Afternoon. My name is Zenyatta, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Las Vegas Sands Corp. 2nd Quarter 2012 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. At this time, I would 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 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 5 quarters. With that, I'll turn it over to Mr.
Adelson.
Thank you, Dan. Good afternoon, everyone, and thank you for joining us today. We reported $845,000,000 EBITDA of $2,580,000,000 in revenue for the Q2 of 2012. Our revenue for the quarter would have been $107,500,000 higher had we held normally in Mattel, Singapore and Las Vegas. Our adjusted property EBITDA difference from the prior year quarter is fully explained by the additional EBITDA of approximately $88,000,000 From the low hold as well as from the decision to increase our provision for accounts receivable in Singapore by an additional $29,000,000 We reported adjusted earnings per share of $0.44 for the quarter.
That number would have been $0.09 higher adjusted for hold and other $0.02 higher after adding back elevated legal expenses in the quarter, so $0.55 in total. Before Mike Robin can provide some more specific insights, let me share with you my view from the financing. We own outstanding assets in every market in which we operate. We happen to operate in the best gaming markets in the world. And 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 optics. First, we've opened the first phase of Cotai Central. And it is and it has performed well and has been well received by customers. Mike will give you some details on how we've done in Macau.
2nd, 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 all of China to Macau will be added steadily in the years ahead and will increase meaningful and will meaningfully enhance market growth in Macau. Our investments on Cotai will allow us to handle allow us to benefit disproportionately. Final, Parcel III will add another integrated use of development for us in the world's largest and most profitable gaming market.
With that backdrop, it's pretty easy to understand my optimism. Results today. Even while Cotai Central won't truly begin its ramp until early next year. On Cotai, we are on the verge of combining more than 9,000 hotel rooms with an unmatched collection of leisure and business activities and amenities and through a series of indoor and climate controlled covered outdoor walkway and moving sidewalks that will all essentially be under one roof. We believe the Cotai Strip will continue to serve as the strong and essential contributor to the Macau government's publicly expressed desire to develop Macau 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 3 to 4 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 Macau 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.
And elsewhere around the globe, we have already submitted our parcel 3 design plans. To the Macau government and pending government approval, we hope to begin putting filings 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 Ron'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 of 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. So with that, let me now turn it over to Mike Levin 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 and 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 5 quarters. We received feedback that would be helpful to all of you.
We listened and 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 days of the property in April. The positives are many. 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 4th Seasons Hotel in Macau in 2,008 for Marina Bay Sands in Singapore. And it is almost as strong as the Venetian Macau's performance in 2,007. The quality and satisfaction scores for both hotels 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 in ETGs. The win per mass table per day is easily exceeding the early performance at both the Venetian Macau and Marina Bay Sands.
The win per slot machine or ETG seat per day is double what the Sands Macau accomplished at the opening and is 4 times the level of the Venetian Macau back in 2,007. It is clear that the early performance at Cotai Central bodes well for our future results. Even before we open the 2nd phase of Cotai Central, a new capacity is allowing us for the first time in recent memory to grow faster year over year than the Macau market in every gaming sector category, VIP, mass tables and slots. We grew gross gaming revenue 26%. The Macau market grew 14%.
We grew VIP revenue by more than 20%. Our 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% and the Macau market grew 34%. We grew slot revenue 19% and the Macau market was up 16%.
When the second phase of Cotai Central opens just 57 days from today on September 20, we will add another 200 mass tables to the property as well as 1200 more slot and ETG units. Together with up to 2,500 additional Sheridan 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 1500 Sheridan Tower Branded Rooms and Suites come online throughout October, November December and the air conditioned walkover 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 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 1 year ago. Adjusted for hold, our EBITDA at Marina Bay Sands would have been approximately $387,700,000 The success of Marina Bay Sands in developing tourism to Singapore has been widely recognized. Singapore's Straight Times recently reported the following. Tourist arrivals to Singapore were up a healthy 15% in the quarter ended March 31. 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 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 South 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 $64,400,000 in EBITDA during the quarter.
