GGRAsia – Sands China 2Q non-gaming rev share hits 22pct: COO

Sands China 2Q non-gaming rev share hits 22pct: COO

Jul 20, 2023 Newsdesk Latest News, Macau, Singapore, Top of the deck

Macau casino operator Sands China Ltd saw a “very sharp acceleration” in business volumes in the last month of the second quarter, helping the firm’s profit margins grow by “about 240 basis points quarter-on-quarter”, according to Grant Chum Kwan Lock, the company’s chief operating officer (COO).

He was speaking on Wednesday on the conference call following the second-quarter earnings announcement of Sands China’s parent, Las Vegas Sands Corp.

“Our margin has continued to improve as we grow the revenues on optimal cost structure. Normalised margins are up about 240 basis points quarter-on-quarter. And I think that will continue to rise as revenues recover,” stated Mr Chum.

Sands China achieved adjusted property earnings before interest, taxation, depreciation and amortisation (EBITDA) of US$541 million in the second quarter of 2023. The parent Las Vegas Sands, which also runs the Marina Bay Sands property in Singapore, reported net revenue of US$2.54 billion and net income of US$368 million for the period.

The Sands China COO said the group now had “a more profitable product mix than in 2019,” based on a “greater proportion of mass to VIP.” He said about 87 percent of the firm’s gross gaming revenue (GGR) in the three months to June 30 derived from the mass-market segment, “versus 71 percent in the second quarter of 2019”.

Mr Chum also said that a shift between gaming and non-gaming had benefited the company’s financial performance.

“We are the dominant revenue generator in non-gaming in the industry, and non-gaming is rising as a percentage of our revenues, going from 17 percent in 2019 to 22 percent this quarter,” he stated. “We’re at 93 percent of our 2019 non-gaming revenues.”

The executive said Sands China was reinvesting its revenues “back into the business,” in order to increase the group’s “capability to handle more visitors, chiefly increasing our headcount to service more hotel rooms”.

He added: “That’s one of the things we achieved this quarter, our room operating capacity was back to 10,700 rooms on average for the quarter. And as we go into the summer… we’re heading back to 12,000 rooms in terms of our operable hotel room capacity, so that labour shortage issue has dissipated as an impediment.”

Mr Chum said additionally that the focus of the industry has also been “to reinvest in the non-gaming programming,” which has been “a tremendous driver to the recovery so far”.

‘Standout June’

The COO said June was a “standout month” in terms of business volumes for Sands China, with company EBITDA reaching US$200 million that month.

“We recovered for the second quarter as a whole to 85 percent of 2019 levels in terms of mass revenues. But in June, our mass revenues were about 97 percent, almost a full recovery to June 2019,” he noted. The premium mass segment still “recovered faster than the base mass,” Mr Chum added.

Market-wide casino GGR in Macau stood at MOP15.21 billion (US$1.88 billion) in June, down 2.3 percent from May. JP Morgan Securities (Asia Pacific) Ltd had said that the June GGR result was “yet another post-pandemic high”, “bucking the seasonality” in terms of a lull typically expected after May.

Visitor arrivals to Macau totalled nearly 2.21 million in June, up 480.5 percent year-on-year, but a slight drop of 0.2 percent month-on-month, according to official data.

Sands China’s Mr Chum said the company observed a “very broad-based acceleration” in business in June. “We saw underlying visitation recover… and all of our key volume metrics were up significantly against April and May,” he stated.

In terms of gaming volumes, he added, “non-rolling drop increased 15 percent against April and May, slot handle was up 9 percent, and rolling volume was up 10 percent”.

Robert Goldstein, chairman and chief executive of Las Vegas Sands, mentioned on the call that the recovery was just in its “early days”, as the group expected the tourism market recovery to go beyond the neighbouring mainland China province of Guangdong.

“Hopefully, this summer will evidence more and more return to pre-pandemic numbers in the non-Guangdong visitation. And that’s going to fuel this business,” said Mr Goldstein.

He added: “We have the capacity – gaming, non-gaming – to participate across the board. And that’s what we believe will happen, that will impact margins. In our mind, that’s an inevitable factor in Macau, [as] six months into this recovery, we’re still way behind in terms of visitation.”

On Wednesday, Las Vegas Sands also announced it would resume its quarterly dividend programme, at US$0.20 per common share. Patrick Dumont, president and chief operating officer of Las Vegas Sands, said on the call that moving forward, the group was looking “to have more of a balance between share repurchase and dividends”.

“I think the dividend size today gives us flexibility with our capital allocation,” said Mr Dumont. “What we’re going to try to do is allocate capital to growth”, as the firm sees a “lot of good opportunities for big growth, both in Macau and in Singapore”.