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Revenue From Sands Macau Drives Earnings During Las Vegas
 Sands 2nd Qtr; Counters a Less-than-Stellar
 Quarter at The Venetian
By Howard Stutz, Las Vegas Review-Journal
Knight Ridder/Tribune Business News

Aug. 3, 2005 -- At times during Wednesday's quarterly earnings conference call for Las Vegas Sands Corp., company President Bill Weidner sounded like he was campaigning for mayor of Macau, expounding on the Chinese gaming enclave's numerous growth opportunities through the end of the decade.

His bullish outlook was understandable based on the company's second-quarter results.

Revenue produced at the Sands Macau drove the earnings of Las Vegas Sands during the three-month period while the company's The Venetian suffered somewhat due to below normal gaming win at the Strip property.

Las Vegas Sands reported adjusted net income of $95.5 million, which translated into earnings of 27 cents per share. A year ago, the company's adjusted net earnings were 12 cents a share on net income of $39.5 million, reflecting less than a full quarter of operation from the Sands Macau. On average, analysts surveyed by Thomson First Call had estimated adjusted earnings per share of 26 cents.

When various expenses and other factors are figured into the equation, the net income for Las Vegas Sands was $86.4 million, or 24 cents a share, in the quarter.

Weidner used much of the conversation with gaming analysts and investors to tout the current and future plans for the Chinese South Sea gaming location, where independent financial forecasters have predicted gaming revenues will reach as high as $14 billion annually by 2010.

Las Vegas Sands is developing seven hotel-casino sites on the Cotai Strip area of Macau, including a $2 billion version of The Venetian that is expected to open in the middle of 2007.

"The analysts have come to the conclusion about the same prospects that we felt when first looking at Macau in 2000," Weidner said. "That is why we are in the leadership position of putting out a lot of product for that market."

Because second-quarter 2004 results at Sands Macau were a partial number, the company used its results during the 2005 first quarter as a comparison to demonstrate the casino's performance.

The Sands Macau had casino revenue of $201.1 million in the second quarter, compared with $171 million in the first quarter; adjusted cash flow was $81 million, compared to $67.8 million; and operating income was $74.8 million, up from $60.5 million.

"We believe the strength of our operating performance and returns to date underscore the potential of the Asian marketplace." Weidner said. "(We're) confident in our long-term plans to not only lead the development of the Cotai Strip, but to be at the forefront of emerging opportunities in other Asian locations."

The Macau results countered a less-than-stellar quarter at The Venetian. While volume in the casino increased, a lower- than-normal win percentage hurt the final totals. Still, Las Vegas Sands executives were encouraged because the April 28 opening of the neighboring Wynn Las Vegas didn't steal away gamblers.

"The Wynn opening actually helped grow business on this end of the Strip, and we captured a lot of those customers," Weidner said. "The volume in our casino during the quarter is reflective of that."

Casino revenue for The Venetian during the quarter was $73.7 million, down from $76.2 million for the same quarter a year ago. Meanwhile, table game wagering increased 13.7 percent, to $253.2 million from $222.6 million a year ago.

The biggest change was in slot machine volume, where $496 million was wagered, compared with $521.4 million.

Venetian executives blamed one customer, a high roller who wagered $33 million in play on $500-a-pull slot machines during the second quarter of 2004, for the anomaly.

"The activity of that one customer, who happens to be a steady customer, had an effect on our slot handle," said Las Vegas Sands Executive Vice President Brad Stone. "I think our slot handle this quarter was much more typical."

Venetian officials pointed to the September openings of two of the resort's three new entertainment offerings -- The Blue Man Group show and Tao, a version of the New York restaurant and nightclub -- to stimulate activity. Work is also continuing on a theater to house "Phantom of the Opera," which is expected open in 2006.

"Macau helped offset a weakness in Las Vegas where Venetian was 11 percent below our estimates," said Goldman Sachs gaming analyst Steven Kent. "The other good news includes the expansion (in) Macau which, considering the continued market strength, seems well timed."

While Wynn Resorts Ltd. and MGM Mirage are building large casinos in the downtown Macau corridor, Las Vegas Sands is focused on the Cotai Strip. The company said its under-construction Venetian Macau will be built out to its total complement of 3,000 rooms, rather than the previously announced 1,500 rooms.

Weidner said development is progressing on a 400-room Four Seasons hotel across from the Venetian site.

Also, Far East Consortium International is constructing a five-hotel complex on another Cotai Strip site that will have 2,800 rooms. Las Vegas Sands is building the casinos for both locations. All the projects should be operational by the end of 2007.

"David Chiu (the head of the Far East Consortium) and I have a Shark Fin Soup bet over who finishes first," Las Vegas Chairman Sheldon Adelson said during the conference call. "We will be ready in 2007. We're very satisfied with the customer loyalty we've found in Macau."

The company reported earnings before the opening of the stock market and shares in Las Vegas Sands were off $2.30, or 5.69 percent, to close at $38.12.

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To see more of the Las Vegas Review-Journal, or to subscribe to the newspaper, go to http://www.lvrj.com.

Copyright (c) 2005, Las Vegas Review-Journal

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