Good afternoon. My name is Daniella, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Las Vegas Sands Corp.'s second quarter 2012 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's 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 1 on your telephone keypad. If you would like to withdraw your question, press the pound key. At this time, I'd like to turn the call over to Mr. Daniel Briggs, Vice President of Investor Relations. Sir, you may begin your conference.
Thank you, operator. 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, adjusted property EBITDA, which are non-GAAP measures. A definition and a reconciliation of each of those measures to the most comparable GAAP financial measures are included in the press release. Please note that this presentation is being recorded. In addition, we have made some supplementary presentation slides available on our website, including a presentation of hold-adjusted, adjusted property EBITDA over the last five quarters.
With that, I'll turn it over to Mr. Adelson.
Thank you, Dan. Good afternoon, everyone, thank you for joining us today. We reported $845 million in EBITDA on $2.58 billion in revenue for the second quarter of 2012. Our revenue for the quarter would've been $107.5 million higher had we held normally in Macao, Singapore, and Las Vegas. Our adjusted property EBITDA difference from the prior year quarter is fully explained by the additional EBITDA of approximately $88 million from the low hold as well as from the decision to increase our provision for accounts receivable in Singapore by an additional $29 million. We reported adjusted earnings per share of $0.44 for the quarter. That number would've been $0.09 higher, adjusted for hold, another $0.02 higher after adding back elevated legal expenses in the quarter. $0.55 in total.
Before Michael Leven can provide some more specific insights, let me share with you my view from the pilot seat. We own outstanding assets in every market in which we operate. We happen to operate in the best gaming markets in the world. When you have outstanding assets in the best markets, there will be significant opportunities for growth. Let me now spend a moment talking specifically about our opportunities for strong growth and outstanding returns in Macao. In short, there are four reasons for my optimism. First, we've opened the first phase of Cotai Central, and it has performed well and has been well-received by customers. Mike will give you some details on how we've done in Macao. Second, our investments on Cotai are allowing us to grow faster than the market in revenue share, and in due course, EBITDA growth and bottom-line profitability will follow.
Next, new infrastructure linking mainland China to Macao will be added steadily in the years ahead and will meaningfully enhance market growth in Macao. Our investments on Cotai will allow us to benefit disproportionately. Final Parcel 3 will add another integrated resort development for us in the world's largest and most profitable gaming market. With that backdrop, it's pretty easy to understand my optimism. While we still have work to do, strong revenue growth is on display in our results today, even while Cotai Central won't truly begin its ramp until early next year. On Cotai, we're on the verge of combining more than 9,000 hotel rooms with an unmatched collection of leisure and business activities and amenities. Through a series of indoor and climate-controlled covered outdoor walkways and moving sidewalks, it will all essentially be under one roof.
We believe that Cotai Strip will continue to serve as a strong and essential contributor to the Macao government's publicly expressed desire to develop Macao into a world center of tourism and leisure. When you factor in that no additional competitive capacity will be coming on Cotai for the next three to four years, the barriers to new entry into the market, the increased spend per visitor the market is currently enjoying, and the future completion of infrastructure projects that will connect Macao more conveniently to the remainder of China, the opportunity for continued growth is outstanding. In addition to our inherent organic growth potential, we also have growth which will be achieved through the addition of Parcel 3. After the recent extension of the completion deadline, we now have an important new project in our development pipeline.
While we will continue to aggressively explore new opportunities in Asia, including in Japan, Korea, and Vietnam. Tree design plans to the Macao government, and pending government approval, we hope to begin putting pilings in the ground by this November. Before I turn it over to the guys to provide some additional perspective on our operations in Macao, Singapore, and here in the U.S., let me leave you with this. Our core strength is that we are in Asian markets that present significant opportunities for revenue, EBITDA, and free cash flow growth in the future. We also have the right team in place today to execute against those opportunities. Mike's recent contract extension as President and Chief Operating Officer, together with Rob's extension as President of Global Gaming, and the addition of Chris Cahill, our Executive Vice President of Operations, gives us a strong leadership team for the future.
On top of that, our success and unique position within the industry provides us the financial strength and flexibility to both pursue and invest in new development opportunities around the world, which we will do in a strategic and disciplined manner while continuing to return cash to shareholders. With that, let me now turn it over to Mike Leven and the rest of the team.
Thanks, Sheldon. I will make some brief comments on operations in general. Rob and Ken will add some short comments. We will move on to your questions. Let me point out that available on our website is an adjusted property EBITDA presentation, which presents hold adjustments for each of the last five quarters. We received feedback that would be helpful to all of you. We listened. We will be providing that information going forward. Moving to operations, we are pleased with the early performance of Cotai Central since we opened the first phase of the property in April. The positives are many. The hotels are enjoying strong occupancy, including 61% in April, 74% in May, 85% of the month of June, and the ramp continues into July.
This is, in fact, higher occupancy than we enjoyed at this stage with either the Four Seasons Hotel Macao in 2008 or Marina Bay Sands in Singapore. It is almost as strong as The Venetian Macao's performance in 2007. The quality and satisfaction scores for both hotels are outstanding, with the Holiday Inn enjoying the highest customer satisfaction marks of any property in their Asian portfolio. While the number of mass gaming units at Cotai Central is quite limited in its first phase, with approximately 200 mass tables and 800 slots and ETGs, the win per mass table per day is easily exceeding the early performance at both The Venetian Macao and Marina Bay Sands. The win per slot machine or ETG seat per day is double what the Sands Macao accomplished at the opening and is four times the level of The Venetian Macao back in 2007.
