Las Vegas Sands Earnings: LVS Underperforms In Macau But Surprises In Singapore

by Trefis Team
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Las Vegas Sands (NYSE: LVS) reported its Q1’17 earnings on April 26th and the results were in line with consensus estimates. However, LVS underperformed in Macau, where its revenues declined in mid-single digits, excluding the impact of acquisitions and divestitures. Although Sands China’s Macau revenues grew nearly 15%, the primary contribution came from the newly opened Parisian Macau. Increased competition in Macau and LVS’s increased alignment with mass market gaming appear to be the reasons behind the underperformance at its older properties. However, LVS continued its solid performance in Las Vegas where it benefited from increased convention attendance and group meetings. LVS’s Singapore revenues increased by nearly 16%, which was a positive surprise considering that the region was experiencing slow growth for about a year.

Sands China Failed to Capitalize On VIP Gaming Rebound In Macau

Macau’s gross gaming revenues (GGR) grew nearly 13% in Q1’17 with VIP gaming increasing by nearly 17%, almost double the growth of mass market gaming in the region. However, despite the strong rebound in the gaming industry, LVS’ existing properties failed to capitalize on it and most of the growth came from its new casino in the Cotai strip, The Parisian. Parisian Macau revenues also declined sequentially in the first quarter of 2017, hinting that LVS’ challenges are far from over. Despite the interconnectedness of all of its Macau properties, LVS wasn’t able to beat its peers in the region. Wynn Resorts’ Wynn Palace saw nearly double-digit sequential revenue growth. There are likely two major drivers behind the sluggish growth of LVS this quarter:

  • Increased competition in Macau and aggressive campaigning by Wynn in the region reduced footfall in LVS casinos.
  • LVS reduced the number of tables for VIP gambling after the corruption crackdown by the Macau government. Thus, LVS was not able to capitalize on the rebound in the VIP segment.

Las Vegas and Singapore Operations Came To The Rescue

LVS’s Las Vegas operations continued to perform exceptionally in the first quarter of 2017, and its revenues grew by 12.7% in the quarter. LVS’s Las Vegas operations recorded the strongest quarter since 2008 and was driven by increased convention and group meeting business. LVS also increased its casino revenues in the region from Chinese VIP gamblers due to the Chinese New Year. We continue to expect stable revenue growth for LVS in the strip area as no new casinos are coming in the region until 2019.

Marina Bay Sands’ results came in as a bit of a surprise for investors when LVS’s revenues and adjusted property EBITDA from Singapore grew by 16% and 33%, respectively. Singapore revenues were either flat or declining for the last year due to weakness in the Asian gambling industry. However, it appears that with the rise of VIP gambling in Macau, Singapore has also picked up the pace. Overall, we expect LVS’s diversified revenue streams to generate sustainable growth throughout the year.

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

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