Las Vegas Sands Earnings Preview: All Eyes On Macau And Singapore Operations

Las Vegas Sands (NYSE:LVS) will report its Q3 2013 earnings on October 17. Macau gaming revenues have been impressive this quarter, as visitors continue to flock to Asia’s gambling hub. We expect the company to post good results in the third quarter on the back of solid growth in mass-market gaming, which had seen 33% surge year-to-date. This is far more than 8% growth in VIP gaming during the same period. ^[1] The company’s Singapore operations should also do well as the macroeconomic situation has been favorable this year. While Singapore’s GDP has contracted 1% in the third quarter, it is up 5% on a yearly basis. ^[2] We will be closely watching for LVS’ Cotai operations since the resort came into operation only in April last year and is turning out to be one of the most popular destinations in Macau.

See our complete analysis for Las Vegas Sands

Continued Growth In Macau

Macau has seen solid growth so far this year. The gross gaming revenues were up 20% in July, amounting to $3.7 billion, the third strongest figure this year. The revenues rose by 18% and 21% to $3.85 billion and $3.63 billion for the months of August and September respectively. ^{[3] [4] [5]} The strong growth was driven by an increase in the number of Chinese visitors. However, on September 22 a severe typhoon hit close to Macau and Hong Kong, disrupting air, road and rail links in the surrounding areas and resulting in a lower influx of visitors into the casino hub. LVS is poised to benefit from the increased gaming revenues in Macau as it operates multiple properties in the area with a market share of close to 23%, only behind SJM Holdings, which commands close to 24% market share. There is a very small percentage of population visiting Macau currently and as the country grows and the number of HNIs increase, more and more people will visit the gambling capital. Fortunately for Macau, it is the only place in China where gambling is legal.

On the other hand, China’s macroeconomic situation is also improving. It is showing signs of stabilization helped by government measures such as lowering taxes for small firms and quickening infrastructure spending for growth. As the U.S. economy picks up, China is seeing growth in exports. China is set to release its third quarter GDP data on October 18 and it is expected to be northward of 7.5%. ^[6] An overall improvement in China will further boost the casino business in Macau.

Singapore Operations Will Benefit From Stronger Economy

Singapore’s economy has been doing well in 2013. The nation’s GDP eased a seasonally adjusted annualized 1% in the third quarter of 2013, compared to the previous three months when it had surged 15%. ^[2] The second quarter growth came in at the fastest pace in more than two years on the back of strengthened services and a rebound in manufacturing. In Q2 2013, LVS witnessed 6.5% revenue growth in Singapore as compared to the same period previous year. ^[7] LVS is benefiting from increased visitors in Singapore. People from Southeast Asia travel to Singapore for gambling. As per the latest data available, there has been 8% growth in international visitors in Singapore. ^[8] We expect the company to benefit from this, as LVS along with Genting are the only two casino operators in the country.

Understand How a Company’s Products Imps act its Stock Price at Trefis

1. Macau Gaming：Alert August Mass Growth Accelerated to 44% and VIP Volume Rebounds 16%, Caijing, Oct 8, 2013 [↩]
2. Singapore GDP Contracts 1.0% In Q3, RTT News, Oct 13, 2013 [↩] [↩]
3. Macau rakes in 20 pct gain in July gaming revenues, Reuters, Aug 1, 2013 [↩]
4. Macau gambling revenue up 17.6 percent in August yr/yr, Reuters, Sep 2, 2013 [↩]
5. Macau gambling revenue up 21.4 percent in Sept yr/yr, Reuters, Oct 3, 2013 [↩]
6. China central bank says 2013 GDP growth to exceed 7.5 percent: Xinhua, Reuters, Oct 11, 2013 [↩]
7. Las Vegas Sands’ SEC Filings [↩]
8. International Visitor Arrivals Statistics, Singapore Tourism Board, Sep 24, 2013 [↩]