It is clear that the early performance at Cotai Central bodes well for our future results. Even before we open the second phase of Cotai Central, the new capacity is allowing us, for the first time in recent memory, to grow faster year-over-year than the Macao market in every gaming sector category: VIP, mass tables, and slots. We grew gross gaming revenue 26%. The Macao market grew 14%. We grew VIP revenue by more than 20%. The Macao market grew 8%. While everybody else is talking about VIP contraction, we are experiencing VIP expansion. We grew mass table revenues, including revenue from ETGs, nearly 40%. The Macao market grew 34%. We grew slot revenue 19%. The Macao market was up 16%.
When the second phase of Cotai Central opens just 57 days from today, on September 20th, we will add another 200 mass tables to the property, as well as 1,200 more slot and ETG units. Together with up to 2,500 additional Sheraton-branded hotel rooms and suites, plus additional retail, dining, and entertainment amenities, we are confident that additional capacity and amenities will meaningfully improve the financial performance of the property. Looking further ahead as the additional 1,500 Sheraton Tower branded rooms and suites come online throughout October, November, and December, and the air-conditioned walk-over bridge connecting The Venetian and Four Seasons to Cotai Central opens in January of 2013, the true ramp and the earnings power of Cotai Central will be reflected in our financial results. In Singapore, at Marina Bay Sands, we enjoyed good growth in all areas during the quarter, with the exception of the rolling volume.
Hotel RevPAR was up nearly 30% in the quarter compared to last year, with occupancy at 99.1%. Our retail rents also reflected meaningful growth, with mall revenue up 13% in the quarter compared to one year ago. Adjusted for hold, our EBITDA at Marina Bay Sands would have been approximately $387.7 million. The success of Marina Bay Sands in developing tourism to Singapore has been widely recognized. Singapore's The Straits Times recently reported the following: tourist arrivals to Singapore were up a healthy 15% in the quarter ended March 31st. Travel agents reported that RWS and Marina Bay Sands still rank high on the must-do list for visitors in Singapore. MBS, with its SkyPark, specifically pulls in crowds from India, China, and Japan.
Travel agents also share that most Japanese visitors to Singapore want to stay at MBS because it has become iconic throughout Japan, and they want to be able to tell their friends that they stayed there. Not bad press. We are confident that this magnificent property in Southeast Asia's most important tourism destination, with outstanding transportation infrastructure, a large population base, growing regional wealth, and a duopoly environment for gaming through at least 2017, will provide an outstanding platform for continued growth in the years ahead. In Las Vegas, we reported $64.4 million in EBITDA during the quarter. We held poorly in Las Vegas this quarter. We should have reported approximately $76.9 million in EBITDA if we had held as expected. Groups, rooms business, and pricing is picking up for 2013.
We are investing for the future in Las Vegas, renovating 1,000 rooms in our Venezia Tower, remodeling and redesigning the gaming floor at The Venetian, and introducing whole new entertainment offerings in the fall. With that, I will turn it over to Rob. I look forward to addressing your questions in a few minutes.
Thanks, Mike. Our gaming business is divided into three primary segments: VIP or premium tables, mass tables, and the slot ETG segment. Macao's exceptional growth has been fueled by the growth of the VIP segment over the past two years. Much has been said about the acceleration of the VIP segment, but rumors of its death might be greatly exaggerated. Our VIP segment has grown considerably over the past two years due to market growth and management focus. The VIP segment will represent about $500 million of departmental income annualized, or about 25%-30% of our overall EBITDA in Macao once Cotai Central's completed. The greatest opportunity for LVS in Macao resides in the mass table market, where we are in a very unique position. Sheldon's $9 billion of integrated resort investment allows us to earn the lion's share of the growth on Cotai.
We will have a great opportunity in the mass tables and slots in the years ahead. The mass table market grew 33% in the most recent quarter, and more importantly, represents a 45% margin, as opposed to VIP's 12%-14% margin. The infrastructural improvements in Macao and the mainland will make this the most profitable segment in Macao. With our Cotai position, we are well-positioned to capitalize on that opportunity. Singapore's incredible success since the opening in 2010 is well documented. The VIP segment has not grown in the last quarter, but we believe that Singapore's tourism and our property's unique positioning will yield results in the future. Our mass table and slot win exceeded $4.5 million per day this quarter. We have seen some growth in that segment, but not the growth we have previously experienced.
However, 300 million people within a 90-minute flight or a car trip gives us confidence that there is considerable room for growth as tourism expands. I look forward to speaking with you further on the Q&A session. I'll turn it over to Ken Kay.
Thanks, Rob. The balance sheet and cash flows are a simple story. Our cash flow remains robust, and we are confident about its future growth. We retain the financial strength to both invest in new development opportunities and to return cash to shareholders, and we will continue to do both. Our board of directors approved yesterday our third consecutive quarterly dividend of $0.25 per share. We meaningfully reduced our debt outstanding during the quarter. We prepaid $400 million on the U.S. restricted group facility, reducing the outstanding amount on that facility to $2.4 billion as of June 30th. In addition, we prepaid $131 million to retire our Macao ferry financing. After the prepayments, our total debt outstanding at June 30th was $9.4 billion. Our weighted average borrowing cost for the second quarter was 3%.
Our borrowing costs remain quite low. With the recent refinancing of our Singapore credit facility, we have no sizable debt maturities until 2014. Despite retiring more than $500 million of debt during the quarter, we held approximately $3.5 billion of cash and cash equivalents on the balance sheet at June 30th. Our consolidated net leverage ratio at June 30th, based on trailing 12 months of EBITDA, was 1.54 times. Our capital expenditures during the second quarter were $337 million. We expect to spend approximately $500 million at Sands Cotai Central before the end of the year and another $500 million thereafter. We will continue to invest in our other operating properties. We expect maintenance CapEx across our property portfolio to be approximately $350 million for the rest of 2012, taking us to about $500 million for the full year.
