, and meeting facilities in a situation where employment is full. Macau runs a 2% employment rate, I want to commend those people for the great job they've done in getting us to date. Plenty of growth to come, the openings have been superb. With that, I'd like to turn it over to Ken to take you through some of the financial situations. We look forward to your questions.
Thanks, Mike. Revenue expanded 12.5% despite low hold in Singapore. Hold-adjusted property EBITDA was $950.7 million, down a little less than 1% compared to the quarter last year. Our strong growth in Macau was offset by a smaller contribution from the VIP business in Singapore compared to last year. Our hold-adjusted EBITDA margin of 34% remains healthy and reflects our higher market share in Macau of lower-margin VIP business. We expect hold-adjusted EBITDA margin to expand as our mix of mass and non-gaming revenues in Macau grows with the ramp-up of Sands Cotai Central. Hold-adjusted diluted earnings per share was $0.53, down $0.06 from last year's third quarter. The decrease in earnings per share was driven by increased depreciation and amortization expense related to the opening of Sands Cotai Central, higher minority interests, and increased share count.
Lower EBITDA had a $0.01 unfavorable impact but was entirely offset by the favorable impact of lower interest expense, income taxes, and other items. Our cash balance at September 30th was $3.75 billion. Our trailing 12-month EBITDA was also $3.75 billion, and our net debt is approximately $5.7 billion. Our debt outstanding is both long-dated and cost-effective, with only approximately $100 million coming due in the remainder of 2012 and 2013, and at an average borrowing rate of approximately 2.9% this quarter. Our net debt to EBITDA on a consolidated basis is approximately 1.5 times. This is a very comfortable position for us and supports the decision to increase our recurring dividend by 40% for 2013 while retaining ample resources and liquidity to pursue future growth opportunities.
Looking ahead, we would be very comfortable with a net leverage ratio of up to 3 to 3.5 times if we were fortunate enough to have several integrated resort projects in development simultaneously. As those projects come online and begin to generate cash flow, the ratio would naturally decrease. Again, our strong balance sheet gives us tremendous financial flexibility. We maintain the flexibility to utilize additional strategies to enhance shareholder returns in the future. The board focused principally on increasing the recurring dividend at the last meeting. Share buybacks and special dividends will continue to be on the potential list of future alternatives, but will be weighed against the requirements for future investments in growth. With that, I'll turn the call over to Rob.
Thanks, Ken. In Macau, we're generating exceptional growth momentum in every gaming segment, mass table, slots, and ETGs, as well as VIP. We're earning $8,700 per table per day versus $6,900 in last year's numbers in the mass table segment. The additional hotel inventory of 1,800 Sheraton rooms came online in September, and an additional 2,000 rooms will come on board early next year, and they should boost our growth as well. Slot and ETG volume is up 29.4% this quarter. Rolling volume is up 45.5%, while total VIP market Macau was flat. Our mass table revenue, including stadium-style ETGs, increased 48+% in the quarter to reach a record $669 million, and that represents a market share of 26.4% of the most important segment in the Macau market from our perspective.
If you look at mass table, slot, and ETG win, together, we're winning $8.5 million a day in the third quarter across our property portfolio, which is up about 35% from a year ago. We are the market leader in mass win per day. Looking ahead, we expect the lion's share of market share growth to occur in Cotai, where the majority of the market's sleeping rooms, shopping, dining, entertainment amenities are located. We should be a primary beneficiary of that growth. The ramp at Sands Cotai Central is visible in our results today. Our mass win per day increased 15% in this quarter compared to the April through June 30 period. Our rolling volume per day increased over 13% in the September quarter compared to the June quarter. Our hotel occupancy was also strong during the quarter and has continued to ramp during the current fourth quarter.
Operator, may we have the first question, please?
Operator? We're ready to start the Q&A session now.
At this time, I would like to remind everyone, in order to ask a question, press star, then the 1 on your telephone keypad. We'll pause for just a moment to compile a Q&A roster. Your first question comes from Mark Strawn from Morgan Stanley.
Hi, good afternoon. Rob, you mentioned some initiatives you're undertaking in both Macau and Singapore to re-accelerate same-store growth in those markets. With same-store growth in Macau flattish and turning negative in Singapore over the last two Qs, where do you think those same-store growth rates can go over the next couple of quarters? What are the real key initiatives you're putting in place that'll drive those levels?
