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Rod Smith
 

Results Vigorous for Venetian's Parent

11 August 2004

With a $419.9 million profit from the sale of its Grand Canal Shoppes in May, Las Vegas Sands posted record net income of $454.6 million in the second quarter, up from $9.6 million a year earlier.

The company, owner of The Venetian in Las Vegas and Sands Macau, also got a boost from the opening of a new 1,013-room hotel tower at The Venetian just more than a year ago and the opening of the Sands Macau in May, the company said Tuesday.

Bear, Stearns & Co. analyst John Mulkey said operating results for the company were extremely strong both in Las Vegas and Macau.

"It shows continued acceptance of its room product as well as generally very strong trends in Las Vegas," he said.

The Sands also posted earnings before interest, taxes, depreciation, amortization and rent, a key measure of profitability, of $105.9 million, up 72 percent from $61.5 million in the same quarter a year earlier.

Revenues rose 67 percent to $251.1 million from $150.4 million.

Sands President Bill Weidner said in a conference call with Wall Street analysts that the company's performance validated its decision to move quickly and aggressively on expansion projects, especially the new tower at The Venetian and the opening of the first American-owned casino in the former Portuguese colony of Macau, now a special administrative region of China.

Sands Senior Vice President Brad Stone said operating results at The Venetian were particularly strong and validated the company's business model of operating a high-end destination resort combined with a convention center to maintain midweek occupancy rates and room rates.

Room revenues at The Venetian were $79 million in the second quarter, up 40 percent from $56 million a year earlier, despite the addition of more than 1,000 hotel rooms at the property, he said.

Furthermore, the average daily room rate increased to $221, up from $206 a year earlier, and the average occupancy increased to 98.8 percent from 97.9 percent, Stone said.

Combined, that spelled an increase in revenue per available room to $218, up 8 percent from $202 a year earlier, he said.

"That's testimony to the strength of The Venetian product," Stone said, adding that slot play in the casino also got a big boost from the addition of more than 1,000 rooms a year ago.

Deutsche Bank analyst Andrew Zarnett said the performance in Las Vegas shows the company just continues to crank profits out of its new hotel tower.

Rob Goldstein, president of The Venetian, said third-quarter projections are tremendous, based on very strong trends in Las Vegas, which he said has "morphed" into a visitor destination market rather than a traditional gaming market.

Stone also said the table drop at the Sands Macau increased 15 percent in July compared with June, vindicating the company's push to open the casino in May and its decision to open its high end gaming rooms including 42 additional table games later this month.

The drop was $392.2 million for the first six months of operation in Macau, Weidner said.

"Our ongoing market research and feedback from several focus groups indicates continuing acceptance of Las Vegas-style resorts in Macau," Weidner said.

Zarnett said the Macau performance is proving "absolutely outstanding compared with the numbers generated from any similar operations (in the United States)."

Joe Greff, gaming analyst at Fulcrum Global Partners, an independent Wall Street investment research firm, said results from Macau were so strong they bode well for developer Steve Wynn, who is also planning to develop casinos in Macau, and for other operators with their eyes set on Asia, such as MGM Mirage.

Weidner said the initial results in Macau were so strong, there is no way to know how high "up" is when discussing prospects for developments in the area.

The Sands Macau is just the first phase of a $5 billion to $10 billion project Venetian owner Sheldon Adelson is planning that will turn a strip of reclaimed land in the seaside Chinese enclave into a huge resort complex of several hotels and casinos that will be patterned after the Strip.