Although we're in the midst of our planning for next year, I expect we will be close to that same amount for 2013. With that, let me hand the call back over to Mike.
Thanks, Ken. Operator, we are now ready to begin the Q&A.
At this time, I would like to remind everyone, in order to ask a question, please press star one on your telephone keypad. Again, that is star one to ask a question. We'll pause for just a moment to compile the Q&A roster.
While you're compiling the roster, operator, let me ask all the participants to please limit your questions to one question and one follow-up. We'd like to have everybody that would like an opportunity to ask a question, have the ability to do so. Thank you.
Your first question comes from the line of Mark Strawn with Morgan Stanley.
Rob, you mentioned the opportunity in the mass table side, and going through some of the recent trends maybe you're seeing in that market in Macau, it seems like visitation has started to slow somewhat from China. Can you talk about what you're seeing in the market, and at your properties, and in Cotai in general?
Yeah. Mark, I think we see, as I mentioned in my remarks, is an amazing opportunity which is unique to this company in that we're going to have over 1,000 mass tables on the floor at the end of Sands Cotai. We're going to have over 9,000 keys. We're seeing the ramp continues for us in mass tables. We kind of divide it into the pure mass, and I would call those the premium mass, then finally the super mass, meaning tables that earn as much as $20,000 per day, which is happening in our Venetian property. I think for this company, obviously, that 33% growth last quarter bodes very well. Visitation may be slowing and not as strong as it was, but the better customers keep coming. The real question, obviously, to the market is, does the spend continue with the deacceleration of the VIP?
You can make whatever argument you want to make. We believe that segment will continue to grow, and we believe we'll be a player in each of the three sub-segments because of the amount of tables we have to offer, the rooms, the retail, especially Sands Cotai Central is built for that. We've seen terrific growth the last two years, and I don't see a reason why that would slow down for us. We have the offerings. We also have the ability to go to ETGs on more of the mass table side, which is being pushed out of the market. Some of that demand is being pushed aside by some operators by raising table limits to HKD 300, HKD 400 per bet. We can take that demand on our ETG levels because we have lots of capacity, about 7,000 slot ETG positions.
I don't know how else to say it, we think the opportunity for us is massive. There's still 33% growth. Even at tax slows down to 25% or 20%, we're just very uniquely positioned, and we feel very good about it for the balance of the year.
Thanks. Just one follow-up on the free cash flow. I know Ken mentioned the cash balance at the end of the quarter, you continue to generate significant cash. As you think about the uses of that cash going forward, whether returning to shareholders in the form of increasing the dividend or a buyback or maintaining reserves for future developments, can you just update us on your latest thinking there?
Yeah. It's Ken, I appreciate that. You've pretty much enumerated all the possibilities there. As we look out over the horizon, I think all of those are definite possibilities that we're considering. I think we get more intelligent with each passing quarter with regard to, I suppose, the realization of some of those future development opportunities. As we take that into account, we'll obviously consider each one of those different alternatives with regard to returning some more of that money to shareholders as our cash balance continues to build.
Great. Thank you very much.
Your next question comes from the line of Joseph Greff with JPMorgan.
Good afternoon, everybody. You talked about the credit provision at Marina Bay Sands in the quarter. Can you talk about collections in Macau, and if you could help us understand what the balances are in Macau and Singapore at the end of June?
Yeah, sure. Let me just give you an overall perspective with regard to receivables, then I can go into the specifics, if you will. Just looking at Marina Bay Sands, for instance, I think we're in pretty good shape. Any slower collection issues that we have encountered are really specific to isolated accounts as opposed to a systemic problem across the portfolio of accounts. Just to give you some perspective on that, since the inception of Marina Bay Sands, we've had credit drop of about $10.4 billion. When you consider that our Singapore casino receivable balance at June 30th is about $822 million, that means we've collected over $9.5 billion of credit issued and played, which is about over 91%.
Against that receivable balance, we've got about $192 million in reserve, or about 1.9% of the total credit drop, which gives you an idea of really how small the potential for bad debt really is. That reserve's about 29% of receivables, excluding open programs and less than 30 days accounts outstanding. Additionally, life to date, the reserve's about 6.9% of rolling win, which is within the range we've discussed before. Despite the fact that the percentage of rolling win this quarter was a little bit higher, I think we're tracking pretty much where we expect it to be in terms of overall credit. When you look at it from a Macau perspective, really, the growth in receivables has predominantly come from the increase in accounts from junkets.
At the end of June 30th, 2012, we have in total receivables in accounts about $680 million. About $510 million of that is really from junkets. Although we've had some increase from direct customers, the big increase has come from junkets, which obviously pay on a very rapid basis. We've continued to collect from the junkets as we have in the past, have really seen no deterioration from that perspective.
Our reserves have grown a little bit just from a prudency standpoint. Against that total amount of receivables, we've got about a 15% reserve that's outstanding.
Okay, great. Helpful. For the September 20th, phase two, expansion at Sands Cotai Central, you talked about having additional 200 mass tables there. Are you talking about incrementally new tables with government approving that, or are you talking about shifting those 200 tables and sourcing them from other properties?
Our indication from the government has always been that we would get 400 additional tables for Sands Cotai Central. On September 20th, we will not have all of those 400. We will be getting them throughout the rest of the year. By the time we open the last property, the last 2,000 or 1,500 rooms in January, we will have guaranteed the 400 additional tables. There will be some movement of some tables on September 20th.