Yeah. Mark, that's still our strength. Our strength is in Macau. I guess we look at the portfolio now as opposed to individual properties. The way I view this thing is a market for us, a portfolio market versus Four Seasons versus Venetian versus Cotai. I think what's happened here is, as you know, the mass revenues are booming there in Macau. Think about $8.5 million a day of 45% margin business. Pretty extraordinary. I think we'll continue to accelerate for the simple reason of capacity, hotel sleeping rooms, and retail. Once that bridge is completed in December, I think we end up with a 9,000-room hotel on Cotai. I can't imagine. We're not going to have to do a whole lot more than continue what we're doing now, which is fill the hotel rooms, fill the retail, and watch the market share increase.
I think David Sisk has to be singled out for what he's done in the junket segment. We were, as you know, a few short years ago, non-competitive in that segment, and now we're very comfortable with going with that. The real story in Macau, as everyone's aware of, is the mass table side, and mass and ETGs and slots. We just see ourselves growing, gaining more share by the quarter, and couldn't be more pleased where we're heading there. Same-store sales, I'd rather speak to same-portfolio sales. I think they're going to be double digits from our perspective on the mass side. Singapore is a different story. As you know, we are flat in the VIP segment for the last four quarters. We had an exceptional year-on-year quarter this time last year. That business is no longer there.
VIP is a challenge today on the growth story because we've seen ourselves softening up. We have increased our event side significantly starting this quarter. We had a very strong event last week and again this week. We're doing more special events at the high end, targeting the rolling customer. The obvious challenge here, as you can see from the numbers, is on the mass slot and table side. Singapore had been a growth story at four, two. Well, it started at two, three a day and went as high as four or five a day since we opened. That is a challenge. I think Mike and Sheldon both referenced we have a very different approach there, and that's going to be targeting premium mass customers. Not rolling customers, but $10,000, $20,000 customers from Jakarta, KL, Bangkok, Tokyo, Seoul, et cetera.
We're putting a team on the ground, incentives on the ground to try to drive more of that premium mass customer into Singapore, more tourist-driven. We think it's going to be very successful. We have started that a few months ago. We're looking to put a lot of boots on the ground, our belief is that's the growth in Singapore in the near future.
Thanks. One follow-up on Macau. Any update on when you think you'll get the additional tables at Cotai Central? If and when you get those, do you plan to move tables back to the existing properties there?
Mike just came back. We believe January is the right date for the additional tables on Cotai. What we continue to do, I think Ed and David and that team is, every day, examining the highest yield per table, be it Cotai or Venetian. We have a good problem. We have a lot of business over there, even downtown, even on the old Sands, continues to do some pretty good numbers. Our goal is to maximize yield per table, profitability per table, regardless of the hotel it's in. As you see Cotai ramping up, our dilemma, it's a wonderful dilemma, is, can we get to $10 million, $11 million, $12 million a day of table ETG wins? Our goal is not to identify a property, but where that table performs best, that's where we'll go.
Great. Thank you.
Thanks, Mark.
Your next question comes from Joe Greff, from J.P. Morgan.
Hello, everyone. Just one follow-up question on Singapore. How much of the declines in rollership volume in Singapore would you say is intentional or by design? Just as a proactive way of maybe managing credit risk and being careful with extension of credit versus it being more of a demand-related issue.
Unfortunately or fortunately, depending on your perspective, we're not managing it to go down. What we're trying to manage it up. The demand on the back end, consumer demand was softer. It has stayed in the $11 billion, $12 billion per quarter range. I'd love to see it go back to $16 billion. Obviously, we're managing our reserve more aggressively, looking at our aging of our accounts. It wasn't by design that the demand was soft. It was by customer demand or lack thereof. Our goal is get back to $15 billion, $16 billion roll quarters and collect the money as well. It was consumer demand.
When you look back at the third quarter by month and maybe what you've seen so far in the 4Q, would you say that year-over-year trend that's negative on a year-over-year basis, that it's stabilized or has it bottomed? Are you seeing any degree of improvement or stabilization?
I think it's stayed pretty flat. If you look at Q2 2012, we did $11.5 billion, $11.8 billion this time. We had that exceptional third quarter 2011 at $16.7 billion. Unfortunately, or fortunately, depends on your perspective, Singapore looks like a $45 billion-$50 billion annualized roll market at this time. I mentioned earlier, we want to be much more aggressive on the event side, doing some very strong special events to drive that, but being margin conscious as well. We don't fear the credit side. We just would like to see more demand of the right kinds of customers. Our biggest challenge, very candidly, is going to make sure that premium mass growth returns again. That's the margin, 65%+ we'd like to get back to, and that's the segment we're really focusing on as far as we think there's short-term appreciation, I hope.
Great.
This is Sheldon, Joe. What I want to say is that the VIP market out of China is reputedly slowing down in Macau, although we're not experiencing that. Again, we have a pretty big footprint in Macau. I think the same thing is happening in Singapore, that the Chinese are averse to uncertainty, and they don't know what's going to happen when the new government comes in either this month or next month, but before the end of the year. Their issue of uncertainty will be resolved if people go back to their normal habits. I, for one, having discussed this with the Chinese people and their behavior, everybody I've talked to says the same thing. They lie low where there's uncertainty, and they become a high profile when the uncertainty is lifted.
The only uncertainty that people can look at is from their own internal viewpoints in the PRC, how is the new government going to treat them? Once those issues move into the more certain column, I think we'll see a lot more VIP business coming back.
Great. Thank you, Sheldon. Sheldon, the last few conference calls, you've spoken more and more about retail mall profitability. We've seen some improving trends there. I guess this would relate more to Macau, but what are your current thoughts on monetizing that, whether selling part of it or spinning out part of it via an equity spin? How do you look at monetizing? Because you do look at these very low cap rates, and you're probably not getting that equity value currently. If you were to monetize it, you certainly could demonstrate those low cap rates out there. That's all for me. Thank you.
When I look at that, Joe, I drool. It's a very drooling, enticing, and stimulating matter. I've been saying that our business model is unlike any other business model in any portion of the hospitality retail business ever. Build these non-core assets, we sell them, we pay for the entire cost. We've got about $9 billion-$10 billion today. I'm not going to sell Macau until we finish the bridge, which is next month in December. We let the cross-traffic. It's a unique bridge. It's not like the bridges in Las Vegas where they're outdoors, they're exposed to the weather. This is fully covered fully equipped with people movers, moving sidewalks. People in Market Street, they're just going to go up there just for the experience of going up over the bridge on moving sidewalks. We'll see how that impacts it.
If it does impact it well, I think we could probably lease another $1 billion or maybe more. We're looking at whether or not we should turn that over now, in terms of monetizing it, or we should wait till we get the approval for the tropical mall, and we put the new retail in lot 3. We're still in the midst of that, in any event. This is a good time. There's a good cap rate. Remember the time there wasn't a good cap rate. We haven't focused on that so much because from my standpoint, I focus on development and strategy. I came up with the idea to do the 800,000 sq ft mall. That'll add a couple or a few more billion dollars. It won't hurt to just keep in development.
All we know is that that money is out there to be gotten without any interest. It feels very good to have that cushion.
We also have 26 more stores opening in The Four Seasons, 43 more stores opening in Sands Cotai Central. As Sheldon said, the potential of an 800,000 sq ft, 300-store mall next to the Sheraton on the tropical garden space. There's a lot more retail to mature for us to essentially maximize that retail facility. The new stores in The Venetian and The Four Seasons will open in November of this year, actually next month.
Thank you.
Your next question comes from Shaun Kelley from Bank of America.
Hi, good afternoon, everyone. I just wanted to ask a little bit more about the ramp-up at Sands Cotai Central. It looks like, obviously from the market share statistics, that some of us see that the debut so far, since September 20th, looks like it's starting to be a little bit more successful. Rob, could you just give us a little bit of your thoughts in terms of how you guys are beginning to utilize some of the hotel rooms, how you feel about the gaming side? Is it mass or is it VIP that you're attracting into phase two? Lastly, what you think about margins at that property because they were down a little bit sequentially, but I imagine they can be a lot higher over time.
