Strong performances by its Macau and Singapore subsidiaries helped global casino operator Las Vegas Sands Corp to post a year-on-year increase of 41.3 percent in net income in the first quarter of 2017 to US$578 million. The group’s consolidated net revenue increased 14.3 percent to US$3.11 billion, the firm announced on Wednesday.
“During the quarter, we again generated strong cash flow across all of our operations, with solid growth both in Macau and Las Vegas,” Las Vegas Sands chairman and chief executive, Sheldon Adelson, said in a conference call with investment analysts following the announcement of the group’s first quarter 2017 results.
Mr Adelson added: “After a challenging period, the Macau market is growing again, and its growth rate has been accelerating for three consecutive quarters. Our Macau operation is experiencing strong growth in both our mass gaming and non-gaming segments.”
He said the addition in September of the Parisian Macao (pictured) to the company’s portfolio in Macau had helped Sands China Ltd – Las Vegas Sands’ Macau subsidiary – to deliver visitor growth of 30 percent across its property portfolio and to increase hotel occupancy levels by 440 basis points compared to the year ago quarter.
Total net revenues for Sands China increased 15.3 percent to US$1.88 billion in the first quarter of 2017, when judged by U.S. generally accepted accounting principles (GAAP). Net income for the Macau-based firm increased 11.9 percent to US$349 million in the first quarter of 2017.
As a Hong Kong-listed firm, Sands China normally reports its earnings under international financial reporting standards (IFRS). The U.S. GAAP numbers were quoted as part of the consolidated earnings of its parent, the U.S.-based Las Vegas Sands.
The Macau unit’s first-quarter results from Parisian Macao, its latest Cotai resort that opened in September 2016, represented the second full quarter of operations for the property. Revenue and adjusted property earnings before interest, taxation, depreciation and amortisation (EBITDA) at the Parisian Macao were US$318 million and US$82 million, respectively, resulting in an adjusted property EBITDA margin of 25.8 percent.
Non-rolling chip drop at the property’s casino was US$983 million, with a non-rolling chip win percentage of 18.2 percent. Rolling chip volume was US$3.72 billion, with a rolling chip win percentage of 2.82 percent. Slot handle was US$854 million for the quarter.
Parisian trailing Palace
Commenting on the Parisian Macao’s first quarter results, investment bank Morgan Stanley stated “incremental EBITDA from Parisian could remain lower than Wynn Palace, implying smaller growth for overall company in percentage terms on top of Sands China being larger.”
Wynn Palace is a Cotai property operated by Wynn Resorts Ltd, and was launched in August 2016, just a month before the Parisian Macao opened its doors.
Morgan Stanley analysts Praveen Choudhary, Alex Poon and Thomas Allen added in their note: “In first quarter 2017, Parisian EBITDA is US$30 million, or 27 percent lower than Palace, mainly because Parisian’s VIP revenue is only one third of Palace’s, while mass revenues are similar.”
The investment bank stated that overall, Sands China’s “property EBITDA of US$619 million (+3 percent quarter-on-quarter) was slightly ahead of our expectation due to better luck and retail, but weaker than market growth of 8 percent quarter-on-quarter.”
During the conference call with analysts, Robert Goldstein, president and chief operating officer of Las Vegas Sands, said the firm was looking at expanding its market share in the VIP gaming segment. “We want to be more involved in that segment,” Mr Goldstein said. “We should be doing better,” he added.
Brokerage Sanford C. Bernstein Ltd said in a note commenting on Sands China’s first quarter performance that the firm had “delivered relatively in-line results on revenue and EBITDA compared to our estimates, but slightly beat consensus”.
Analysts Vitaly Umansky, Zhen Gong and Yang Xie added: “VIP gross gaming revenue was lighter than we had anticipated with growth lower than our market estimate quarter-on-quarter (-2 percent versus +8 percent estimate for the market). Mass gross gaming revenue, however was better than expected, with growth better than the market quarter-on-quarter (+5 percent versus +2 percent estimate for the market) on robust premium mass growth (+ 30 percent quarter-on-quarter).
Mr Goldstein additionally said during the conference call that the ongoing infrastructure improvements in Macau would be beneficial for further growth of the overall Cotai market. That was a reference to a number of public sector projects including: the Hong Kong-Zhuhai-Macau Bridge, likely to open in 2018; Macau’s coming new Pac On Ferry Terminal at Taipa, due to launch in the current quarter; and an ongoing expansion of China’s high-speed rail network that will include new links to Macau’s neighbouring mainland city, Zhuhai.
Marina Bay Sands ‘global benchmark’
In Singapore, Las Vegas Sands’ Marina Bay Sands posted a year-on-year increase of 15.9 percent in revenue to US$700 million in the first quarter of 2017. Its adjusted property EBITDA increased 32.7 percent to US$365 million.
Rolling chip volume at Marina Bay Sands was US$8.92 billion for the quarter. Non-rolling chip drop was US$967 million, while slot handle increased 1.9 percent to US$3.42 billion for the quarter compared to the year-ago quarter.
In the conference call with analysts, Mr Adelson noted that Marina Bay Sands was often mentioned as a reference point for jurisdictions looking to legalise gambling or to expand their respective casino industries. Japan is part way down the legalisation path, and South Korea is set on expansion of its existing industry.
Several investment analysts have said that the Japanese government is using the Singapore property as a benchmark as part of its discussions to legalise gambling in Japan. Japanese Prime Minister Shinzo Abe toured the Marina Bay Sands during an official visit to Singapore in May 2014.
Las Vegas Sands has shown strong interest in investing in Japan. Mr Adelson again mentioned the country during the first-quarter conference call with analysts. He added he had information from several sources that Las Vegas Sands was “ahead of the other competition as a candidate to get [an] integrated resort approval” in that market, once casino gaming is completely legalised.
Mr Adelson also said the firm had been looking at other places in Asia “for a long time” regarding possible expansion, but “they are not moving that fast”. He mentioned the case of Vietnam, which recently approved legislation paving the way for selected domestic casinos to accept bets from Vietnamese gamblers, for a trial three-year period.
“We’re not necessarily in love with the conditions of the three-year test period,” Mr Adelson said. “We don’t want to spend billions of dollars and find out in three years they’ve changed their mind and they’re not going to allow locals in. So we want to see how that goes.”
Marina Bay Sands “continues to be a key asset for highlighting the company’s integrated resort model, which it can leverage in other international markets”, Wells Fargo Securities LLC analyst Cameron McKnight said in a note following the Las Vegas Sands’ results announcement.
He added that the property’s normalised EBITDA of US$388 million was “ahead of expectations of US$351 million”.
During the conference call with analysts, the management of Las Vegas Sands confirmed it was still looking to sell part of the shopping mall at Marina Bay Sands, but noted the process was still in its “very early” stages. According to previous comments by Las Vegas Sands’ management, the firm expects to get between US$3 billion and US$3.5 billion from the sale of a 49-percent stake in the shopping mall.
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"The stronger mass growth [in Macau in the second quarter] should be viewed positively vis- à-vis [the] government’s stated priority”
Japanese brokerage Nomura