We held poorly in Las Vegas this quarter. We should have reported approximately $76,900,000 in EBITDA if we had held as expected. Group's 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 a 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 3 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 2 years. Much has been said about the acceleration of the VIP segment, but rumors of its depth might be greatly exaggerated.
Our VIP segment has grown considerably over the past few years due to market growth and management focus. The VIP segment represent about $500,000,000 of departmental income annualized for about 25% to 30% of our overall EBITDA in Macao once Cotai Central is completed. But the greatest opportunity for LVS in Macao resides in the mass table market, where we are in a very unique position. Sheldon's $9,000,000,000 of Integrated Resort investment allows us to earn the lion's share of the growth on Cotai. We will have a great opportunity in 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% to 14% margin. The infrastructure 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, and we believe that Singapore's tourism and our property's unique positioning will yield results in the future.
Our mass table and slot 1 exceeded $4,500,000 per day this quarter. We have seen some growth in that segment, but not the growth we have previously experienced. However, 300,000,000 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 and A session. I'll turn it over to Ken Kaye.
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 3rd consecutive quarterly dividend of $0.25 per share.
We meaningfully reduced our debt outstanding during the quarter. We prepaid $400,000,000 on the U. S. Restricted group facility, reducing the outstanding amount on that facility to $2,400,000,000 as of June 30. In addition, we paid $131,000,000 to retire our Macau Ferry financing.
After the prepayments, our total debt outstanding at June 30 was $9,400,000,000 Our weighted average borrowing cost for the 2nd quarter was 3%. Our borrowing cost remained quite low and with the recent refinancing of our Singapore credit facility, we have no sizable debt maturities until 2014. Despite retiring more than $500,000,000 of debt during the quarter, we held approximately $3,500,000,000 of cash and cash equivalents on the balance sheet at June 30. Our consolidated net leverage ratio at June 30 based on trailing 12 months of EBITDA was 1.54 times. Our capital expenditures during the Q2 were $337,000,000 We expect to spend approximately $500,000,000 at Sands Cotai Central before the end of the year and another $500,000,000 thereafter.
We will continue to invest on our other operating properties. We expect maintenance CapEx across our property portfolio to be approximately $350,000,000 for the rest of 2012, taking us to about $500,000,000 for the full year. And 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 and A.
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 is starting to slow somewhat from China. You talk about what you're seeing in the market and at your properties and in Cotai in general?
Yes. Mark, I think we see is, 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 and we're going to have over 9,000 keys. We're seeing the ramp continues for us at mass tables. We kind of divide it into the pure mass and I would call that the premium mass and final the super mass meaning in tables earned as much as $20,000 per day, which is happening in somewhere in our Venetian property. I think for this company, obviously, that 33% growth last quarter just bodes very well.
Visitation may be slowing and as strong as it was, but the better customers keep coming. And the real question obviously to the market is, does the spend continue with the de acceleration of the VIP? And you can make whatever argument you want to make. We believe that, that segment will continue to grow, we believe we'll be a player in each of the 3 sub segments because of the amount of tables you have to offer, the rooms, the retail, especially Sands Cove to Essential is built for that. We've seen terrific growth the last 2 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 or 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 at HKD300, HKD400 per bed. 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, but we think the opportunity for us is massive.
There's still 33% growth. Even that slows down to 25% or 20%. It's we're just very uniquely positioned and we feel very good about it for the balance of the year.
Thanks. And just one follow-up on the free cash flow. I know Ken mentioned the cash balance at the end of the quarter and 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?
Yes. It's Ken, and I appreciate that. I mean, you've pretty much enumerated all the possibilities there. And 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.
And so 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 Joe 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?
Yes, sure. Let me just give you kind of an overall perspective with regard to CEEBLIT and 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. And just to give you some perspective on that, since the inception of Marina Bay Sands, we've had credit drop of about $10,400,000,000 And when you consider that our Singapore casino receivable balance at June 30 is about $822,000,000 That means we've collected over $9,500,000,000 of credit issued in play, which is about over 91%.
And then against that receivable balance, we've got about $192,000,000 in reserve or about 1.9 percent of the total credit drop, which gives you an idea of really how small the potential for bad debt really is. That reserves about 29% of receivables, excluding open programs and less than 30 days accounts outstanding. And then additionally, life to date, the reserve is about 6.9% of rolling win, which is within the range we've discussed before. So 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.
And so at the end of June 30, 2012, we have in total receivables in Macau about $680,000,000 about $510,000,000 of that is really from junkets. So although we've had some increase from direct customers, a big increase has come from junkets, which obviously pay on a very rapid basis. And 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. And then for the September 20, Phase 2, expansion at Sanskotai 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?
So our indication from the government has always been that we would get 400 additional tables for Cotai Central. On September 20, we will not have all of those 400. We will be getting them throughout the rest of the year. And by the time we open the last property, the last 2000 or 1500 rooms in January, we will have guaranteed the 400 additional tables. So there will be some movement of some tables on September 20.
Great. That's all for me. Thank you.
Thanks, Jeff.
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 kind of the Macau properties overall. When I kind of look at the group as a portfolio now that you have Cotai Central in it, it gets a little harder to compare. But one of the things that we're kind of seeing is that it looks like last year property level margins were pretty steady in the 33% range across the kind of Macao portfolio. They were still pretty steady in the Q1 at 32%, but then they dipped about 29.5%.
You obviously have some kind of ramp up time and some operating leverage or deleverage at Cotai Central. But could you was there anything else on the expense side or anything else that kind of crept up as you think about the Macau properties overall? Any reason that you can't get back to mid-30s once you get more volume into Cotai Central?
But down to 29%.
29.2%. Yes. 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 Sans Kotai Central.
And 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. And as it flattens out, you'll see those margins return into the 30s. Hey, Sean, 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.
So the mix there is skewed towards the lower margin 12%, 14% versus the 45%. And I got to tell you, I think once that really ramps up what'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 mass premium mass, 6,000 keys, lots of retail. I think the VIP growth can get better, but 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 will self correct. Everything is fine with the rest of the properties.
It all ties back to Cotai.
Okay. That's great color. And then my other question would just be on just 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 kind 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, but just kind
of what are you seeing at any sequential change in that would be helpful?
I think just the opposite. We're seeing is there's talk about obviously, junket segments remain 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, but 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 Macao are going to move more to slot ETG and mass tables, and I wouldn't be surprised to see some people being more aggressive. But 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.
And as Cotai gets more and more mature, we've seen this was referenced earlier in the call. You saw it in Singapore. You saw it in Monisha Macau. Monisha Macau opened up to sub $100 wind per unit per day in the slots. Tables were about 3000, 4000 a day.
That property now does 4 times that in terms of the win per units. And so the point being is 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 John Oh with CLSA.
John, just a second. This is Dan. I just want to point out, Sean, as well that if you look at Page 6 on the deck on the website, on a hold adjusted basis for the quarter, we are at 30 4.3% for the company overall. And I know if you look at page Page 7, you can also see that on a hold adjusted basis, we're at 30.1% in the Macau operations for the quarter. Okay, John?
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 journey, the problem resides in the demand side. We've anecdotally talked to our junket people all the time, and the feedback we're getting is not that they're not they're still their cost is the credit as they've always been. I'm not sure it's significantly changed. The difference, I think, I believe both in Singapore and Macau and even the U. S.
Is customer demand. We have where there's appetite for credit, we grant it the same we've always had, and we try to be judicious about it. But 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 pullback in consumer demand.
And just a follow-up on Singapore. Along the same veins on rolling chip, we've seen the number pretty much range bound around the $11,000,000,000 to $12,000,000,000 dollars 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? Or is there anything else that we should read into the demand of our VIP play in the C4 region?
