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Best of Howard Stutz

Gaming Guru

Howard Stutz
 

Macau market decline cuts into Las Vegas Sands' quarterly revenues

23 July 2015

At least it wasn't a net loss.

Las Vegas Sands Corp. said Wednesday financial issues surrounding the Macau gaming community resulted in the casino company reporting a 19.4 percent decline in revenue and 30.1 percent drop in profits during the second quarter.

For the past year, visitation by gamblers to Macau has been hampered by various challenges, including economic downturn, a crackdown on corruption by the mainland Chinese government against junket operators, a potential smoking ban, and tourist restrictions. Overall Macau gaming revenue has declined 37 percent through June and the market has seen 13 straight monthly decreases.

Las Vegas Sands collected more than 60 percent of its overall revenue from Macau in the quarter where the company operates four business segments and is building the $2.7 billion The Parisian Macao resort on the Cotai Strip.

Company Chairman Sheldon Adelson said he wasn't deterred by the market's yearlong challenges.

"Despite the current headwinds in the Macau market, we remain sharply focused on the consistent execution of our global growth strategy," Adelson said. "I remain steadfast in my belief that we will grow and prosper in the long term. We remain committed to Macau."

During the quarter that ended June 30, Las Vegas Sands saw its overall net income decline 30.1 percent to $469.2 million while earnings per share fell 28.9 percent to 59 cents per share. Overall revenue declined 19.4 percent to $2.92 billion.

Las Vegas Sands said second-quarter revenue at its Macau properties fell 25.6 percent to $1.77 billion. Net income from the Macau properties dropped 37 percent to $388.7 million. In Singapore, Marina Bay Sands saw net revenue decline 11.4 percent to $713 million. The property's operating income declined 31.6 percent to $277.2 million.

Adelson said on a conference call with analysts that Las Vegas Sands grew its market share in Macau despite the challenges. The company attracted 16 million visitors to its Macau properties during the quarter.

In Las Vegas, where the company operates The Venetian Resort-Hotel-Casino and The Palazzo Resort Hotel Casino, overall revenue declined 2 percent to $346 million. Adelson said low hold percentages in the amount wagered by customers on slot machines and table games caused a 17.1 percent decline in casino revenue. Table game wagering grew 6 percent and 15.4 percent in slot machine handle in the quarter.

In an investors note published before the quarterly earnings release, Susquehanna gaming analyst Rachael Rothman said Las Vegas Sands price per share has increased roughly 4 percent since the beginning of the month on Macau's easing of visitation restrictions and that a casino industrywide smoking ban might be less stringent. The Macau casino market has also had to absorb competition from an expansion of the Galaxy Macau which is owned by Hong Kong-based Galaxy Entertainment.

"All eyes will be on margins this quarter as the market works to assess how promotional Macau became in the face of increasing competition from Galaxy Phase II and still-declining gaming revenues," Rothman said.

Las Vegas Sands' Sands Bethlehem casino in Pennsylvania was the only business segment reporting a quarterly revenue increase, up 9 percent in the quarter.

Las Vegas Sands paid a recurring quarterly dividend of 65 cents per share in the quarter, 30 percent higher than a year ago. The company plans to pay another 65 cents per share dividend in September. Despite the challenges in Macau, Adelson said the company will continue to pay dividends.

"We remain committed to the maintenance of our generous recurring dividend program, and we remain committed to increasing those recurring dividends in the future as our cash flows grow," said Adelson, who controls almost 53 percent of the company's stock.

Las Vegas Sands said its total debt at the end of the quarter was $9.82 billion.