Las Vegas Sands Corp. ended 2018 with a $40 million net loss during the fourth quarter, but company leaders expressed continued optimism toward business in Macau, which was the only market segment reporting increased revenues and cash flows.
“We’re strong believers in Macau,” Las Vegas Sands President Rob Goldstein said in a conference call with analysts Wednesday. “We’re bullish. We’re blinded by the extreme size of Macau.”
Goldstein and Sands Chief Financial Officer Patrick Dumont led the company’s quarterly call. Las Vegas Sands Chairman and CEO Sheldon Adelson “was under the weather” and made drowsy by medication, Goldstein told listeners at the call’s outset.
“We met with him yesterday and his message was he’ll look forward to talking with everyone in the next quarter,” Goldstein said.
In the quarter, which ended Dec. 31, Las Vegas Sands said net revenues increased 2.5 percent to $3.48 billion.
However, the company took a net loss of $40 million due to a non-recurring non-cash income tax expense of $727 million. A year ago, the company reported a net profit of $1.36 billion, which included a non-recurring non-cash income tax benefit of $526 million.
For all of 2018, Las Vegas Sands reported total revenues of $13.7 billion and net income of $2.4 billion.
During the quarter, revenue from Las Vegas Sands’ two Strip resorts fell 2.1 percent to $424 million and revenue declined 11.6 percent to $726 million at the company’s Marina Bay Sands in Singapore.
But Las Vegas Sands six properties in the Macau market – more than any other operator in the Chinese gaming enclave – saw revenue grow 10.1 percent to $2.22. Cash flow in Macau grew 7.9 percent to $783 million.
For the full year in Macau, Las Vegas Sands revenues increased 14 percent to $8.67 billion.
Executives said the market was driven by a large mass market business. Macau has become a much easier commute for middle income Chinese residents through the opening last fall of the $20 billion Hong Kong-Zhuhai-Macau Bridge, which took nine years to build, is the world’s longest sea span bridge, and connects three key cities.
“I wouldn’t count out VIP business and it’s been very resilient,” Goldstein said. “We haven’t seen the full impact of bridge. It’s an impressive piece of work.”
Las Vegas Sands is spending $2.2 billion in Macau to transition the 1,200-room Holiday Inn property that is part of Sands Cotai Central into the 600-room Londoner Macau, which will become a British-themed all-suite resort.
The project will take anywhere from 18 to 24 months to complete.
“We remain confident in the future opportunity in Macau and are progressing with our investments,” Adelson said in a statement that accompanied the earnings press release. “We believe our market-leading interconnected integrated resort portfolio in Macau.”
Shares of Las Vegas Sands closed at $57.29 on the New York Stock Exchange Wednesday, up 24 cents or 0.42 percent. After earnings were released, the company’s stock price declined more than 4 percent during afterhours trading.
Analysts were somewhat skeptical toward the Macau market. Macau casinos collected $37.6 billion in revenue in 2018, a 14 percent increase over 2017, the second straight double-digit increase. But many suspect those days of double-digit hikes may be over.
Credit Suisse gaming analyst Cameron McKnight called the Macau results “disappointing,” given there were “higher expectations” after the official fourth quarter market numbers were released by Macau gaming regulators.
“The company attributed margin compression to low hold on higher margin direct VIP business,” McKnight said in a research note. “We don’t know if lower direct VIP hold was a result of the smoking ban and lower ‘time on device,’ which significantly impacts hold rates.”
Despite the Las Vegas Sands’ fourth quarter revenue decline at the Venetian and Palazzo on the Las Vegas Strip – cash flow fell 12.3 percent during the period – revenue for the total year was a less than 1 percent increase.
Dumont told analysts the company was pleased by the business in Las Vegas.
Howard Stutz is the executive editor of CDC Gaming. He can be reached at hstutz@cdcgamingreports.com. Follow @howardstutz on Twitter.
