Las Vegas Sands (NYSE:LVS) recently reported its Q4 2013 earnings. The company benefited from strong gaming volumes in Macau and reported a 56% jump in Macau EBITDA (earnings before interest, taxes, depreciation and amortization) to a record $888 million in the fourth quarter.  However, the company’s Singapore operations witnessed a decline amid weaker economy towards end of the year.
Las Vegas Sands’ consolidated revenues increased by 16% to $3.66 billion and earnings jumped 32% to $0.70 for the quarter.  The company’s new resort Sands Cotai Central (SCC) in Macau continued to be a star performer and saw solid growth across all segments, resulting in 61% jump in revenues and more than 250% surge in operating income.  SCC very quickly has ramped up to be the third property for Las Vegas Sands with more than $1 billion annual EBITDA.
The company’s mass table wins in Macau for the quarter increased 58% to reach a record $1.22 billion in a market that grew approximately 40% in the quarter.  We continue to believe that going forward mass-market gaming will be the key driver for future growth in Macau. It yields significantly higher margins, compared to VIP gaming. Las Vegas Sands is poised to benefit from this due to its diverse portfolio of properties in the region.
We currently have $72 price estimate for Las Vegas Sands, which we will soon update based on the fourth quarter earnings announcement.
Macau Continues Its Impressive Run
Las Vegas Sands continued to show healthy growth in its Macau operations. The Venetian Macao and SCC posted solid growth, driven by higher rolling chip volume. However, Four Seasons Hotel Macao and Plaza Casino operations witnessed a 20% decline in revenues, primarily due to lower gaming volume. SCC continued its strong growth with a 73% surge in rolling chip volume, an 80% jump in non-rolling chip volume and 41% growth in slot handle activity.  The company managed to ramp up the mass table productivity in Macau to $12,143 of mass win per table from $9,716 a year ago.  Las Vegas Sands has been able to establish a critical mass with its diverse portfolio of properties in the region. Macau now accounts for close to two-thirds of the company’s revenues. According to our estimates, Macau casinos and hotels alone contribute close to 60% to the company’s stock value.
We continue to believe that Macau operations will drive growth for Las Vegas Sands in the coming years. We remain positive on SCC, which appears to have a potential of much more than $1 billion in annual EBITDA. With more than 200 mass market tables to offer, SCC in Cotai, is becoming a hot property in Macau. The company is also coming up with another property – The Parisian in late 2015 – which will add to its offerings in the region.
Singapore Operations Contract
Marina Bay Sands in Singapore witnessed a 14% decline in EBITDA to $259 million. This can be primarily attributed to lower rolling chip volume, which declined by 17% to $13.73 billion for the quarter. Moreover, rolling chip win percentage also declined to 1.92% in the fourth quarter, compared to 2.14% achieved during the same period in 2012. The high-margin hotel room segment of the property continued to reflect strong revenue growth of 14%. Average Daily Rate (ADR) increased to $425 and occupancy levels remained high at 97% during the quarter. 
Singapore’s economy itself contracted in the fourth quarter with GDP declining by an annualized and seasonally adjusted 2.7% as compared to the third quarter of 2013 and thereby hurting Las Vegas Sands’ growth in the region.  Singapore operations are important for Las Vegas Sands as they contribute more than 20% to the company’s value, according to our estimates. Growth in Southeast Asia’s major economies is expected to improve this year as the economies of more advanced nations start to recover, lifting demand for the Southeast Asia’s exports. As the economy improves, Las Vegas Sands will see growth in the region. Moreover, people from neighboring countries often travel to Singapore for gambling and an increase in such visitors will boost the company’s revenue growth. According to the latest data available, there has been 7% growth in international visitors to Singapore last year. Notes:
- Las Vegas Sands’ SEC Filings [↩] [↩] [↩] [↩] [↩]
- Las Vegas Sands’ CEO Discusses Q4 2013 Results – Earnings Call Transcript, Seeking Alpha, Jan 29, 2014 [↩] [↩]
- Singapore GDP contracts in Q4, hurt by sluggish manufacturing, Reuters, Jan 2, 2014 [↩]
- International Visitor Arrivals Statistics, Singapore Tourism Board, Jan 24, 2014 [↩]