Yeah. I guess from the way I look at the properties, first, we're really happy with the junket segment there. Couldn't be happier with what's happened with the junket side. The team there, that segment has proven very well, and to be blunt about it, we're surprised just how well it does so quickly out of the box. We have growth opportunity. That's our weakest performer right now on the mass table side. Part of the reason why is The Venetian is so damn strong, and so is, of course, the Four Seasons, although a much smaller offering at tables. I think our growth potential, both from a margin and EBITDA perspective, emanates from the ramp as we use more hotel rooms, the retail gets open as we get up to a $10,000. Our goal is $10,000 win per day like The Venetian did this quarter.
If we get there, you're going to see the Sands Cotai Central. I believe it's the ultimate mass product built for that market. What they've done in the junket segment surprises me, how well it's doing. If they get the mass table went up to 10,000 a day, get all the ETGs pumped up, that's where the growth opportunities are for the Sands Cotai Central to start pushing up against The Venetian in 2013 and 2014. The margins will move with the mass. Let's be honest, 10, 11% junket segment is still challenging on the margin side. The ETGs in that building, along with the slots, it had a slow start. It's all coming together.
As we get the premium mass side cranking, and we get all the rooms open in early first quarter of next year, and that bridge gets complete, I don't think there's any reason to doubt that this property should be a billion-dollar property on the road. I feel wildly confident. It's the right property for the market in Macau today. Lots of sleeping rooms, lots of retail, lots of food, a great gaming floor. I feel wildly, always felt confident that the Sands Cotai Central would rival The Venetian once it's fully operational.
That's really helpful, Rob. Secondarily, I'd just like to ask a little bit about the dividend announcement. We've obviously gotten very good feedback, and it looks like, depending upon where the stock opens tomorrow, you'll be right around a 3% yield. Ken, could you talk a little bit about just what you'd be comfortable with in terms of a payout ratio over time and just any additional color on how much we could think about potentially increasing that? Would possible double-digit percentage increases be on the table in the future? That'd be helpful for investors. Thanks.
We'll see what it is.
A little bit of a loaded question there. I appreciate that. I think what I can tell you is.
In or is that with fish?
Exactly. When we went through the deliberations on the dividend, we were really trying to focus in on right-sizing the dividend and getting it to around a 3% yield, which is what you articulated, and that's really where the lion's share of the discussion focused in on. I think depending on what conditions are going forward, our focus is obviously on increasing that over time. As far as what the percentage of increase is, it really
Got to take into account what the horizon looks like from investments in future growth. We have to factor that in and make sure we're in a balanced situation. For right now, the right size of the dividend we felt was the 3%, and that's where we generated the increase of 40% to get to.
Great. Thanks a lot.
You're welcome.
Your next question comes from Felicia Hendrix of Barclays.
Hi, good afternoon, everybody. Rob, you guys have given us a lot of detail, and we really appreciate that. Clearly the quarter was affected by hold. Even adjusting for that, though, and the provision in Singapore, you did come in a little bit below our property EBITDA forecast. I'm just wondering, on a hold-adjusted basis, were there any properties? You talked about Sands Cotai, what's going on there, but were there any other properties where you might have expected to see better flow-through?
Is she talking not in Singapore, but Macao?
Well, just, no, in general.
Oh, obviously. I mean, the Sands Cotai numbers are good, but they can be better. Again, as the margins are hurting a bit due to the premium mass, a lack of premium mass. I think The Venetian did very well. The Four Seasons, it's a junket-driven property, so it's always got that challenge. No, I think the Sands downtown was great. Obviously, the large reserve in MBS hurt us. That's just a recognition of the aging of some of the accounts. No, overall, I think it's all there to see. We laid it all out for you, so I can't add much color to that.
Okay. Actually just touched on something else. What was the % of direct play at the Four Seasons in the quarter versus last year at this time, in the third quarter?
Direct play being defined as direct junket play, or as our direct business?
Your direct business.
Let's take a look, see. Let's see. We were down a bit. We had rolling volume this quarter of 1,461 versus 1,507. We held light 2.69 versus last year's-- Excuse me, I'm looking at Q2. Q3 2011, we were at 1,570 versus 1,461 on the rolling volume. We held 4.39 last year versus 2.69.