I think we've said before and 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.
And you're right, we're disappointed the growth hasn't continued. We haven't seen it ramped. We had quarters at $15,000,000,000 $16,000,000,000 back to $11,500,000,000 And 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 the fabulous product in a very, very strong market, but hard to put any color 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 high it's much more premium driven market with people gambling $5,000,000 $10,000,000 You don't have the plethora of people betting $500,000,000 like you do in Macau.
Okay. Thank you. I'd like to say that it's Sheldon. I'd like to say that this is we're 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 hold one reduction in the hold, even though it amounted to over $100,000,000 at the top line. Anybody who thinks that this is a change of culture is just missing the boat. For 1000 of years, the Asian people have been seeing gaming and chance taking as their form of entertainment. And the anybody who thinks that a quarter is creating a new trend, there is nothing on 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 that had a we didn't have first of all, a lot of big numbers says that we're not going to grow from $100 like we grew when we had $10 So the percentage of growth is going to be a smaller number.
But anybody who says that the culture that has existed for 1000 of years and the habits of the Asian people is changing because of 1 quarter with low hold, I think it's just missing the boat.
Thanks, John.
Your next question comes from the line of Alicia 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 Q3 of next year. I'm just wondering, is there any reason to believe or why margins would not be the niche in type of EBITDA margins?
I think they could be better, please, but only because Venetian here's the pluses and minuses. Venetian is a theme property, gets ridiculous amount of visitation to 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 doubled the sleeping rooms and an equally strong retail product.
It's not themed. In my opinion, the Indonesian 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 2 properties by a walkover bridge. I think that's going to be very impactful for visitation of both properties. In essence, we have a 7 1,000 property, Venetian Cotai and 9,000 excuse me, Venetian Cotai and the Four Seasons.
But there's no reason why once 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 other properties.
So we've got to get more slot ETG positions. That comes together in the fall. We've got to get that cross serve 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. But the real upside of that property is slot ETG, mass premium tables, and that's the margin sweet spot.
Come on guys, let me call to your attention. That's it's a very good question Felicia and let me answer it. First of all, at the Venetian margin, we have rooms that whose ADR is substantially higher. And we got 2,500 rooms open. So and 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 percentage.
I want to point out to you that in growing the 1200 rooms of Holiday Inn and the 600 rooms of Conrad in ramping it up, we are running at extremely very, very good occupancy percentages. But 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. So if we're looking at $100 at Holiday Inn and $150 at Conrad, we're comparing that to $2.50 $300 a day at The Venetia with More Roads. The second issue is that all of the non gaming activities at Cotai Central are barely half open. So we're opening the 6,000 rooms.
We'll have 6,000 rooms open within a few short months. We're opening tower the second tower of about 2,000 keys September 20. In addition to that, we're going to open about 500 rooms in the 3rd room tower of another 2,200 rooms. So we're opening on September 20 a lot of the additional non gaming activities that we have in The Venetian that we don't yet have open in Cotai Central. With that additional income from the additional amenities that have generated that income and a casino that's a lot closer on the mass side and other 200 tables on the mass side, then we're going to have a percentage that will be where the Venetian Macao is and where it will continue.
So when we get all the non gaming or we get the gaming open and we stabilize the prices for the hotel rooms, then we will have significantly greater than what it is today with the ramp up period.
Can I have one point, Sheldon? At least just for fun, if you do the math.
I'm going to get one question, Bob. All right. I'm going to get one or 2.
One bite of the apple. I'm sorry.
Okay. How do you bring in an apple
for the last week? Just one thought for you. Our 4 seasons numbers are in excess of 12,000 wind per unit per day in the mass and the Venetian ran over 9,500. So blend out at 10,000 per day. Cotai is running right now at about 5,000 per day.
