Jul 26, 2018 Newsdesk Latest News, Macau, Top of the deck, World  
Global casino operator Las Vegas Sands Corp reported a year-on-year increase of 1.8 percent in net income in the second quarter of 2018 to US$556 million. The quarterly results were driven by a strong performance at Sands China Ltd, which saw a 25-percent increase in adjusted property earnings before interest, taxation, depreciation and amortisation (EBITDA), the parent firm said on Wednesday.
The group’s consolidated net revenue for the three months to June 30 increased by 6.2 percent from the prior-year period, to US$3.30 billion. Operating income in the second quarter fell 2.4 percent year-on-year to US$797 million. The decrease in operating income “was primarily due to softer rolling volume and win percentage in Singapore and a US$92 million write-off of costs related to the tower adjacent to the Four Seasons Macao,” said Las Vegas Sands.
Las Vegas Sands reports its results using U.S. generally accepted accounting principles, also known as GAAP.
Group-wide consolidated adjusted property EBITDA – a non-GAAP measure – increased 1.4 percent year-on-year to US$1.23 billion, with EBITDA margin of 37.1 percent versus 38.9 percent in the second quarter of 2017.
“We are pleased to have delivered strong financial results in the quarter, led by robust growth in Macau, where every property in our portfolio delivered growth and adjusted property EBITDA reached US$750 million, an increase of 25 percent compared to the second quarter of 2017,” said Sheldon Adelson, the group’s chairman and chief executive, in a prepared statement.
On a U.S. GAAP basis, total net revenues for Macau-based Sands China increased 18 percent year-on-year to US$2.11 billion in the three months to June 30, compared to US$1.79 billion in the prior-year quarter. The unit’s net income for the period rose by 30.0 percent to US$427 million, compared to US$328 million in the second quarter of 2017.
“Sands China second quarter results came in line with consensus (slightly below our estimate),” said brokerage Sanford C. Bernstein Ltd in a Thursday memo. “EBITDA was helped by high VIP hold rate (3.5 percent versus 3.3 percent in second quarter 2017 compared to a normal range for Sands of 3 percent to 3.3 percent),” wrote analysts Vitaly Umansky, Zhen Gong and Kelsey Zhu.
The brokerage noted that Sands China’s net income “was negatively impacted” by a non-recurring US$92-million write-off of disposal of assets – related to the tower adjacent to the Four Seasons Macao – along with slightly higher interest costs.
Mass growth
According to Wednesday’s results, Sands China outperformed the Macau market in VIP growth but had slightly lower mass growth than the overall market.
Sands China saw its VIP rolling win increase by 29.8 percent year-on-year, to US$645 million in the second quarter of 2018. The company operated an average of 252 VIP gaming tables during the period, compared to 211 in the prior-year period.
The Macau unit was able to expand its revenues in the premium mass table segment by about 29.0 percent in the second quarter of 2018, while mass gaming table revenues overall grew by 19.6 percent.
“I think the success of this quarter demonstrates material growth in all our segments in our businesses in Macau. Rolling, mass, premium-mass, slots, electronic table games, rooms, retail all showed material growth,” Robert Goldstein, Las Vegas Sands’ president and chief operating officer, said on a conference call with analysts following the results announcement.
“Our EBITDA [in Macau operations] reflects US$150 million year-on-year improvement. But the most important driver of this growth is premium mass,” he added.
Las Vegas Sands management said on the conference call that it remained optimistic about the Macau market outlook, especially in the premium mass. The company executives emphasised that strong growth in the premium mass sector was largely on deeper penetration into the mainland China market, beyond the Guangdong province.
“This strong growth comes – we think – from a non-Guangdong segment of the business and it bodes well for our future,” said Mr Goldstein.
“We are extremely confident that we found the key to growing our business, not just this year but beyond … The growth is based on a much more sustainable segment, that being mass and premium mass,” he added.
VIP expansion
Las Vegas Sands confirmed that it was looking to expand its business in the VIP segment, as that would improve liquidity in the overall gaming market and eventually also help to grow the premium mass segment.
“In the junket business, we need to do more. We keep redefining the physical structures in the rooms, we keep talking to our junket partners, and we think there’s a lot more growth ahead of us,” noted Mr Goldstein. “That relationship also spills over to our premium mass … when you have liquidity, that fuels other segments.”
Management reiterated the importance of adding more suites to its Macau portfolio, mainly via the renovation of the Parisian Macao, Four Seasons Macao and the St. Regis, as well as the redevelopment and rebranding of Sands Cotai Central into the Londoner Macao.
Renovation work of Sands Cotai Central – to be done in phases – is scheduled to begin in late 2018, with completion of all components expected in 2020.
“I’m very excited by the way the design work for the Londoner is progressing. The Londoner will have tremendous potential as a third landmark, must-see destination,” said Mr Adelson on the conference call.
Sands China’s flagship property Venetian Macao (pictured) generated revenue of US$830 million in the second quarter, up 23.1 percent in year-on-year terms. Adjusted property EBITDA was US$331 million, a year-on-year increase of 29.3 percent.
Venetian Macao’s casino revenue increased 25.8 percent year-on-year, to US$677 million. The property recorded rolling chip volume of US$7.46 billion for the period, up 44.3 percent from the prior-year period.
The Parisian Macao reported revenue and adjusted property EBITDA of US$371 million and US$114 million, respectively, compared to US$353 million and US$106 million in the second quarter of 2017.
Rolling chip volume at Parisian Macao was nearly US$4.48 billion, up 19.1 percent year-on-year. Non-rolling chip drop at the property’s casino was US$1.06 billion, an increase of 8.6 percent from a year earlier.
Marina Bay Sands in Singapore – also part of the property portfolio of Las Vegas Sands – saw its quarterly results negatively impacted by lower rolling chip volume and win percentage.
The property generated revenue of US$705 million in the second quarter of 2018, down 15.5 percent compared to the prior-year period. Adjusted property EBITDA was US$368 million, a decrease of 25.2 percent from a year earlier.
Rolling chip volume for the Singapore unit fell by 32.6 percent year-on-year to US$5.87 billion, with a rolling chip win rate of 2.84 percent, down from 4.42 percent in the second quarter of 2017.
Las Vegas Sands paid a quarterly dividend of US$0.75 per share during the April to June period. The company announced that its next recurring quarterly dividend of US$0.75 per share will be paid on September 27.
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