SANDS CHINA REVENUES TURN FLAT IN 3Q

2014/10/17

From：Macau Business Daily

The company posted a 3.3 percent profit increase mainly due to increasing competition in the premium mass segment

Sands China Ltd posted net revenues of US$2.3 billion (MOP18.4 billion) in the third quarter of the year, a slight decrease of 0.4 percent compared to the same quarter a year ago.
According to the company’s third quarter results report filed with the Hong Kong Stock Exchange, Sands China’s third-quarter adjusted property earnings before interest, taxes, depreciation and amortization (EBITDA) rose to US$811.6 million from a year earlier, and compared to the US$799.3 million average of four analysts’ estimates compiled by Bloomberg.
Net income in the quarter at Sands China climbed 4.3 percent to US$644.6 million from US$617.9 million a year ago, while net revenue fell 0.4 percent to US$2.33 billion, according to the parent company Las Vegas Sands Corp’s earnings statement.
The Macau unit of Las Vegas Sands Corp had reported a 3.3 percent rise in profit due to growth in mass-market gamblers. “Management mentioned increasing competition in the premium mass segment” and that’s impacting margins for this higher-spending group of gamblers, Barclays Plc analyst Phoebe Tse wrote in a note yesterday. Margins for lower-tier, mass-market gamblers remained high at more than 45 percent, she said.
Billionaire Sheldon Adelson, who controls Sands China, said this month that he expects VIP gambling business in the city to recover after casino revenue in the three months ended September fell 7.1 percent. Chinese players have been “staying below the radar” by avoiding Macau and not spending money in ostentatious ways, Mr. Adelson said.

Venetian, Cotai Central

EBITDA recorded at the company’s Venetian Macao property decreased by 1.3 percent to US$352.7 million in the third quarter over that of the same period last year. According to the earnings’ statement, non-rolling chip drop increased 10.1 percent to reach US$2.2 billion.
In addition, slot machines registered a 25.9 percent increase to reach US$1.4 billion.
Also registering an increase was the premises’ shopping malls, where revenues were up 12.1 percent to US$51 million.
At the group’s property across the street, Cotai Central registered a 25.1 percent increase in mass table, slot and electronic table game win per day to US$5.4 million in the third quarter compared to the third quarter of 2013. Non-rolling chip was US$1.9 billion, up 32.3 percent, and slots increased 38.7 percent to US$2.03 billion.
Sands Cotai Central’s Dragon Palace premium mass lounge “failed to attract premium mass players,” analysts at Deutsche Bank AG said in a note to clients after Sands China released its quarter earnings.
According to the company filing, more than 80 percent of Las Vegas Sands’ operating profit in both Macau and Singapore operations comes from mass gaming and non-gaming segments. And less than 20 percent of the profit comes from the VIP segment.

Leading declines

Meanwhile, Sands China led declines among casinos in Hong Kong trading as intense competition between the resorts hit margins for higher-stakes mass-market gamblers.
Sands China fell as much as 2 percent to HK$41.40 as at 10:13 a.m., while MGM China Holdings Ltd. declined 1.1 percent and Galaxy Entertainment Group Ltd. slipped 0.5 percent.
China’s clampdown on corruption and lavish spending has hit the big spenders who contributed more than 60 percent to Macau’s gambling revenue. These high-rollers now increasingly bet outside the city, the only place in China where casino gambling is legal, boosting overseas casinos from Manila to Las Vegas.
Operators such as Sands China and Galaxy Entertainment Group Ltd. have allocated more resources to the premium mass-market gamblers who bet in cash and provide bigger margins than high rollers. Such players don’t use junket operators, which charge companies a commission to bring them to Macau.
Casinos in Macau are also facing greater labour unrest and a profit margin squeeze as more employees join protests to demand higher pay and better welfare support.
Analysts at Telsey Advisory Group said in their latest note to clients that investors could view Las Vegas Sands’ results as a ‘mixed bag’. ‘We see no reason to change our positive outlook,’ the note reads. ‘In Macau, VIP headwinds persist as expected, but it appears the smoking ban is a non-event so far, wage inflation appears under control and margins remain intact.’

Copyright@Macau Business Daily