Great. That's all for me. Thank you.
Thanks.
Your next question comes from the line of Shaun Kelley with Bank of America Merrill Lynch.
Hi, good afternoon, guys. I just wanted to ask about the Macau properties overall. When I look at the group as a portfolio, now that you have Sands Cotai Central in it gets a little harder to compare. One of the things that we're seeing is that it looks like last year, property-level margins were pretty steady in the 33% range across the Macau portfolio. They were still pretty steady in the first quarter at 32%, they dipped to about 29.5%. You obviously have some kind of ramp-up time and some operating leverage or deleverage at Sands Cotai Central. Was there anything else on the expense side or anything else that crept up as you think about the Macau properties overall? Any reason that you can't get back to mid-thirties once you get more volume into Sands Cotai Central?
What's down to 29%?
29.2.
29.2. Yeah. The margin gets impacted by especially good VIP play that's grown. It takes a little while for the mass to catch up to that. We said that a long time ago, that that's what happened in the early opening of Sands Cotai Central, as well as the efficiency when you start is not going to be the efficiency when you finish. There is some pay overload, getting ready for the next opening and whatever that's carried there. As it flattens out, you'll see those margins return into the thirties.
Hey, Shaun, it's Rob. I think you know that Sands Cotai is underperforming in the mass table side and doing pretty well in the VIP side. The mix there is skewed towards the lower margin, 12%-14%, versus the 45%. I got to tell you, I think once that really ramps up what it's going to be and that property is fully open, because right now it's a very young, very immature property, I think margins will be better there than any place in the group because that is built for the premium mass 6,000 keys, lots of retail. I think the VIP growth can get better, nowhere near the opportunity we've got to get to on the mass tables.
Once that margin goes from being a small part of the mix versus a large part of the mix from the mass table side, that'll all self-correct. Everything's fine with the rest of the properties. It all ties back to Cotai.
Okay. That's great color. My other question would just be on maybe the overall promotional environment and kind of levels here as you've seen gross gaming revenue growth kind of level off. Have you seen any areas of promotional activity? Another competitor talked a little bit about probably some increased competition. Obviously, you guys are driving a piece of that with all the new supply out of Cotai Central, what are you seeing and any sequential change in that would be helpful.
I think just the opposite we're seeing is there's talk about, obviously, the junket segment has remained pretty much fixed. No one's moving numbers there, so I don't think that's a concern. There's competition on the slot ETG and mass table side. We haven't seen evidence of that, it makes sense to me that there will be movement in that direction because that's where the growth is. I mean, the story as the de-acceleration of VIP continues, the opportunities in Macau are going to move more to slot ETG and mass tables, I wouldn't be surprised to see some people being more aggressive. In the end, we don't see a need to move our margins or be more aggressive because we've got the product in place and the infrastructure in place to compete very well.
We've got the tables, we've got the sleeping rooms, we've got the food and beverage and retail. As Cotai gets more and more mature, we've seen this, it was referenced earlier in the call. You saw it in Singapore, you saw it in The Venetian Macao. The Venetian Macao opened up to sub-$100 win per unit per day in the slots. Tables were about 3,000, 4,000 a day. That property now does four times that in terms of the win per units. The point being is as that matures, we see no reason to compete on pricing. Just the opposite. We've got the infrastructure to stay consistent.
Great. Thanks, Rob.
Your next question comes from the line of Jon Oh, with CLSA.
Jon, just a second. This is Dan. I just want to point out, Shaun, as well, that if you look at page six on the deck on the website, on a hold-adjusted basis for the quarter, we are at 34.3% for the company overall. I know if you look at page seven, you can also see that on a hold-adjusted basis, we're at 30.1% in the Macau operations for the quarter. Okay, Jon.
All right, thanks. I just have a question on Macau. Could you give us some color as to the credit appetite from the VIP players in recent times, and also the credit appetite of your junkets and also your direct VIP play. Are we seeing any significant shift in that business?
I don't think the problem resides in the credit, Johnny. The problem resides in demand side. The feedback we're getting is they're cautious to credit as they've always been. I'm not sure it's significantly changed. The difference, I think, I believe both in Singapore, Macau, and even the U.S., is customer demand. Where there's appetite for credit, we grant it, the same we always have, and we try to be judicious about it. I don't think the junket people, nor do I think our direct salespeople are seeing us pull back on credit. You're seeing a pull back in consumer demand.
Just to follow up on Singapore, along the same vein on rolling chip, we've seen that number pretty much range bound around the $11 billion to $12 billion per quarter. If you were to look at the seasonality of this quarter, is there anything specific to it that we should pick out as to the number that we saw? Is there anything else that we should read into the demand of VIP play in the Singapore region?
I think we said before, I think it remains true, that Singapore is very, very chunky. It's very, very concentrated. The reality of Singapore is that you've got people making large bets with large bankrolls, but they come and go as they please. They're not as seasonally driven as you might think. They're driven by their desire to be there. You're right. We're disappointed the growth hasn't continued. We haven't seen it ramped. We had quarters at $15 billion, $16 billion. Now we're back to $11.5 billion. I can't give you a good way to look at that other than say that it's highly concentrated. It's mostly out of mainland China. It's mostly foreign visitors to Singapore. We have a lot of faith that we have a fabulous product in a very, very strong market.
Hard to put any color to that other than say that we live quarter to quarter and see how it goes. We have a high concentrated market there, unlike Macau, which its neighbor is mainland China, and access is terrific. Singapore, you have to fly to get there, and it's much more of a premium-driven market with people gambling $5 million, $10 million. You don't have the plethora of people betting a half a million, a million dollars like you do in Macau.
