Inside Asian Gaming

INSIDE ASIAN GAMING | February 2009 28 of a unit in The Four Seasons apartment hotel in Macau,” he added. “While it is clear that residential property prices in the region have been negatively impacted by the weakness in the global economy, our discussions with interested parties, particularly investors we have targeted from Japan and Korea, have continued. What we have on offer is clearly unique—a one of a kind opportunity to own shares in an entity that will provide the holder of the shares the exclusive right to the use of a Four Seasons apartment hotel unit on the Cotai Strip. We are now beginning the process of converting expressions of interest to definitive share purchase agreements, which will require 10% of the price of the shares of the non-refundable deposit,” said Mr Weaver. Popular mood Notwithstanding the good news story on the potential for monetisation as told by Mr Weaver, it’s currently pretty fashionable to talk down the market prospects of Macau in general and Las Vegas Sands Corp in particular. It was no surprise then that newspaper coverage of LVS’ Q4 ’08 results tended to focus on the US$17.8 million adjusted net loss for the fourth quarter sustained despite whopping revenue of US$1.09 billion—¬a 4.3% growth in gross income on the equivalent period in 2007. In Q4 ’07, the company managed an adjusted net surplus of US$71.1 million. LVS explained the Q4 ’08 loss as reflecting increases in net interest expense, and depreciation and amortisation costs. Arguably of more interest to investors is what’s happening to margins, given LVS’s focus on running an ever more efficient business. Margins For the Las Vegas operations, margin on EBITDA (earnings before interest, taxation, depreciation and amortisation) was down 13.4% in Q4 ’08 year-on-year. The Venetian Macao experienced a 9.4% fall in casino revenue in Q4 ’08, but EBITDA margin based on US GAAP (Generally Accepted Accounting Principles) was stable, showing a 0.3% rise year-on-year, thanks in part to compensating factors including a 30.4% increase in ‘retail & other’ revenue. The Venetian Macao generated adjusted EBITDA of US$112.8 million for the fourth quarter of ’08. There were a record 6.7 million visitors during the quarter, said the company. Brad Stone, President of Global Operations and Construction told the earnings conference call that VIP play made up only 15% of adjusted property EBITDAR for the Venetian Macao in the fourth quarter. “Given that backdrop, our principal objectives are carefully managing the business and controlling that credit risk while developing more profitable direct play, particularly from markets outside mainland China including Japan, Korea, Indonesia, Taiwan, and Singapore,” said Mr Stone. “During the fourth quarter, our directed VIP play at the Venetian Macao grew to 16.7% of our total rolling volume compared to just 6.9% in the fourth quarter of 2007 and 14.9% in the third quarter of 2008. We have achieved this increase in direct play while maintaining our prudent approach of bringing credit to our VIP customer market,” he added. Down For Sands Macao, all the revenue indicators were down in Q4 ’08 except for hotel income, contributing to an overall 5.5% fall in EBITDA margin. “Although the results of the Sands Macao clearly reflect the competitive environment for gaming customers on the Macao peninsula, our gaming volumes have remained healthy and reflect the unique market positioning of the Sands Macao on the Macao peninsula,” the company said in a prepared statement on the Q4 ’08 results. “Our rolling chip table games play was stronger compared to the same quarter last year, and while our mass volumes were down year over year, they continue to reflect healthy play. Looking ahead, we expect to improve our performance at the property by further reducing the Sands’ cost structure,” the company added. “There is no doubt that we know exactly what it is we have to do and we’re focused on doing that,” said Mr Weidner in his closing remarks to analysts during the Q4 earnings call. “We’re not that naïve about the environment that we’re in. We recognise what it means to us and what it means to the company and what it is that we have to do. And all of us are focused on that, whether it be in Macau or here in Las Vegas.” LVS