If we get when that number gets to 10,000 per day on 400 tables, it's our run rate of $1,400,000,000 at 45%. If that happens, you're making $600,000,000 $700,000,000 of mass if and when that happens. If we can just simply match our existing portfolio out in Cotai, Sands Cotai is making $600,000,000 $700,000,000 departmentally next year. So our goal, I think what Ed Tracy and David Sisk and the guys who run that place trying to do is figure out how to ramp that number using rooms, retail, etcetera. When that happens, you were talking before the junket play kicks in, in in excess of $600,000,000 $700,000,000 of departmental contribution.
So that solves all of your problems as far as margin and being profitable. And we think that's very, very doable. It's not pie in the sky. We're not aspiring 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 LUX56, and it's called the tropical guidance. It's a big strip. It goes well beyond the length of our properties, the depth from east to west. And it cuts in a couple of other properties on the other side of the back service room, 339 feet wide. And we have come up with an idea to develop that not with another integrated resort, but with a multilevel, very, very high powered retail mall that will be both a standalone mall that will be a major attraction and contribute further to Macau being the shopping city between Hong Kong and Macau.
And we will have a connection to Lot 6 from that. We don't know we're in the process of doing design. And we could have anywhere from 500,000 to 800,000 net leasable square footage, and we'll have another air conditioned moving sidewalk, walkway going over to parcel 3. And so it will be a circle of all under one roof, that part of the Kotai strip. This is our idea.
This was my idea. This was my vision. And the other competitors may or may not have any additional land. The Macau Camillo 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. And they'll and they want to get into Cotai. Nobody wanted to get into Cotai before. I think that this we're looking we've got more development.
If we can do that tropical garden development, then we think we can. We is the other part, it'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 can we're asking the government to develop. And there's still a couple more other development pieces that we could do. We haven't done the 4th tower on month of 5 and 6.
And there's still the potential for another tower of other rooms or apartments in the back of The Venetian and possibly on the west side of the Strip on the tropical gun. So we've got an awful lot of development opportunity 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 strategy.
Thank you.
Thanks a lot. I actually do have other questions, but I'll let other people get in the queue. Thanks.
Thanks, Alicia.
Your next question comes from the line of Stephen Kentsch 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. And if you look at the quarterly spread between the reported and the hold adjusted, it's getting wider over the past 5 quarters going from $36,000,000 to now in this quarter $88,000,000 a difference. Sometimes it was positive, sometimes it was negative. But 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.
So 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 will 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, the end of the year, it's a none event.
Bob, is it starting to correct already?
I can't 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 at the end of
the day, we will be what we need to be. We look at our business day in and day out based on volume. And we're more interested in volume than the whole percentage, because we had some very good days and very bad days. This quarter had some bad days, but I don't think it's something I spend a whole lot of time. But we're handling that no one's ever done years ago at Caesars Palace, this is a big thing every quarter, 4 guys win or 3 guys will lose.
This company has so many thousands of people gambling so much money. I think when the year is over, it will be a non event for you and everybody in this room.
Steve, 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 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, if you This is 1 quarter to last year's quarter. If you look at Unless you're looking at something I don't have a
Yes, no, I haven't. If you look at the quarter quarter 2nd quarter 2011 and third quarter 2011, it's basically the same volatility that what you're saying is in 2012, it's larger in 2012 than it was in the Q1 and second quarter it's larger. There could be a multiple of reasons for that. You could have more players swaying 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, whatever is played on the revenue and the volume is going to end up at that level of volatility.
So I think it's a I don't think it's anything you can really forecast except that if end up at 2.85 or 2.9 or 3 as your whole and your real forecast is what is the revenue number, what is the roll number. And we could be so I don't 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 Q1, we lost in the Q2. Yes.
I think, Steve, that's the appropriate comment Mike just made. We picked up $72,000,000 plus side Q1 against the expected hold adjust and we lost back $87,000,000 So net net on 1,000,000,000 of dollars of volume, the net less than $20,000,000 first half of the year. That could be a it just isn't that big a deal.
