Global casino operator Las Vegas Sands Corp reported a year-on-year increase of 61.9 percent in net income in the second quarter of 2017 to US$638 million. The quarterly results were driven by strong performance at its Macau and Singapore subsidiaries, the firm said on Wednesday.
The group’s consolidated net revenue increased 18.6 percent to US$3.14 billion. Group-wide consolidated adjusted property earnings before interest, taxation, depreciation and amortisation (EBITDA) increased 26.5 percent year-on-year to US$1.21 billion, with EBITDA margin increasing 240 basis points to 38.5 percent.
Las Vegas Sands reports its results using U.S. generally accepted accounting principles, also known as GAAP.
“We are pleased to have delivered a strong set of financial results during the quarter, led by another quarter of growth in Macau and a record-setting performance in Singapore,” said Sheldon Adelson, the group’s chairman and chief executive, in a prepared statement.
According to Wednesday’s results, Macau-based Sands China Ltd was able to expand its revenues in the premium mass segment “by nearly 40 percent” in the second quarter of 2017, while mass gaming revenues overall grew by 22.5 percent.
“Strong mass revenue growth, coupled with higher hotel occupancy and growth in the VIP segment all contributed to a 23-percent increase in our adjusted property EBITDA in Macau, which reached US$600 million in the quarter,” said Mr Adelson.
On a U.S. GAAP basis, total net revenues for Sands China increased 23 percent year-on-year to US$1.82 billion in the three months to June 30, compared to US$1.48 billion in the prior-year quarter. The unit’s net income for the period rose by 37.6 percent to US$326 million, compared to US$237 million in the second quarter of 2016.
Sands China’s property EBITDA “was broadly in line” with market expectations, said Morgan Stanley Research in a note on Wednesday.
“Property EBITDA declined by 4 percent quarter-on-quarter to US$600 million, slightly missing our estimate of US$607 million and Bloomberg consensus of US$605 million,” stated analysts Praveen Choudhary, Alex Poon and Thomas Allen. “EBITDA for Parisian Macao of US$106 million was up 29 percent quarter-on-quarter, but was offset by weaker Venetian Macao (-11 percent quarter-on-quarter) and Sands Macao (-28 percent quarter-on-quarter).”
Sands China’s flagship property Venetian Macao generated revenue of US$687 million, up 3.2 percent in year-on-year terms. Adjusted property EBITDA in the second quarter was US$256 million, a year-on-year increase of 4.9 percent, with an adjusted property EBITDA margin of 37.3 percent, reflecting a 70 basis point increase in margin compared to the second quarter of 2016.
Venetian Macao’s casino revenue increased 3.2 percent year-on-year, to US$586 million. The property recorded rolling chip volume of US$5.17 billion for the period, down 24.7 percent from the prior-year period. Rolling chip win for the second quarter stood at 3.61 percent, above the expected range and the 2.73 percent experienced in the prior-year quarter.
In the second quarter of 2017, there were approximately 19 percent fewer rooms available at Venetian Macao, mainly due to renovation work.
The Parisian Macao (pictured), Sands China’s latest Cotai resort, opened in September 2016, reported its third full quarter of operations.
“The Parisian Macao continued to exhibit growth, enjoying strong visitation … delivering sequential growth in hotel occupancy, average daily rate and gaming volumes, while mass win per day of US$2.44 million was the highest result since the property’s opening last year,” said Mr Adelson in the statements accompanying the second quarter results.
Revenue and adjusted property EBITDA at the Parisian Macao were US$361 million and US$106 million, respectively, resulting in an adjusted property EBITDA margin of 29.4 percent.
Non-rolling chip drop at the property’s casino was US$973 million, with a non-rolling chip win percentage of 19.7 percent. Rolling chip volume was US$3.76 billion, with a rolling chip win percentage of 3.89 percent, above the expected range and the first quarter 2017 win percentage of 2.82 percent.
“Parisian Macao performed strongly, though helped by great VIP luck and relatively high mass hold, balanced by somewhat softer performances at other properties (except Four Seasons),” said JP Morgan Securities (Asia Pacific) Ltd analysts DS Kim and Sean Zhuang in a Thursday memo.
During a conference call with analysts, the management of Las Vegas Sands said the firm was currently rejigging the hotel accommodation in the 3,000-room Parisian Macao to appeal to upper-end mass-market gamblers, with the revamped accommodation “coming on board in early 2018” and the renovation work completed “by the end of 2018”.
Las Vegas Sands has earmarked a total of approximately US$1.05 billion in capital investment globally for 2017, including US$500 million for maintenance and US$275 million for refurbishment of the Parisian Macao, according to the firm’s presentation on Wednesday.
“Increasing hold at Parisian Macao over the next few quarters will be a key potential value driver,” said brokerage Sanford C. Bernstein Ltd.
“Reconfiguring the room inventory to a larger percentage of suite product (will be done in phases and potentially to be completed by autumn of 2018) and adding additional casino area restaurant space, should help with improving hold as length of customer stay and value of customer increases,” said analysts Vitaly Umansky, Zhen Gong and Yang Xie in their Thursday note.
The JP Morgan team said Sands China’s premium-mass gross gaming revenue (GGR) grew 4 percent quarter-on-quarter and 39 percent year-on-year, “much faster than base-mass’ -3-percent quarter-on-quarter and +11 percent year-on-year”. The analysts added: “Premium mass as a result accounted for 47 percent of its mass GGR in second quarter, the highest level in its history.”
“Strong premium mass was somewhat expected given recent VIP resurgence,” said Mr Kim and Mr Zhuang.
Casino GGR in Macau’s VIP segment rose 34.8 percent year-on-year in the second quarter, according to data released earlier this month by the local regulator, the Gaming Inspection and Coordination Bureau.
During a conference call with analysts, the management of Las Vegas Sands highlighted again that VIP strength in the Macau market is benefitting premium mass “as it provides liquidity to players”.
Marina Bay Sands in Singapore – also part of the property portfolio of Las Vegas Sands – generated revenue of US$836 million in the second quarter of 2017, up 17.7 percent compared to the prior-year period. Adjusted property EBITDA was US$492 million, an increase of 37.8 percent from a year earlier.
“Marina Bay Sands delivered a record quarter,” said Mr Adelson. “Marina Bay Sands’ innovative programming, consistent mass gaming play, strength in non-gaming revenues and higher hold in VIP play compared to the same quarter last year all contributed to the outstanding performance,” he added.
Rolling chip volume for the Singapore unit was US$8.71 billion for the quarter, a year-on-year increase of 29.2 percent. Non-rolling chip drop was US$911 million during the April to June period, down by 2.7 percent in year-on-year terms. Total mass win-per-day during the quarter was US$4.42 million, slightly below the same quarter last year. Slot handle increased 4.9 percent to US$3.40 billion.
Robert Goldstein, president and chief operating officer of Las Vegas Sands, said in the conference call with investment analysts on Wednesday that the results in Singapore “reflect the many opportunities that we have to drive our business at Marina Bay Sands”.
“There is nothing new there [in Singapore] in terms of marketing strategies, what we are doing is reducing commissions in the rolling segment to enhance our profitability and our margins,” said Mr Goldstein. “We successfully keep pushing back on the commissions and testing the waters to see how far we can go … And we played lucky, we had a lot of luck this quarter, probably about US$100 million of increased hold,” he added.
Las Vegas Sands paid a quarterly dividend of US$0.73 per share during the April to June period. The company announced that its next recurring quarterly dividend of US$0.73 per share will be paid on September 29, to shareholders of record on September 21.
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Amount that each Macau casino operator paid for the circa six-month extension of their respective contract