Las Vegas Sands Shares Stumble After Company Posts Soft Macau Results

Posted on: July 24, 2019, 02:55h. 

Last updated on: July 24, 2019, 03:30h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Shares of Las Vegas Sands Corp. (NYSE:LVS) plunged in Wednesday’s after-hours session after the company said it earned 72 cents a share in the second quarter, well short of the 78 cents per share analysts were expecting. At one point the stock was down about 4.5 percent before recovering to a loss 3.11 percent at this writing.

Venetian Macao, a region that weighed on Sands’ second-quarter earnings. (Image: Booking.com)

For the quarter ending June 30, Sands notched revenue of $3.33 billion, $60 million shy of Wall Street estimates. Slack results in Macao, where LVS is one of the dominant operators, are seen as the culprit behind the stock’s Wednesday tumble. The Sands China business generated revenue growth of 1.4 percent to $2.14 billion on earnings before interest, depreciation and amortization (EBITDA) of $765 million. Analysts expected Macao EBITDA of $788 million on revenue of $2.15 billion.

In the second quarter, Macao accounted for 61 percent of the company’s adjusted EBITDA followed by Singapore at 27 percent and the US at 12 percent, according to Sands data.

We remain enthusiastic about our future growth opportunities in Asia, which will be enhanced through the introduction of our Four Seasons Tower Suites Macao later this year, the Londoner Macao throughout 2020 and 2021 and the expansion of Marina Bay Sands in Singapore thereafter,” said Sands Chairman and CEO Sheldon Adelson in a statement.

Sands’ net income for the second quarter was $1.1 billion, including a $556 million gain attributable to the company’s sale of the Sands Bethlehem in Pennsylvania.

Not So Marvelous Macao, But Pushing Forward In Asia

LVS, owner of the Parisian Macao, Sands Cotai Central and Venetian Macao, among other properties in China’s gambling hub, generated revenue of $2.3 billion in the first three months of 2019. The company is one of many in the US that have referenced weakness in China on second-quarter earnings calls.

To this point, more than half of the S&P 500 members that have reported earnings for the April through June period have highlighted the world’s second-largest economy as an area of weakness, according to FactSet. During the quarter, shares of US gaming operators tumbled amid escalating tensions between the US and China only to rally earlier this month on signs the two sides are moving forward with trade talks.

On the call, Las Vegas Sands executives did not give a timeline for when the company will deal with renewing its Macao licenses, saying only that it remains committed to the region. Along with several rivals, Sands China will have to rebid for licenses that are set to expire in June 2022.

LVS is planning $2.2 billion worth of investments on the peninsula, including new premium suites, aimed to bolstering non-gaming revenue there. With second-quarter revenue of $830 million, Venetian Macao was the company’s top-grossing property there followed by Sands Cotai Central at $509 million.

The company said it’s angling for $3.3 billion of spending to expand the Marina Bay Sands in Singapore, the world’s most profitable integrated resort. For the second quarter, that venue had adjusted property EBITDA of $346 million.

“We are also aggressively pursuing additional development opportunities in new markets, including in Osaka, Japan,” said Adelson in the statement.

The LVS CEO, who is battling non-Hodgkin’s lymphoma, did not participate in the earnings call. He’s currently in Israel. On Tuesday, he spoke at an event in Bnei Barak for entrepreneurs involved in the country’s technology industry.

Other Capital Plans

As of June 30, the owner of the Palazzo and Venetian in Las Vegas, had $4.03 billion in cash and $12 billion in debt, according to a company slideshow obtained by Casino.org.

Since 2012, Sands has returned $24.8 billion to shareholders via dividends and buybacks, the latter of which the company spent $180 million on from April through June. LVS said it “remains committed to returning capital through dividends and share repurchases” and that it has the “industry’s strongest balance sheet.”

Executives said on the call maintaining the company’s investment-grade credit rating is a priority and that its flexible balance sheet could allow for future investments of $20 billion or more.