Las Vegas Sands Likely Outperformed Macau Market In Q4, Led By Mass-Market And Non-Gaming Operations

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Las Vegas Sands (NYSE:LVS) will report its Q4 2015 earnings on January 27th. We estimate Sands’ Macau revenues declined between 20% and 25% in Q4 amid continued weakness in the market. Overall Macau gaming revenues plunged 27% in Q4 2015 to $6.8 billion, as VIP gaming players continued to stay away from the world’s largest gambling hub amid government’s anti-graft measures. [1] However, these figures reflect sequential improvement over the previous quarter, which is a positive sign for the industry. We’ll be closely watching for Las Vegas Sands’ reported EBITDA margins in the earnings release, as the company reported higher margins in the past few quarters due to cost efficiencies. Higher margins in Q4 can bolster the bottom line, and this may go well with the investors. The stock has seen deep decreases of over 20% in the past 3 months due to a weakness in gaming market, decelerating Chinese economy and the recent turmoil in global equity markets.

Now most of the weakness in Macau market is on the VIP front while the mass-market gaming has comparatively been better. VIP gaming revenues in Macau fell 36% in Q4, while mass-market posted only a 15% drop. [1] This is favorable for Las Vegas Sands, which has a higher profit reliance on mass gaming and non-gaming operations. Accordingly, this will help the company offset some of the losses seen on the VIP gaming front and outperform the overall market.

We currently estimate Las Vegas Sands’ Macau VIP gaming turnover (Rolling Chip Volume) will decline from $140 billion in 2014 to around $85 billion for 2015. Similarly, we expect Macau mass market gaming drop (Non-rolling Chip Volume) to decline from $22 billion in 2014 to around $16 billion in 2015. Looking forward, we estimate the pace of decline to slowdown in the near term, due to the comparison with 2015’s already lower figures.

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Las Vegas Sands’ Singapore operations did well in Q3 on constant currency basis and it likely continued this trajectory into Q4. Singapore’s GDP also saw a surprise growth of 2% in Q4, which is likely to bode well for Sands’ Singapore operations. [2] We currently estimate Singapore revenues and EBITDA to decline in low-single-digit for full year 2015, primarily reflecting the currency issues. Overall, we estimate gross revenues of around $13 billion for Las Vegas Sands in 2015, with EPS of $2.60, which is lower than the market consensus of $2.75, compiled by Thomson Reuters. We currently have a $59 price estimate for Las Vegas Sands, which we will update after the fourth quarter earnings announcement.


Notes:
  1. VIP MARKET TAKES A BEATING IN Q4 BUT MACAU POSTS FIRST SEQUENTIAL IMPROVEMENT, Calvin Ayre, Jan 19, 2016 [] []
  2. Singapore logs surprise Q4 growth spurt but 2015 GDP is sluggish, CNBC, Jan 3, 2016 []