Sheldon Adelson
Billionaire Sheldon Adelson said he’s optimistic recreational gamblers and tourists are spurring a recovery in Macau’s hard-hit casinos industry, as Las Vegas Sands Corp. reported mass-market gaming revenue in the Chinese city rose in June for the first time in two years.
The comments helped spark a rally in casino stocks after the company reported its Macau unit Sands China Ltd. saw earnings before interest, taxes, depreciation and amortization fall 14 percent to USD487.7 million in the second quarter, missing analysts estimates. While weak revenue from high rollers hurt profit, mass-market revenue recorded the first month of growth since September 2014, according to the parent company.
Casino stocks have rallied in the past only to retreat after a turnaround to Macau’s two-year gambling downturn seemed elusive. The latest sign of a recovery comes as the former Portuguese enclave is in the midst of a casinos building boom, with the $4.1 billion Wynn Palace scheduled to open Aug. 22 while Sands China’s $2.7 billion Parisian project is slated to open Sept. 13.
“It is difficult to say whether this is the bottom for Macau given the fact that the VIP segment is quite volatile and cyclical by nature,” said Bloomberg Intelligence analyst Margaret Huang. A recovery for the industry “may not be apparent until after the third quarter when comparisons ease” and new casino resorts open for business, she said.
Sands China, the first among Macau’s casino companies to report second-quarter results, rose as much as 8.3 percent, the most intraday since Jan. 22. Wynn Macau Ltd. rose as much as 11 percent, while Galaxy Entertainment Group Ltd. added 7.1 percent.
“So I think stabilization appears to be here,” Adelson, Sands China chairman, said on a call with investors. “We’re very happy that there’s one month that hit the bottom and we have no reason to believe that that’s not going to continue.”
“Something good happened in June,” Rob Goldstein, Sands’ president, said on the call. “The gaming floors are busy, especially on weekends. Macau is morphing into the world’s greatest mass market. Hopefully we’ll see it for the rest of the summer.”
Sands, the casino operator founded by Adelson, earned 52 cents a share in the second quarter, excluding some items, the Las Vegas-based company said in a statement. Analysts had expected 56 cents, the average of 14 estimates compiled by Bloomberg shows. Sales fell 9.3 percent to $2.65 billion, missing estimates of $2.75 billion.
Sands China’s mass-oriented flagship Venetian adjusted property Ebitda fell 4.2 percent from a year earlier. Ebitda in Singapore fell 1.7 percent to $357 million.
Sands is the largest casino operator in Macau. Betting there has been in a two-year slump amid a Chinese government crackdown on corruption that has prompted high rollers to cut back on conspicuous consumption. The market is showing signs of recovery, with the overall drop in betting moderating and visitor traffic on the upswing.
“We believe Sands China’s product offering is one of the best positioned to capitalize on Macau’s paradigm shift,” to focus on recreational gamblers, wrote Sanford C. Bernstein & Co. analysts lead by Vitaly Umansky in a note yesterday.
Umansky rated the stock as outperform, citing its portfolio of hotel, retail and conference facilities as “key drivers” in continuing to attract recreational gamblers and tourists, according to the analyst. The Parisian’s opening is a “key inflection point” that gives it a competitive advantage with nearly 12,700 hotel rooms, he wrote.
The positioning of the Parisian “caters well to both the current Macau market conditions and the long-term growth trends in Chinese outbound tourism,” Adelson said. Christopher Palmeri, Daniela Wei, Bloomberg
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