Macau’s much challenged casino market caused Las Vegas Sands overall revenues to dip somewhat in the third quarter. But company executives said Wednesday they are still bullish on the world’s largest gaming destination and are pushing ahead with $2 billion worth of expansions.
Las Vegas Sands said its revenues from Macau declined 2% to $2.08 billion for the three months that ended Sept. 30. Overall, company revenues declined 3.6% to $3.25 billion, despite a 7% increase in Las Vegas and 3.5% increase in Singapore.
Revenues from Macau accounted for 65 percent of Las Vegas Sands’ overall total.
For the first nine months of the year, Macau’s overall gaming market is down 1.7% and analysts said the region might be challenged to match last year’s $37.6 billion total. August also saw the market’s biggest percentage drop in 27 months.
“The numbers speak for themselves in Macau, it’s been challenging there,” Las Vegas Sands President Rob Goldstein said on a conference call with analysts. “We’ve been doing this a long time and we’ve watched the market ebb and flow. We’re in a difficult time period.”
Las Vegas Sands is renovating and enhancing its Macau properties, primarily rebranding the Sands Cotai Central into The Londoner Macau, a $1.35 billion London-themed resort. The company is spending $400 million for the 370-suite St. Regis Tower Suites and $450 million for the 290-suite Four Seasons Tower Suites. Both are expected to be completed by the first quarter of 2020.
Sheldon Adelson
Wednesday’s earnings call also marked the return of Chairman and CEO Sheldon Adelson, who has not participated in the company’s conference calls for a year while he was being treated for non-Hodgkin’s Lymphoma.
Reading from prepared remarks, the 86-year-old Adelson, who is currently No. 17 on the Forbes 400 list of billionaires, said, “I feel good, I’m very happy to be here with Rob, (CFO) Patrick (Dumont) and the team.”
Adelson and his family control almost 56% of Las Vegas Sands.
“I am extremely touched by all the calls and emails I’ve received over the past several months,” Adelson said. “It has been remarkable to hear from so many people, including many of you joining us today. I deeply appreciate the well wishes and everyone who took the time to reach out to me. It certainly means a lot.”
He didn’t participate in the question and answer session, allowing Goldstein and Dumont to handle the responses to analysts. However, when the he announced the company had increased the annual dividend for 2020 to $3.16 per share, he responded with his trademarked “Yay dividends.”
In the quarter, Las Vegas Sands’ total net income was $69 million, off slightly compared to a year ago. Cashflow was down less than 1% to $1.21 billion.
On the conference call, Goldstein and Dumont talked extensively about the company’s prospects to land an integrated resort license in Japan. In August, the company said it would not bid on a location in Osaka and would instead turn its attention toward Tokyo and Yokohama.
“We think Tokyo Bay and the Yokohama region were just a better fit for out skill set,” Goldstein said. He added that $10 billion “is probably the starting point” for building a resort in Japan, and that “our chairman and board” will make the final decision if the company can get a good return on investment for the project.
“One integrated resort in Japan is what Sheldon and the company spent on several resorts in China,” Goldstein said. “We have the balance sheet and capacity to do it.”
Prior to earnings, several analysts remained upbeat on Las Vegas Sands, despite the worries over Macau’s gaming market.
Credit Suisse gaming analyst Ben Combs had a positive view of the company’s long-term outlook in Macau, considering growth in Chinese wealth, travel and the continued interest in Macau.
“While we think the next few months could be volatile, given macro, geopolitical and licensing risks, we would note our credit indicators point to a rebound early next year,” Combs told investors.
Deutsche Bank gaming analyst Carlo Santarelli said he valued Las Vegas Sands stock at being worth $70 per share.
“We continue to believe Las Vegas Sands is trading at the low end of a well-defined trading range, with the potential for multiple expansion should mass market trends remain firm and the Las Vegas Sands mass market centric model prove resilient, until the VIP segment regains its footing,” Santarelli said.
Shares of Las Vegas Sands, traded on the New York Stock Exchange, closed at $59.22 Wednesday, up 60 cents or 1.02%.
Meanwhile, Fitch Ratings Service said earlier this month it thought Las Vegas Sands’ gaming concession in Macau would be extended.
However, the agency said there was a “plausible risk” that Las Vegas Sands would be subject to “onerous” extension terms, such as a higher tax, a concession payment or a call by the government for significant lower return on investments figures.
All six concessions in Macau are scheduled to expire in June 2022. In a statement, Fitch said concession extension conversations would begin next year after a new Macau administration takes office in December.
Howard Stutz is the executive editor of CDC Gaming. He can be reached at hstutz@cdcgamingreports.com. Follow @howardstutz on Twitter.
