Apr 21, 2016 Newsdesk Latest News, Macau, Top of the deck  
Net income at casino developer and operator Las Vegas Sands Corp fell approximately 37.4 percent in the first quarter.
On a U.S. generally-accepted accounting principles (GAAP) basis, such income decreased to just under US$320.2 million, compared to US$511.9 million in the first quarter of 2015, the firm said in a filing to the New York Stock Exchange on Wednesday.
The decrease in net income attributable to Las Vegas Sands “reflected the decline in operating income… as well as a US$35.8 million mark-to-market loss on Singapore dollar forward contracts. This was partially offset by a US$10.4 million decrease in net income attributable to non-controlling interests,” said the group.
Robert Goldstein, the group’s president and chief operating officer, mentioned on the accompanying first quarter earnings call that the first quarter results in Macau had been negatively affected by a “bad debt hit of US$22 million versus the fourth quarter”. That, combined with “some weakness… in the rooms and non-gaming side food and beverage,” had cost the group’s Macau operation approximately US$60 million in the quarter, added Mr Goldstein.
Group wide, diluted earnings per share in the first quarter of 2016 decreased 37.5 percent to US$0.40, compared to US$0.64 in the prior-year quarter.
On a GAAP basis, group operating income in the first quarter of 2016 decreased 17.6 percent to US$585.6 million, compared to US$711.1 million in the first quarter of 2015.
Marina Bay Sands
The decrease in operating income “was principally due to softer results across the company’s Macau property portfolio and lower win percentage on rolling chip play at Marina Bay Sands in Singapore,” said the parent in its earnings statement.
Marina Bay Sands generated adjusted property earnings before interest, taxation, depreciation and amortisation (EBITDA) of US$274.9 million, down by 33.8 percent in year-on-year terms. On a hold-normalised basis, adjusted property EBITDA was US$382.8 million. On a constant-currency basis, hold-normalised adjusted property EBITDA increased 10.3 percent.
On a GAAP basis, total net revenues for Sands China decreased 7.9 percent to US$1.63 billion in the first quarter of 2016, compared to US$1.77 billion in the first quarter of 2015. Adjusted property EBITDA for Sands China decreased 2.5 percent to US$517.9 million in the first quarter of 2016, compared to US$531.0 million in the first quarter of 2015.
Net income for Sands China decreased 9.6 percent to US$311.6 million in the first quarter of 2016, compared to US$344.7 million in the first quarter of 2015.
The group’s Macau flagship property the Venetian Macao generated adjusted property EBITDA of US$267.8 million in the first quarter with an adjusted property EBITDA margin of 35.8 percent.
VIP rolling chip volume at the Venetian Macao was just under US$8.23 billion for the quarter, a decrease of 3.4 percent judged year-on-year. Rolling chip win percentage was 3.21 percent in the quarter, above the 2.83 percent experienced in the prior-year quarter.
Non-rolling chip drop at the property was US$1.77 billion, a decline of 5.2 percent year-on-year.
Slot handle at the Venetian Macao was up 0.7 percent year-on-year in the first quarter, to US$1.07 billion. Aggregate gaming revenue at the Venetian Macao in the first quarter was US$654.9 million, a decrease of 3.3 percent year-on-year.
Venetian Macao indicators
Judged quarter on quarter, the performance of all those gaming indicators at the Venetian Macao improved in the first quarter – a period including the Lunar New Year ‘Golden Week’ holiday in China – compared to the fourth quarter of 2015. In the fourth quarter, rolling chip volume at the Venetian Macao had been down 20.8 percent year-on-year, non-rolling chip drop had been down 17.3 percent, and slot handle had fallen 23.8 percent from the prior-year period. Aggregate gaming revenue at the Venetian Macao in the fourth quarter had been down 13.8 percent year-on-year.
The Las Vegas Sands chairman Sheldon Adelson said in a statement accompanying the first quarter 2016 results: “The operating environment in Macau remained challenging during the quarter; but we do see signs of stabilisation, particularly in the mass market.”
He added: “We remain confident that our market-leading Cotai Strip properties, which will be complemented later this year by the Parisian Macao, targeted to open in mid-September 2016, will continue to provide the economic benefits of diversification to Macau, help attract greater numbers of business and leisure travellers, and provide our company with an outstanding and diversified platform for growth in the years ahead.”
Shopping mall revenues at the Venetian Macao rose 10.1 percent year-on-year in the first quarter, to US$48.9 million.
“First quarter Macau EBITDA was 5 percent below recently elevated expectations,” said analyst Cameron McKnight of Wells Fargo Securities LLC in a note on Wednesday.
“Expenses were higher and margins were lower than expected. With the recent rally in the group, investors were expecting another margin driven beat. Management is hopeful Macau is stabilising, though noted that March wasn’t strong and hopes it was an aberration,” added Mr McKnight.
Cost savings
During the group’s first quarter earnings call with analysts, Mr Adelson confirmed that group wide in 2015 Las Vegas Sands had made annualised cost reductions of approximately US$250 million.
He stated: “I believe we can achieve further savings in 2016. Moreover, as we open the Parisian Macao we will be able to increase labour productivity and redeploy staff to operate the new property.”
Mr Adelson added: “… additional cost avoidance from staff transfers will amount to approximately US$140 million on an annualised basis. Together with targeted savings of an additional US$60 million on an annualised basis, we anticipate having a total benefit to our current operations in 2017 of approximately US$200 million after we open the Parisian later this year.”
During the call management was asked whether there was concern that – in the currently modest consumer demand experienced by the Macau gaming market – the US$2.7-billion Parisian Macao could be opening on Cotai only weeks after the neigbouring Wynn Palace, the US$4.1-billion new offering from Wynn Resorts Ltd. It is likely that Wynn Palace will open in early August, said that firm’s chairman Steve Wynn at an investor conference earlier this month.
Group president Mr Goldstein stated: “I have a funny feeling that Wynn [Palace] will be an inflection point for the market as will [the] Parisian, and I think opening them within the same 30 or 40 days isn’t going to matter a whole lot.”
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