Sands China Profit Misses Estimates as Macau Revenue Tumbles

  • Ebitda fell 33% while revenue shrank 29% amid more competition
  • "Virtually impossibly" to tell how to think of Macau: Adelson

Sands China Ltd., the Macau casino operator controlled by billionaire Sheldon Adelson, reported third-quarter profit fell 33 percent, missing analysts’ estimates, as competition for tourists intensified in the city’s Cotai Strip area.

Sands China’s adjusted earnings before interest, taxes, depreciation and amortization shrank to $545 million from $811.6 million a year earlier, the parent company Las Vegas Sands Corp. said in a statement Wednesday. That compares with the $563 million median estimate of five analysts surveyed by Bloomberg. Revenue shrank 29 percent to $1.66 billion, the company said.

“The implication is bit mixed, with some positives including dividend policy, cost-saving efforts and positive management tone about ‘stabilization in mass demand’, and some negatives including mass revenues and retail rent weaker than expected,” DS Kim, an analyst at JPMorgan Chase & Co., wrote in a note after the results.

Sands China rose 0.2 percent to HK$28 by the close of trading in Hong Kong, against the benchmark Hang Seng Index which declined 0.6 percent. Galaxy Entertainment Group Ltd. advanced 1.9 percent, the top gainer among Macau casino stocks after it confirmed the government approved 100 additional gaming tables for its projects.

Lost Market Share

Operators such as Sands China and Melco Crown Entertainment Ltd. are opening new projects aimed at attracting tourists as China’s anti-graft campaign and a slowing economy discourage high-rollers from visiting Macau.  Galaxy had surged the most in more than three months on Oct. 15 after reporting a 13 percent sequential rise in profit for the third quarter as the opening of new casinos helped boost customer traffic and revenue.

“Sands lost market share in the third quarter on some customer overlap with Galaxy Macau, which opened Phase two,” Karen Tang, a Deutsche Bank analyst, wrote in a note, referring to Galaxy’s expansion of an existing casino-resort in the Macau’s Cotai Strip.

Casino operators are building shops, tourist attractions and other non-gambling features to lure tourists as part of Macau’s goal to reduce reliance on hard-core players.

Melco was authorized by the government to operate 250 gambling tables at its $3.2 billion Studio City resort that will open Oct. 27, the company announced Tuesday, in line with analyst estimates though far fewer than Chairman Lawrence Ho said he was expecting.

Macau Question Mark

Other companies awaiting Macau’s gaming table decisions are Wynn Macau Ltd., which is scheduled to open its the $4.1 billion Wynn Palace project in March, while Sands China’s Parisian Macao is targeted for a summer 2016 debut.

Las Vegas tycoon Steve Wynn criticized the government last week for its policy of limiting gambling tables, and delays in informing operators of the number of tables casinos will receive. Macau fired back days later saying casinos must fully comply with its rules.

Adelson, who said in a teleconference after the results that he’s seeing “signs of stabilization” in Macau’s mass market gambling, remained apprehensive about the outlook for the world’s largest gambling hub.

“It’s virtually impossible for us to tell you what we - how to think about Macau,” said the 82-year-old casino billionaire. “It’s so unknown to any of us. It is the big question mark for any operator today, and will continue. ”

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