Rob, she's looking for the difference between the junket business and the premium direct business.
Is that right?
Yeah.
I'm trying to give you the premium direct or the junket?
Yes.
What percentage of your overall VIP play was your direct generated play?
Our potential overall business, it's mostly 7.5 rolling on the VIP junket versus 1.461 on the direct.
Okay.
The lion's share, obviously, the VIP junket.
At The Plaza.
At The Plaza.
It's much higher at The Venetian.
I was just asking at the Four Seasons.
7.5 versus 1.4, the hold is obviously in 3Q 2011, we held two versus 2.56 this year.
Right.
It was about 16% in terms of the premium mass percentage.
Ken, what was it last year?
Hold on a second, I'll tell you.
It'll be higher because we
It was $72 million versus
We didn't have as much junket last year.
$72 The $152 million for third quarter 2011.
Is about 37%.
Yeah. Versus $69 million.
Yeah. It's about 37%, so.
Okay. Thank you.
Our growth is going to have a junket segment.
Correct. Yeah, that's correct. I just am trying to figure out where the disparity was with our numbers. Sheldon, is it a little too early regarding The Parisian to talk about the incremental number of tables you think you might get there?
Well, I can only quote what the government has said publicly.
What?
No.
No what? Oh, publicly.
Oh, publicly. No, I don't want to talk about what they say publicly. We've asked for the minimum that we think we need to open Lot 3, I see other people are getting more. The government has said that they've indicated publicly that they will give more tables to the people who are building more non-gaming. They're not going to allow the total space to the matrix to come down to 25% casino and 75% non-gaming. They want it down to 10% or less, which means that the guys who are going to build casino and hotel and a couple of restaurants, they're not going to get very many tables. They only have like 2,000 tables to give out.
I don't think it would be surprising for them to say, the guys who build 25% or more of casino will get the same number of tables that people who build 10% or less. Our business model says that we build-- Actually, we have the largest casino in the world in The Venetian Macao, and it's only 4.5% of the total amount of space. All of our plans for all of the lots on the Cotai Strip would've amounted to, if we were able to build them all, 2.5% of total. We're setting the precedent to how they're going to do it. In our case, I'm pretty sure that if the government follows what it said publicly, that we'll get at least a number of tables we asked for.
I've since increased that because publicly I've increased it to 500, but we could live with 450 because the other guy is saying, "Hey, Sham says nobody want's till it's good, and npl says They want 500. They're not going to build the entertainment, the shopping, the MICE space in particular. As you know, we focus a lot on MICE space. They want people that are going to give the tables to the people, they say, that are contributing more to the leisure or business travel objectives.
That is very helpful. Thank you.
You're welcome.
Your next question comes from the line of Jon Oh from CLSA.
Hi. Thank you, everyone. Rob, if you could just give us a quick sense of your strategy in Macau in the premium mass market segment. Could you quantify for us, how big is the opportunity today? Maybe give us a sense of how much of your mass market today would you classify as premium mass market, maybe give us a roadmap as to how much bigger you think it could be specifically for Cotai Central.
Okay, Jon. I think, let's be honest.
Our objective is to make money.
Yeah. To some form, Jon, the way we view this is we're in a different place than anybody else because we have three distinct segments. We've got super premium, which tables winning $20,000 plus a day. Probably that's less than 5% portfolio. 15% would probably be devoted to what I'll call premium mass, the lion's share, the bulk would be in the pure mass business. We're in a unique place, let's be frank. We've got more capacity than anybody else by a lot. We've got more sleeping rooms, more retail, more food. The way I view this is, it's probably the single greatest opportunity I've ever seen in any market anywhere. I could see a day when, if we're able to do it this by 8.5, how big does it get?
Depends on, obviously, if we're going to grow faster than anybody because we've got the capacity and the sleeping rooms to grow. Our buildings are built for mass, premium mass, super mass. We're very focused on it. We think we've done a terrific job of upping the junket segment, but our focus and our profit margins obviously reside in this segment. I think one of the unique things about our buildings is that we can talk to the customers not betting just HKD 1,000 a day. We can talk to people betting less. We can offer things no one else can offer. We've got a multifaceted strategy to all three segments. Our biggest single opportunity, obviously, is in those tables that we can drop minimums down and get that customer. We think ETGs are a very important part of that. How big can it get, Jon?
