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China – Sands China sees ‘signs of stabilisation’

By - 25 April 2016

Las Vegas Sands saw its steepest fall in eight months after revenue fell by another 9.8 per cent in the first quarter, dropping to $2.72bn and missing estimates of $2.88bn.

Whilst highlighting the plight of Macau’s under-performing casino market, the operating giant did say that its saw ‘signs of stabilisation, particularly in the mass market’ in Macau.

Sands China’s first quarter decreased 7.9 per cent to $1.63bn, compared to $1.77bn in the first quarter of 2015. The market as a whole fell by 13.3 per cent in that period.

EBITDA at Sands’ Macau resorts fell by 2.5 per cent to $517.9m. Despite the softer gaming market in Macau, The Venetian Macao continued to enjoy market-leading visitation and financial performance.

Sheldon Adelson, Chairman and Chief Executive Officer, said: “The operating environment in Macau remained challenging during the quarter; but we do see signs of stabilisation, particularly in the mass market. Our focus on the higher margin mass and non-gaming segments and the geographic diversification of our cash flows enabled us to once again deliver in excess of US$1bn of hold-normalised adjusted property EBITDA during the quarter. We remain intensely focused on the consistent execution of our proven global growth strategy, which leverages the power of our unique convention-based Integrated Resort business model.”

However, analysts believe it is too early to suggest any degree of stabilisation. Wells Fargo analyst Cameron McKnight said: We remain neutral on LVS and Macau. We believe stabilisation is already discounted. We think it’s too early to call stabilisation and don’t expect a v-shaped recovery when we see it. Q1 Macau EBITDA was five per cent below recently elevated expectations. Expenses were higher and margins were lower than expected. With the recent rally in the group, investors were expecting another margin-driven beat.”

Mr. Adelson added: “We remain confident in our ability to both further extend our global leadership position and deliver strong growth in the future. In Macau, notwithstanding the difficult operating environment, we delivered $510.4m in adjusted property EBITDA across our Macau property portfolio during the quarter. We remain confident that our market-leading Cotai Strip properties, which will be complemented later this year by The Parisian Macao, targeted to open in mid-September 2016, will continue to provide the economic benefits of diversification to Macao, help attract greater numbers of business and leisure travellers, and provide our company with an outstanding and diversified platform for growth in the years ahead.”

Elsewhere, profit in Singapore, which is also dependent on Chinese players fell by 34 per cent to $274.9m. Sands has confirmed that it could offload the retail parts of its Singapore resort operation when a government-enforced moratorium ends next year. Things are picking up in Las Vegas where adjusted property EBITDA at The Venetian Las Vegas and The Palazzo, including the Sands Expo and Convention Center, was $86.9m for the quarter, an increase of 17.3 per cent compared to the first quarter of 2015.

Mr. Adelson said: “Marina Bay Sands in Singapore continues to attract visitors from across the region to Singapore, which enabled us to generate yet another record mass gaming win-per-day in local currency terms. While the impact of the stronger US dollar and low win percentage on Rolling Chip play negatively impacted the company’s reported financial results for the quarter, both gaming volumes and our non-gaming segments remain resilient. On a constant currency basis, hold-normalized adjusted property EBITDA increased 10.3 per cent. At The Venetian Las Vegas and The Palazzo, including the Sands Expo and Convention Center, a 10 per cent year-over-year increase in RevPAR to $231 drove a 17.3 per cent increase in adjusted property EBITDA during the first quarter of 2016.”

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