Las Vegas Sands Pre Earnings: What To Expect?

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Las Vegas Sands (NYSE:LVS) will be reporting its Q3’16 earnings on November 3rd and we expect mid to high single digit growth in its earnings due to opening of The Parisian in Cotai strip and improved Macau gross gaming revenues in August and September. In China LVS’s strategy  is to focus on mass market gaming and non-gambling revenues and it is likely to aid its revenue growth going forward. The Singapore market is also improving due to positive signals from Macau. Singapore and Macau constitute about 90% of LVS’s overall revenues and a lot is at stake for LVS from its new casino on the Cotai strip.

 

The Parisian to Focus on Mass Market Gaming and Non-Gambling Revenues

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LVS opened its new casino on the Cotai strip on September 13th at an estimated cost of about $3 billion, which is expected to contribute nearly 10% to LVS China revenues in 2017.  The Las Vegas Sands shifted its focus from VIP gaming to mass market gaming following the Chinese government’s corruption crackdown in 2014. 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 although LVS China got license for only 150 new tables in September. Besides placing special emphasis on mass market gaming, the company intends to develop alternate revenue streams to reduce risk.  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.

 

Improved GGR of Macau Casino Industry

Macau’s GGR (gross gaming revenue) witnessed 87% growth between 2010 and 2015 before declining by 34% in 2015 due to a corruption crackdown by the government and a slowdown of the Chinese economy. However, the region’s GGR witnessed growth in this past August and September after falling continuously for the last 27 months. LVS Macau operations accounted for more than half of its overall revenues in 2015. Thus, Parisian’s implied contribution to LVS overall revenues will be an estimated 5% in 2017.  Despite a slight increase in GGR, it still too early to determine if the market has stabilized as China’s economy has not recovered from the slowdown and junket operators are still very few in number due to corruption crackdown.

For model and valuation, please refer to our complete analysis of Las Vegas Sands.

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