Las Vegas Sands (NYSE:LVS) recently reported its Q2 2014 earnings. The casino giant benefited from strong gaming volumes in Macau and reported a 22% jump in Macau EBITDA to $801 million. While rolling chip volume declined by 27% in Singapore, EBITDA was up 18% as compared to the prior year quarter.  This can be attributed to a high rolling chip win percentage.
Las Vegas Sands’ consolidated revenue increased by 12% to $3.62 billion and earnings per share jumped 31% to $0.85 for the quarter.  Sands Cotai Central was the star performer with revenues at the property rising 34% and EBITDA up 70% to $249 million.  Cotai has been the driving force for Las Vegas Sands in the recent past, and we believe that it will continue its uptrend in the coming years driven by higher mass-market gaming. We estimate that the Cotai property will generate over $1 billion of EBITDA in 2014.
The company’s gaming mix was 44% for VIP and 56% for non-VIP in a market with 60% VIP and 40% non-VIP gaming.  These statistics highlight Las Vegas Sands’ stronghold over the mass-market segment in Macau. It must be noted that the mass-market segment yields significantly higher margins compared to VIP gaming. We believe mass-market gaming will be a key driver for future growth in Macau and for Las Vegas Sands.
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We currently have $82 price estimate for Las Vegas Sands, which we will soon update to incorporate the second quarter earnings.
Continued Growth In Macau Operations
Las Vegas Sands continues to witness strong growth at Venetian Macau and Sands Cotai Central. The Cotai property saw a 53% jump in non-rolling chip drop and 0.62 points jump in rolling chip win percentage. This led to a 120% surge in operating income for the property.  The casino giant has been consistently outperforming Macau’s overall gaming growth. Macau’s gaming revenues grew by 5% in the second quarter while Sands China saw a 15% jump in revenues to $2.38 billion. Las Vegas Sands has been able to establish a critical mass with its diverse portfolio of properties in the region and is benefiting from the overall gaming growth, especially in the mass-market segment.
However, VIP gaming saw some pressure as it declined by 20% in June as compared to May, primarily due to the rise in bets on the FIFA world cup matches.  Average table revenue dropped from HK$801 to HK$775 million per day after the World Cup kicked off, representing a decline of 3.3%. Casino revenues for June dropped 3.7%, amounting to $3.4 billion.  Nevertheless, we believe that the long-term trend in Macau remains intact and VIP as well as non-VIP gaming will pick up in August.
VIP gaming accounts for only 17% of Las Vegas Sands’ Macau profits.  The company was quick to realize the potential of mass market gaming in China and has been aggressive on capturing that space. We continue to believe that Macau operations will drive growth for Las Vegas Sands in the coming years.
Singapore Casino Volume Decline
Las Vegas Sands’ Singapore casino revenues increased by 10% to $646 million in the second quarter. While rolling chip volume declined by 27%, the win percentage increased to 3.45% compared to 2.53% in the prior year quarter. Singapore’s hotel continued to do exceptionally well with 99.1% occupancy levels and 8% growth in ADR (average daily rate) to $409 for the quarter. This led to 9% growth in net revenues and 18% jump in EBITDA to $418 million. 
The decline in Singapore casino volume was on expected lines due to a sluggish economy and weak tourism data. Many tourists from other Southeast Asian countries come to Singapore for gaming activities. While data on the visitors in the second quarter is not available yet, international visitation declined by 0.2% during the first four months of 2014, according to data released by Singapore Tourism Board.  Singapore’s economy contracted by 0.8% during the second quarter as compared to 5.3% growth in the prior year period.  We estimate Singapore gross revenues to be around $3.6 billion in 2014.Notes:
- Las Vegas Sands’ SEC Filings [↩] [↩] [↩] [↩] [↩] [↩] [↩]
- Las Vegas Sands’ CEO Sheldon Adelson on Q2 2014 Results – Earnings Call Transcript, Seeking Alpha, Jul 17, 2014 [↩]
- Macau casinos feel heat of World Cup fever as gamblers bet elsewhere, South China Morning Post, Jul 1, 2014 [↩]
- International Visitor Arrivals Statistics, Singapore Tourism Board, Jun 27, 2014 [↩]
- Singapore economy contracts in Q2 amid broad-based weakness, Financial Times, Jul 14, 2014 [↩]