LVS betting on Macau operations in business recovery

Casino operator Las Vegas Sands Corp. (LVS) has recorded October as its strongest month since August, highlighting the return of its patrons to Macau who are “high-quality, high-frequency customers.”
According to Sheldon Adelson, chairman and chief executive officer of the company, operating losses reduced sequentially over the second quarter in its Macau operations. However, the third quarter results are not representative of its current business trajectory, he said in a call with investors last week.
Macau subsidiary Sands China reported a net loss of $562 million in the third quarter of this year, an increase from the $549 million loss recorded in the second quarter.
“As the resumption of visa issuance across all provinces in China only commenced toward the end of September, the initial stages of recovery since then have been very encouraging. During the Golden Week, we saw meaningful recovery across the different segments of our Macau operations,” he said.
Business volumes in the premium mass segment enjoyed the most significant resurgences.
The chairman noted that business volumes in the premium mass segment in its Macau operations have been leading revenue generation at this stage of the recovery.
At current gambling levels, Sands Macau is slightly profitable so far in October, reported Bloomberg, citing analyst David Katz.
“The indications that the company could be approaching break-even in Macau, coupled with the continued confidence the market access should progress in the coming months, should be taken positively by the market,” David Katz, an analyst at Jefferies LLC, said in a report.
The company managed to narrow its loss in the third quarter from the preceding three months. Las Vegas Sands reported a loss of 67 cents a share for the period, excluding some items, a smaller deficit than the 74 cents analysts were predicting.
Shares in Sands gained as much as 8.3% in New York on Thursday, the biggest increase since August 10, and continued to rise into Friday.
On the same call, Grant Chum, CEO of Sands China Ltd. said that, principally based on the premium mass recovery, for the month of October to date, the gaming operator’s non-rolling drop per day is just over $20 million – which is about 30% of last year’s level.
“After Golden Week, we had the expected lull in the second week of October, but then we saw a very notable rebound in the third week. In fact, in the third week, we are actually still averaging around or just under a $20 million drop per day as well,” he added.
The executive said that they have seen a resurgence in the retail mall sales, most particularly in the Four Seasons in the luxury segment, adding that the retail recovery actually began in September and has continued into October.
Chum also commented that base mass is relatively low in terms of traffic, as the overall visitation in the SAR remains low.
“We’re confident that the base mass will follow as visitation recovers. As for the VIP segment, obviously, that’s been slower in terms of the recovery. That’s expected.”
Robert Goldstein, president and chief executive officer of LVS, has also expressed confidence about the future prospects in Macau, noting that China has had a sustainable recovery that could be transferred to Macau in the future.
“But if I’m to make a bet, I’d bet on Macau [making] much quicker of a recovery than Las Vegas. Vegas has some challenges, whereas Macau just has to have that barrier come down and let people come in. That’s all there is,” said the executive.