Okay. Thank you.
It's Sheldon. I'd like to say that we're in the gaming business. The rate of hold goes up and down, and one quarter does not a trend make. Anybody who thinks that the cultural habits of the Asian people is changing because of one reduction in the hold, even though it amounted to over $100 million at the top line. Anybody who thinks that this is a change of culture is just missing the boat. For thousands of years, the Asian people have been seeing gaming and chance taking as their form of entertainment. Anybody who thinks that a quarter is creating a new trend, there is nothing in the horizon, nothing within sight, nothing on the horizon that would suggest that the gaming habits of Asian people are going to change. There must be something in the wind or in the air or in the food.
First of all, a lot of big numbers says that we're not going to grow from $100 like we grew when we were at $10. The percentage of growth is going to be a smaller number. Anybody who says that the culture that has existed for thousands of years and the habits of the Asian people is changing because of one quarter with low hold, I think you're just missing the boat.
Thanks, Sheldon.
Your next question comes from the line of Felicia Hendrix with Barclays.
Good afternoon. On Sands Cotai, you all have talked a lot about how the property probably won't hit its full stride until the third quarter of next year. Just wondering, is there any reason to believe or why margins would not be Venetian-type of EBITDA margins?
I think they could be better, Felicia, only because Venetian. Here's the pluses and minus. Venetian is a theme property, gets ridiculous amount of visitation, 100,000 people on a good Saturday, and that theme is very powerful and potent, and so is the retail, and that drives terrific visitation, no question. The difference is the Cotai property has double the sleeping rooms and an equally strong retail product. It's not themed. In my opinion, the Venetian theme is superior. Once we connect, one of the things we need to do right away, we're getting to it by the end of this year, is connect the two properties by a walk-over bridge. I think that's going to be very impactful for visitation of both properties. In essence, we have a 7,000-room property, Venetian Cotai, and 9,000, excuse me, Venetian Cotai and the Four Seasons.
There's no reason why the shortcoming in Sands Cotai is in the mass and premium mass, which is the sweet spot of that property's physical ability. I think once we figure that out and get our space right, we also, let's face it, we didn't put enough slot ETG product on the floor. Let's not kid ourselves. It was a mistake not to do that. We have 800 positions right now. They're out-producing all of our other properties. We've got to get more slot ETG positions. That comes together in the fall. We've got to get that crosser bridge that happens by year-end. We've got to employ more sleeping rooms for the gaming sector. I think when all that comes together, the margins will be very fat and happy. We're really happy where the junkets are landing, and that keeps growing.
The real upside for that property is slot ETG mass premium tables, and that's the margin sweet spot.
Come on, guys. Let me call to your attention. It's a very good question, Felicia. Let me answer it. First of all, at The Venetian Macao, we have rooms whose ADR is substantially higher. We got 2,500 rooms open. We've got all the non-gaming activities. We've got a huge 350-tenant shopping mall. We're connected to the high-end shopping at the Four Seasons. We had a showroom open. We just closed it recently. We have a lot of non-gaming income that is contributing to the EBITDA %. I want to point out to you that in growing the 1,200 rooms of Holiday Inn and the 600 rooms of Conrad, in ramping it up, we are running at extremely very good occupancy %.
We've come up with a revenue management is intentionally kept low so that we could ramp it up in the future and get higher numbers. If we're looking at $100 at Holiday Inn and $150 at Conrad, we're comparing that to $250 and $300 a day at The Venetian Macao with more rooms. The second issue is that all of the non-gaming activities at Cotai Central are barely half open. We're opening the 6,000 rooms. We'll have 6,000 rooms open within a few short months. We're opening the second tower of about 2,000 keys September 20th. In addition to that, we're going to open about 500 rooms in the third room tower of another 2,000, 2,200 rooms. We're opening on September 20th, a lot of the additional non-gaming activities that we have in The Venetian Macao that we don't yet have open in Cotai Central.
With that additional income from the additional amenities that are generating that income and a casino that's a lot closer on the mass side, another 200 tables on the mass side, we're going to have a percentage that will be where The Venetian Macao is and where it will continue. When we get all the non-gaming, when we get the gaming open, we stabilize the prices for the hotel rooms, we will have significantly greater than what it is today. We're in the ramp-up period.
Can I have one point, Sheldon? Please, just for fun, if you do the math, our-
You only get one question, Rob.
All right.
You only get one at your.
One bite of the apple? I'm sorry.
Okay. Can you bring in an apple for Rob?
Just one thought for you. Our Four Seasons numbers are in excess of 12,000 win per unit per day on the mass, and the Venetian ran over 9,500. Blend that at 10,000 per day. Cotai is running right now at about 5,000 per day. When that number gets to 10,000 per day on 400 tables, you're doing a run rate of $1.4 billion at 45%. If that happens, you're making $600 million, $700 million out of the mass. If and when that happens, if we can just simply match our existing portfolio out in Cotai, Sands Cotai ends up making $600 million, $700 million departmentally next year. Our goal, I think what Edward Tracy and David Sisk and the guys who run that place are trying to do is figure out how to ramp that number using rooms, retail, et cetera.
When that happens, you were talking before the junket play kicks in excess of $600 million, $700 million of departmental contribution. That solves all of your problems as far as margin and being profitable. We think that's very doable. It's not pie in the sky. We're not aspiring to something that's not achievable. I think it's very achievable.