I don't know. I read your reports, I believe you. It can get very, very, very big, I think you're right. I think the growth opportunities are enormous for us because we're in the sweetest part of the market, where the margins are 45%, 48%. I see a day when we can, on the ETG slot side, surpass $1 billion not too far down the road. I think mass tables can be staggering. I really do. The market and the mass tables, I think all of us are dumbstruck at how well it's done. The biggest beneficiary is this company, that's where our focus is. How big can it be? I don't know. I like to believe you're right. It can grow double digit for the foreseeable next two years, and we're the biggest beneficiary.
Now, do you currently have
That's our biggest opportunity by far.
Do you currently have any space allocated within Sands Cotai Central for you to allocate specifically for premium mass, or is that just jumbled within the whole overall mass floor?
We're reallocating space now, Jon, up on the top floors, as well as rethinking the floor. Ed and David have a very definite strategy to rethink Cotai and Sands Cotai with additional new rooms, new spaces. We are rethinking as we speak because that's where the opportunity for Cotai to be a billion-dollar property resides.
All right. Just the last one for me. For Ken.
I want to-
Jon, hang on. Sheldon wants to make a comment.
There's a very big space.
Yeah
That we want to reallocate called the Theater. We've got plenty of room. I think it's 70,000.
Theater box five.
Pardon?
42 and 30. Sheldon's referencing a theater box 5 in Sands Cotai Central. It's over 80,000.
We had the same box.
Yes
in what was Lot 6.
Correct.
Which is now The Showroom.
Correct.
We could turn that into mass gaming, mass premium, PMS.
We're thinking the floor, Jon, every which way we can, including the 39th floor of the current building, including Sheldon referenced the theater spaces. Yes, we have opportunity, and we recognize it's got to be the right physical space to make it really sing to $10,000, $15,000 per table per day. I do think with the bridge connecting 9,000 keys, all that retail, I don't think $10,000 a day across the portfolio is that ambitious. I think it's very achievable for us.
Now, one marketing move we're going to make is forever. The situation is fluid, it's dynamic. We'll try out new things. What used to be high limit is now high limit, Diamond, Ruby, and it's now being retitled the premium mass.
If you look at our space in The Venetian, that's what Sheldon's referencing. That mass play in The Venetian Ruby, Diamond has been exemplary from the day we opened it. It is an extraordinary success story. Look at The Venetian doing $10,000 plus per table per day currently. Where does it go? I don't know. It could be $11,000, $12,000 a day.
Okay, great. A question for Ken. The $1.40 of dividends from LVS, that's a 40% increase in payout, you have not really made any commitments on Sands China dividends of HKD 0.58 for every six months. How should we go about thinking about that? How are you sourcing that incremental $0.40 per share payout? Are you taking that from Singapore? If you are, could you help us think about how should we model the tax implications of that?
Yeah, sure.
The Sands China board will need to make a determination as far as what the dividend will be coming out of them for 2013, that decision hasn't been made yet. I think if you just look at it from a cash flow standpoint, I think the way that I'm thinking about funding the LVS dividend, which is about $1.2 billion. It's probably close to about $1 billion coming out of Sands China Limited, that would be net of the minority interest piece that would get paid out. That $1 billion would be flowing up approximately from them, the balance would be sourced from either cash from Marina Bay Sands or cash that we have, either in the U.S. restricted group or at the parent level.
That's kind of the way we're thinking about it, although no final determination has been made relative to that. It's all really any money that we bring up from Sands China Limited or from Marina Bay Sands is very tax efficient because we would be offsetting any taxes that would be owed on the repatriation of dividends with foreign tax credits that are generated in our Asian activities. For all intents and purposes, that money comes up on a tax-free basis.
Okay. Thank you very much.
Jon, this is Sheldon. Obviously, we're going to have to get some money out of SCL, and we've got to share it proportionately. To the extent that we upstream the amount of money, we just got the okay from the board day before yesterday. We haven't talked to the SCL board, obviously we're going to have to share the good fortune. By the way, we're happy about that. We get 70.3% of that.
