Las Vegas Sands Earnings Preview: Mixed Results Expected

by Trefis Team
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Las Vegas Sands (NYSE: LVS) will report its Q1’17 earnings on April 26, and we expect the company’s revenues to grow by about 15% this quarter, driven by strength in the Macau gaming industry. However, despite a nearly 20% increase in Macau’s GGR in February and March, as well as the opening of its new casino in the region, LVS may not fully capitalize on the market recovery due to increased competition in the region. Additionally, the growth in Macau was primarily attributed to VIP gaming in Q1’17, and Macau’s local casinos hold the upper hand in VIP gaming. Wynn Resorts has also intensified the competition in Macau, and its aggressive campaigning of Wynn Palace may dampen LVS’s growth this quarter.

LVS’s Singapore operations are expected to remain flat this quarter as we expect a decline in Chinese VIP gamblers going to Singapore to gamble due to the improved VIP markets in Macau. The Las Vegas area remained positive for the quarter, and we expect LVS’s businesses to grow moderately in the Las Vegas Strip. LVS’s overall profits may also remain low this quarter due to high CapEx from its Cotai project.

Increased Competition In Macau May Dampen Growth

VIP gaming revenues in Macau declined significantly in the last few years due to the corruption crackdown by the Macau government. LVS accordingly shifted its focus towards mass market gaming in order to minimize its risks. Interestingly, in Q1’17, Macau’s gaming industry grew by nearly 13% driven by a 16.8% increase in VIP gaming and an 8.5% increase in mass market gaming. As local casinos such as SJM and Galaxy hold the upper hand in Macau’s VIP gaming sector, we do not expect LVS to fully translate Macau’s overall GGR growth this quarter. The primary contributor to revenue growth for LVS will be its new casino in the Cotai strip, which was opened in the third quarter of 2016. Again, increasing competition in Macau will not allow LVS to grow as much as it would have liked. LVS’s major competitor in Macau, Wynn Resorts, aggressively campaigned for its new Wynn Palace casino and was able to outperform Parisian Macau in Q4’16, which may continue to dampen Sands China’s growth this quarter.

Las Vegas, Singapore Businesses To Remain Sluggish

LVS’s Las Vegas Strip and other domestic resorts are expected to grow moderately this quarter, as overall casino industry revenues in the Las Vegas Strip area remained positive for the quarter. LVS’s Singapore gaming revenues accounted for nearly 21% of its overall revenues in 2016. However, LVS’s Singapore businesses have declined in the last couple of years because of weakness in the Asian VIP gaming industry. Chinese VIP gamblers preferred the U.S. when Macau’s anti-corruption movement was in action, and now they have started to return to Macau as the situation is eased. As entry to locals in Singapore is restricted, and VIP gamblers from China remain in China, we expect LVS Singapore revenues to be flat this quarter.

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

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