And so you see the other thing to think about it
The difference in what you call volatility and 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. So it has nothing to do with any operational policy or whatever we do. One day, we could be the difference would be 100% and the next day it could be minus.
There's nothing that we can control and there's nothing I don't believe there's anything that one can interpret out of the difference between the hold adjusted and non hold adjusted over a period
of time. And 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. And when we hold light, obviously, we 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. So 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 Q3 should likely be the strongest of the year, especially from the VIP side?
I think it's too this is Sheldon. I think we still don't have the handle on seasonality. The period of opening and the ramp up period is still too short. I think we need at least 3, 4 years to determine on a definitive basis when and what the seasonality is. I don't know, maybe my colleagues have some other answer, but that's my answer.
Yes, divide it too, Steve, and call into the I'm sorry, into the different parts of the business. On the hotel side, 1 seasonality versus the high roller side versus the local business. So I think on the VIP side, it's very hard for seasonality. It just we had a great obviously, Q1 is always a strong quarter because of the Chinese New Year's. And last year, we bopped the 16 $1,000,000,000 roll in the Q3 because honestly 25 people showed up that we they 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. And that could happen this quarter. And I don't think that's a trend. I think that is operational in terms of the 3rd quarter of 2011.
Okay. Thanks, Rob. That's helpful. And 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 work
share What's your competitor in both segments?
Well, we're moving up? I don't know how you I haven't seen their numbers recently, but I think look, we feel very good about MBS and relative positioning to our competitor, RWS. I think we've 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, both mass slot ETG and as well as the VIP segment. I don't think we do a lot different than we've done already. And the numbers are the numbers in the last 2 years. And they're a good competitor, but we're very comfortable.
We are vis a vis the 2 properties.
I appreciate it. Thanks, guys.
Sure. Thanks, Collin.
Your next question comes from the line of Harry Curtis with Nomura.
Afternoon. 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?
That's right. It's a personal question. Since I own 431,000,000 kids, I'd like to see some more evidence. 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.
But certainly, we're going to our intention, my intention, I think the Board's intention is to 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. But anyway, everybody, 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. So 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, it seems me that it's one hell of a good reason to take a lot of the money and put in some buyback. It's a great it's a superb opportunity for buyback.
2nd question, a little less amusing,
is
the potential to amend the Casino Control 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?
And given those headwinds, can do you expect to see mass casino volumes continue to increase?
First of all, the Singaporeans there's a lot more in Singapore than any discussions with the government. It's illegal to disclose that. However, I can discuss what's been in the press, what's in what we normally call PD public domain. Public domain shows that the government is interested in protecting the more vulnerable people in society. But I as an individual and our company has a stand up morality that we don't want to take money from poor people.
So 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 3 room apartments that are less than a certain number that puts them in. And also that according to the paper, that receive welfare, the 2nd quarter doesn't have welfare, but they receive money from the government for 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.
I know the company doesn't want money like that morally. We want to see people enjoy themselves when they come to gamble and the mass market end of it. And if the Singapore government wants to put the limit on keep financials compelling in our 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 him on that. Maybe I might have been able to go to the summer camp.
You go now.
I can go now. Rob is just saying instead of going to summer camp, I should buy them all. But I'm a little handicap, so I can't run can't slide at the basis like I used So good for the government. This is my feeling has always been, if you don't like the way government does things, don't go there. Now we're already there.
We're doing very well. And we don't make the kind of money we do, and we don't see the future coming out of 4 unfortunate, very vulnerable people. My wife and I developed 3 Adelson clinics to treat narcotic drug addicts. And I have to tell you that the a lot of them are very poor people. They're very exceptionally very poor.
Of close to get some affluent people once in a while. But we care about these people. And we and when I was a kid, before I met my present wife, I opened up a a an adolescent drug abuse treatment center for 250 kids in Staunton, a suburb outside of Boston. So we care about people that have compulsive behaviors. We care about people that have problems.
And coming from a poor family, I appreciate the travails of a poor family. We don't want to make money from that. But we certainly respect what the government is doing.
