15Q1 EBITDA to drop 40 percent YoY: UBS

Thursday 16th of April 2015

UBS Securities said it expects 15Q1 EBITDA to drop 40 percent year-on-year and 15 percent quarter-on-quarter, a steeper drop than GGR which fell 37 percent YoY and 14 percent QoQ.

UBS analyst Anthony Wong wrote in a note that by segment, underlying VIP revenue dropped 19 percent QoQ and 45 percent YoY, while mass revenue dropped 8 percent QoQ and 21 percent YoY.

“We expect operating de-leverage, and higher mass promotional costs to drive a sequential contraction in sector EBITDA margins; but cushioned slightly by beneficial business mix (mass contracting slower than VIP).”

The note says that Sands is expected to show the largest decline in QoQ profits due to share loss across segments- especially its mass declining 28 percent YoY and 13 percent QoQ, weaker than industry declines of 21 percent and 8 percent, respectively.

“We expect Wynn/MPEL to show lower QoQ declines on low base/more stable operations respectively. We expect MPEL to generate ~US$50m of mass/slot GGR in Manila, but minor property EBITDA (US$3-4m) given only half a quarter of initial ramp up, and no VIP contribution yet.”

In response to the government announcement that it will cap the number of mainland visitors to 21 million per year and once infrastructure improves, that number "can increase", Wong said the government's policy on arrivals is “murky.

“We note this seems different from govt's previous tone to "fine tune" the IVS policy. We see policy outlook on visitation as quite murky. For mainland to introduce a cap could mean a quota on visas need to be implemented in a nationally coordinated way, which is not easy in our view.”