LVS 15Q1 earnings miss forecasts as Macau revenue slumps

Las Vegas Sands reported weaker-than-expected Q1 profit and revenue, pulled down by a slump in its Macau gaming operations.

Group net revenue for the first quarter of 2015 decreased 24.9 percent to $3.01 billion, missing forecasts for $3.2 billion, according to analysts polled by Capital IQ.

Adjusted net income decreased to $531.1 million, or $0.66 per diluted share, compared to $793.9 million, or $0.97 per diluted share, in the first quarter of 2014. That’s well below the $0.72 expected by analysts.  

At Sands China, adjusted property EBITDA fell 43.4 percent to $531 million, while net income at the unit fell by more than half. Total revenue fell by 34.9 percent to $1.77 billion.

As expected, LVS was hurt by the continuing decline in VIP gamblers in Macau as China’s crackdown on corruption kept high rollers at bay. Rolling chip volume at its flagship Venetian Macau property declined 44 percent to $8.52 billion, while non-rolling chip drop was also lower, with a 22.5 percent decline to $1.87 billion.

However, revenue from the resort’s shopping malls bucked the trend, gaining 15.9 percent and benefiting from increased visitation from China during the period.

LVS is the first of Macau’s casino operators to report Q1 results. Aside from the anti-corruption drive, revenue in the world’s largest gambling hub has been hit by a series of issues, from weakness in the mainland economy to a clampdown on tourist visas, together with troubles in the junket system and China UnionPay terminals.

That said, Q1 figures are also being compared with the year-ago period’s stellar results, when GGR in Macau was at record levels.

LVS Chairman and CEO Sheldon Adelson expressed confidence in the future of Macau, saying the opening of new resorts such as The Parisian will help Macau diversify its tourism offering.

He said the group’s focus on the mass market and wider variety of non-gaming options had helped cushion the downturn, with Sands China accounting for 57 percent of Macau's total non-gaming revenue in the quarter.

"The Macau market saw strong visitation from mainland China during the quarter and we enjoyed solid visitation to our Cotai Strip properties,” he said in a release. “We welcomed over 16 million visits to our Macau property portfolio, delivered strong growth in the high-margin retail mall business and steady performance in most of the other non-gaming segments of our business.”

Group executives on a later conference call with analysts also said they believed there remains considerable pent up demand in China that ultimately will bode well for the territory. Adelson added that on a recent visit he had never seen the casino floors so busy in the mass segment.

He also poured cold water on concern the government is preparing to cap the number of mainland visitors to Macau. He said it’s not the position of the Macau government at this time, it’s the position of a single government minister and it would be almost impossible to implement.

“From my standpoint as a MICE operator, all MICE to Macau would collapse,” he said.

 Executives said the company has also requested further labor from the government to complete its new Parisian resort, scheduled to open in late 2016, and is optimistic the request has been met favorably. That may bring forward the opening date of the property, executives said.

In Singapore, Marina Bay Sands reported a decline of 4.6 percent in adjusted property EBITDA to $415.3 million, as a decline in VIP volumes offset modest growth in mass gaming and mall revenues. Adjusted property EBITDA at The Venetian Las Vegas and The Palazzo, including the Sands Expo and Convention Center, was $74.1 million for the quarter, a 7.0 percent decrease compared to the first quarter of 2014.  

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