Sands China earnings miss estimates as VIPs stay away

Sheldon Adelson

Sands China Ltd reported earnings that missed analyst estimates after China’s clampdown on graft and illicit fund flows into the city deterred high-end gamblers.
Profit fell 15 percent from a year earlier to USD713.2 million in the fourth quarter based on adjusted property earnings before interest, taxes, depreciation and amortization, according to parent Las Vegas Sands Corp.’s earnings statement. That compares with the median estimate of $728 million from 10 analysts surveyed by Bloomberg.
Chinese President Xi Jinping’s anti-corruption campaign has contributed to seven straight months of revenue declines for the former Portuguese enclave’s casino industry. Sands China said yesterday it will open its fifth casino in 2016, after initially saying it would do so as early this year.
The new resort is among a slew of planned properties offering entertainment features such as Batman and Broadway aimed at wooing mass-market tourists. Casinos are betting on entertainment to help offset the decline in high rollers.
“We don’t have an opening date yet,” Adelson said in a conference call. “It’ll be some time in 2016.”
Adelson said he would travel to Macau this coming week to meet the city’s newly installed government.
Sands China fell 0.5 percent to HK$39.45 as of 1:53 p.m. in Hong Kong trading. The benchmark Hang Seng index lost 1.2 percent. Las Vegas Sands fell 1.6 percent in New York trading, before the results.
Net income in the quarter declined to $535.3 million from $655.6 million a year ago, and net revenue slumped 16 percent to $2.12 billion.
Gambling at VIP tables plunged across all four of the company’s Macau casinos, according to a Sands China statement issued to the Hong Kong exchange yesterday.
Rolling chip volume, referring to wagers at VIP tables, dipped 40 percent to $10.1 billion at Venetian Macao and 52 percent to $8.4 billion at Sands Cotai Central. The projects are Sands China’s top two earners. Non-rolling chip drop, or gambling money used at tables aimed at the mass market, fell between 7 to 14 percent at three of the resorts, with only Sands Cotai Central posting an 11 percent gain.
Macau’s government has imposed more scrutiny over junket operators, the middle-men who bring in high-rollers and loan them money to gamble, hitting the VIP sector in the city. Fourth quarter volume of Macau’s VIP junkets last year was the lowest since the same period in 2010, Adelson said.
Adelson, 81, is due to take direct charge of Las Vegas Sands’ China unit as Macau recorded its first annual casino revenue slump in the wake of government actions that included a crackdown on illicit currency conversions linked to mainland debit cards.
He will become chief executive officer of Sands China on March 6, in addition to his existing role as chairman. The appointment came after Sands China chief Edward Tracy said he will retire in March.
Xi visited Macau in December, coinciding with plans to crack down on illicit funds the government has said are funneled through the city, the only place in China where casinos are legal.
Sands China is building the $2.7 billion Parisian Macao, which will have about 3,000 hotel rooms and features an Eiffel Tower replica. When completed, Sands China’s room supply will increase to almost 13,000, representing about 45 percent of total hotel rooms in Macau, Adelson said.
The company will compete with a series of new projects being constructed in the city’s Cotai Strip, including a $3.2 billion Melco Crown Entertainment Ltd. resort that seeks to woo vacationing Chinese with a family entertainment center that includes a Batman ride. The project is part of the company’s plan to shift resources away from high rollers.
Galaxy Entertainment Group Ltd. also announced on Jan. 23 that it will invest about HK$57 billion ($7.4 billion) to expand in Macau and will recreate New York’s Broadway theater district to attract more visitors. MDT/Bloomberg