The headline numbers for the second quarter look pretty outstanding for Las Vegas Sands Corp. (NYSE:LVS). Net revenue increased 25.6%, to $3.24 billion, hold-adjusted property EBITDA was up 29%, to $1.17 billion, and net income was up 42.1%, to $597.6 million. But a deeper dive into the numbers show at least a little disappointment in the quarter.
The good and bad in Macau
Macau was a different story depending on where you looked. Sands Cotai Central is finally starting to generate the gaming volume Sheldon Adelson envisioned, but ran into bad luck; The Venetian Macau saw mass market play jump, and had good luck with high rollers, and Sands Macau continues to slowly fall victim to Cotai.
The best way to analyze the numbers is to look at rolling chip volume (high roller play), non-rolling chip volume (mass market table games), and slot handle at the company’s casinos. For some perspective on the growth each component displayed, remember that Sands Cotai Central wasn’t fully open, so a better gauge than growth there is comparing figures to The Venetian Macau, and Macau’s overall revenue was up 15.8% in the quarter.
|Rolling Chip Volume||Non-Rolling Chip Volume||Slot Handle|
|Venetian Macau||$11.84 billion
|Sands Cotai Central||$14.34 billion
|Four Seasons Macau||$9.94 billion
|Sands Macau||$5.82 billion
Source: Las Vegas Sands Q2 2013 earnings release.
We can see that the center column is the strongest, which means that mass-market play is growing, especially on Cotai. What’s a little less clear is how much growth we can expect in the high roller business on Cotai. The Venetian Macau and Four Seasons both experienced relatively slow growth rates in high-end play and negative growth in slots.
With that said, overall volume growth was strong for Las Vegas Sands Corp. (NYSE:LVS), and the company clearly took share from Wynn Resorts, Limited (NASDAQ:WYNN), Melco Crown Entertainment Ltd (ADR) (NASDAQ:MPEL), and MGM Resorts International (NYSE:MGM) over the past year.
When looking at other operators that will report earnings over the next few weeks, we can see trends toward Cotai continue. That will hurt Wynn Resorts, Limited (NASDAQ:WYNN) and MGM Resorts International (NYSE:MGM) until their Cotai resorts are complete, and likely help Melco Crown Entertainment Ltd (ADR) (NASDAQ:MPEL)’s results again this quarter.
The real disappointment right now is Singapore, where Marina Bay Sands isn’t generating the profit Sheldon Adelson expected when he built the resort. There was hope the resort would generate $2 billion in EBITDA and, after generating $1.72 billion in EBITDA from Q2 2011 to Q1 2012, that looked possible. But revenue growth has slowed, and the resort has only generated $1.32 billion in EBITDA over the past year.
That’s still a big figure, but when your company is valued at 12 times EBITDA, a $700-million shortfall from expectations priced into the stock can be a drag.
A new cash king
What’s new for gaming companies lately is returning money to shareholders through dividends and share repurchases. Extra cash was used for growth until recent years, but with the sheer cash Macau casinos are spitting off, Las Vegas Sands Corp. (NYSE:LVS) and Wynn are able to pay back shareholders.
In Las Vegas Sands Corp. (NYSE:LVS)’s case, that means a $0.35 per-share quarterly dividend and a new $2.0 billion share buyback program. The company is also steadily lowering its debt, which now stands at $9.49 billion. This greatly reduces the company’s risk and provides some stability for shareholders in the future.