Las Vegas Sands Expected To Post Softer Numbers For Q2 Despite A Recovery In Macau

Las Vegas Sands (NYSE: LVS) is scheduled to release its second quarter results on July 24 and Trefis expects continued softness in gross gaming revenue (GGR) in Macau and Singapore to affect its Q2 earnings. Trefis estimates Las Vegas Sands’ valuation to be $63 per share, which is in line with the market price. We capture trends in Las Vegas Sands’ Earnings over recent quarters in an interactive dashboard along with our forecast for full-year 2019. You can modify any of the key drivers to visualize the impact of changes on the company’s share price estimate. Additionally, you can find more of our Consumer Discretionary sector data here.

A Quick Look at Las Vegas Sands’ Revenues

Wynn reported $13.7 billion in Total Revenues for full-year 2018. This included five revenue streams:

• Casino: $9.8 billion in FY2018 (72% of Total Revenues). This segment includes income from regulated gambling activities at the company’s properties. Macau and Singapore properties contribute 69% and 22% of the casino revenues, respectively.
• Rooms: $1.7 billion in FY2018 (13% of Total Revenues). This segment includes income from visitors/tourists who take a lodge in the company’s properties. Macau, Las Vegas, and Singapore properties contribute 42%, 35%, and 23% of the room revenues, respectively.
• Food and Beverage: $865 million in FY2018 (6% of Total Revenues). This segment includes income from restaurants at the company’s properties.
• Mall: $690 million in FY2018 (5% of Total Revenues). This segment includes income retail stores at the company’s properties from rentals and retail sales.
• Convention, Retail and Other: $622 million in FY2018 (5% of Total Revenues). This segment includes income from business conventions at the company’s properties.

A brief look at the previous quarter results

Sands reported $3.64 billion of net revenues in Q1, growing by 1.9% over the prior year quarter. The quarterly growth was driven by a 2.4% and 1.1% growth in casino and hotel revenues, respectively.

Macau Properties: The Venetian Macao, Sands Cotai Central, and Parisian Macau are the largest properties operated by Sands in Macau. These properties together contribute nearly 85% of LVS’s casino revenues from Macau.

• Sands’ casino revenues from Macau observed a 10% (y-o-y) growth during the first quarter, supported by non-rolling chip drop (mass market gaming) across its three prominent resorts.
• In Q1, Rolling chip volume (VIP gaming) observed a decline of 5%, 20%, and 15% (y-o-y) in Venetian Macao, Sands Cotai Central, and Parisian Macau, respectively.
• Macau’s overall Gross Gaming Revenues remained nearly flat during the first quarter due to Beijing’s restrictions on foreign currency transactions, an overall slowdown in the Chinese economy and the U.S.-China trade dispute.

Singapore and Las Vegas Properties: Singapore and Las Vegas properties contribute 22% and 8% of Sands’ casino revenues, respectively. However, the share of room revenues is much higher with Marina Bay Sands and The Venetian Las Vegas having a share of 22% and 35%, respectively

• Casino revenues declined by 17% and 6% at Sands’ Singapore and Las Vegas properties, respectively.
• However, room revenues remained flat for both destinations.

What to expect from the second quarter results?

• After shrinking by a sharp 8.3% in April, gross gaming revenues in Macau increased by 1.8% and 5.9% in May and June, respectively.
• Taken together, this indicates that Macau’s GGR for the second quarter remained almost flat as compared to last year.
• Visitor volume in Las Vegas also remained almost flat for April and May. Moreover, the gaming revenues in Vegas declined sharply by 11% during May.
• Visitor arrival growth in Singapore was also slow in April and May, consistent with the previous quarter trend.
• Considering the aforementioned factors affecting Sands’ top line, we expect the company to post low single-digit growth in quarterly revenues for Q2 y-o-y.

We expect Las Vegas Sands to report an EPS figure of $3.60 for FY 2019. This EPS figure coupled with our P/E multiple of 17.5x works out to a price estimate of $63 for the company, which is in line with the current market price.

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