Sands China profit down 9.6 percent, below estimates

Wednesday 20th of April 2016

Macau casino operator Sands China Ltd reported 16Q1 profit fell 9.6 percent year on year, the result of a challenging operating environment in Macau.

The results, which were below analyst expectations, saw total net revenue for Sands China down 7.9 percent to $1.6 billion in the first quarter of 2016, compared to $1.8 billion the year before. Adjusted property EBITDA decreased 2.5 percent to $517.9 million in the quarter, whilst net income was down 9.6 percent to $311.6 million in 16Q1, compared to $344.7 million in 15Q1.

"Despite stronger QoQ growth in mass, EBITDA margin decline is worrying. Annualized 1Q16 property EBITDA would mean 7 percent decline in 2016," said a note from Morgan Stanley following the release of the results.

Las Vegas Sands chairman and chief executive officer said the operating environment in Macau remained challenging in the quarter, but there were signs of stabilization, particularly in the mass market.

“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… help attract greater numbers of business and leisure travelers,” said Adelson.

Bernstein said given the company's weak result and weak GGR run rate overall in Macau, gaming stocks may feel some pressure in the near term, but said the current price provides a buying opportunity for long-term investors.

"We see long term fundamental value in Sands China and look favorably upon its management team, product positioning and strategy, strong balance sheet and focus on returning capital to investors. We would recommend buying the stock on weakness. "

In Singapore, the strong U.S. dollar, as well as low win percentage on rolling chip negatively impacted on financial results.

Operating income was down 41.7 percent to $186 million, down from $319 million in the first quarter of 2015.

Property generated adjusted EBITDA was $274.9 million, down 33.8 percent compared to 15Q1, but on a hold-normalized basis, adjusted property EBITDA was $382.8 million, up 10.3 percent.

Overall, net revenue for the first quarter of 2016 for Las Vegas Sands was down 9.8 percent to $2.72 billion, compared to $3 billion in the first quarter of 2015.

Consolidated adjusted property EBITDA of $917.6 million decreased 12.7 percent in the first quarter of 2016, and net income attributed to Las Vegas Sands in the first quarter of 2016 was down 37.5 percent to $320.2 million, compared to $511.9 million in 2015.

Analysts earlier this week expected LVS to report strong first quarter results based on Macau’s market outperformance in 16Q1 and Vegas reporting high visitation growth, but had said Singapore “remained the wildcard.”

“We continue to see signs of stability and even some growth in the mass market, with LVS having the greatest exposure to this segment in Macau,” said Union Gaming analysts shortly before the results announcement.

In 15Q4, Las Vegas Sands posted weaker-than-expected results as the downturn in Macau continued to weigh, though chairman Sheldon Adelson said the situation there was stabilizing.

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