U.S.-based casino operator Las Vegas Sands Corp posted a 47-percent decline year-on-year in net income in its Macau operations for the third quarter. But results for its Marina Bay Sands property in Singapore were up by more than 10 percent in the period, the firm said in a filing on Wednesday.
“Notwithstanding a challenging environment in the VIP and premium mass gaming segments [in Macau]… we remain confident that our market-leading Cotai Strip properties, which will be complemented in the future by the St. Regis tower at Sands Cotai Central opening in December 2015, and by the Parisian Macao, targeted to open in late 2016, will… help attract greater numbers of business and leisure travellers,” company chairman and chief executive Sheldon Adelson (pictured) said in a statement.
Total net revenues for Sands China Ltd – the subsidiary of Las Vegas Sands in Macau – decreased 28.8 percent to US$1.66 billion in the third quarter on a GAAP (generally accepted accounting principles, the U.S. standard) basis. Adjusted property earnings before interest, taxation, depreciation and amortisation (EBITDA) went down 32.8 percent in year-on-year terms to US$545 million. Sands China reported net income of US$343.2 million for the period, down by 46.8 percent from a year earlier.
Venetian Macao casino resort – the company’s flagship property in Macau – generated adjusted property EBITDA of US$256.4 million in the third quarter, with a EBITDA margin of 36.6 percent.
Casino revenue at the property stood at US$590 million, down 27.9 percent year-on-year. Market wide in Macau, accumulated gross gaming revenue (GGR) for the July to September period was down 34.4 percent year-on-year.
Rolling chip volume – a measure of performance in the VIP gaming segment – at Venetian Macao decreased 32.1 percent year-on-year to US$6.88 billion during the quarter.
VIP gaming revenue across the entire Macau market fell by 38.0 percent year-on-year during the same period to approximately MOP28.99 billion (US$3.63 billion), according to official Macau government data published last week.
Mass stabilising in Macau
“Sands China delivered slightly weaker than expected results with a stabilising base mass business and quarter-on-quarter EBITDA margin improvement,” brokerage Sanford C. Bernstein Ltd commented.
Mr Adelson said in a conference call with investment analysts following the results announcement that the company is seeing “signs of stabilisation” in the mass segment in Macau.
He added: “We continue to benefit from the scale of our hotel room inventory, the diversity of our product offering and the attraction of the Venetian Macao as Macau’s ‘must-see’ destination.”
Mass casino volumes (excluding slot machines) at Venetian Macao went down 21.1 percent in year-on-year terms, according to Las Vegas Sands statement.
Mr Adelson added he was not too worried about the ongoing decline in casino revenue in Macau. The city has posted 16 consecutive months of year-on-year decreases in GGR and October is likely to follow the trend, several analysts say.
“We sometimes get asked whether our capacity advantage is diminished given the recent market revenue decline. I believe the opposite is the case,” Mr Adelson stated during the conference call.
He noted: “In a market where peak periods, the weekends and holidays matter more than ever before and where mass market customers will generate the lion’s share of the revenue and future profit growth, our capacity advantage will in fact be further amplified.”
Sands China is also performing well in its premium direct VIP, Mr Adelson stated.
“In VIP gaming, despite the continued weakening of the junket segment during the quarter, our premium direct business yet again delivered a solid quarter. Our premium direct rolling volumes were up 1 percent quarter-on-quarter, versus the 17 percent decline in the overall Macau junket segment,” he said.
Mr Adelson added that the company’s cost-cutting measures in Macau were “well on track” to achieve up to US$240 million of savings in 2015. “I am pleased that since the first quarter [of 2015] we have been able to sustain higher levels of market share, while controlling costs and increasing labour productivity,” he stated.
“Management continues to focus on cost control,” UBS Securities Asia Ltd wrote in a Thursday note. It added that so far in 2015, Sands China had achieved US$170 million of annualised costs savings versus 2014. About 30 percent of those savings came from cost reductions in payroll, with one quarter occurring in gaming operational expenses, analysts Anthony Wong and Angus Chan wrote.
Despite the negative impact of a stronger U.S. dollar, adjusted property EBITDA at Las Vegas Sands’ Marina Bay Sands in Singapore increased 10.8 percent year-on-year to US$389.7 million in the third quarter. The better performance was driven by growth in mass play from visitors to Singapore and “healthy” VIP volume, the company said.
On a constant-currency basis, adjusted property EBITDA increased 20.8 percent from the prior-year period, Las Vegas Sands added.
Rolling chip volume at Marina Bay Sands was US$11.44 billion for the three months to September 30, a 25.4 percent increase compared to the US$9.12 billion generated in the prior-year period. Non-rolling chip drop was US$1.07 billion (down 5.8 percent year-on-year), while slot-machine handle increased 9.0 percent year-on-year to US$3.41 billion.
Company-wide – including its operations in the United States – Las Vegas Sands recorded net revenue of US$2.89 billion in the third quarter, a year-on-year decline of 18.1 percent.
Operating income decreased 23.9 percent to US$739.1 million, “principally due to softer results across the company’s Macau property portfolio,” Las Vegas Sands said.
Net income decreased 22.7 percent to US$519.4 million, while diluted earnings per share in the third quarter of 2015 went down 21.7 percent to US$0.65, compared to US$0.83 in the prior-year quarter.
Las Vegas Sands also announced that its next recurring quarterly dividend of US$0.65 per common share will be paid on December 31, to company shareholders of record on December 22. That dividend represents an increase of 30.0 percent compared to the dividend paid in the fourth quarter of 2014.
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"If the [Macau casino] concessions are put up for bid, there will also be a lot of giant Chinese companies, some having nothing to do with gaming, which would like to take over these enormously successful casinos”
Professor emeritus at Whittier Law School in California, in the United States, and a visiting professor at University of Macau