In addition to that, I'd like to point out, we have a piece of land that we acquired when we acquired Lots 5 and 6. It's called the Tropical Gardens. It's a big strip. It goes well beyond the length of our properties, the depth from east to west. It cuts in a couple of other properties on the other side of the back service road, 339 feet wide. We have come up with an idea to develop that, not with another integrated resort, but with a multilevel, very high-powered retail mall that will be both a standalone mall that'll be a major attraction and contribute further to Macao being the shopping city between Hong Kong and Macao. We will have a connection to Lot 6 from that. We don't know. We're in the process of doing design.
We could have anywhere from 500,000-800,000 net leasable square footage, and we'll have another air-conditioned moving sidewalk walkway going over to Parcel 3. It'll be the Cotai Strip. This was my idea. This was my vision. The other competitors may or may not have any additional land. The Macau Studio City will be built next to our Lot 3, but we have a big footprint there because we were the guys who started it. I started it. Nobody wanted to buy into the idea. Now everybody wants to give their right arm and maybe their left arm, if they're lefties. They want to get into Cotai. Nobody wanted to get into Cotai before. We've got more development. If we can do that Tropical Garden development, we think we can.
There's the other part that's on, I don't know if it's on either, it's part of Lot 2 or Lot 3. There's another part of the Tropical Gardens that we're asking the government to develop. There's still a couple more other development pieces that we could do. We haven't done the fourth tower on Lot 5 and 6. There's still the potential for another tower of either rooms or apartments in the back of The Venetian, possibly on the west side of the Strip on the Tropical Garden. We've got an awful lot of development opportunity that nobody else has because our vision, our development, they passed on it in the past, now they're trying to catch up, so they've got to go to the backside of the Strip.
Awesome. Thank you.
Thanks a lot. I actually do have other questions, I'll let other people get in the queue. Thanks.
Thanks, Felicia.
Your next question comes from the line of Steven Kent with Goldman Sachs.
Hi. I looked at your slides, actually slide 20, and I look at your hold adjusted property EBITDA, and I appreciate that you're starting to show that. If you look at the quarterly spread between the reported and the hold adjusted, it's getting wider over the past five quarters, going from $36 million to now in this quarter, $88 million of difference. Now, sometimes it was positive, sometimes it was negative. I sort of thought that as you got more and more used to your customer base and as the volumes increased, that this would start to smooth out. I wanted to know whether there was a customer profile or the way they're playing that is changing, and should we expect even more volatility as you get bigger, which would go against, I guess, the law of large numbers, that they should start to smooth out.
Steve, it's Rob. I think you're absolutely right. It's a big spread this quarter, but it'll probably be the other way next quarter because volatility is diminished as we have volume, and the volume keeps increasing, as you can see. We had a bad run in Singapore. It'll self-correct, and I don't think we have any trepidation whatsoever that in the end of the day, this company has very little volatility. Despite this quarter's swing, when you look at this company at the end of the year, it's a non-event.
Rob, is it starting to correct already?
Let me give you some numbers. Let me break out July for you. I just don't think it's something that you've got to waste a lot of time on. I think in the end of the day, we will be where we need to be. We look at our business day in and day out based on volume, we're more interested in volume than the whole percentage because we have some very good days and very bad days. This quarter had some bad days, I don't think it's something I'd spend a whole lot of time on. Years ago at Caesars Palace, this was a big thing every quarter, four guys would win or three guys would lose. This company has so many thousands of people gambling so much money.
I think when the year is over, it'll be a non-event for you and everybody in this room.
Steven, this is Sheldon. I'd like to point something out. Up until this quarter, we had 11 straight quarters of growth. When you have 11 straight quarters of growth, how do you interpret volatility?
I'm not sure, Sheldon, if you're asking me that question, but all I'm saying is that as the business gets bigger.
I'm asking you that question, Steve.
Okay.
How do you conclude volatility out of 11 straight quarters of growth?
Well, your own slide shows the volatility, Sheldon. It's getting wider and wider.
Steve, Mike
This is one quarter to last year's quarter.
If you look at
Are you actually looking at something I don't have in front of me?
No, I am. If you look at the second quarter 2011 and third quarter 2011, it's basically the same volatility level. What you're saying is in 2012, it's larger in 2012 than it was in the first quarter and second quarter, it's larger. There could be a multiple of reasons for that. You could have more players playing-
First of all
that would give you a wider variation in the hold. At the end of the day, I think if you look at the normalization range at whatever's played in the revenue and the volume, it's going to end up at that level of volatility. I don't think it's anything you can really forecast except that if you end up at 2.85 or 2.9 or 3 as your hold, and your real forecast is what is the revenue number? What is the roll number? As Rob said, I don't think there's any science to it. I think it's basically it's going to end up in the same place. What we gained in the first quarter, we lost in the second quarter. Yeah, I think, Steve, that's the appropriate comment Mike just made. We picked up $72 million plus side Q1 against the expected hold adjust, and we lost back $87 million.
Net on billions of dollars of volume, the net's less than $20 million first half of the year. It just isn't that big a deal.
Steve, the other thing to think about.
The difference in what you're calling volatility in the delta between an adjusted and unadjusted. This has nothing to do with us. This is the nature of the law of averages. Sometimes you're up, sometimes you're down. It has nothing to do with any operational policy or whatever we do. One day, the difference would be 100%, and the next day it could be minus. There's nothing that we can control, and I don't believe there's anything that one can interpret out of the difference between the hold adjusted and not hold adjusted over a period of time.
Steve, when you think about the fact that Singapore, if it holds very heavy, all of that comes to us, every single bit of it, except for the taxes. When we hold light, obviously, the impact is much, much greater on the flow-through basis because your taxes are around 10% in Singapore, and your taxes are 40% when you hold heavy or light in Macau. That makes a big difference on what flows through to EBITDA.
Okay. Thanks, Dan.
Your next question comes from the line of Carlo Santarelli with Deutsche Bank.
Hey, guys. Thanks. Just a quick question on Singapore as it relates to seasonality there, and when you come out of, obviously, having seen some changes in the market in 2Q. Do you guys still have a pretty good sense or feel you have your hands around seasonality, whereas third quarter should likely be the strongest of the year, especially from the VIP side?
This is Sheldon. I think we still don't have a handle on seasonality. The period of opening and the ramp-up period is still too short. I think we need at least three, four years to determine on a definitive basis when and what the seasonality is. I don't know, maybe my colleagues have some other answer, that's my answer.
You have to divide it too, Carlo, I'm sorry, into the different parts of the business. On the hotel side is one seasonality versus the high roller side versus the local business. I think on the VIP side, it's very hard for me to get a sense of a seasonality. Obviously, Q1 is always a strong quarter because of Chinese New Year. Last year, we bopped a $16 billion roll in the third quarter because, honestly, 25 people showed up that rolled excessively. I don't think that's a trend or a seasonal thing. That's 25 guys deciding to do something that quarter and gamble with us. That could happen this quarter. I don't think that's a trend. I think that was aberrational in terms of the third quarter of 2011.
Great. Thanks, Rob. That's helpful. Then if you guys wouldn't mind, could you comment a little bit about how you're seeing share in that market between mass and VIP?
Share as far as worksheets?
Share versus your competitor in both segments.
Oh, moving up?
I haven't seen their numbers recently, but look, we feel very good about MBS and relative positioning to our competitor, RWS. I think that's been indicated quarter after quarter. We're not going to change our credit policies and change our promotional policies. We stay consistent, and I think it's going to, in the end, we've got the best of it, and we feel very good about our competitive position in both mass, slot ETG, as well as the VIP segment. I don't think we'd do a lot different than we've done already, and the numbers are the numbers the last two years. They're a good competitor, but we're very comfortable where we are vis-à-vis the two properties.
I appreciate it. Thanks, guys.
Sure.
Thanks, Carlo.
Your next question comes from the line of Harry Curtis with Nomura.
Afternoon. A follow-up question on cash on your balance sheet for Sheldon. You're sitting on a lot now. It's going to be even bigger by the end of the year. Sheldon, what would you like to see done with that? Personal or company?
That's right. It's a personal question.
Sure.
Since I own 431 million shares, I'd like to see some more dividends. What I'd like to see, I'm looking at the price of the stock. I think I'm going to have a call with the members of the board to see if we could put aside some money to buy back some shares at these prices. Certainly, our intention, my intention, I think the board's intention, and by the way, I simply don't vote on the board regarding the dividends. I think I have a little bit of a conflict of interest here. Anyway, we want the shareholders, whether it's me, my wife, my kids, my pets, my doggies or kitties. Beside them, every other shareholder in the company wants dividends.
We'll probably focus more on dividends, but I got to tell you, I'm looking at the stock price now as we're talking, and it seems to me that it's one hell of a good reason to take a lot of the money and put into some buyback. It's a superb opportunity for buyback.
Second question, a little less amusing, is the potential to amend the Casino Control Act in Singapore. There is some debate over that. The Singaporeans are attempting to restrict local visitation more and more. Could you give us an update on where you think that process is going? Given those headwinds, do you expect to see mass casino volumes continue to increase?
Singaporeans, there's a law in Singapore that any discussions with the government, it's illegal to disclose that. However, I can discuss what's been in the press, what we normally call PD, public domain. Public domain shows that the government is interested in protecting the more vulnerable people in society. I, as an individual, and our company has a stance of morality that we don't want to take money from poor people. We don't have any problem if they want to put a limitation on either the visitation or the exclusion of very poor people who live in three-room apartments that earn less than a certain number that puts them in, and also that according to the paper, that receive welfare. Singapore doesn't have welfare, but they receive money from the government to subsidize their living expenses. We don't want money from those people.
That's not the kind of business that we run. I don't run it morally. The company doesn't want money like that morally. We want to see people enjoy themselves when they come to gamble in the mass market end of it. If the Singapore government wants to put the limit on the key financial stability in their society, I think that's good for them. Listen, I come from a very poor family. Nobody put limits on my parents, and my father, when he wanted to go to Suffolk Downs in Boston and spend a lot of money on the ponies. I wish somebody would have put money on that. Maybe I might have been able to go to summer camp.
You go now.
I go now. Rob is just saying instead of going to summer camp, I should buy the pony. I'm a little handicapped, so I can't run, can't play, can't slide into the bases like I used to. Good for the government. My feeling has always been, if you don't like the way a government does things, don't go there. We're already there. We're doing very well, we don't make the kind of money we do, we don't see the future coming out of poor, unfortunate, very vulnerable people. My wife and I developed three adolescent clinics to treat narcotic drug addicts. I have to tell you that a lot of them are very poor people. They're exceptionally very poor. Of course, we get some affluent people once in a while. We care about these people.
When I was a kid, before I met my present wife, I opened up an adolescent drug abuse treatment center for 250 kids in Stoughton, a suburb outside of Boston. We care about people that have compulsive behaviors. We care about people that have problems. Coming from a poor family, I appreciate the travails of a poor family. We don't want to make money from them. We certainly respect what the government has done.
At the end of the day, do you think that the mass can continue to grow into 2013, assuming some of these restrictions intensify to some degree?
I think so.
Harry, also, you're discounting, I think.
