How The Parisian Will Impact Las Vegas Sands’ Growth
Las Vegas Sands (NYSE: LVS) opened The Parisian, its new casino in Cotai strip in Macau, on September 13th 2016. Macau’s gross gaming revenues showed growth for the first time in August 2016 after they started declining in mid 2014. The Parisian augments the market with addition of 150 gaming tables, 3,000 hotel rooms and about 1,600 slot handles and the company’s revenue is likely to go up in the last quarter of 2016 as a result. Nevertheless, despite the increased capacity and physical connectivity of all the casinos of LVS Macau, revenue growth for the full year will not be significant. However, with the expected recovery of Macau’s GGR in 2017 and more table license for Sands China in 2017, we expect revenue growth of about 11.5% next year. We have priced in this expectation in our estimates. Approximately 30% of incremental revenues in 2017 will come from the addition of The Parisian. Additionally, the property will impact EPS positively by 14%.
How big is The Parisian Casino for LVS?
- With The Stock Flat This Year, Will Q1 Results Drive Las Vegas Sands Stock Higher?
- Down 13% In Last Six Months, Will Macau Recovery Over Q4 Drive Las Vegas Sands Stock?
- Las Vegas Sands Stock Has Remained Flat This Year Despite Macau Recovery. What’s Next?
- Macau Recovery Will Drive Las Vegas Sands Q2 Results
- Singapore Strength And Macau Rebound Drive Las Vegas Sands Q1. What’s Next For The Stock?
- Is Las Vegas Sands Stock A Buy With Macau On Cusp Of Recovery?
LVS Macau operations accounted for 51.2% of its overall revenues in 2015, and we expect The Parisian to contribute nearly 10% to LVS China business revenues in 2017. Thus, Parisian’s implied contribution to LVS overall revenues will be nearly 5% in 2017. The Parisian has about 1,600 slots and 400 gaming tables but it got license for only 150 tables in September 2016. The Parisian has close to 3000 hotel rooms which has resulted in nearly 35% increase in the total number of hotel rooms of Sands China since 2015. The total capital investment for the property is estimated to be nearly $3 billion.
How The Parisian will ensure sustainable growth for Sands China?
Despite the sharp decline in revenues, Macau still accounted for more than 50% of revenues of LVS in 2015. The region’s casino industry has suffered since 20014 from the corruption crackdown of the Chinese government. Following this, Las Vegas Sands shifted its focus from VIP gaming to Mass Market gaming. The latter segment’s contribution to LVS Macau casino revenues increased from 52% in 2010 to 75% in 2015. The Parisian is a result of this focus. Besides placing special emphasis on VIP gaming, the company intends to develop alternate revenue streams to reduce risk. The The Parisian, with its 3000 rooms and related amenities, is intended to attract non-gamblers to Macau as well and will add to its non-gambling revenues.
Wynn Resorts (NASDAQ: WYNN) also opened its new casino in Cotai strip on August 22nd 2016 but took very passive approach towards the marketing. On the other hand, Sands China has been more heavily marketed, which reflects in its impressive footfall compared to Wynn Palace.
Notes:
1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis of Las Vegas Sands
View Interactive Institutional Research (Powered by Trefis):
Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap