Fitch Ratings Inc forecasts a year-on-year decline in full-year 2016 revenue and earnings before interest, taxation, depreciation and amortisation (EBITDA) for the Macau operations of international casino firm Las Vegas Sands Corp.
Las Vegas Sands is the parent of Macau-based gaming operator Sands China Ltd.
Fitch projects “Las Vegas Sands’ Macau revenues and EBITDA to decline by 7 percent and 10 percent, respectively, in 2016 and then rebound to approximately 2015 levels by 2017 as the Parisian ramps up, the market begins to recover and Sands China realises operating synergies,” the credit ratings agency wrote in a Friday note.
Las Vegas Sands chairman and chief executive Sheldon Adelson said, on a conference call with investment analysts in April, that the group was targeting a mid-September opening for its US$2.7-billion Parisian Macao (pictured in a file photo) on Cotai.
Fitch forecast a 5 percent year-on-year decline in market-wide gross gaming revenue in Macau for 2016.
In its review of Las Vegas Sands operations, the credit ratings agency stated that the casino firm’s recent legal settlements with a former Sands China chief executive, Steve Jacobs, and with the U.S. Securities and Exchange Commission (SEC), respectively, would “help to alleviate regulatory and litigation overhangs” regarding Las Vegas Sands.
Sands China announced on June 1 it had reached a settlement with Mr Jacobs. Mr Jacobs had been suing – via courts in the United States – the group and several of its entities, alleging wrongful termination, defamation, and breach of contract.
In April, Las Vegas Sands announced that it would pay a US$9-million fine to settle a regulatory investigation by the SEC related to the firm’s operations in China.
In its Friday note, Fitch reaffirmed Sands China’s issuer default rating at ‘BBB-’ – the lowest level in investment grade debt – with a stable outlook.
The credit ratings agency gave a similar rating to Marina Bay Sands Pte Ltd – also a subsidiary of Las Vegas Sands – that operates casino resort Marina Bay Sands in Singapore.
“We expect Marina Bay Sands’ operations to be stable with the asset benefiting from growing visitation to Singapore (up 6 percent on a last 12 months basis as of March 2016),” Fitch stated.
It added: “Recent performance was negatively impacted by foreign exchange and adverse hold while underlying trends in gaming volume, lodging and retail have been more stable.”
Fitch Ratings also affirmed the issuer default rating of Las Vegas Sands at BBB-.
It added: “Las Vegas Sands’ prospects for future, large-scale developments are limited due to the regulatory hurdles in jurisdictions where Las Vegas Sands is interested in developing. The legislative initiative to legalise casinos in Japan remains stalled, and Fitch believes there is low political inclination for expanding gaming to locals in South Korea.”
According to a media report, a group of representatives from Las Vegas Sands earlier this month visited the port city of Busan, in South Korea. The Korea Economic Daily stated that the gaming firm was mulling the idea of developing a large-size casino resort in Busan, but the report added that the company wanted to ensure local gamblers are permitted in the gaming facilities.
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”As the Macau gaming revenue structure is now leaning heavily towards the mass business … once the border fully reopens, the recovery from mass should drive the sector to bounce more swiftly”
Vitaly Umansky, Louis Li and Shirley Yang
Analysts at Sanford C. Bernstein