The results announced by local casino operator Sands China’s parent company, Las Vegas Sands, were seen as ‘disappointing’ and ‘below expectations’, according to analysts at Wells Fargo and J.P.Morgan. The results, released yesterday, showed that the group’s local property EBITDA (earnings before interest, taxation, depreciation and amortisation) came in 5 per cent below the Street, while the normalized EBITDA was 11 per cent below consensus, point out the Wells Fargo analysts. ‘The miss was driven by: lower than expected market share, higher promotions, and higher than expected opex [operation expenditure],’ note the analysts.
The adjusted property EBITDA for the group in the fourth quarter of the year came in at US$610 million, which was a 3 per cent quarter-to-quarter drop, but a 5 per cent year-on-year increase, falling short of J.P.Morgan analysts’ consensus by 4 per cent to 6 per cent, with the group noting that: ‘although management’s tone was upbeat for both the short term […] and the long term, the knee-jerk reaction to the stock is likely to be negative.
‘We held towards the low end of our expected hold range in mass tables. We estimate low hold in mass tables, particularly at The Parisian Macau, impacted EBITDA negatively by between US$15 million and US$20 million,’ notes a release by Sands China summarizing the earnings call given by Las Vegas Sands (LVS) Chairman and CEO Sheldon Adelson.
‘We think it was a disappointing quarter,’ note analysts at Wells Fargo, pointing to overall local market revenues increasing 10 per cent quarter-to-quarter.
‘Total net revenues for Sands China increased 12 per cent to US$1.86 billion in the fourth quarter of 2016,’ counters the Sands China filing on the Hong Kong Stock Exchange. ‘Net income […] decreased 7.9 per cent to US$348 million,’ details the filing.
Results
The group’s local properties saw significant reductions in different areas, with the Venetian undergoing a year-on-year drop in the group’s Convention, Retail and Other sectors of 30 per cent, down to US$21 million, and net revenues dropping 12.1 per cent.
Both the property’s casino revenues and room revenues fell by 12 per cent and 12.5 per cent year-on-year, hitting US$602 million and US$44 million, respectively.
The group’s slot handle suffered a 22.4 per cent drop, while its rolling chip fell 13.9 per cent in the quarter, year-on-year.
The group’s Sands Cotai Central operations also saw a fall in the slot handle, of 14 per cent, and rolling chip volume of 31.5 per cent, year-on-year, with revenue from the casino falling 14.3 per cent in the quarter, year-on-year, to US$365 million. Convention, retail and other activities also saw a 14.3 per cent year-on-year reduction, to US$6 million.
New kid on the block
The first full-quarter results from Sands China’s newest property, The Parisian Macao, showed that the casino brought in US$301 million in revenue, while the rooms brought in US$30 million, with 91 per cent occupancy in the quarter. Rolling chip hit US$3.31 billion.
J.P.Morgan analysts note that ‘both its [the Parisian’s] gaming and non-gaming performed solidly’.
‘Overall the group’s gross gaming revenue rose 8 per cent quarter-to quarter […] with its mass gross gaming revenue up 6 per cent quarter-to-quarter and VIP up 13 per cent quarter-to-quarter […] non-Parisian mass gross gaming revenue actually fell 7 per cent quarter-to-quarter, dragged down by Sands Cotai in particular down (14 per cent quarter-to-quarter),’ note the analysts.
The group’s oldest local property, Sands Macao, suffered cannibalization from the new property, as its rolling chip volume fell 47.9 per cent year-on-year in the quarter, hitting US$1.4 billion, and overall casino revenue fell 21.7 per cent, to US$155 million. The property still saw 98.6 per cent room occupancy, while suffering a 6.2 per cent year-on-year drop in the average daily rate of rooms.
CNY
The management’s expectations for Chinese New Year, note analysts at J.P.Morgan, are ‘upbeat’: “CNY holiday demand is likely to be off the chart huge”, which the group notes as ‘in line with feedback from junkets, operators and hotel booking trends.
“To date we have invested approximately US$13 billion in Macau […] We remain confident that our […] Cotai Strip portfolio of properties will continue to provide the economic benefits of diversification to Macau […],” states the group’s Chairman and CEO.
‘We can and will continue to return excess cash to shareholders while maintaining our ability to invest in new development opportunities,’ notes the filing.
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Sands China employees get raise and bonus
Sands China has announced that it will increase the salaries of eligible full-time staff ‘by an average of 2 per cent to 6 per cent’ starting from March 1, according to a press release by the operator yesterday. The company is the only one of the six gaming concessionaires to announce a raise in salary as well as a ‘discretionary bonus’ in advance of the Chinese New Year holiday, as opposed to the other operators which have only announced bonuses for eligible employees.
The group notes the raise and bonus is to ‘reward their contributions towards the company’s continuing success and achievements’.
Full-time employees making MOP12,000 or less will receive a MOP600 salary raise, while those earning over MOP12,000 will receive ‘an average of a 2 percent to 2.5 per cent pay rise’.
The discretionary bonus will be for employees who have worked in the company for at least one year and will be equivalent to one month’s salary. The group will also distribute a bonus in July of this year.