Okay, thank you.
Your next question comes from the line of Steven Kent from Goldman Sachs.
Yeah, hi. Could you just discuss the new development opportunities? Maybe, Mike, you could speak to what you're envisioning in New York. When you talk about the opportunity in Madrid, I guess I'm intrigued because on your slide, you go through 6 steps that you're looking for, but the bottom one is that you need to see some changes in the economic conditions. That almost seems secondary now when I'm looking at the slides versus just a few months ago when that seemed to be more paramount.
Well, I think, Steve, the economic conditions really, during the course of the meetings with the Spanish government and the course of our meetings here, if something were to deteriorate significantly in terms of the euro, what have you, that's just a caveat that we're watching that. This is a process that will go on for a number of months as we go through the process of legislations, final site selection, the tender, land acquisition, et cetera. If something turns dramatically negative in the short term, that's simply something that we would look at, and we'd want anybody to know that we'd be making a judgment on that basis. I think that's on the chart, just to keep aware that something could happen. We feel good about looking at the investment at the present time and looking at the future.
Basically, if all things come in order, they could all come in order, but if something dramatic happens in the economic environment that cause us real concern, we'd very much hesitate to go forward.
If Spain stays the way it is right now, then you would go forward from an economic perspective?
I think if everything else worked according to our plan, yes.
You have to understand that one of the biggest triggers in the entire matrix is the fact that we're doing the sensitivity analysis. I don't want to say this publicly, but our gaming tax rate, which we're well known over there, is going to be significantly lower. We can make significant adjustments to end up with our EBITDA percentage by the tax rate. We make a 33% EBITDA rate in Macau with the tax rate at 40%. We make 50%-55% EBITDA of revenue in Singapore with a tax rate averaging about 15%. If we get below that, which I'm confident we will, significantly, and we have certain things to achieve there to get below that, then we don't need anywhere near as much money by any measure, win per unit per day of either tables or slots.
We might end up with the same amount of money with only 70% of the amount of business that it would take to do that in either of our other locations. You can't compare apples to apples. They're two different calculations.
Okay, then the commentary on New York.
In New York, basically, Steve, we have been having some conversations about Willets Point in Queens. We previously have looked at Manhattan. Most of the noise we get in Manhattan is that it won't happen. We think there's a potential. There's been some press about Willets Point. We've looked at it, continue to look at it. We're testing that market and talking to the owners of that situation
About that kind of development. Once again, that would very much depend upon what kind of arrangements we could make there, as well as what the tax rate would be. There's lots of rumors and lots of things flying around, we think that's a viable market, and we're under investigation there now.
Okay, thank you.
Your last question comes from Carlo Santarelli from Deutsche Bank.
Carlo, are you there?
Yeah, I'm here. Can you guys hear me?
We can hear you.
You hear me okay?
Yes.
All right. Sorry, guys. The question was for Rob. You talked a little bit earlier about your mass business, your premium versus your regular mass, and obviously the 45% margins in your regular mass business. Could you guys maybe quantify a little bit, the differences between the margins of that premium mass customer and that regular mass customer to the extent that there are any in Singapore and Macau?
I think in Macau, it's not that material, Carlo. I think if you think about it blends out at 44%, up to the high 40s%. I don't think there's a lot of difference. It's mostly if it's complimentary, it's room comps, it's meals. The spread is not great. It really isn't. Singapore, I'd say the same. It stays pretty consistent, high 60s%. Slot, ETG, mass table. The margins grow obviously the win per table in both markets, and the win per tables we're hitting $20,000 per table out of The Venetian in some periods. It may ramp up, but frankly, not a whole lot of spread that I can tell. Not a whole lot of spread.
Thank you. Then if I could just ask a follow-up. Were there any changes in your provisions this quarter that hampered specifically the Singapore results at all?
I'm sorry, I missed the first part.
Any changes in your provisions in this period?
Yeah. We raised them.
Yeah. Quarter-over-quarter, third quarter 2012 versus third quarter 2011, it was about a $15 million increase in receivable provisions.
Yeah, okay. That's helpful. Thank you very much.
Sure.
This concludes today's conference call. You may now disconnect.