Revival Begins For LVS With The Opening Of The Parisian

+6.92%
Upside
51.70
Market
55.28
Trefis
LVS: Las Vegas Sands logo
LVS
Las Vegas Sands

Las Vegas Sands (NYSE: LVS) recently reported its Q3’16 earnings, delivering strong results for the quarter.  This marked a notable change  given the challenging conditions that have existied in the Macau gaming industry since the crackdown by China on corruption.  In fact, revenues for LVS declined for seven straight quarters starting Q3’14. LVS earnings for Q3’16 rebounded with about 2.6% growth in revenues and 8.6% growth in adjusted property EBITDA. This was driven by increased visitation due to improvement in Macau’s gaming industry and the opening of its new casino The Parisian in the Cotai strip. Additionally, the company saw about 400 bps increase in hotel occupancy, benefiting from the summer vacations. It is interesting that The Parisian outperformed Wynn Resort’s Wynn Palace in terms of the number of visitors and social media buzz despite having fewer operating days in the quarter. However, LVS’ Marina Bay Sands and Las Vegas operations grew little because of high promotional allowances this quarter and a slight decline in food and beverage revenues. However, we believe that company will gain in the short term from the improved gaming industry sentiment, especially in the Asian markets.

 

Sands China To Drive Growth For LVS Amid Challenging Conditions Aided By Parisian Macau

Relevant Articles
  1. Down 13% In Last Six Months, Will Macau Recovery Over Q4 Drive Las Vegas Sands Stock?
  2. Las Vegas Sands Stock Has Remained Flat This Year Despite Macau Recovery. What’s Next?
  3. Macau Recovery Will Drive Las Vegas Sands Q2 Results
  4. Singapore Strength And Macau Rebound Drive Las Vegas Sands Q1. What’s Next For The Stock?
  5. Is Las Vegas Sands Stock A Buy With Macau On Cusp Of Recovery?
  6. Company Of The Day: Las Vegas Sands

Sands China performed extraordinarily well in Q3’16, with a 15.3% increase in adjusted property EBITDA. The solid performance in the quarter was primarily the result of improvement in mass market gaming and 19% increase in LVS Macau property visitations in Q3’16 due to its new casino The Parisian. Improved hotel occupancy due to summer vacations and mall revenues also aided the EBITDA growth of LVS in Q3’16.

The Chinese government’s corruption crackdown had resulted in decline of both VIP and mass market gaming but the impact was more on the VIP gaming revenues. Following that, government took several steps in order to encourage casino owners to drive revenues from mass market gaming and non-gambling attractions. LVS followed this strategy and was rewarded by 6% annual growth in mass market gaming revenues from Macau in Q3’16. We believe that Sands China revenues will continue this momentum going forward aided by significant growth in Macau GGR.

For the first 18 days of operations, adjusted property EBITDA for The Parisian averaged $1.1 million per day, and daily visitations exceeded 40,000, making it the second most visited casino after The Venetian.  The Parisian outperformed Wynn Palace, the newly opened casino of Wynn Resorts in Cotai strip, in terms of visitations and revenues despite having less number of operating days in Q3’16. LVS now has about 13,000 hotel rooms in Macau which approximates to about half of the total rooms owned by casino operators of Macau. We believe that Parisian Macau will overtake all the other casinos in Cotai strip in terms of visitations in the coming quarters, due to its interconnectedness with other LVS resorts and non-gambling attractions.

 

We are currently reviewing our valuation model for Las Vegas Sands in light of recent earnings, and will have an update ready soon.

 

For model and valuation, 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

More Trefis Research