But at the end of the day, do you think that the mask can continue to grow into 2013, assuming some of these restrictions intensify to some degree?
I think so. You're also
a little bit of a downward trend. The number of Singaporeans that come into the property is approximately 25%. We don't know how much that's 1 per day in the mass market from Singaporeans. We haven't calculated that. I'm not sure that we can accurate.
So from that standpoint, the number of farmers that are coming in are increasing the mass market return. So we've got 3 quarters of the mass market of the total visitation is fine.
Well, we can't speak to the government's decisions or whether 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 marine is wonderful. And as that hotel ramps up and just keeps getting closer to 350, 375, more rooms, more developed. And I think we'll be we'll participate on the mass side very well in the tourist sector.
That does it for me. Thanks.
Operator, we have time for one more question.
Your final question comes from the line of Robin Farley with UBS. Great, thanks. I have a question on Singapore and we know it's volatile in terms of VIP volumes. But if you look at it on kind of a rolling 12 month average or trailing 12 month average to kind of smooth out quarterly volatility and smooth out any seasonality issue kind of 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.
So 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 and just a little more color on that. And then on the receivables front, can you clarify a little bit whether the significant provision here, is that for something that you've 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 Or 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.
Well, can you clarify if conservative CFO means changing reserve policies or just that the receivables are?
When he likes to call the glass that's half full of water, he likes to call it FMC. We like to call it half full.
I mean, did you change your reserve policies? Or is it just a slower collection?
No. We didn't. This is not up. No, 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.
And I think we simply look at some of these accounts. We don't look at necessarily about it'd be 300 days, front 8 days, look at people we've now seen not paying us, not delivering, and we're taking a prudent approach. It could change next quarter, because it changed our reserve policy, much as recognition that some people haven't paid us, they probably pay us. And we're hoping they would and they didn't. I think the decision was a valid one.
It is 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 $800,000,000 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.
But that's how we look at receivables. And it moves it's a living, breathing issue. It doesn't change for us. We keep looking all the time, and we go back and assess our weaknesses and our strengths, and they came up with a bigger number this quarter.
And then any thoughts on the in terms of the volume, as I said, even smoothing out on a 12 month basis?
Yes, I don't yes, look at the last 4 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. And I think it I was reading the thing you did with Grant this week on the Singapore Macau 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 $1,000,000 or $500,000 or $100,000 It's much more dependent on very high end gamblers and 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. We plan to revisit that approach. We are going to get very aggressive on some very concentrated high end events for people who gamble large amounts of money.
But I would agree with you. It hasn't grown that much. It's very concentrated and the story kind of remains the same. It's not there's no real nothing new to offer that would shed more insight to Singapore's VIP market. It hasn't changed all the last 4 or 5 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 I was since about 40 or 50 years ago. Don't you know we're in the digital age?
We're still trying to get there.
Okay. And then just a final thing. Just trying to get to the dollar amount of EBITDA that you're saying you would add back $88,000,000 for low hold. Are you adjusting that I'm not getting to as high a number. And I'm just wondering if you're lowering that by like Sam's Coach I 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 Macau properties in total by segment, so you have to look at the junk, it's separate from the premium direct. If we don't hold within $2.7 to $3.0 if we have higher than the $2.30 by segment, then we're adjusting to the trailing 12 months 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 2.73. No adjustment for that. It's only for under 2.7 or over 3.0.
And so for Sands Cotai Central, which so for Sands Cotai Central, it's above the range, but there's no real trailing 12 month of that property. Did you just sort of kind of hold on to the above?
Robin, we did the junket piece altogether across all the properties in Macau and they came in between 2.7 and 3.0. So there's no adjustment whatsoever to any junket piece in Macau under this methodology. And I'm happy to take everybody through the methodology offline.
I guess, we just can't see the breakdown, I guess, between junket and non junket on hold. So okay, thank you.
We can't take a 12 month trade link 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.