Just let me finish one thing. 75% or more, it varies from day to day and is a little bit of a downward trend. The number of Singaporeans that come into the property is approximately 25%, and we don't know how much that's one per header per day in the mass market from Singaporeans. We haven't calculated that. I'm not sure that we can accurately. From that standpoint, the number of foreigners that are coming in are increasing the mass market return. We've got three-quarters of the mass market of the total visitation is foreign.
Well, we can't speak to the government's decisions or where they're going to go in the future, but we do believe strongly in the tourist market and the growth and the fact that the property is a great part of it. The Marina is wonderful. As that hotel ramps up and just keeps getting closer to 350, 375. More rooms, more development. I think we'll participate on the mass side very well from the tourist sector.
That does it for me. Thanks.
Operator, we have time for one more question.
Yes. Your final question comes from the line of Robin Farley with UBS.
Great, thanks. I have a question on Singapore. We know it's volatile in terms of VIP volumes. If you look at it on a rolling 12-month average or trailing 12-month average to smooth out quarterly volatility and smooth out any seasonality issues, looking at it on that basis, we're still not really seeing growth in volume versus the trailing 12 months if you look a couple of quarters back. I guess, can you give a little more color on whether you think that, is that players, they come, and they're not coming back, or they're coming back, but there aren't new players coming in the VIP? Just a little more color on that.
Then on the receivables front, can you clarify a little bit whether the significant provision here, is that for something that is actually non-collectible, or is it just that it's past a certain number of days, and so it clicks over into having to take the write-down on it or increase reserves on it? It didn't sound like you're actually raising reserve policies, but I just wanted to clarify why the big chunk this time.
In one short sentence, we've got an extremely highly conservative CFO.
I'm with him.
Well, can you clarify what conservative CFO means? Changing reserve policies or just that the receivables are?
Rob, he likes to call the glass that's half full of water, he likes to call it half empty. We like to call it half full.
Did you change your reserve policies or is it just a slower collection?
We didn't. I hate to say it's more of an approach. We sit down, it's Rob and Ken and the people in the field as well as people at the property, and review these things every other week. I think we simply look at some of these accounts. We don't look at necessarily about it be 300 days, 180 days. The people we've now seen not paying us, not delivering, and we're taking a prudent approach. It could change next quarter. I don't think it's a change in reserve policy as much as a recognition that some people haven't paid us we thought would pay us. We're hoping they would, and they didn't. I think the decision was a valid one. It's consistent. Last quarter, we also ramped up last quarter.
I think we've taken a more realistic viewpoint of where we stand with about $800 million of outstanding receivables. Not to say we won't continue to pursue those collections, but I think it's the prudent thing to do, and it's a lot more than a year ago. That's how we look at receivables. It's a living, breathing issue. It doesn't change for us. We keep looking at it all the time, and we go back and assess our weaknesses and our strengths, and they came up with a bigger number this quarter. I guess.
Right. Then, any thoughts in terms of volume, as I said, even smoothing out on a 12 months basis?
Yeah, look at the last four quarters. Look at 12.2, 16.7, 10.7, 12.8, now 11.5. The problem is, I sound like a broken record, but I think it's consistently the same story. I was reading the thing you do with Grant this week on the Singapore Macao gaming update. I think you guys nailed it pretty well there. It's a very, very concentrated market. Unfortunately, unlike Macao, it doesn't have thousands of people coming every day with $1 million or half a million dollars or $100,000. It's much more dependent on very high-end gamblers who bet large amounts of money, and primarily they come from mainland China, or they reside in Singapore as PRs occasionally, or they come from around the Asian region. We just can't predict when they show up. We did a couple of special events last summer that worked very, very well.
I would agree with you. It hasn't grown that much. It's very concentrated, and the story kind of remains the same. There's nothing new to offer that would shed more insight to Singapore's VIP market. It hasn't changed all the last four or five quarters.
I want to correct Rob Goldstein's stand. You could tell he's an old guy because he used the expression, "I sound like a broken record." I haven't seen any record since about 40 or 50 years ago. Don't you know we're in the digital age?
We're trying to get there.
Okay, just a final thing. Just trying to get to the dollar amount of EBITDA that you're saying, you would add back $88 million for low hold. Are you adjusting that down by the properties where you played a little bit above your expected range? The math that I'm doing here back of the envelope, I'm not getting to as high a number, and I'm just wondering if you're lowering that by Sands Cotai Central playing a bit above average, which should be offsetting some of what you sort of feel would be added back.
Yes, Robin. What we're doing is across all the Macao properties in total by segment. You have to look at the junket separate from the premium direct. If we don't hold within 2.7 to 3.0, if we come out higher than the 2.7 to 3.0 by segment, we're adjusting to the trailing 12-month average on the upside or the downside.
We don't adjust when we're in the normal range. If 2.85 is in the middle, you go from 2.7 to 3.0. No adjustment for that. It's only for under 2.7 or over 3.0.
For Sands Cotai Central, it's above the range, but there's no real trailing 12 months of that property. Did you just sort of hold on to the above 3.0?
Robin, we did the junket piece all together across all the properties in Macao. They came in between 2.7 and 3.0, so there is no adjustment whatsoever to any junket piece in Macao under this methodology. I am happy to take everybody through the methodology offline.
Oh, no, that is fine. I guess we just can't see the breakdown, I guess, between junket and non-junket on hold. Okay. Thank you.
We only have three months. We can't take a 12-month trailing in that single property.
Right. Okay. Thank you.
Thanks so much for your time, everyone.
This concludes today's teleconference. You may now disconnect at this time.