U.S.-based casino operator Las Vegas Sands Corp reported an increase in company wide third quarter revenue, on what it said was a strong performance from its Macau unit, Sands China Ltd, following the opening of its latest resort, the Parisian Macao (pictured).
Group-wide, on a U.S. generally accepted accounting principles (GAAP) basis, Las Vegas Sands’ revenue for the three months ended September 30 increased 2.6 percent year-on-year to US$2.97 billion, the parent said on Thursday.
Consolidated adjusted property earnings before interest, taxation, depreciation and amortisation (EBITDA) increased by 8.6 percent year-on-year to US$1.14 billion, with margin expanding 210 basis points to 38.5 percent, the firm said.
Net income attributable to shareholders however fell by 1.2 percent year-on-year to US$513.4 million, said Las Vegas Sands.
Operating income in the third quarter decreased 2.6 percent from the prior-year quarter, to US$719.6 million. The company said the decrease was a result of higher pre-opening, depreciation and amortisation expenses during the third quarter of 2016, “partially offset by stronger results across the company’s Macau and Las Vegas property portfolios”.
“We are pleased to have continued to execute our strategic objectives this quarter and to have delivered a solid operating performance in each of our markets,” said Sheldon Adelson, chairman and chief executive of Las Vegas Sands.
He added: “Importantly, the operating environment in Macau continued to improve during the quarter, particularly in the mass segment, as the Macau market exhibited growth in total gaming revenue, overnight visitation, and length of stay.”
On a GAAP basis, total net revenues for Sands China increased by 3.6 percent to US$1.72 billion in the third quarter of 2016, compared to US$1.66 billion in the year-ago period. The Macau unit reported net income of US$324.3 million for the period, down 5.5 percent compared to US$343.2 million in the third quarter of 2015.
The Macau portfolio generated US$628.5 million in adjusted property EBITDA, an increase of 15.3 percent over the same quarter last year, said the parent company.
Las Vegas Sands said growth in Macau was driven by “strong mass gaming revenues, continued execution on cost efficiency programmes, and higher hold in the premium direct segment”.
Parisian ramp up
The firm’s third quarter results included 18 days of operation of the Parisian Macao, a property that features a half-sized replica of the Eiffel Tower. The new casino resort opened in Macau’s Cotai district on September 13, with a total investment of approximately US$2.9 billion, inclusive of payments made for the land premium and pre-opening costs.
Wells Fargo Securities LLC said in a note on Thursday that Las Vegas Sands reported “a good third quarter”. “Parisian is clearly ramping well, with the third quarter beat driven by strong controls, and higher than expected mass market share,” said analysts Cameron McKnight and Robert Shore.
Speaking on a conference call with analysts following the third quarter results announcement, Mr Adelson said that the company’s properties in Macau continued to see positive year-on-year growth in mass gaming revenues in the third quarter.
“Our mass table revenues grew by 6 percent year-over-year, the first quarter of positive growth since the third quarter of 2014. This growth rate accelerated to 15 percent in the month of September, as we benefited from the strong opening of the Parisian Macao,” said the Las Vegas Sands’ CEO.
Mr Adelson confirmed on the call that an air-conditioned bridge that will link the Shoppes at Four Seasons to the Parisian Macao is scheduled to open by the end of November.
The Parisian Macao recorded revenue and adjusted property EBITDA of US$68.6 million and US$19.2 million, respectively, resulting in an adjusted property EBITDA margin of 28 percent, said Las Vegas Sands.
The Venetian Macao – the first Sands China property in Cotai – generated revenue of US$772.5 million for the third quarter, up by 10.4 percent from a year earlier. The property reported a 22.8-percent year-on-year increase in adjusted property EBITDA, to US$314.8 million in the third quarter. Adjusted property EBITDA margin grew by 4.2 percentage points to 40.8 percent.
Other properties in Sands China’s portfolio – Sands Cotai Central; Four Seasons Hotel Macao and Plaza Casino; and Sands Macao – reported a decline in net revenues, mainly due to a decrease in casino revenue. While Sands Cotai Central and the Four Seasons Hotel Macao and Plaza Casino recorded an increase in adjusted property EBITDA, Sands Macao on the peninsula reported a 10.6 percent decline.
Increase in visitors
Union Gaming Securities Asia Ltd said that Sands China’s results beat investment analysts’ estimates “by a wide margin”.
“Most importantly … there appears to have been very little, if any, cannibalisation of the existing Sands China assets. We would attribute this in part to significant pre-opening marketing, as well as the likely capture of a greater wallet share of Sands China customers staying on Cotai,” said analyst Grant Govertsen in a note on Thursday.
On the call with investors, Las Vegas Sands said it saw a 19 percent increase in visitors to its Macau properties in September, compared to the same month last year.
Wells Fargo’s Mr McKnight and Mr Shore said they estimated Sands China’s Macau market share increased 190 basis points to 23.6 percent in the three months to September 30. “We estimate mass table share increased 100 bps in the quarter, which is notable given Parisian was open for only 18 days in the quarter,” they said.
In Singapore, where Las Vegas Sands developed and operates the Marina Bay Sands, adjusted property EBITDA was US$390.7 million in the third quarter, compared to US$389.7 million a year earlier.
Casino revenue at Marina Bay Sands increased 1.1 percent year-on-year to US$591.4 million in the three months to September 30.
In the company’s home market of Las Vegas, adjusted property EBITDA increased by 6.9 percent year-on-year to US$85.3 million. Revenue for that market declined by 0.6 percent from the prior-year period, to US$383.2 million.
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”We expect Goa to quickly become a US$1 billion market as it transitions to land-based casinos (from US$150 million today), which is still just a fraction of India’s total GGR potential of US$10 billion to US$17 billion”
Analyst at Union Gaming Securities Asia